<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement [ ] Confidential, For Use of the
[X] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
</TABLE>
RPM, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11
(set forth the amount on which the Filing Fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
RPM, INC. - 2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258 - 330-273-5090
[RPM LOGO]
THOMAS C. SULLIVAN
Chairman
August 28, 1998
TO RPM SHAREHOLDERS:
This year's Annual Meeting of RPM Shareholders will be held at 2:00 p.m.,
Eastern Daylight Time, Friday, October 9, 1998, at the Holiday Inn Select
located at Interstate 71 and Route 82 East, Strongsville, Ohio.
In addition to discussing the items of business outlined in this Proxy
Statement, we look forward to giving you a progress report on the first quarter
of our current fiscal year, which will end on August 31. As in the past, there
will be an informal discussion of the Company's activities, during which time
your questions and comments will be welcomed.
We hope that you are planning to attend the Annual Meeting personally, and
we look forward to seeing you. Whether or not you expect to attend in person,
the return of the enclosed Proxy as soon as possible would be greatly
appreciated and will ensure that your shares will be represented at the Annual
Meeting. If you do attend the Annual Meeting, you may, of course, withdraw your
Proxy should you wish to vote in person.
On behalf of the Directors and management of RPM, I would like to thank you
for your continued support and confidence.
Sincerely yours,
/s/ Thomas C. Sullivan
THOMAS C. SULLIVAN
<PAGE> 3
[RPM LOGO]
2628 PEARL ROAD - P.O. BOX 777
MEDINA, OHIO 44258
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of RPM, Inc.
will be held at the Holiday Inn Select Strongsville, 15471 Royalton Road,
Strongsville, Ohio, located at Interstate 71 and Route 82 East, on Friday,
October 9, 1998, at 2:00 P.M., Eastern Daylight Time, for the following
purposes:
(1) To elect four Directors in Class I for a three-year term ending in
2001; and
(2) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Holders of Common Shares of record at the close of business on August 18,
1998 are entitled to receive notice of and to vote at the Annual Meeting.
By Order of the Board of Directors.
P. KELLY TOMPKINS
Secretary
August 28, 1998
Please fill in and sign the enclosed Proxy and return the Proxy
in the envelope enclosed herewith.
<PAGE> 4
[RPM LOGO]
2628 PEARL ROAD - P.O. BOX 777
MEDINA, OHIO 44258
PROXY STATEMENT
MAILED ON OR ABOUT AUGUST 28, 1998
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 9, 1998
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of RPM, Inc. (the "Company") to be used at the
Annual Meeting of Shareholders of the Company to be held on October 9, 1998, and
any adjournment or postponement thereof. The time, place and purposes of the
Annual Meeting are stated in the Notice of Annual Meeting of Shareholders which
accompanies this Proxy Statement.
The accompanying Proxy is solicited by the Board of Directors of the
Company. All validly executed Proxies received by the Board of Directors of the
Company pursuant to this solicitation will be voted at the Annual Meeting, and
the directions contained in such Proxies will be followed in each instance. If
no directions are given, the Proxy will be voted FOR the election of the four
nominees listed on the Proxy.
Any person giving a Proxy pursuant to this solicitation may revoke it. A
shareholder, without affecting any vote previously taken, may revoke a Proxy by
giving notice to the Company in writing, in open meeting or by a duly executed
Proxy bearing a later date.
The expense of soliciting Proxies, including the cost of preparing,
assembling and mailing the Notice, Proxy Statement and Proxy, will be borne by
the Company. The Company may pay persons holding shares for others their
expenses for sending proxy materials to their principals. In addition to
solicitation of Proxies by mail, the Company's Directors, officers and
employees, without additional compensation, may solicit Proxies by telephone,
telegraph, and personal interview. The Company also may retain a third party to
aid in the solicitation of proxies.
VOTING RIGHTS
The record date for determination of shareholders entitled to vote at the
Annual Meeting was the close of business on August 18, 1998. On that date, the
Company had 110,511,003 Common Shares, without par value ("Common Shares"),
outstanding and entitled to vote at the Annual Meeting. Each Common Share is
entitled to one vote.
At the Annual Meeting, in accordance with the General Corporation Law of
Ohio and the Company's Code of Regulations, the inspectors of election appointed
by the Board of Directors for the Annual Meeting will determine the presence of
a quorum and will tabulate the results of
1
<PAGE> 5
shareholder voting. As provided by the General Corporation Law of Ohio and the
Company's Code of Regulations, holders of shares entitling them to exercise a
majority of the voting power of the Company, present in person or by proxy at
the Annual Meeting, will constitute a quorum for such meeting. The inspectors of
election intend to treat properly executed proxies marked "abstain" as "present"
for these purposes. Such inspectors also will treat as "present" shares held in
"street name" by brokers that are voted on at least one proposal to come before
the Annual Meeting.
Nominees for election as Directors receiving the greatest number of votes
will be elected Directors. Votes that are withheld or broker non-votes in
respect of the election of Directors will not be counted in determining the
outcome of the election. The General Corporation Law of Ohio provides that if
notice in writing is given by any shareholder to the President, a Vice President
or the Secretary of the Company not less than 48 hours before the time fixed for
holding the meeting that the shareholder desires the voting at the election to
be cumulative, each shareholder shall have cumulative voting rights in the
election of Directors. Cumulative voting enables shareholders to give one
nominee for Director as many votes as is equal to the number of Directors to be
elected multiplied by the number of shares in respect of which a shareholder is
voting, or to distribute votes on the same principle among two or more nominees,
as the shareholder sees fit.
Pursuant to the Company's Code of Regulations, all other questions and
matters brought before the Annual Meeting will be, unless otherwise provided by
law or by the Articles of Incorporation of the Company, decided by the vote of
the holders of a majority of the shares entitled to vote thereon present in
person or by proxy at the Annual Meeting. In voting for such other proposals,
votes may be cast in favor, against or abstained. Abstentions will count as
present for purposes of the item on which the abstention is noted and will have
the effect of a vote against. Broker non-votes, however, are not counted as
present for purposes of determining whether a proposal has been approved and
will have no effect on the outcome of any such proposal.
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Shares as
of May 31, 1998, unless otherwise indicated, by (i) each person or group known
by the Company to own beneficially more than 5% of the outstanding Common
Shares, (ii) each Director and nominee for election as a Director of the
Company, (iii) each executive officer named in the Executive Compensation tables
below and (iv) all Directors and executive officers as a group. All information
with respect to beneficial ownership has been furnished by the respective
Director, nominee for election as a Director, or executive officer, as the case
may be. Unless otherwise indicated below, each person named below has sole
voting and investment power with respect to the number of shares set forth
opposite his or her respective name.
2
<PAGE> 6
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED(1) COMMON SHARES(1)
------------------------ ------------- ----------------
<S> <C> <C>
Max D. Amstutz(2)........................................... 24,843 *
Edward B. Brandon(3)........................................ 17,187 *
Lorrie Gustin(4)............................................ 1,590 *
E. Bradley Jones(5)......................................... 9,393 *
James A. Karman(6).......................................... 802,045 0.7
Donald K. Miller(7)......................................... 32,949 *
John H. Morris, Jr.(8)...................................... 242,856 0.2
Kevin O'Donnell(9).......................................... 16,028 *
William A. Papenbrock(10)................................... 15,181 *
Charles G. Pauli(11)........................................ 48,417 *
Albert B. Ratner(12)........................................ 6,250 *
Frank C. Sullivan(13)....................................... 216,136 0.2
Thomas C. Sullivan(14)...................................... 1,446,964 1.3
All Directors and executive officers as a group (twenty
persons including the directors and executive officers
named above)(15).......................................... 3,213,215 2.9
</TABLE>
- ---------------
* Less than .1%.
(1) In accordance with Securities and Exchange Commission ("Commission") rules,
each beneficial owner's holdings have been calculated assuming full
exercise of outstanding options covering Common Shares, if any, exercisable
by such owner within 60 days after May 31, 1998, but no exercise of
outstanding options covering Common Shares held by any other person.
(2) Dr. Amstutz is a Director of the Company.
(3) Mr. Brandon is a Director of the Company.
(4) Ms. Gustin is a Director of the Company.
(5) Mr. Jones is a Director of the Company. Mr. Jones purchased an additional
2,500 shares on July 22, 1998.
(6) Mr. Karman is a Director and an executive officer of the Company. Mr.
Karman's ownership is comprised of 212,650 Common Shares which he owns
directly, 47,402 Common Shares which are owned by his wife, 227,372 Common
Shares which are held by a family-owned corporation, of which Mr. Karman is
an officer and director, 313,827 Common Shares which he has the right to
acquire within 60 days after May 31, 1998 through the exercise of stock
options, and approximately 794 Common Shares held by Key Trust Company of
Ohio, N.A., as trustee of the RPM, Inc. 401(k) Plan, which represents Mr.
Karman's approximate percentage ownership of the total Common Shares held
in the RPM, Inc. 401(k) Plan as of May 31, 1998. The ownership of the
shares held by his wife and by the family-owned corporation is attributed
to Mr. Karman pursuant to Commission rules.
(7) Mr. Miller is a Director of the Company. Mr. Miller's share ownership is
comprised of 10,983 Common Shares which he owns directly and 21,966 Common
Shares held by his sons. The ownership of the shares held by his sons is
attributed to Mr. Miller pursuant to Commission rules.
(8) Mr. Morris is a Director and an executive officer of the Company. Mr.
Morris' ownership is comprised of 83,434 Common Shares which he owns
directly, 158,710 Common Shares which he has the right to acquire within 60
days after May 31, 1998 through the exercise of stock options, and
approximately 712 Common Shares held by Key Trust Company of Ohio, N.A., as
trustee of the RPM, Inc. 401(k) Plan, which represents Mr. Morris'
approximate percentage ownership of the total Common Shares held in the
RPM, Inc. 401(k) Plan as of May 31, 1998.
3
<PAGE> 7
(9) Mr. O'Donnell is a Director of the Company. Mr. O'Donnell's ownership is
comprised of 10,342 Common Shares which he owns through his retirement
plans, 3,186 Common Shares which are owned by his wife through her
retirement plans and 2,500 Common Shares owned jointly with his wife. The
ownership of the shares held by his wife is attributed to Mr. O'Donnell
pursuant to Commission rules.
(10) Mr. Papenbrock is a Director of the Company. All of Mr. Papenbrock's Common
Shares are owned through his retirement plan for which National City Bank
is Trustee.
(11) Mr. Pauli is an executive officer of the Company. Mr. Pauli's ownership is
comprised of 7,944 Common Shares which he owns directly, 40,001 Common
Shares which he has the right to acquire within 60 days after May 31, 1998
through the exercise of stock options, and approximately 472 Common Shares
held by the Key Trust Company of Ohio, N.A., as trustee of the RPM, Inc.
401(k) Plan, which represents Mr. Pauli's approximate percentage ownership
of the total Common Shares held in the RPM, Inc. 401(k) Plan as of May 31,
1998.
(12) Mr. Ratner is a Director of the Company.
(13) Mr. Frank C. Sullivan is a Director and an executive officer of the
Company. Mr. Sullivan's ownership is comprised of 59,606 Common Shares
which he owns directly, 30,000 Common Shares owned by the Frank C. Sullivan
Irrevocable Trust, 7,266 Common Shares which he holds as Custodian for his
sons, 118,593 Common Shares which he has the right to acquire within 60
days after May 31, 1998 through the exercise of stock options, and
approximately 671 Common Shares held by Key Trust Company of Ohio, N.A., as
trustee of the RPM, Inc. 401(k) Plan, which represents Mr. Sullivan's
approximate percentage ownership of the total Common Shares held in the
RPM, Inc. 401(k) Plan as of May 31, 1998. The ownership of the shares held
as Custodian for his sons is attributed to Mr. Sullivan pursuant to
Commission rules.
(14) Mr. Thomas C. Sullivan is Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Sullivan's ownership is comprised of
716,509 Common Shares which he owns directly, 118,375 Common Shares which
are owned by his wife, 154,916 Common Shares owned by the Thomas C.
Sullivan Family Foundation, Inc., of which Mr. Sullivan serves as
Co-Trustee, 456,367 Common Shares which he has the right to acquire within
60 days after May 31, 1998 through the exercise of stock options, and
approximately 797 Common Shares held by Key Trust Company of Ohio, N.A., as
trustee of the RPM, Inc. 401(k) Plan, which represents Mr. Sullivan's
approximate percentage ownership of the total Common Shares held in the
RPM, Inc. 401(k) Plan as of May 31, 1998. The ownership of the shares held
by his wife and by the Thomas C. Sullivan Family Foundation, Inc. is
attributed to Mr. Sullivan pursuant to Commission rules.
(15) The number of Common Shares shown as beneficially owned by the Company's
Directors and executive officers as a group on May 31, 1998 includes
1,335,021 Common Shares which the Company's Directors and executive
officers as a group have the right to acquire within 60 days after said
date through the exercise of stock options granted to them under the
Company's stock option plans, and approximately 6,348 Common Shares held by
Key Trust Company of Ohio, N.A., as trustee of the RPM, Inc. 401(k) Plan,
which represents the group's approximate percentage ownership of the total
Common Shares held in the RPM, Inc. 401(k) Plan as of May 31, 1998.
4
<PAGE> 8
ELECTION OF DIRECTORS
The authorized number of Directors of the Company presently is fixed at
twelve, with the Board of Directors divided into three Classes of four Directors
each. The term of office of one Class of Directors expires each year, and at
each Annual Meeting of Shareholders the successors to the Directors of the Class
whose term is expiring at that time are elected to hold office for a term of
three years.
The term of office of Class I of the Board of Directors expires at this
year's Annual Meeting of Shareholders. The term of office of the persons elected
Directors in Class I at this year's Annual Meeting will expire at the time of
the Annual Meeting held in 2001. Each Director in Class I will serve until the
expiration of that term or until his successor shall have been duly elected. The
Board of Directors' nominees for election as Directors in Class I are Messrs.
Edward B. Brandon, William A. Papenbrock, Thomas C. Sullivan and Frank C.
Sullivan, all of whom currently serve as Directors in Class I.
The Proxy holders named in the accompanying Proxy or their substitutes will
vote such Proxy at the Annual Meeting or any adjournment or postponement thereof
for the election as Directors of the four nominees unless the shareholder
instructs, by marking the appropriate space on the Proxy, that authority to vote
is withheld. If cumulative voting is in effect, the Proxy holders shall have
full discretion and authority to vote for any one or more of the nominees. In
the event of cumulative voting, the Proxy holders will vote the shares
represented by each Proxy so as to maximize the number of Board of Directors'
nominees elected to the Board. Each of the nominees has indicated his
willingness to serve as a Director, if elected. If any nominee should become
unavailable for election (which contingency is not now contemplated or
foreseen), it is intended that the shares represented by the Proxy will be voted
for such substitute nominee as may be named by the Board of Directors. In no
event will the accompanying Proxy be voted for more than four nominees or for
persons other than those named below and any such substitute nominee for any of
them.
NOMINEES FOR ELECTION
<TABLE>
<S> <C> <C>
Edward B. Brandon photo
EDWARD B. BRANDON, age 66 -- Director since 1989.
Retired Chairman, National City Corporation. Mr. Brandon received his
B.S. degree in economics from Northwestern University and his M.B.A.
degree from Wharton School of Banking and Finance. He joined National
City Bank in 1956. Mr. Brandon served as President of National City
Corporation and President and Chief Executive Officer of National City
Bank prior to his election as Chairman in September 1987, and served as
Chief Executive Officer of National City Bank until April 1989. Mr.
Brandon also served as Chief Executive Officer of National City
Corporation from September 1987 until July 1995. Mr. Brandon retired
from National City Corporation in October 1995, however, he remains on
the Corporation's Board of Directors. Mr. Brandon is also a Director of
The Standard Products Company.
COMMON SHARES BENEFICIALLY OWNED: 17,187 NOMINEE FOR CLASS I
(TERM EXPIRING IN 2001)
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C> <C>
William A. Papenbrock photo
WILLIAM A. PAPENBROCK, age 59 -- Director since 1972.
Partner, Calfee, Halter & Griswold LLP, Attorneys-at-law. Mr. Papen-
brock received his B.S. degree in Business Administration from Miami
University (Ohio) and his LL.B. degree from Case Western Reserve Law
School. After serving one year as the law clerk to Chief Justice Taft
of the Ohio Supreme Court, Mr. Papenbrock joined Calfee, Halter &
Griswold LLP as an attorney in 1964. He became a partner of the firm in
1969 and is Vice Chairman of the firm's Executive Committee. Calfee,
Halter & Griswold LLP serves as counsel to the Company.
COMMON SHARES BENEFICIALLY OWNED: 15,181 NOMINEE FOR CLASS I
(TERM EXPIRING IN 2001)
</TABLE>
<TABLE>
<S> <C> <C>
Thomas C. Sullivan photo
THOMAS C. SULLIVAN, age 61 -- Director since 1963.
Chairman and Chief Executive Officer, RPM, Inc. Mr. Thomas C. Sullivan
received his B.S. degree in Business Administration from Miami
University (Ohio). He joined RPM, Inc. as a Divisional Sales Manager in
1961 and was elected Vice President in 1967. He became Executive Vice
President in 1969, and in 1971 Mr. Sullivan was elected Chairman of the
Board, President and Chief Executive Officer of RPM, Inc. Mr. Sullivan
is a Director of Pioneer-Standard Electronics, Inc., National City
Bank, and Huffy Corporation.
COMMON SHARES BENEFICIALLY OWNED: 1,446,964 NOMINEE FOR CLASS I
(TERM EXPIRING IN 2001)
</TABLE>
<TABLE>
<S> <C> <C>
Frank C. Sullivan photo
FRANK C. SULLIVAN, age 37 -- Director since 1995.
Executive Vice President and Chief Financial Officer, RPM, Inc. Mr.
Frank C. Sullivan entered the University of North Carolina as a
Morehead Scholar and received his B.A. degree in 1983. From 1983 to
1987, Mr. Sullivan held various commercial lending and corporate
finance positions at Harris Bank and First Union National Bank prior to
joining RPM as a Regional Sales Manager at its AGR Company joint
venture. In 1989, he became the Company's Director of Corporate
Development. He became a Vice President of the Company in 1991, Chief
Financial Officer in 1993, and was elected Executive Vice President in
1995.
COMMON SHARES BENEFICIALLY OWNED: 216,136 NOMINEE FOR CLASS I
(TERM EXPIRING IN 2001)
</TABLE>
6
<PAGE> 10
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER ANNUAL MEETING
<TABLE>
<S> <C> <C>
Dr. Max D. Amstutz photo
DR. MAX D. AMSTUTZ, age 69 -- Director since February 1995.
Chairman and Chief Executive Officer since 1994 of Von Roll Holding
Ltd., a designer and manufacturer of environmental technology prod-
ucts, electrotechnical and industrial insulation systems and industrial
metal specialities, and Vice Chairman of Alusuisse--Lonza Holding Ltd.
since 1988. Dr. Amstutz received his degree in Business Adminis-
tration and a Doctorate of Economics from the University of Berne,
Switzerland. Dr. Amstutz is a Director of Holderbank Financiere Glaris
Ltd., a world leader in cement, concrete and aggregates and RPM, Inc.'s
50-50 joint venture partner in The Euclid Chemical Company.
COMMON SHARES BENEFICIALLY OWNED: 24,843 DIRECTOR IN CLASS III
(TERM EXPIRES IN 1999)
</TABLE>
<TABLE>
<S> <C> <C>
E. Bradley Jones photo
E. BRADLEY JONES, age 70 -- Director since 1990.
Retired Chairman and Chief Executive Officer of Republic Steel Corpo-
ration, LTV Steel Company and Group Vice President of The LTV
Corporation. Mr. Jones received his B.A. degree from Yale University.
He began his career with Republic Steel Corporation in 1954 in sales
and became President in 1979 and Chairman and Chief Executive Officer
in 1982. Following the merger of Republic Steel Corporation and The LTV
Corporation in June 1984, Mr. Jones served as Chairman and Chief
Executive Officer of The LTV Steel Company and Group Vice President of
The LTV Corporation until his retirement in December 1984. Mr. Jones
also serves as a Director of TRW Inc., Consolidated Rail Corporation,
and Birmingham Steel Corporation, and is a Trustee of Fidelity Funds.
COMMON SHARES BENEFICIALLY OWNED: 9,393 DIRECTOR IN CLASS III
(TERM EXPIRES IN 1999)
</TABLE>
<TABLE>
<S> <C> <C>
John H. Morris, Jr. photo
JOHN H. MORRIS, JR., age 56 -- Director since 1981.
Executive Vice President, RPM, Inc. Mr. Morris holds a B.S. degree from
the University of West Virginia and an M.B.A. degree from Case Western
Reserve University. Mr. Morris held management positions with the
Armstrong Cork Company and the General Tire & Rubber Company prior to
joining RPM, Inc. as Director of Corporate Marketing in 1977. He became
Corporate Vice President that same year and was elected Executive Vice
President of RPM, Inc. in 1981. Mr. Morris is also a Director of The
Fifth Third Bank of Northeastern Ohio.
COMMON SHARES BENEFICIALLY OWNED: 242,856 DIRECTOR IN CLASS III
(TERM EXPIRES IN 1999)
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C> <C>
Albert B. Ratner photo
ALBERT B. RATNER, age 70 -- Director since 1996.
Co-Chairman of the Board of Forest City Enterprises, Inc., a conglom-
erate corporation engaged in real estate development, sales, invest-
ment, construction and lumber wholesale. Mr. Ratner received his B.S.
degree from Michigan State University. Mr. Ratner is also a Director of
American Greetings Corporation.
COMMON SHARES BENEFICIALLY OWNED: 6,250 DIRECTOR IN CLASS III
(TERM EXPIRES IN 1999)
</TABLE>
<TABLE>
<S> <C> <C>
Lorrie Gustin photo
LORRIE GUSTIN, age 73 -- Director since 1992.
Director of the National Association of Investors Clubs Trust since
1982, and Secretary of the World Federation of Investment Clubs since
1978. Ms. Gustin attended Pasadena State College. She served as an
officer and director of the N.A.I.C. Corporation (investment education)
from 1966 to 1983, and as President thereof from 1980 to 1983.
COMMON SHARES BENEFICIALLY OWNED: 1,590 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2000)
</TABLE>
<TABLE>
<S> <C> <C>
James A. Karman photo
JAMES A. KARMAN, age 61 -- Director since 1963.
President and Chief Operating Officer, RPM, Inc. Mr. Karman holds a
B.S. degree from Miami University (Ohio) and an M.B.A. degree from the
University of Wisconsin. Mr. Karman taught corporate finance at the
University of Wisconsin and was an Investment Manager, The Union Bank &
Trust Company, Grand Rapids, Michigan, prior to joining RPM, Inc. as
Treasurer in 1963. Mr. Karman became Vice President and Treasurer in
1969, Vice President, Secretary and Treasurer in 1972, and was elected
Executive Vice President in 1973. In 1978, Mr. Karman was elected
President and Chief Operating Officer of RPM, Inc. Mr. Karman also was
Chief Financial Officer of RPM, Inc. from 1982 until 1993. Mr. Karman
is a Director of A. Schulman, Inc., McDonald & Company Investments,
Inc., Metropolitan Financial Corp., and Shiloh Industries, Inc.
COMMON SHARES BENEFICIALLY OWNED: 802,045 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2000)
</TABLE>
8
<PAGE> 12
<TABLE>
<S> <C> <C>
Donald K. Miller photo
DONALD K. MILLER, age 66 -- Director since 1972.
Chairman of Greylock Financial Inc., a venture capital firm, from
January 1992 to December 1997. Mr. Miller served as Managing Partner of
Greylock Financial Partnership from December 1986 through December 1991
when Greylock became incorporated. Formerly, Mr. Miller served as
Chairman and CEO of Thomson Advisory Group L.P. ("Thomson"), a money
management firm, from November 1990 to March 1993 and Vice Chairman
from April 1993 to November 1994 when Thomson became PIMCO Advisors
L.P. Mr. Miller served as a Director of PIMCO Advisors, L.P. from
November 1994 to December 1997. Mr. Miller is a Director of Layne
Christensen Company, a successor corporation to Christensen Boyles
Corporation, a supplier of mining products and services, where Mr.
Miller served as Chairman from January 1987 through December 1995. Mr.
Miller received his B.S. degree from Cornell University and his M.B.A.
degree from Harvard University Graduate School of Business
Administration. Mr. Miller is also a Director of Huffy Corporation.
COMMON SHARES BENEFICIALLY OWNED: 32,949 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2000)
</TABLE>
<TABLE>
<S> <C> <C>
Kevin O'Donnell photo
KEVIN O'DONNELL, age 73 -- Director since 1979.
Managing Director since August 1994 of O'Donnell & Associates, a
management consulting company. Mr. O'Donnell graduated from Kenyon
College and received his M.B.A. degree from Harvard University Graduate
School of Business Administration. He joined the Steel Improvement &
Forge Company, the predecessor of SIFCO Industries, Inc., a diversified
metalworking company, in 1947 and served in numerous capacities until
1960. From 1960 to 1972, he served as a management consultant, as a
General Manager of a specialty steel distributor and with the Peace
Corps in various capacities. In 1971, he was named Associate Director
for international operations of ACTION (Head of the Peace Corps). He
rejoined SIFCO Industries, Inc. in 1972 as Executive Vice President and
was named President and Chief Operating Officer in 1976 and Chief
Executive Officer in 1983. Mr. O'Donnell served as President and Chief
Executive Officer until his retirement in June 1990 and then became
Chairman of the Executive Committee of the Board until July 1994. Mr.
O'Donnell is a Director of National Machinery Company.
COMMON SHARES BENEFICIALLY OWNED: 16,028 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2000)
</TABLE>
9
<PAGE> 13
INFORMATION REGARDING MEETINGS AND COMMITTEES
OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, a Compensation Committee
and an Audit Committee. The Executive Committee exercises the power and
authority of the Board in the interim period between Board meetings. The
Compensation Committee administers the Company's Stock Option Plans, Incentive
Compensation Plan, and Restricted Stock Plan, and reviews and determines the
salary and bonus compensation of certain key executives. The Audit Committee
reviews the activities of the Company's independent auditors and various Company
policies and practices. The Board of Directors does not have a nominating
committee.
Set forth below is the current membership of each of the above-described
Committees, with the number of meetings held during the fiscal year ended May
31, 1998 in parentheses:
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION AUDIT
COMMITTEE(0) COMMITTEE(3) COMMITTEE(2)
------------ ------------ ------------
<S> <C> <C>
Thomas C. Sullivan Edward B. Brandon Donald K. Miller
(Chairman) (Chairman) (Chairman)
James A. Karman Kevin O'Donnell E. Bradley Jones
Kevin O'Donnell Albert B. Ratner Lorrie Gustin
Edward B. Brandon Max D. Amstutz
E. Bradley Jones
</TABLE>
The Board of Directors held four meetings during the fiscal year ended May
31, 1998. During that fiscal year no Director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period he or she served as a Director and (ii) the total number of
meetings held by Committees of the Board on which the Director served, during
the periods that the Director served.
Directors who are not also employees of the Company, with the exception of
William A. Papenbrock, received a quarterly fee of $6,500 and an additional
$1,000 for each Board and Committee meeting attended, except for the Chairman of
each Committee who received $1,500 for each Committee meeting attended. In April
1986, the Board of Directors adopted a Deferred Compensation Plan providing for
the deferred payment of Directors' fees in either cash or stock equivalents and
the payment of such deferred fees in cash commencing six months following the
date of the participating Director's retirement, resignation or death, or
termination of such participating Director's Deferred Compensation Agreement.
Participation in the Deferred Compensation Plan is at the election of each
Director entitled to receive compensation for serving on the Board.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
With the approval of the Board of Directors, the Company has agreed to
purchase a parcel of land (38.7 acres) adjacent to the Company's headquarters in
Medina, Ohio from the Estate of Margaret M. Sullivan, who passed away August 23,
1997, the wife of RPM's founder Frank C. Sullivan (deceased 1971), and the
mother of Thomas C. Sullivan, Chairman and Chief Executive
10
<PAGE> 14
Officer of the Company. The purchase price for the land will be $160,000. An
appraiser was appointed by the Cuyahoga County Probate Court to provide an
independent appraisal of the value of the land. This appraisal served as the
basis for the purchase price. Thomas C. Sullivan is a Co-Executor of the Estate
along with National City Bank and Mr. Sullivan has an interest in the land as a
beneficiary of the Estate.
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended May 31, 1998, 1997 and 1996, of those persons who were, at May 31, 1998:
(i) the Chief Executive Officer; and (ii) the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------ RESTRICTED
COMPENSATION SECURITIES STOCK PLAN ALL OTHER
NAME AND ---------------------------- UNDERLYING GRANTS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) DOLLAR VALUE(2) (3)(4)
------------------ ---- ------ ----- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Sullivan 1998 $785,000 $508,000 500,000(5) $651,813 $22,084
Chairman of the Board 1997 $745,000 $462,000 78,750 0 $16,077
and Chief Executive 1996 $710,000 $420,000 78,125 0 $12,419
Officer
James A. Karman 1998 $620,000 $420,000 343,750(5) $523,364 $32,044
President and Chief 1997 $590,000 $382,000 62,500 0 $28,862
Operating Officer 1996 $560,000 $347,000 62,500 0 $29,302
John H. Morris, Jr. 1998 $365,000 $290,000 43,750 $168,282 $16,373
Executive Vice 1997 $350,000 $264,000 38,750 0 $ 8,259
President 1996 $335,000 $240,000 39,063 0 $ 6,237
Frank C. Sullivan 1998 $300,000 $220,000 43,750 $ 38,504 $ 9,667
Executive Vice President 1997 $265,000 $200,000 38,750 0 $ 3,677
and Chief Financial 1996 $250,000 $140,000 39,063 0 $ 1,112
Officer
Charles G. Pauli 1998 $185,004 $422,338(6) 8,750 $ 82,547 $ 8,797
Vice President, 1997 $185,004 $414,631(6) 10,000 0 $ 5,391
Technology 1996 $185,004 $210,532(6) 12,500 0 $ 3,140
</TABLE>
- ------------------
(1) Figures reported for fiscal years 1997 and 1996 have been adjusted to
reflect the 5-for-4 stock dividend in December 1997.
(2) Dollar value calculated by multiplying the restated number of restricted
shares granted pursuant to the Company's 1997 Restricted Stock Plan (Mr.
Thomas C. Sullivan -- 39,866 Common Shares, Mr. Karman -- 32,010 Common
Shares, Mr. Morris -- 10,292 Common Shares, Mr. Frank C. Sullivan -- 2,355
Common Shares, and Mr. Pauli -- 5,048 Common Shares) by the restated closing
price of $16.35 on October 17, 1997, the effective date of grant.
(3) All Other Compensation consists of (i) insurance premiums paid by the
Company in connection with split dollar and other executive life insurance
policies and (ii) in fiscal 1998, the value (Mr. Thomas C. Sullivan $9,750,
Mr. Karman $9,750, Mr. Morris $9,313, Mr. Frank C. Sullivan $8,500, and Mr.
Pauli $5,589) of the Company's matching contributions, in the form of Common
Shares, to the RPM, Inc. 401(k) Plan relating to before-tax contributions
made by the Named Executive Officers. In fiscal 1997, the value of the
Company's matching contributions, in the form of Common Shares, to the RPM,
Inc. 401(k) Plan was $2,375 for each of the Named Executive Officers.
11
<PAGE> 15
(4) All Other Compensation includes the following amounts equal to the full
dollar economic value of the premiums paid by the Company in connection with
life insurance policies issued pursuant to the Split Dollar Life Insurance
Agreements between the Company and the following named Executive Officers
during 1998, 1997 and 1996, respectively: Mr. Thomas C. Sullivan $10,852
(1998), $9,420 (1997) and $8,280 (1996); Mr. Karman $20,710 (1998) and
$7,530 (1997); Mr. Morris $6,029 (1998), $3,488 (1997) and $2,926 (1996);
and Mr. Frank C. Sullivan $871 (1998), $710 (1997) and $667 (1996). The
premiums paid by the Company in connection with the life insurance policies
issued pursuant to such Split Dollar Life Insurance Agreements set forth in
the preceding sentence will be recovered in full by the Company upon the
payment of any death benefits under any such life insurance policy.
(5) One time final option grants awarded in July, 1997, as adjusted for the
5-for-4 stock dividend in December 1997, to Mr. Sullivan and Mr. Karman in
anticipation of their expected retirement on May 31, 2002. The options vest
25% per year starting in July 1998 through 2001.
(6) Mr. Pauli's bonus is based on the earnings of the Kop-Coat, Inc. group of
companies, for which Mr. Pauli serves as President, and not pursuant to the
Company's Incentive Compensation Plan.
12
<PAGE> 16
OPTION GRANTS
Shown below is information on grants of stock options pursuant to the
Company's 1996 Stock Option Plan during the fiscal year ended May 31, 1998 to
the executive officers who are named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ----------------------------------------------------------------------------------- VALUE AT ASSUMED
PERCENTAGE ANNUAL RATES OF
OF TOTAL STOCK PRICE
OPTIONS APPRECIATION
NUMBER OF GRANTED TO FOR OPTION
SECURITIES EMPLOYEES EXERCISE OR TERMS(3)(4)
UNDERLYING IN FISCAL BASE PRICE EXPIRATION --------------------------
NAME OPTIONS(1) YEAR (PER SHARE)(2) DATE 5% 10%
---- ---------- ---------- -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Sullivan 500,000(5) 30.4% $15.15 7/16/2007 $4,763,877 $12,072,599
Chairman of the Board and
Chief Executive Officer
James A. Karman 343,750(5) 20.9% $15.15 7/16/2007 $3,275,165 $ 8,299,912
President and Chief
Operating Officer
John H. Morris, Jr. 43,750(5) 2.7% $15.15 7/16/2007 $ 416,839 $ 1,056,352
Executive Vice President
Frank C. Sullivan 43,750(5) 2.7% $15.15 7/16/2007 $ 416,839 $ 1,056,352
Executive Vice President
and Chief Financial
Officer
Charles G. Pauli 8,750(6) 0.5% $16.35 10/17/2007 $ 89,971 $ 228,005
Vice President, Technology
</TABLE>
- ---------------
(1) The option agreements relating to the options granted under the Company's
1996 Stock Option Plan provide that such options become fully vested upon
certain "changes in control" of the Company described in such option
agreements. The number of options reported have been adjusted to reflect the
5-for-4 stock dividend in December 1997.
(2) This price represents the fair market value at the date of grant pursuant to
the terms of the Company's 1996 Stock Option Plan, as adjusted to reflect
the 5-for-4 stock dividend in December 1997.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% appreciation rates dictated by the Commission and are not
intended to be forecasts of the Company's stock price.
<TABLE>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERMS
-------------------------------
5% 10%
-------------- --------------
<S> <C> <C> <C>
(4) Value created for all shareholders: $1,071,839,234 $2,716,251,061
Gain of named executive officers as a percent of value
created for all shareholders: 0.84% 0.84%
</TABLE>
(5) One time final option grants awarded in July, 1997, as adjusted for the
5-for-4 stock dividend in December 1997, to Mr. Sullivan and Mr. Karman in
anticipation of their expected retirement on May 31, 2002. The options vest
25% per year starting in July 1998 through 2001.
(6) This option was granted on October 17, 1997 pursuant to the Company's 1996
Stock Option Plan. Twenty-five percent of the shares subject to the option
become exercisable on each anniversary date thereof.
13
<PAGE> 17
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the exercise of stock options
during the fiscal year ended May 31, 1998 to purchase the Company's Common
Shares by the executive officers named in the Summary Compensation Table and
with respect to the unexercised stock options at May 31, 1998 to purchase the
Company's Common Shares for the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND MAY 31, 1998 OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT MAY 31, 1998 AT MAY 31, 1998(2)
NUMBER OF --------------------------- ---------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Sullivan -- -- 276,524 613,751 $1,769,905 $1,488,755
Chairman of the Board and
Chief Executive Officer
James A. Karman -- -- 184,921 433,596 $1,171,887 $1,080,167
President and Chief
Operating Officer
John H. Morris, Jr. 11,954 $ 91,961 120,507 100,159 $ 738,411 $ 360,483
Executive Vice President
Frank C. Sullivan -- -- 82,342 98,207 $ 495,050 $ 348,224
Executive Vice President and
Chief Financial Officer
Charles G. Pauli -- -- 40,001 24,845 $ 255,447 $ 69,662
Vice President, Technology
</TABLE>
- ---------------
(1) Represents the difference between the option exercise price and the last
sales price of a Common Share on the Nasdaq National Market on the date of
exercise.
(2) Based on the last sales price of the Common Shares of $17.00 on the Nasdaq
National Market on May 29, 1998 (the last trading day of the Company's
fiscal year ended May 31, 1998). The ultimate realization of profit on the
sale of the Common Shares underlying such options is dependent upon the
market price of such shares on the date of sale.
14
<PAGE> 18
EMPLOYMENT AGREEMENTS
Under an Amended Employment Agreement, dated as of July 15, 1998, Thomas C.
Sullivan is employed as Chairman of the Board and Chief Executive Officer of the
Company for a four-year period ending May 31, 2002. Mr. Sullivan has advised the
Compensation Committee that both he and Mr. James A. Karman, President,
presently intend to retire as executive officers of the Company when their
Agreements terminate on May 31, 2002. Pursuant to the terms of the Agreement,
Mr. Sullivan's annual base salary, effective as of June 1, 1998, is $825,000.
Mr. Sullivan's annual base salary is subject to review on an annual basis by the
Compensation Committee of the Board of Directors, and such base salary may be
increased (but not decreased) based upon his performance, then generally
prevailing industry salary scales, the Company's results of operations and other
relevant factors. In addition to his base salary, Mr. Sullivan is entitled to
such annual incentive compensation under the 1995 Incentive Compensation Plan or
bonuses as the Compensation Committee determines and the Board of Directors
approves, and to participate in the other benefit plans provided by the Company.
Under the provisions of the Agreement, the Company may terminate the employment
of Mr. Sullivan for Disability or Cause (as defined). Mr. Sullivan may terminate
employment under the Agreement for Good Reason (as defined, including removal or
failure to re-elect him Chairman of the Board and Chief Executive Officer) or in
the event of a Change of Control of the Company (as defined, including any offer
to purchase a controlling block of Common Shares of the Company pursuant to a
tender offer or otherwise). If Mr. Sullivan should elect to terminate his
employment for Good Reason, Change of Control or for other specified reasons, he
is entitled to receive an amount equal to the product of his annual base salary
then in effect multiplied by five, a portion of which may not be deductible to
the Company as an ordinary and necessary business expense and may be subject to
a 20% excise tax to Mr. Sullivan pursuant to the provisions of the Tax Reform
Act of 1984. In the event that Mr. Sullivan were to terminate his employment
under such circumstances, he would be entitled to receive payment of
approximately $4,125,000. The Agreement also provides for the payment by the
Company of legal fees incurred by Mr. Sullivan in the event that, following a
Change of Control, Mr. Sullivan may be caused to institute or defend legal
proceedings to enforce his rights under the Agreement.
Under an Amended Employment Agreement, dated as of July 15, 1998, James A.
Karman is employed as President and Chief Operating Officer of the Company for a
four-year period ending May 31, 2002. Pursuant to the terms of the Agreement,
Mr. Karman's annual base salary, effective as of June 1, 1998, is $650,000. Mr.
Karman's Agreement also contains the same provisions which are described above
in connection with Mr. Sullivan's Agreement. In the event that Mr. Karman were
to terminate his employment under such circumstances, he would be entitled to
receive payment of approximately $3,250,000.
Effective July 15, 1998, the Company amended Employment Agreements
previously entered into with each of John H. Morris, Jr. and Frank C. Sullivan.
Pursuant to these Employment Agreements, Messrs. Morris and Sullivan are
employed in their current positions as Executive Vice President, and Executive
Vice President and Chief Financial Officer, respectively, for a one-year period
ending July 31, 1999. The Employment Agreements provide for the following base
salaries, effective June 1, 1998: Mr. Morris -- $380,000; and Mr.
Sullivan -- $330,000. The Employment Agreements also provide for severance
payments in the amount of one year's base salary in the event of termination of
the officer's employment and three years' base salary in the event of
termination of employment due to a Change of Control of the Company not approved
by the
15
<PAGE> 19
Company's Board of Directors. The Employment Agreements contain the same
provision for the recovery of legal fees incurred to enforce the provisions of
the Agreements following a Change of Control as described above in connection
with Mr. Thomas C. Sullivan's Agreement.
DEFINED BENEFIT PENSION PLAN
The table below sets forth the normal annual retirement benefits payable
upon retirement at age 65 (as of June 1, 1998) under the Company's tax qualified
defined benefit retirement plan (the "Retirement Plan") for employees in the
compensation ranges specified, under various assumptions with respect to average
annual compensation and years of benefit service, assuming that the employee
elected to receive his or her pension on a normal life annuity basis:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
AVERAGE (AS OF JUNE 1, 1998) WITH YEARS OF SERVICE INDICATED (1)
ANNUAL --------------------------------------------------------
COMPENSATION (2) 5 YEARS 10 YEARS 20 YEARS 30 YEARS 35 YEARS
---------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 5,964 $ 11,927 $ 23,855 $ 35,782 $ 37,996
150,000 9,446 18,892 37,784 56,675 60,496
200,000 12,928 25,856 51,712 77,568 82,996
250,000 16,410 32,820 65,641 98,461 105,496
300,000 19,892 39,785 79,569 119,354 127,996
350,000 23,374 46,749 93,498 140,247 150,496
400,000 26,857 53,713 107,426 161,140 172,996
450,000 30,339 60,677 121,355 182,032 195,496
500,000 33,821 67,642 135,284 202,925 217,996
550,000 37,303 74,606 149,212 223,818 240,496
600,000 40,785 81,570 163,141 244,711 262,996
650,000 44,267 88,535 177,069 265,604 285,496
700,000 47,749 95,499 190,998 286,497 307,996
750,000 51,232 102,463 204,926 307,390 330,496
800,000 54,714 109,427 218,855 328,282 352,996
850,000 58,196 116,392 232,784 349,175 375,496
900,000 61,678 123,356 246,712 370,068 397,996
950,000 65,160 130,320 260,641 390,961 420,496
1,000,000 68,642 137,285 274,569 411,854 442,996
1,050,000 72,124 144,249 288,498 432,747 465,496
1,100,000 75,607 151,213 302,426 453,640 487,996
1,150,000 79,089 158,177 316,355 474,532 510,496
1,200,000 82,571 165,142 330,284 495,425 532,996
1,250,000 86,053 172,106 344,212 516,318 555,496
</TABLE>
- ---------------
(1) The amounts listed may be reduced in accordance with certain provisions of
the Internal Revenue Code of 1986 which limit the maximum amount of
compensation that may be taken into account under the Retirement Plan to
$160,000 and the maximum annual benefit payable under the Retirement Plan to
$130,000. Prior to June 1, 1997, the Company maintained a cash Benefit
Restoration Plan for its executive officers and certain subsidiary
presidents providing for the payment of supplemental retirement benefits
because of such Internal Revenue Code limits. See "Benefit Restoration Plan"
below. At the October, 1997 Annual Shareholders
16
<PAGE> 20
Meeting, the shareholders approved the adoption of the RPM, Inc. 1997
Restricted Stock Plan, and pursuant to its terms the cash Benefit
Restoration Plan was frozen as of June 1, 1997 and will be eliminated over
time.
(2) Includes base compensation as in effect on June 1, 1998, overtime and
commissions paid and bonuses paid or accrued. The compensation covered by
the Retirement Plan for the executive officers named in the Summary
Compensation Table is the salary and bonus listed in such table.
With respect to the executive officers listed in the Summary Compensation
Table: Mr. Thomas C. Sullivan has 36.4 years of service; Mr. Karman, 35.4 years
of service; Mr. Morris, 21.4 years of service; Mr. Frank C. Sullivan, 9.3 years
of service; and Mr. Pauli, 7.2 years of benefit service.
BENEFIT RESTORATION PLAN
Effective January 1, 1991, the Company established the RPM, Inc. Benefit
Restoration Plan (the "Benefit Restoration Plan") for the purpose of providing
for the payment of supplemental retirement and death benefits to officers of the
Company designated by the Board of Directors whose Retirement Plan benefits may
be limited under the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA") and the Internal Revenue Code. In April 1991, the Board of
Directors designated Messrs. Thomas C. Sullivan, James A. Karman and John H.
Morris, Jr. as participants in the Benefit Restoration Plan. In July 1993, the
Board of Directors also designated Mr. Frank C. Sullivan and certain other
officers as participants in the Benefit Restoration Plan. The Benefit
Restoration Plan replaced the prior Supplemental Executive Retirement Plan which
provided similar supplemental retirement benefits. The Benefit Restoration Plan
is an unfunded excess benefit plan which is administered by the Company. The
Benefit Restoration Plan provides that any cash payment under the Plan is to be
made in an amount equal to the amount by which a participant's benefits
otherwise payable under the Company's Retirement Plan are reduced as a result of
limitations under ERISA and the Internal Revenue Code. The supplemental
retirement benefits are forfeited if the officer terminates employment before
attaining five years of vesting service and age 55. Supplemental death benefits
are paid to the surviving spouse or designated beneficiary of the officer. The
Company is entitled to a federal tax deduction in an amount equal to the cash
benefits at the time such cash benefits are paid to a participant.
RESTRICTED STOCK PLAN
At the October, 1997 Annual Shareholders Meeting, the shareholders approved
the adoption of the 1997 Restricted Stock Plan (the "Restricted Stock Plan").
The purpose of the Restricted Stock Plan is to replace, over a period of time,
the cash based Benefit Restoration Plan with a stock based plan. Shares granted
under the Restricted Stock Plan (the "Restricted Shares") directly reduce and
replace the cash amount of supplemental retirement restoration benefits and
supplemental death restoration benefits owed to participants under the Benefit
Restoration Plan. The Restricted Stock Plan is administered by the Compensation
Committee of the Board of Directors, which has the exclusive right and sole
discretion to authorize the granting of Restricted Shares. Only employees of the
Company, including employee Directors who are not members of the Compensation
Committee, are eligible to participate in the Restricted Stock Plan. The Company
is permitted to take a tax deduction for the value of the Restricted Shares upon
the vesting of such shares. The Restricted
17
<PAGE> 21
Stock Plan will expire on May 31, 2007 or such earlier date as may be determined
by the Board of Directors.
The Restricted Shares are Common Shares of the Company which are
forfeitable and nontransferable for a specified period of time. The transfer
restrictions remain in place until the earliest of (a) the later of either the
employee's termination of employment or the lapse of forfeiture restrictions,
(b) a "change of control" with respect to the Company, as such term is defined
in the Restricted Stock Plan, or (c) the termination of the Restricted Stock
Plan. The Restricted Shares are subject to complete forfeiture until the
earliest to occur of (a) the later of either the employee's attainment at age 55
or the fifth anniversary of the May 31st immediately preceding the date on which
the Restricted Shares were awarded, (b) the retirement of the employee on or
after the attainment of age 65, or (c) a "change in control" with respect to the
Company, as such is defined in the Restricted Stock Plan. Notwithstanding the
above, if the employee's service to the Company is terminated on account of the
death or total disability prior to the lapsing of restrictions, such
restrictions shall lapse.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors administers the cash
salary, bonus, and other incentive compensation and stock option programs for
the executive officers of the Company pursuant to (i) the Code of Regulations of
the Company, which was adopted by the shareholders on October 14, 1987, and (ii)
a Compensation Committee Charter, which was first adopted by the Board of
Directors on January 24, 1992. The Compensation Committee Charter, as amended,
provides for the Compensation Committee (i) to review and recommend to the Board
of Directors the amount of compensation for services rendered to the Company to
be paid to the executive officers of the Company, (ii) to review and approve the
terms and conditions of written Employment Agreements for executive officers of
the Company, (iii) to administer the Company's Stock Option Plans, (iv) to
review and recommend to the Board of Directors the amount of reasonable
compensation and payment of expenses and other benefits to be paid to members of
the Board of Directors for serving as a Director of the Company, (v) to review
and approve the Compensation Committee Report to be included in the Company's
Proxy Statement for its Annual Shareholders Meeting, and (vi) to review,
approve, and administer any other matters or plans specifically delegated to the
Committee by the Board of Directors. The Compensation Committee presently
consists of three independent Directors who are appointed to the Committee by
and report to the entire Board of Directors. Each member of the Compensation
Committee qualifies as a "non-employee director" within the definition of Rule
16b-3 under the Securities Exchange Act of 1934 and as an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code.
The Compensation Committee reviews and recommends the cash salaries,
incentive compensation, and bonuses to be awarded to Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer, and certain other executive
officers, annually in July of each year based upon a number of factors, but the
Committee does not utilize pre-established, specific performance goals in making
cash salary compensation decisions. Historically, Mr. Sullivan has prepared a
recommendation to the Compensation Committee for cash salary and bonus increases
and stock option awards for himself and the other executive officers which the
Committee then reviews and considers in light of a number of factors, including
(i) increases in sales, net income, and earnings per share,
18
<PAGE> 22
(ii) performance of the Company's Common Shares in the open market, (iii)
increases in cash dividends paid to shareholders, (iv) return on shareholders'
equity, and (v) acquisitions, corporate financings, and other general corporate
objectives which were achieved during the May 31 fiscal year. Any increases in
cash salaries for Mr. Sullivan and the other executive officers are made
retroactive to June 1 of each fiscal year and are included in an Amendment to
the officer's Employment Agreement. Once awarded, an increase in salary cannot
be reduced without the officer's consent.
In 1995, the Company retained a professional compensation consulting firm
to review the Company's executive compensation programs in light of Section
162(m) of the Internal Revenue Code which disallows a tax deduction for certain
compensation paid in excess of $1,000,000 to certain key executives. The
regulations under Section 162(m), however, except from this $1,000,000 limit
various forms of compensation, including "performance-based" compensation. The
consulting firm eventually recommended to the Compensation Committee a
performance-based Incentive Compensation Plan (the "Plan") which would satisfy
the requirements of Section 162(m). The Plan was approved by the Committee and
the Board of Directors in July 1995 and was approved by the Company's
shareholders at the October 1995 Annual Shareholders Meeting.
The Plan provides for the granting of annual cash bonus awards (the "Bonus
Awards") to those employees of the Company who in any respective fiscal year are
the Chief Executive Officer and the other four most highly compensated officers
of the Company (the "Covered Employees").
The Plan is designed to promote the interests of the Company and its
shareholders by attracting and retaining officers who are key employees of the
Company; motivating such officers by reason of performance-related incentives to
achieve the Company's performance goals; enabling such officers to participate
in the growth and financial success of the Company; and, by qualifying the Bonus
Awards as "performance-based" compensation under Section 162(m) of the Internal
Revenue Code, assuring that the Company will continue to be able to deduct cash
bonuses paid to the Covered Employees. The Plan is intended to be utilized as
the primary annual cash bonus program for the Company's Covered Employees.
The Plan calls for providing an aggregate Bonus Award pool of 1.3% of the
Company's Income Before Income Taxes ("pre-tax income") in each applicable
fiscal year for the Covered Employees. Within the first three months of each
fiscal year the Compensation Committee, which administers the Plan, is required
to determine in writing the portion of such aggregate Bonus Award pool that each
Covered Employee may receive in respect of such fiscal year. At the end of each
fiscal year, the Compensation Committee shall calculate the aggregate Bonus
Award pool based on the Company's audited pre-tax income and each individual's
Bonus Award payout amount.
The Compensation Committee may reduce or eliminate a Covered Employee's
Bonus Award, at the Compensation Committee's sole discretion, based solely on
individual performance. The total of all Bonus Award payments made under the
Plan in any given fiscal year shall not exceed 1.3% of the Company's pre-tax
income. Furthermore, the total of all payments to any one individual Covered
Employee under the Plan in any fiscal year shall not exceed $1,500,000. Payments
under the Plan, pursuant to the terms herein described, are intended to satisfy
the requirements of Section 162(m) of the Internal Revenue Code as
"performance-based" compensation and therefore be fully tax deductible to the
Company.
19
<PAGE> 23
In August 1997, the Compensation Committee determined on a percentage basis
the portion of the aggregate Bonus Award pool to be awarded to each Covered
Employee in respect of the Company's performance for the fiscal year ending May
31, 1998 as follows: Thomas C. Sullivan, 30%; James A. Karman, 25%; John H.
Morris, Jr., 18%; Frank C. Sullivan, 15%; and Richard E. Klar, 12%. The
Compensation Committee will follow the same procedure in 1998 as in 1997.
Mr. Pauli became an executive officer in February 1998. Mr. Pauli's bonus
for fiscal 1998 was based on the earnings of the Kop-Coat, Inc. group of
companies, for which Mr. Pauli serves as President.
For fiscal year May 31, 1998, the Company's pre-tax income was $149.6
million, and consequently the Bonus Award pool for the five highest paid
executive officers totaled $1,944,000. However, upon the recommendation of Mr.
Thomas C. Sullivan, the Compensation Committee awarded bonuses totaling
$1,630,000 to such officers, and in each case the bonus awarded to each officer
was less than the bonus which would have been obtained by multiplying each
officer's percentage times the total allowable Bonus Award pool provided for
under the Plan. See "Executive Compensation -- Summary Compensation Table."
The Company's 1996 Key Employees Stock Option Plan for its executive
officers and other key employees is intended to provide long-term equity
incentive to the officers and employees and, in the long-term, relates to
shareholder value. Options to executive officers are awarded by the Committee
based upon the recommendation of Mr. Sullivan, and the various presidents of the
Company's operating subsidiaries submit recommendations with respect to option
grants to subsidiary employees. Options are granted at the last sales price on
the date of grant, have a term of ten years, and vest at the rate of 25% per
year after one year.
As of May 31, 1998, 2,856,000 shares were available for future grant under
the 1996 Key Employees Stock Option Plan. The Compensation Committee at its July
1998 meeting granted options totaling 284,500 shares to executive officers and
other key employees of the Company and, in addition, it is contemplated that
approximately an additional 450,000 shares will be granted in October 1998 to
subsidiary presidents and key subsidiary employees.
The Company does not have any "cheap stock" plans.
In February 1994, the Company adopted a deferred compensation plan for
executive officers pursuant to which officers can defer receipt of a portion of
their salary and/or cash bonus until a future date during which period of time
the deferred compensation will receive tax deferred interest or appreciation
based upon the value of the Company's Common Shares and dividends paid thereon.
Any compensation deferred under the plan would not be included in the $1,000,000
limit provided for under Section 162(m) until the year in which the compensation
actually is received.
Edward B. Brandon, Chairman
Kevin O'Donnell
Albert B. Ratner
20
<PAGE> 24
PERFORMANCE GRAPHS
Set forth below are line graphs comparing the yearly cumulative total
shareholders' return on the Company's Common Shares against the yearly
cumulative total return of the S&P Composite -- 500 Stock Index and indices of
certain companies selected by the Company as comparative to the Company. For
fiscal years 1996 and 1997, the companies selected to form the peer group index
were: Detrex Corporation, Ferro Corporation, H. B. Fuller Company, Lawter
International, Inc., Lilly Industries, Inc., NL Industries, Inc., PPG Industries
Inc., Rohm and Haas Company, Standard Brands Paint Company, The Sherwin-Williams
Company and Valspar Corporation (the "Old Peer Group"). The Company has
eliminated Standard Brands Paint Company from its peer group index since it was
liquidated in bankruptcy proceedings during the last year. The Company has
elected to form a new peer group index by replacing Standard Brands Paint
Company with an additional comparative company, Imperial Chemical Industries PLC
(the "New Peer Group").
The graphs assume that the value of the investment in the Company's Common
Shares, the S&P Composite -- 500 Stock Index and the respective peer group index
was $100 on May 31, 1993 and May 31, 1988, respectively, and that all dividends,
if any, were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG RPM, INC., THE S&P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NEW PEER OLD PEER
(FISCAL YEAR COVERED) RPM,INC. GROUP GROUP S&P 500
<S> <C> <C> <C> <C>
5/93 100 100 100 100
5/94 101 113 107 104
5/95 115 125 119 125
5/96 123 145 142 161
5/97 146 172 177 208
5/98 167 223 221 272
</TABLE>
* $100 INVESTED ON 05/31/93 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MAY 31.
21
<PAGE> 25
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN*
AMONG RPM, INC., THE S&P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NEW PEER OLD PEER
(FISCAL YEAR COVERED) RPM,INC. GROUP GROUP S&P 500
<S> <C> <C> <C> <C>
5/88 100 100 100 100
5/89 128 106 94 127
5/90 163 110 97 148
5/91 212 131 117 165
5/92 224 158 147 182
5/93 279 151 158 203
5/94 281 170 169 211
5/95 320 188 188 254
5/96 344 218 225 326
5/97 406 260 280 422
5/98 466 336 349 552
</TABLE>
* $100 INVESTED ON 05/31/88 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MAY 31.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and Directors and persons who own 10% or more of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Commission.
Officers, Directors and 10% or greater shareholders are required by Commission
regulations to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers and Directors complied
with all filing requirements applicable to them with respect to transactions
during the fiscal year ended May 31, 1998, except for the filing of a late Form
4 to report the inadvertent omission of one transaction involving a purchase of
10,000 Common Shares by Dr. Max D. Amstutz.
22
<PAGE> 26
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected the firm of Ciulla,
Smith & Dale, LLP, independent certified public accountants, to examine and
audit the financial statements of the Company and its subsidiaries for the
fiscal year ending May 31, 1999. This firm has served as independent auditors
for the Company since 1964. A representative of Ciulla, Smith & Dale, LLP will
be present at the Annual Meeting and will have an opportunity to make a
statement should he so desire. The representative also will be available to
respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder proposal intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company's Secretary at its
principal executive offices not later than April 30, 1999 for inclusion in the
Board of Directors' Proxy Statement and form of Proxy relating to that meeting.
Each proposal submitted should be accompanied by the name and address of the
shareholder submitting the proposal and the number of Common Shares owned. If
the proponent is not a shareholder of record, proof of beneficial ownership also
should be submitted. All proposals must be a proper subject for action and
comply with the Proxy Rules of the Commission.
The Company may use its discretion in voting Proxies with respect to
Shareholder proposals not included in the Proxy Statement for the Fiscal Year
ended May 31, 1999, unless the Company receives notice of such proposals prior
to July 14, 1999.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the meeting other than those mentioned in the accompanying Notice.
However, if other matters shall properly come before the meeting, it is the
intention of the persons named in the accompanying Proxy to vote in accordance
with their best judgment on such matters.
Upon the receipt of a written request from any shareholder entitled to vote
at the forthcoming Annual Meeting, the Company will mail, at no charge to the
shareholder, a copy of the Company's Annual Report on Form 10-K, including the
financial statements and schedules required to be filed with the Commission
pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, as amended,
for the Company's most recent fiscal year. Requests from beneficial owners of
the Company's voting securities must set forth a good-faith representation that
as of the record date for the Annual Meeting, the person making the request was
the beneficial owner of securities entitled to vote at such Annual Meeting.
Written requests for the Annual Report on Form 10-K should be directed to:
P. Kelly Tompkins, Secretary
RPM, Inc.
P.O. Box 777
Medina, Ohio 44258
You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the Annual Meeting. For your convenience a
return envelope is enclosed requiring no additional postage if mailed in the
United States.
By Order of the Board of Directors.
P. KELLY TOMPKINS
Secretary
August 28, 1998
23
<PAGE> 27
PROXY PROXY
RPM, INC.
ANNUAL MEETING OF SHAREHOLDERS -- OCTOBER 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints JAMES A. KARMAN and JOHN H. MORRIS, and each
of them, as Proxy holders and attorneys, with full power of substitution, to
appear and vote all of the Common Shares of RPM, Inc., which the undersigned
shall be entitled to vote at the Annual Meeting of Shareholders of the Company
to be held at the Holiday Inn Select located at Interstate 71 and Route 82 East,
Strongsville, Ohio, on Friday, October 9, 1998 at 2:00 P.M. Eastern Daylight
Time, and at any adjournment or postponement thereof, hereby revoking any and
all proxies heretofore given, and (ii) authorizes and directs said Proxy holders
to vote all of the Common Shares of the Company represented by this Proxy as
follows, WITH THE UNDERSTANDING THAT IF NO DIRECTIONS ARE GIVEN ON REVERSE SIDE,
SAID SHARES WILL BE VOTED "FOR" THE ELECTION OF THE FOUR DIRECTORS NOMINATED BY
THE BOARD OF DIRECTORS.
Election of Directors, Nominees:
Edward B. Brandon,
William A. Papenbrock,
Thomas C. Sullivan,
Frank C. Sullivan
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN
THIS CARD.
...............................................................................
DETACH CARD
DIRECTIONS TO THE HOLIDAY INN SELECT STRONGSVILLE
FROM CLEVELAND AND POINTS NORTH (INCLUDING HOPKINS AIRPORT)
I-71 South to the North Royalton exit (#231A). Cross over bridge and the
hotel is on the right hand side.
FROM THE OHIO TURNPIKE EAST AND WEST
Ohio Turnpike (I-80) to I-71 South (exit 10). Exit at the North Royalton
exit (#231A). Cross over bridge and the hotel is on the right hand side.
FROM THE EAST
I-480 West to I-71 South. Exit at the North Royalton exit (#231A).
Cross over bridge and the hotel is on the right hand side.
FROM THE SOUTH
I-71 North to the Strongsville exit (#231).
Turn right at end of exit ramp and hotel is on the right hand side.
[direction map]
<PAGE> 28
RPM, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING
DARK INK ONLY. LOGO
<TABLE>
<CAPTION>
[ ]
FOR WITHHELD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C> <C>
1. Election of Directors [ ] [ ] [ ] 2. In their discretion to act on any
(see reverse) other matter or matters which may
properly come before the meeting.
For, except vote withheld from the following
nominee(s): Change of Address (mark box and [ ]
__________________________________________ revise pre-printed address as
necessary)
Will Attend Annual Meeting [ ]
Date:_________________________, 1998
____________________________________
Signature(s)
______________________________
Signature(s)
Note: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee, or
guardian, please give full
title as such.
</TABLE>
...............................................................................
/\ FOLD AND DETACH HERE /\
PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 29
PROXY PROXY
DIRECTION CARD
RPM, INC. 401(k) PLAN (FORMERLY RETIREMENT SAVINGS TRUST AND PLAN)
TO: KEY TRUST COMPANY OF OHIO, N.A., TRUSTEE
The undersigned hereby directs Key Trust Company of Ohio, N.A., RPM, Inc. 401(k)
Plan (formerly Retirement Savings Trust and Plan) Trustee to vote Common Shares
held for the undersigned's 401(k) Plan account at the Annual Meeting of
Shareholders of the Company to be held at the Holiday Inn Select located at
Interstate 71 and Route 82 East, Strongsville, Ohio, on Friday, October 9, 1998
at 2:00 P.M. Eastern Daylight Time, and at any adjournment or postponement
thereof, as specified, WITH THE UNDERSTANDING THAT IF A SIGNED DIRECTION CARD IS
RETURNED WITH NO DIRECTIONS GIVEN ON REVERSE SIDE, SAID SHARES WILL BE VOTED
"FOR" THE ELECTION OF THE FOUR DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND
TO VOTE IN ACCORDANCE WITH ITS DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING. ANY CONFIDENTIAL DIRECTION CARDS WHICH ARE NOT RETURNED
WILL BE VOTED BY THE TRUSTEE OF THE PLAN IN ITS DISCRETION.
Election of Directors, Nominees:
Edward B. Brandon,
William A. Papenbrock,
Thomas C. Sullivan,
Frank C. Sullivan
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE.
................................................................................
/\ FOLD AND DETACH HERE /\
<PAGE> 30
RPM, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. LOGO
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C> <C>
1. Election of Directors [ ] [ ] [ ] 2. In their discretion to act on any
(see reverse) other matter or matters which may
properly come before the meeting.
For, except vote withheld from the following
nominee(s):
____________________________________________ PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE
ACCOMPANYING
ENVELOPE.
Date:____________________ , 1998
________________________________
Signature(s)
________________________________
Signature(s)
Note: Your signature to this
Direction Card form should be
exactly the same as the name
imprinted hereon. Persons
signing as executors,
administrators, trustees, or
in similar capacities should
so indicate.
</TABLE>
................................................................................
/\ FOLD AND DETACH HERE /\
