<PAGE> 1
2251
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:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE SHERWIN-WILLIAMS COMPANY
- ------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STEPHEN J. PERISUTTI
THE SHERWIN-WILLIAMS COMPANY
101 PROSPECT AVENUE, N.W.
CLEVELAND, OHIO 44115
(216) 566-2543
- ------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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/ / 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:
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(2) Form, schedule or registration statement no.:
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(4) Date filed:
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<PAGE> 2
THE SHERWIN-WILLIAMS COMPANY
------------------
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of THE SHERWIN-WILLIAMS COMPANY will be
held at Marriott Society Center, 127 Public Square, Cleveland, Ohio on Wednes-
day, April 27, 1994 at 10:00 A.M., Local Time, for the following purposes:
1. To fix the number of Directors of the Company at ten, and to elect ten
Directors to hold office until the next Annual Meeting of Shareholders
or until their successors are elected;
2. To amend the Company's 1994 Stock Plan; and
3. To transact such other business as may properly come before the Annual
Meeting of Shareholders.
Holders of Common Stock of record at the close of business on February 28,
1994 are the only shareholders entitled to notice of and to vote at the Annual
Meeting of Shareholders.
L. E. STELLATO
Secretary
Midland Building
Cleveland, Ohio 44115-1075
March 15, 1994
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING A FOLLOW-UP LETTER
BY THE PROMPT COMPLETION AND RETURN OF THE ENCLOSED PROXY WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS. FOR YOUR CONVENIENCE, THERE
IS ENCLOSED A SELF-ADDRESSED ENVELOPE REQUIRING NO POSTAGE IF MAILED IN THE
UNITED STATES.
<PAGE> 3
THE SHERWIN-WILLIAMS COMPANY
MIDLAND BUILDING
CLEVELAND, OHIO 44115-1075
PROXY STATEMENT
March 15, 1994
PRELIMINARY
The enclosed proxy is requested by the Board of Directors in connection
with the Annual Meeting of Shareholders to be held April 27, 1994 for the
purpose of considering and acting upon the matters specified in the foregoing
Notice of Annual Meeting. The mailing date of this Proxy Statement is on or
about March 15, 1994.
The Board of Directors is not aware of matters other than those specified
in the foregoing Notice of Annual Meeting that will be brought before the Annual
Meeting of Shareholders for action. However, if any such matters should be
brought before the Annual Meeting of Shareholders, it is intended that the
persons appointed as proxies may vote or act thereon according to their
judgment.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the year which ended
December 31, 1993 is enclosed with this Proxy Statement. In addition, financial
and other reports may be submitted at the Annual Meeting of Shareholders, but it
is not intended that any action will be taken with respect thereto.
ELECTION OF DIRECTORS
It is intended that proxies which contain no instructions to the contrary
will be voted in favor of fixing the number of Directors at ten and for the
election of the nominees listed on the proxy. The candidates receiving the most
votes will be elected.
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<PAGE> 4
Should any nominee decline or be unable to accept such nomination or be
unable to serve as a Director, an event which management does not now expect,
the Board of Directors reserves the right to substitute such other person as a
nominee, or to reduce the number of nominees to such extent, as they shall deem
advisable.
Each of the nominees, except for Mrs. Petrauskas who was appointed a
Director by unanimous action of the Board of Directors on July 21, 1993, has
been previously elected as a Director by the shareholders. The following, based
upon information received in part from the respective persons and in part from
the records of the Company, sets forth information regarding each nominee as of
December 31, 1993:
JAMES M. BIGGAR has served as Chairman and Chief Executive Officer of Glencairn
Corporation (real estate development) since July 1991 prior to which he
served as Chairman of Nestle USA, Inc. (food products, restaurants, hotels)
commencing January 1991. From January 1984 to January 1991, Mr. Biggar
served as Chairman and Chief Executive Officer of Nestle Enterprises, Inc.
Mr. Biggar is 65 years old and has served as a Director of the Company
since July 1987. Mr. Biggar is a Director of National City Bank and
National City Corporation, and is Chairman of the Gateway Economic
Development Corporation and the New Cleveland Campaign.
JOHN G. BREEN has served as Chairman and Chief Executive Officer of the Company
since June 1986. Mr. Breen is 59 years old and has served as a Director of
the Company since April 1979. Mr. Breen is a Director of National City
Corporation, Mead Corporation, Parker-Hannifin Corporation and The Goodyear
Tire and Rubber Company. Mr. Breen is a Trustee of Catholic Charities
Corporation, the Cleveland Opera, John Carroll University, the Musical Arts
Association (The Cleveland Orchestra) and University Hospitals of
Cleveland, and is a Member of The Case Western Reserve University Visiting
Committee for the School of Medicine.
LEIGH CARTER, prior to his retirement in September 1990, served as President and
Chief Operating Officer of B.F. Goodrich Company (diversified
manufacturing) since April 1986. Mr. Carter is 68 years old and has served
as a Director of the Company since October 1985. Mr. Carter is a
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<PAGE> 5
Director of The Adams Express Co., Centerior Energy Corporation, The Lamson
and Sessions Co., NCC Funds and Petroleum and Resources Corporation. Mr.
Carter is a Trustee of The Cleveland Museum of Art, the Great Lakes Theater
Festival and University Circle Inc.
THOMAS A. COMMES has served as President and Chief Operating Officer of the
Company since June 1986. Mr. Commes is 51 years old and has served as a
Director of the Company since April 1980. Mr. Commes is a Director of
Society National Bank, Centerior Energy Corporation and the Greater
Cleveland Growth Association, and is a Trustee of The Cleveland Clinic
Foundation and Vocational Guidance Services (VGS).
DANIEL E. EVANS has served as Chairman, Chief Executive Officer and Secretary of
Bob Evans Farms, Inc. (food products and restaurants) since 1971. Mr. Evans
is 57 years old and has served as a Director of the Company since April
1990. Mr. Evans is a Director of Evans Enterprises, Inc., Motorists Mutual
Insurance Company, National City Bank and National City Corporation.
WILLIAM G. MITCHELL, prior to his retirement in May 1987, served as Vice
Chairman of Centel Corporation (independent telephone and electric
properties) since May 1986. Mr. Mitchell is 63 years old and has served as
a Director of the Company since April 1979. Mr. Mitchell is a Director of
Interlake Corporation, The Northern Trust Company, Northern Trust
Corporation and Peoples Energy Corporation.
A. MALACHI MIXON, III has served as Chairman, Chief Executive Officer and
President of Invacare Corporation (manufacturer and distributor of home
health care products) since September 1983. Mr. Mixon is 53 years old and
has served as a Director of the Company since April 1993. Mr. Mixon is a
Director of The Lamson and Sessions Co. and Primus Venture Capital, and is
a Trustee of The Cleveland Clinic Foundation, Cleveland Institute of Music
and Case Western Reserve University.
HELEN O. PETRAUSKAS has served as Vice President - Environmental and Safety
Engineering of Ford Motor Company (automobile manufacturing) since March
1983. Mrs. Petrauskas is 49 years old and has served as a Director of the
Company since July 1993. Mrs. Petrauskas is a
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<PAGE> 6
Director of MCN Corporation, is a Trustee of the Henry Ford Health System,
and is a Member of the Advisory Board - Center for Risk Analysis, Harvard
School of Public Health and a Member of the Board of Visitors of North
Carolina A&T State University.
RALPH E. SCHEY has served as Chairman and Chief Executive Officer of The Scott &
Fetzer Company (a diversified manufacturing company) since September 1974.
Mr. Schey is 69 years old and has served as a Director of the Company since
April 1984. Mr. Schey is a Director of Primus Venture Capital, is a Trustee
of Case Western Reserve University-Weatherhead School of Management, and is
Chairman of the Board of Trustees of The Cleveland Clinic Foundation and
the Board of Trustees of Ohio University.
RICHARD K. SMUCKER has served as President of The J.M. Smucker Company (makers
of food products) since January 1987. Mr. Smucker is 45 years old and has
served as a Director of the Company since September 1991. Mr. Smucker is a
Director of The J.M. Smucker Company and the Wm. Wrigley Jr. Company, and
is a Trustee of the Musical Arts Association (The Cleveland Orchestra).
DIRECTORS' FEES
Each Director who is not an employee of the Company receives a retainer of
$22,000 per annum, earned and payable monthly. In addition, each such Director
receives $1,250 for each meeting of the Board of Directors or Committee of the
Board of Directors that he or she attends, or $1,500 for each meeting of a
Committee of the Board of Directors that he or she chairs. No fees or other
remuneration, as such, are paid to employees of the Company for services as a
member of the Board of Directors or any Committee thereof. Directors who are not
employees of the Company are permitted to defer all or a portion of their fees
pursuant to the Company's Director Deferred Fee Plan. The plan provides for
deferred fees to be invested in either a Deferred Cash Account (which bears
interest at the current base lending rate) or a Shadow Stock Account (the value
of which fluctuates according to the value of the Company's Common Stock).
4
<PAGE> 7
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of the current Executive
Officers, the positions and offices with the Company held by them as of February
28, 1994 and the date when each was first elected or appointed an Executive
Officer:
<TABLE>
<CAPTION>
DATE WHEN
FIRST ELECTED
NAME AGE PRESENT POSITION OR APPOINTED
- ---------------------- --- ------------------------------------- --------------
<S> <C> <C> <C>
John G. Breen 59 Chairman and Chief Executive January 1979
Officer, Director
Thomas A. Commes 51 President and Chief Operating March 1979
Officer, Director
Larry J. Pitorak 47 Senior Vice President -- Finance, June 1978
Treasurer and Chief Financial Officer
John L. Ault 48 Vice President -- Corporate January 1987
Controller
Conway G. Ivy 52 Vice President -- Corporate Planning March 1979
and Development
Robert E. Kinney 58 Vice President -- Administration February 1994
Thomas Kroeger 45 Vice President -- Human Resources October 1987
Louis E. Stellato 43 Vice President, General Counsel and December 1989
Secretary
James J. Sgambellone 36 Assistant Secretary and Corporate July 1991
Director of Taxes
</TABLE>
Following is a brief account of each Executive Officer's business
experience with the Company during the last five year period:
Mr. Breen has served as Chairman and Chief Executive Officer since June
1986 and has served as a Director since April 1979.
Mr. Commes has served as President and Chief Operating Officer since June
1986 and has served as a Director since April 1980.
Mr. Pitorak has served as Senior Vice President -- Finance, Treasurer and
Chief Financial Officer since April 1992 prior to which he served as Senior Vice
President -- Finance and Chief Financial Officer commencing July 1991. From
February 1988 to July 1991, Mr. Pitorak served as Vice President, General
Counsel and Secretary.
5
<PAGE> 8
Mr. Ault has served as Vice President -- Corporate Controller since January
1987.
Mr. Ivy has served as Vice President -- Corporate Planning and Development
since April 1992 prior to which he served as Vice President and Treasurer
commencing January 1989.
Mr. Kinney has served as Vice President -- Administration since February
1994 prior to which he served as President & General Manager, Transportation
Services Division commencing July 1987.
Mr. Kroeger has served as Vice President -- Human Resources since October
1987.
Mr. Stellato has served as Vice President, General Counsel and Secretary
since July 1991 prior to which he served as Assistant Secretary and Corporate
Director of Taxes commencing December 1989. From January 1987 to December 1989,
Mr. Stellato served as Senior Corporate Counsel.
Mr. Sgambellone has served as Assistant Secretary and Corporate Director of
Taxes since July 1991 prior to which he served as Senior Corporate Counsel
commencing December 1989. From October 1987 to December 1989, Mr. Sgambellone
served as Corporate Counsel.
There are no family relationships between any of the persons named.
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<PAGE> 9
OPERATING MANAGERS OF THE COMPANY
The following table sets forth the names and ages of the current Operating
Managers, the positions and offices with the Company held by them as of February
28, 1994 and the date when each was first appointed an Operating Manager.
<TABLE>
<CAPTION>
DATE WHEN
FIRST
NAME AGE PRESENT POSITION APPOINTED
- ------------------------- --- ------------------------------------- ---------------
<S> <C> <C> <C>
Frank E. Butler 58 President & General Manager, November 1981
Coatings Division
Thomas Coy 35 President & General Manager, February 1994
Transportation Services Division
Claudio A. Geiger 44 President, International Group April 1993
T. Scott King 41 President & General Manager, February 1992
Consumer Brands Division
James W. Krause 49 President & General Manager, August 1987
Automotive Division
Blair P. LaCour 47 President & General Manager, Mid October 1989
Western Division, Paint Stores Group
John C. Macatee 42 President, Paint Stores Group June 1986
Steven J. Oberfeld 41 President & General Manager, South September 1992
Western Division, Paint Stores Group
James E. Renshaw 46 President & General Manager, Eastern June 1986
Division, Paint Stores Group
Joseph M. Scaminace 40 President & General Manager, May 1985
Specialty Division
Richard M. Wilson 41 President & General Manager, South- June 1987
eastern Division, Paint Stores Group
</TABLE>
Following is a brief account of each Operating Manager's business
experience during the last five year period:
Mr. Butler has served as President & General Manager, Coatings Division
since February 1992 prior to which he served as President & General Manager,
Consumer Division commencing May 1984.
Mr. Coy has served as President & General Manager, Transportation Services
Division since February 1994 prior to which he served as Vice President &
Director -- Sales and Operations, Transportation Services Division commencing
August 1992. From May 1989 to August 1992, Mr. Coy
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<PAGE> 10
served as Controller, Transportation Services Division prior to which he served
as Director -- Inventory Services, Paint Stores Group commencing July 1988.
Mr. Geiger has served as President, International Group since April 1993
prior to which he served as President & General Manager, Sherwin-Williams do
Brasil Industria e Comercio Ltda. ("Sherwin-Williams Brasil"), a subsidiary of
the Company, commencing January 1991. From February 1990 to January 1991, Mr.
Geiger served as Director -- Logistics of Sherwin-Williams Brasil prior to which
he served as Materials Director of Bozzano do Brasil, an affiliate of Revlon,
Inc., commencing September 1983.
Mr. King has served as President & General Manager, Consumer Brands
Division since February 1992 prior to which he served as Vice President,
Director of Sales and Marketing, Consumer Division commencing June 1987.
Mr. Krause has served as President & General Manager, Automotive Division
since August 1987.
Mr. LaCour has served as President & General Manager, Mid Western Division,
Paint Stores Group since September 1992 prior to which he served as President &
General Manager, Mid Central Division, Paint Stores Group commencing October
1989. From April 1988 to October 1989, Mr. LaCour served as Director of Sales,
Western Division, Paint Stores Group.
Mr. Macatee has served as President, Paint Stores Group since September
1992 prior to which he served as President & General Manager, South Central
Division, Paint Stores Group commencing June 1986.
Mr. Oberfeld has served as President & General Manager, South Western
Division, Paint Stores Group since September 1992 prior to which he served as
Vice President of Sales, South Central Division, Paint Stores Group commencing
August 1990. From January 1987 to August 1990, Mr. Oberfeld served as Director
of Sales, South Central Division, Paint Stores Group.
Mr. Renshaw has served as President & General Manager, Eastern Division,
Paint Stores Group since June 1986.
Mr. Scaminace has served as President & General Manager, Specialty Division
since September 1985.
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<PAGE> 11
Mr. Wilson has served as President & General Manager, Southeastern
Division, Paint Stores Group since June 1987.
There are no family relationships between any of the persons named.
COMPENSATION AND MANAGEMENT DEVELOPMENT
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Executive Compensation Program ("Program") is administered by
the Compensation and Management Development Committee ("Committee") of the Board
of Directors. The Committee is composed of five outside Directors and is
accountable to the Board of Directors on all compensation matters regarding the
Executive Officers. The Program is designed to enable the Company to attract,
motivate and retain key executives and to establish and maintain a performance
and achievement-oriented environment. The Program provides for: (a) competitive
salary levels which reflect, in part, individual performance, (b) additional
compensation based on the achievement of financial performance goals recommended
to the Committee, and (c) long-term stock-based incentive opportunities. The
Program consists of both cash and equity-based compensation.
The annual performance incentive opportunities and long-term incentive
opportunities established by the Committee are intended to be competitive with
market incentive compensation opportunities. The Committee utilizes data from
various commercially available executive compensation surveys in order to
identify, on an annual basis, the base salary and incentive opportunities
available at companies with comparable sales. These companies may or may not
include the companies included in the peer group identified in the performance
graphs. For the various components of compensation, the Committee uses the
median compensation paid to executive officers holding equivalent positions or
having similar responsibilities in companies with comparable sales.
In approving the amount of compensation to be paid to any of the Executive
Officers, the Committee places great emphasis on establishing incentive
opportunities for the Executive Officers which are directly linked with Company
performance and the maximization of shareholder value. The Committee establishes
a threshold Company earnings goal, and 75% of this goal must be met before
incentive compensation is paid to the Executive
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<PAGE> 12
Officers. This earnings goal is established at a level which exceeds the
Company's prior year's earnings, therefore requiring that the Company improve
its earnings performance before incentive compensation is paid. During the
fiscal year ended December 31, 1993, the Company's earnings exceeded that goal.
In addition, compensation decisions for individual Executive Officers are based,
in part, on financial performance goals for the Company, as described below, and
other individual goals related to each Executive Officer's area of
responsibility.
Annual cash compensation consists of a base salary and the opportunity to
earn additional compensation under the Company's Management Incentive Plan
("Plan"). All of the Executive Officers participate in the Plan. With regard to
base salary, the Committee approves a salary range for each Executive Officer by
using the compensation surveys, with the median market base salary approximating
the midpoint of the range. Once a range is formulated, salary levels are based
upon the Executive Officer's performance and, to a lesser extent, tenure in the
particular position. The base salary of each Executive Officer is reviewed and
approved annually by the Committee.
Annual incentive compensation awarded to an Executive Officer is also
determined by using the median incentive compensation (identified from the
compensation surveys), which is generally equivalent to the amount an Executive
Officer could receive under the Plan if 100% of all of the Company and
individual goals are obtained. In the event the Company and an Executive Officer
exceed 100% of the stated goals, additional incentive compensation can be
awarded. Decisions on annual incentive compensation awarded to an Executive
Officer are based upon financial performance goals, such as after-tax net income
and the return on stockholders' equity, for each Plan year, and the
accomplishment by the Executive Officer of individual performance goals, which
vary by Executive Officer. The financial performance goals are generally
weighted more heavily.
Long-term incentive compensation may be awarded to any one or all of the
Executive Officers under the Company's 1984 Stock Plan or the Company's 1994
Stock Plan, which replaced the 1984 Stock Plan on February 16, 1994. (For
purposes of this Report, the 1984 Stock Plan and the 1994 Stock Plan are
collectively referred to as the "Stock Plan".) All of the
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<PAGE> 13
Executive Officers participate in the Stock Plan. Under the Stock Plan, the
Committee may grant stock options to the Executive Officers based on competitive
market practices. Competitive market practices are determined by the various
compensation surveys mentioned above, and the Committee grants stock options
based upon the median market value of the underlying stock relating to stock
options that comparable companies are granting to their executive officers. The
option exercise price is equal to the fair market value of the Company's Common
Stock on the date options are granted. Stock options granted typically vest at
the rate of one-third per year for three years and expire ten years from the
date of grant.
Awards of restricted stock under the Stock Plan may be granted to the
Executive Officers. The granting of restricted stock is determined in the same
manner that the granting of stock options is determined. If granted, restricted
stock may be issued with certain performance and time restrictions. The number
of shares of restricted stock which may actually vest at the end of the
restriction period is dependent upon the Company's relative return on average
shareholder equity versus a group of peer companies. Depending on the Company's
performance at the end of the restriction period, from 0% to 100% of the
restricted stock may vest. The restriction period is typically four years from
the date of grant of the restricted stock, which is subject to a "substantial
risk of forfeiture."
Effective January 1, 1994, the Omnibus Budget Reconciliation Act of 1993
added Section 162(m) to the Internal Revenue Code. Section 162(m) generally
provides that certain compensation in excess of $1 million per year paid to a
company's chief executive officer and any of its four other highest paid
executive officers is no longer deductible to a company beginning in the 1994
tax year unless the compensation qualifies for an exception. This deduction
limit generally applies only to compensation that could otherwise be deducted by
a company in a taxable year, which excludes compensation deferred by an
executive officer. For 1994, the Committee believes that Mr. Breen is the only
Executive Officer who is likely to be paid compensation exceeding $1 million.
However, because of Mr. Breen's use of deferrals, the Committee does not expect
that Section 162(m) will limit the Company's deductibility of his compensation.
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<PAGE> 14
Section 162(m) provides an exception to the deductibility limit for
performance-based compensation if certain procedural requirements, including
shareholder approval of the material terms of the performance goal, are
satisfied. Accordingly, as part of this Proxy Statement, the Company is
proposing certain amendments to the 1994 Stock Plan which are intended to
qualify grants of options, stock appreciation rights and restricted stock for
this exception for performance-based compensation. The Committee is also
currently reviewing the Company's other compensation programs in light of
Section 162(m).
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Committee determined Mr. Breen's compensation for the fiscal year ended
December 31, 1993 based on a number of factors and criteria. Mr. Breen's base
salary range was determined using the median base salary of chief executive
officers for companies having comparable sales as the Company. Mr. Breen's base
salary within his range was established based upon a review by the Committee of
Mr. Breen's 1992 performance (which was measured, in part, by the Company's 1992
performance) and his tenure with the Company. For 1993, the average salary
increase given generally to salaried employees of the Company was 4.5%, and the
range of potential increases was 0% to 10%. Mr. Breen received a base salary
increase of 7% in January 1993. Mr. Breen's increase was based primarily upon
his above average 1992 performance (which was measured, in part, by the
Company's above average performance in 1992) and his tenure with the Company. In
addition, incentive compensation paid to Mr. Breen under the Plan was based
primarily upon the Company's achievement of 1993 financial performance goals
relating to after-tax net income, the return on stockholders' equity and cash
flow. Mr. Breen's achievement of certain other 1993 financial goals and
corporate planning and development objectives were also factors, but were
weighted less heavily.
In determining the number of stock options and shares of restricted stock
awarded to Mr. Breen under the Stock Plan, the Committee also identified the
median market value of the underlying shares relating to stock options and of
shares of restricted stock which comparable companies granted to their chief
executive officers. The amount of outstanding stock
12
<PAGE> 15
options and shares of restricted stock is not considered by the Committee in
making awards of stock options and restricted stock.
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
W. G. Mitchell, Chairman
J. M. Biggar
L. Carter
R. E. Schey
W. W. Williams
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<PAGE> 16
PERFORMANCE GRAPHS
The following line graphs set forth a comparison of the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return of the companies listed on the Standard & Poor's 500 Stock Index and a
Peer Group of companies selected on a line-of-business basis:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE SHERWIN-WILLIAMS COMPANY, S&P 500 INDEX AND
LINE-OF-BUSINESS PEER GROUP*
Assumes $100 invested on December 31, 1988 in the Common Stock of The
Sherwin-Williams Company, S&P 500 Index and a Line-of-Business Peer Group,
including reinvestment of dividends, through the fiscal year ended December 31,
1993.
* PPG Industries, Inc., Rohm and Haas Company, Ferro Corporation, NL Industries,
Inc., H.B. Fuller Company, Valspar Corporation, RPM, Inc., Grow Group, Inc.,
Standard Brands Paint Company, Pratt & Lambert, Inc., Lilly Industries, Inc.,
Lawter International, Inc., Guardsman Products, Inc., Detrex Corporation.
14
<PAGE> 17
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN
AMONG THE SHERWIN-WILLIAMS COMPANY, S&P 500 INDEX AND
LINE-OF-BUSINESS PEER GROUP*
Assumes $100 invested on December 31, 1983 in the Common Stock of The
Sherwin-Williams Company, S&P 500 Index and a Line-of-Business Peer Group,
including reinvestment of dividends, through the fiscal year ended December 31,
1993.
* PPG Industries, Inc., Rohm and Haas Company, Ferro Corporation, NL Industries,
Inc., H.B. Fuller Company, Valspar Corporation, RPM, Inc., Grow Group, Inc.,
Standard Brands Paint Company, Pratt & Lambert, Inc., Lilly Industries, Inc.,
Lawter International, Inc., Guardsman Products, Inc., Detrex Corporation.
15
<PAGE> 18
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING
NAME AND PRINCIPAL ------------------------ AWARD(S) OPTIONS/ ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) ($)1,2,3 SARS (#)1 COMPENSATION($)4
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
J. G. Breen 1993 722,800 560,000 615,000 32,000 143,026
Chairman and Chief 1992 675,506 525,000 --0-- 37,000 146,443
Executive Officer 1991 652,704 425,000 726,750 56,000 --
T. A. Commes 1993 467,308 325,000 338,250 18,000 108,471
President and Chief 1992 444,236 305,000 --0-- 21,000 100,376
Operating Officer 1991 415,834 235,000 382,500 32,000 --
L. J. Pitorak 1993 238,360 145,000 153,750 9,000 52,252
Senior Vice President 1992 225,268 133,000 --0-- 10,000 45,169
-- Finance, Treasurer 1991 198,925 99,000 165,000 15,200 --
and Chief Financial
Officer
L. E. Stellato 1993 181,760 110,000 123,000 5,000 37,277
Vice President, General 1992 160,478 95,000 --0-- 4,600 28,823
Counsel and Secretary 1991 134,599 62,000 75,375 7,000 --
C. G. Ivy 1993 184,500 100,000 123,000 5,000 43,231
Vice President -- 1992 175,808 95,000 --0-- 4,600 40,750
Corporate Planning and 1991 169,104 85,000 114,750 7,000 --
Development
</TABLE>
- ---------------
1 The figures set forth in this column reflect the two-for-one split of Common
Stock effectuated in the form of a 100 percent stock dividend declared by the
Board of Directors on February 20, 1991.
2 The number of shares of restricted stock held on December 31, 1993 and the
aggregate value of such holdings on such date for Messrs. Breen, Commes,
Pitorak, Stellato and Ivy are 58,000 shares with a value of $2,073,500, 31,000
shares with a value of $1,108,250, 13,000 shares with a value of $464,750,
7,000 shares with a value of $250,250 and 10,000 shares with a value of
$357,500, respectively. The values indicated are not necessarily indicative of
the actual values which may be realized by the named Executive Officers.
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<PAGE> 19
3 Grantees are entitled to retain dividends, if any, and vote all restricted
stock held, subject to the conditions of each grant of restricted stock.
4 The amounts disclosed in this column include: (a) Company contributions in the
amounts of $11,443 for each of Messrs. Commes, Pitorak and Ivy, and $10,782
for Mr. Stellato, under the Company's Pension Investment Plan, a defined
contribution plan. Mr. Breen does not participate in such plan; (b) Company
contributions in the amounts of $20,578, $4,072 and $1,121 for Messrs. Commes,
Pitorak and Ivy, respectively, under the Company's Pension Investment Plan
Equalization Program, a defined contribution plan. Messrs. Breen and Stellato
do not participate in such program; (c) Company contributions in the amount of
$8,599 for each of Messrs. Breen, Commes, Pitorak, Stellato and Ivy under the
Company's Employee Stock Purchase and Savings Plan, a defined contribution
plan; (d) Company contributions in the amounts of $71,283, $40,781, $15,068,
$8,403 and $9,771 for Messrs. Breen, Commes, Pitorak, Stellato and Ivy,
respectively, under the Company's Deferred Compensation Savings Plan, a
defined contribution plan; (e) an accrual, by the Company, pursuant to Mr.
Breen's employment agreement dated January 15, 1979, in the amount of $12,659
for certain pension-related benefits; (f) the dollar value of compensatory
split-dollar life insurance benefits, under the Company's Executive Life
Insurance Plan, in the amounts of $46,015, $23,058, $10,494, $7,571 and $9,745
for Messrs. Breen, Commes, Pitorak, Stellato and Ivy, respectively; and (g)
payments, by the Company, related to premiums under the Company's Executive
Disability Income Plan in the amounts of $4,470, $4,012, $2,576, $1,922 and
$2,552 for Messrs. Breen, Commes, Pitorak, Stellato and Ivy, respectively.
17
<PAGE> 20
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM4
--------------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE EXPIRA-
GRANTED IN FISCAL PRICE TION
NAME (#)1,2 YEAR ($/SH)3 DATE 5% ($) 10% ($)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. G. Breen 32,000 9.7859 30.75 1/20/03 619,920 1,564,560
T. A. Commes 18,000 5.5046 30.75 1/20/03 348,705 880,065
L. J. Pitorak 9,000 2.7523 30.75 1/20/03 174,353 440,033
L. E. Stellato 5,000 1.5291 30.75 1/20/03 96,863 244,463
C. G. Ivy 5,000 1.5291 30.75 1/20/03 96,863 244,463
Value realiza-
ble for all
shareholders5 N/A N/A N/A N/A 1,714,229,537 4,326,388,833
Value realiza-
ble for the
named Exec-
utive Officers
as a % of
value realiza-
ble for all
shareholders N/A N/A N/A N/A 0.078% 0.078%
</TABLE>
- ---------------
1One-third of the options granted are exercisable on each of the first, second
and third anniversary dates of the grant.
2All options granted become immediately exercisable, in full, upon a filing
pursuant to any federal or state law in connection with any tender offer for
shares of the Company's Common Stock (other than a tender offer by the Company)
or upon the signing of any agreement for the merger or consolidation of the
Company with another corporation or for the sale of substantially all of the
assets of the Company to another corporation, which tender offer, merger,
consolidation or sale, if consummated, would, in the opinion of the Board of
Directors of the Company, likely result in a change in control of the Company.
In the event any such tender offer, merger, consolidation or sale is abandoned
or, in the opinion of the Board of Directors, is not likely to be consummated,
the Board of Directors may
18
<PAGE> 21
nullify the effect of the immediately preceding sentence and reinstate the
provisions providing for accrual in installments, without prejudice to any
exercise of options that may have occurred prior to such nullification.
3The exercise price is equal to the fair market value of the Company's Common
Stock on the date of grant.
4The amounts disclosed in these columns, which reflect appreciation of the
Company's Common Stock price at the 5% and 10% rates dictated by the Securities
and Exchange Commission, are not intended to be a forecast of the Company's
Common Stock price and are not necessarily indicative of the actual values
which may be realized by the named Executive Officers or the shareholders.
These assumed rates of 5% and 10% would result in the Company's Common Stock
price increasing from $30.75 per share to approximately $50.12 per share and
$79.64 per share, respectively.
5Based on the closing price of the Company's Common Stock on January 20, 1993
(the date on which the options set forth in this table were granted) multiplied
by the total number of shares of such stock outstanding on such date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SARS AT FY-END
ACQUIRED ON VALUE AT FY-END (#) ($)2
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)1 UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. G. Breen 46,000 475,295 --0--/ --0--/
75,334 685,217
T. A. Commes --0-- --0-- 26,334/ 409,492/
42,667 389,256
L. J. Pitorak 6,400 87,385 8,799/ 86,507/
20,735 171,092
L. E. Stellato --0-- --0-- 17,399/ 320,342/
10,401 84,570
C. G. Ivy --0-- --0-- 43,059/ 985,752/
10,401 90,972
</TABLE>
19
<PAGE> 22
- ---------------
1The value realized on the exercise of options is based on the difference
between the exercise price and the fair market value of the Company's Common
Stock on the date of exercise.
2The value of unexercised in-the-money options is based on the difference
between the exercise price and the fair market value of the Company's Common
Stock on December 31, 1993.
PENSION PLAN
The Sherwin-Williams Company Salaried Employees' Retirement Plan ("Pension
Plan") provides pension benefits for salaried employees hired on or before
December 31, 1983, including Executive Officers of the Company. The Pension Plan
requires five years of service for a participant to become fully vested with
respect to a participant who has at least one hour of service on or after
January 1, 1989 and ten years of service for all other participants. A
participant may also become one hundred percent vested in the event the
participant's employment is terminated (in specified situations) after a Change
in Control (as defined in the Pension Plan) of the Company. As of December 31,
1993, the maximum annual benefit under the provisions of the Pension Plan is
$115,641 due to limitations imposed by ERISA and the Internal Revenue Code.
The Company has established a Retirement Equalization Program to provide
eligible employees with the benefits they would have received under the Pension
Plan but for the maximum limitations imposed by ERISA and the Internal Revenue
Code. The program authorizes the Company, at its discretion, to enter into
appropriate agreements with employees who are, or may become, eligible to
participate in the program. The benefits under this program will be paid from an
irrevocable grantor trust funded from the Company's general funds or by the
Company from the Company's general funds in the event of a deficiency in the
trust.
The following table sets forth the estimated aggregate annual regular
benefits payable under the Pension Plan and the Company's Retirement
Equalization Program commencing at age 65 in the form of a single life annuity:
20
<PAGE> 23
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
REMUNERATION 10 15 20 25
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 500,000 49,490 74,490 99,490 124,490
600,000 59,490 89,490 119,490 149,490
700,000 69,490 104,490 139,490 174,490
800,000 79,490 119,490 159,490 199,490
900,000 89,490 134,490 179,490 224,490
1,000,000 99,490 149,490 199,490 249,490
1,100,000 109,490 164,490 219,490 274,490
1,200,000 119,490 179,490 239,490 299,490
1,300,000 129,490 194,490 259,490 324,490
</TABLE>
Pensions are based upon average annual earnings (salary and bonuses) for
the highest five consecutive years out of the last ten years of employment with
the Company. For Mr. Breen, this average amount equaled $1,124,329 as of
December 31, 1993. Normal monthly pensions equal one-twelfth of one percent of
the Average Annual Earnings (as defined in the Pension Plan) times the number of
years of credited service up to a maximum of forty years, less an offset of
$42.50 (or such lesser amount as may be required under the Internal Revenue
Code). The pension may be adjusted for a surviving spouse's pension or other
options under the Pension Plan. Pensions are not subject to any deduction for
social security or any other offset amounts. Mr. Breen was credited with fifteen
years of service under the Pension Plan as of December 31, 1993 and participates
in the Company's Retirement Equalization Program.
EMPLOYMENT CONTRACTS
Messrs. Breen, Commes and Ivy have employment contracts with the Company.
In addition to their basic compensation, incentive compensation, and
participation in the employee benefit plans, the 1984 Stock Plan and the 1994
Stock Plan, each is entitled to receive, in the event the Company terminates his
employment for any reason, except in the event termination is the result of a
change of control of the Company, an amount equal to one and one-half times his
total compensation for the last preceding year. In the event the termination of
employment is the result of a change of control of the Company, Mr. Breen is
entitled to receive, at the time of his termination of employment, an amount
equal to two times his annual assured compensa-
21
<PAGE> 24
tion, and Messrs. Commes and Ivy are entitled to receive an amount equal to
their annual assured compensation. Compensation received due to a termination of
employment resulting from a change of control of the Company shall be an offset
against the amounts payable under the severance pay agreements as described
herein.
SEVERANCE PAY AGREEMENTS
To ensure continuity and the continued dedication of key executives during
any period of uncertainty caused by the possible threat of a takeover, the
Company has entered into severance pay agreements with certain key executives.
In the event there is a Change of Control (as that term is defined in the
agreements) of the Company and the employment of the contracting key executive
terminates under certain conditions described in the agreements at any time
during the two year period following a Change of Control of the Company, the
executive will receive an agreed upon amount of severance pay. In the event the
executive has an employment contract with the Company providing for the payment
of severance pay at the time of termination of employment, the amounts payable
under such employment contract shall be offset against amounts payable under the
severance pay agreement. The Company has entered into severance pay agreements
with each of the Executive Officers named in the Summary Compensation Table.
For Messrs. Breen and Commes, the severance pay agreements provide that
upon termination, whether voluntary or involuntary, unless the termination is
because of death, Disability or by the Company for Cause (as such terms are
defined in the agreements), they will receive, in addition to accrued salary,
incentive compensation and vacation pay: (a) a lump sum cash amount equal to
four times the sum of (i) twenty-six times their highest regular bi-weekly
compensation in effect within the three year period preceding termination, plus
(ii) the greater of the highest incentive compensation received within the three
year period preceding termination or the targeted incentive compensation for the
year of termination; (b) continued participation in the Company's employee
welfare benefit plans and other benefit arrangements for a period of four years
following termination; and (c) special retirement benefits so that the total
retirement benefits
22
<PAGE> 25
received will be equal to the retirement benefits which would have been received
had their employment with the Company continued during the four year period
following termination.
For all other Executive Officers named in the Summary Compensation Table,
the severance pay agreements provide that upon termination for any reason other
than death, Disability, by the Company for Cause or by the executive for other
than Good Reason (as such terms are defined in the agreements), the executive
will receive, in addition to accrued salary, incentive compensation and vacation
pay: (a) a lump sum cash amount equal to three times the sum of (i) twenty-six
times the executive's highest regular bi-weekly compensation in effect within
the three year period preceding termination, plus (ii) the greater of the
highest incentive compensation received by the executive within the three year
period preceding termination or the executive's targeted incentive compensation
for the year of termination; (b) continued participation in the Company's
employee welfare benefit plans and other benefit arrangements for a period of
three years following termination; and (c) special retirement benefits so that
the total retirement benefits received will be equal to the retirement benefits
which would have been received had such executive's employment with the Company
continued during the three year period following termination. Each such key
executive has the right to terminate his employment with the Company for any
reason during the thirty day period immediately following the first anniversary
date of a Change of Control of the Company, in which event such key executive
shall receive, in lieu of the amount set forth in clause (a) above, a lump sum
cash amount equal to two times the sum of clauses (a)(i) and (a)(ii) above.
The salary and other benefits provided by the severance pay agreements will
be payable either from an escrow fund established by the Company with a national
banking institution or from the Company's general funds. The Company has agreed
to indemnify such executives for any legal expense incurred in the enforcement
of their rights under the severance pay agreements.
23
<PAGE> 26
AMENDMENTS TO 1994 STOCK PLAN
The Board of Directors has adopted and recommends to the shareholders for
approval certain amendments to the 1994 Stock Plan ("Plan"). The Plan was
approved by the shareholders at the 1993 Annual Meeting of Shareholders and
succeeded the 1984 Stock Plan ("1984 Plan"). The Plan is designed to attract and
retain key executive, managerial, technical and professional personnel for the
Company and its subsidiaries and to provide such personnel incentives and
rewards for superior performance. The Directors believe it to be in the best
interest of the Company to approve the amendments to the Plan. On December 31,
1993, the closing price of the Company's Common Stock was $35.75 per share.
The Plan provides for the granting of stock options ("Options"), stock
appreciation rights ("SARs") and restricted stock ("Restricted Stock") relating
to the Common Stock of the Company.
A summary of the reason for the amendments is set forth below. In addition,
a description of the amendments and a description of the material provisions of
the Plan (without regard to the amendments) are also set forth below.
A. REASON FOR AMENDMENTS
Effective January 1, 1994, the Omnibus Budget Reconciliation Act of 1993
added Section 162(m) to the Internal Revenue Code ("Code"). Section 162(m)
generally provides that certain compensation in excess of $1 million per year
paid to a company's chief executive officer and any of its four other highest
paid executive officers is no longer deductible to a company beginning in the
1994 tax year unless the compensation qualifies for an exception. Section 162(m)
provides an exception to the deductibility limit for performance-based
compensation if certain procedural requirements, including shareholder approval
of the material terms of the performance goal, are satisfied. Accordingly, the
amendments are intended to qualify grants of Options, SARs and Restricted Stock
for this exception for performance-based compensation.
24
<PAGE> 27
B. DESCRIPTION OF AMENDMENTS
Limitation on Number of Options. The Plan presently contains no limit on
the number of shares of Common Stock for which Options may be granted to any
Eligible Employee (as defined in the Plan). The proposed amendments would
establish a limit of 500,000 shares for which Options may be granted to any
Eligible Employee during any calendar year. The Plan would be amended to add a
new Subsection 3.01(I) as follows:
(I) The maximum number of shares for which Option Rights may be
granted to any Eligible Employee during any calendar year shall not exceed
500,000.
Limitation on Number of SARs. The Plan presently contains no limit on the
number of shares of Common Stock for which SARs may be granted to any Eligible
Employee. The proposed amendments would establish a limit of 500,000 shares for
which SARs may be granted to any Eligible Employee during any calendar year. The
Plan would be amended to add a new Section 4.05 as follows:
4.05 Limitation on Number of Appreciation Rights. The maximum number
of shares for which Appreciation Rights may be granted to any Eligible
Employee during any calendar year shall not exceed 500,000.
Limitation on Number of Shares of Restricted Stock; Vesting Requirement.
The Plan presently contains no limit on the number of shares of Restricted Stock
that may be granted to any Eligible Employee. The proposed amendments would
establish a limit of 500,000 shares of Restricted Stock that may be granted to
any Eligible Employee during any calendar year.
In addition, the Plan currently provides that the Board of Directors may
authorize the granting of Restricted Stock to Eligible Employees from time-
to-time upon such terms and conditions as it may determine and that such shares
of Restricted Stock shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. The proposed amendments would
establish a vesting requirement to determine the number of shares of Restricted
Stock that a participant would be entitled to receive without restriction. The
vesting requirement would be based upon a com-
25
<PAGE> 28
parison of the average return on average equity of the Company and a group of
other companies.
The Plan would be amended to add a new Subsection 5.01(F) as follows:
(F) Each grant or sale shall be subject to a vesting requirement. The
percentage of the number of shares of Restricted Stock granted to any
Participant that such Participant shall be entitled to receive without
restriction shall be based upon a comparison of the average return on
average equity of the Company and a group of other companies. The number of
shares of Restricted Stock which a Participant shall be entitled to receive
without restriction shall be determined in accordance with the following
table:
<TABLE>
<CAPTION>
AVERAGE RETURN ON
AVERAGE EQUITY PERCENTILE RANKING PERCENTAGE OF
OF THE COMPANY COMPARED SHARES
TO GROUP OF OTHER COMPANIES VESTING
----------------------------------------------------- -------------
<S> <C>
80th to 100th Percentile............................. 100%
75th to 80th Percentile.............................. 90%
70th to 75th Percentile.............................. 80%
65th to 70th Percentile.............................. 70%
60th to 65th Percentile.............................. 60%
55th to 60th Percentile.............................. 50%
50th to 55th Percentile.............................. 40%
Less than 50th Percentile............................ 0%
</TABLE>
The maximum number of shares of Restricted Stock that may be granted
to any Eligible Employee during any calendar year shall not exceed 500,000.
C. DESCRIPTION OF 1994 STOCK PLAN
Eligibility. Any person who is at the time an officer (including an
officer who is a member of the Board of Directors) or other key employee of the
Company or any of its subsidiaries may be selected by the Board of Directors to
participate in the Plan. Participation is totally discretionary
26
<PAGE> 29
with the Board of Directors. As of January 31, 1994, the approximate number of
persons who would have been eligible to participate in the Plan, including all
of the Executive Officers of the Company, was 726.
Number of Shares. The number of shares of Common Stock of the Company
available under the Plan shall not exceed, in the aggregate, 2,000,000 shares,
plus the number of shares of Common Stock authorized pursuant to the 1984 Plan
which were not granted ("carryover") pursuant to the 1984 Plan as of the
expiration thereof, subject to certain adjustments. As of February 16, 1994,
there were 3,066,430 shares available for issuance under the Plan.
Options. Options available under the Plan may be either non-qualified
stock options or incentive stock options intended to qualify for special tax
treatment in accordance with Section 422 of the Code. The number of Options and
any period of employment required before the Options may be exercised with
respect to any participant would be determined by the Board of Directors at the
time of the grant; provided, however, no Option may be exercised more than ten
years from the date of grant. The Option exercise price will be equal to the
Fair Market Value (as such term is defined in the Plan) of the Common Stock of
the Company to which the Options relate, as determined on the date of grant. The
Options are not transferable except by will or the laws of descent and
distribution.
SARs. SARs may be granted with respect to any Options which may be granted
pursuant to the Plan or any employment agreement with the Company. SARs may be
exercised at any time when the related Options may be exercised by surrendering
the Option, unexercised, to the Company. At the time of the exercise of the SAR,
the participant will be entitled, subject to certain exceptions, to the excess
of the Fair Market Value of the shares of Common Stock covered by the related
Options, as determined on the date such SAR is exercised, over the aggregate
Option price provided for in the related Option. The transferability of SARs is
subject to the same restrictions as Options.
Restricted Stock. The grant of Restricted Stock constitutes an immediate
transfer of the ownership of shares of Common Stock to the participant and
entitles such participant to the dividends, voting rights and other rights
27
<PAGE> 30
of ownership of the Common Stock subject, however, to a substantial risk of
forfeiture and transfer restrictions. The number of shares of Restricted Stock,
the consideration to be paid by the participant to the Company, if any, for the
Restricted Stock, and the conditions which comprise the substantial risk of
forfeiture and transfer restrictions, including, but not limited to, a stated
number of years of service in a specific position and performance criteria for
the Company and/or the participant, will be determined by the Board of Directors
at the date of the grant. Upon lapse of the substantial risk of forfeiture and
transfer restrictions, the Common Stock represented by the grant, or a
percentage thereof as determined by the terms of the grant, will be transferred
to the participant free from restrictions, other than such restrictions as may
apply to the Common Stock of the Company generally or as are required by federal
and state law. During the existence of the substantial risk of forfeiture, the
transferability of the Restricted Stock may be prohibited or restricted in a
manner and to the extent prescribed by the Board of Directors at the date of
grant.
Other Provisions. The Plan may be amended from time to time by the Board
of Directors; however, without further approval of the shareholders, no such
amendment shall (a) increase the maximum number of shares that may be issued
under the Plan, subject to certain exceptions, (b) change the definition of
Eligible Employees, or (c) cause Rule 16b-3 of the Securities Exchange Act of
1934 to cease to be applicable to the Plan.
The Plan specifically provides for the cancellation or amendment of Options
or Restricted Stock and authorizes the granting of new Options or Restricted
Stock to such optionee at the then current market price.
The Plan will terminate by its term on February 16, 2003. Any grants of
Options, SARs or Restricted Stock granted on or before that date will continue
to be effective in accordance with the terms of the grant. The Board of
Directors may adjust the exercise price, sale price and the number or kind of
shares of Common Stock or other securities covered by Options, SARs or
Restricted Stock grants as it determines is equitably required to prevent
dilution or enlargement of the rights with respect thereto resulting from any
stock split, stock dividend, combination of shares, recapitalization or other
change in the capital structure of the Company, any merger, consolidation,
separation, reorganization or partial or complete liquidation,
28
<PAGE> 31
or any other corporate transaction or event having an effect similar to any of
the foregoing.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Under present federal income tax regulations,
generally there will be no federal income tax consequences to either the Company
or to a participant when an "Incentive Stock Option" (ISO) is granted or timely
exercised. However, such consequences will arise when the stock received under
the option is sold or otherwise disposed. If the participant retains the shares
acquired through an ISO for the requisite holding periods prescribed by the
Code, any gain or loss realized upon a subsequent disposition will constitute
long-term capital gain or loss to the participant. The gain or loss is measured
by the difference between the option price and the proceeds of the sale. The
requisite holding periods are two years after the ISO is granted and one year
after the shares subject to the ISO are transferred to the participant. In
general, if a participant disposes of the shares prior to the expiration of the
requisite holding periods, ordinary income will be realized equal to the excess
of the fair market value at the time of exercise, over the option price. In
certain circumstances, the amount of ordinary income realized on a sale or
exchange prior to the expiration of the requisite holding periods is limited to
the excess of the lesser of (a) the fair market value at the time of exercise or
(b) the amount realized upon such sale or exchange, over the option price. Any
gain in excess of such amount realized on a subsequent sale or disposition would
be taxed as a capital gain. In general, if a disposition occurs prior to the
expiration of the holding period, the Company will be entitled to a deduction
equal to the ordinary income realized by the participant.
Although a participant will not realize ordinary income upon the exercise
of an ISO, the excess of the fair market value of the shares acquired at the
time of exercise over the option price is included as an adjustment in computing
"alternative minimum taxable income" under Section 56 of the Code, and thus, may
result in the imposition of the "alternative minimum tax" for the participant
pursuant to Section 55 of the Code.
29
<PAGE> 32
Non-qualified Options. Under present federal income tax regulations,
generally the granting of a "non-qualified" stock option will not result in
federal income tax consequences to either the Company or the participant.
However, upon exercise of such option, the participant will realize ordinary
income measured by the excess of the then fair market value of the shares
acquired upon exercise of the non-qualified option over the option price. The
Company will be entitled to a deduction for a corresponding amount if and to the
extent that the amount is an ordinary and necessary expense, is not limited by
Section 162(m) of the Code, and satisfies the test of reasonable compensation.
If the participant retains the shares for the requisite holding period
prescribed by the Code, the gain or loss upon a subsequent sale or exchange will
constitute a long-term capital gain or loss. For purposes of determining gain or
loss realized upon a subsequent sale or exchange of such shares, the
participant's tax basis will be the sum of the option price paid and the amount
of ordinary income, if any, recognized by the participant on the date of
exercise.
Restricted Stock. During the period that shares of restricted stock are
subject to a "substantial risk of forfeiture," no taxable income will be
recognized by a participant with respect thereto except with respect to
dividends paid thereon. However, the participant has the right to elect under
Section 83 of the Code, within a thirty day period from the date of transfer, to
include in his taxable income for that year an amount equal to the excess of the
Fair Market Value of such shares (determined without regard to the restrictions)
at the time of transfer to him, over the amount, if any, paid for such shares.
In general, if the participant does not make this election timely, he will
realize ordinary taxable income for the year in which the restrictions terminate
or otherwise cease to impose a substantial risk of forfeiture to any holder, in
an amount equal to the excess of the Fair Market Value of the shares held by him
on the day the restrictions expire or are removed over the amount, if any, paid
for such shares, and the Company ordinarily will be entitled to a corresponding
deduction.
SARs. Under present federal income tax regulations, there will be no
federal income tax consequences to either the Company or the participant upon
the grant of SARs. Upon exercise of such appreciation rights by a participant,
the amount of any cash received and the Fair Market Value of
30
<PAGE> 33
any shares of Common Stock received will be taxable to the participant as
ordinary income, and the Company ordinarily will be entitled to a corresponding
deduction. The tax basis of any Common Stock received will be its Fair Market
Value on the exercise date.
Withholding Taxes. The Company will have the right to deduct from any
transfer of shares or other payment under the Plan an amount equal to the
federal, state and local income and employment taxes required to be withheld by
it with respect to such transfer and payment and, if the cash portion of any
such payment is less than the amount of taxes required to be withheld, to
require the participant or other person receiving such transfer or payment to
pay to the Company the balance of such taxes so required to be withheld.
Notwithstanding the foregoing, when the participant is required to pay to the
Company an amount required to be withheld under applicable income and employment
tax laws, the participant may elect to satisfy the obligation, in whole or in
part, by electing to have withheld, from the shares required to be delivered to
the participant, shares of Common Stock having a value equal to the amount
required to be withheld (except in the case of Restricted Stock where an
election under Section 83(b) of the Code has been made), or by delivering to the
Company other shares of Common Stock held by the participant. The shares used
for tax withholding settlement will be valued at an amount equal to the Fair
Market Value of such Common Stock on the day the tax is first determinable ("Tax
Date"). An election by a participant to have shares withheld or to deliver other
shares of Common Stock for this purpose will be subject to the following
restrictions: (a) it must be made prior to the Tax Date, (b) it will be
irrevocable (subject to certain exceptions), (c) it will be subject to the
disapproval of the Board of Directors, (d) if the participant is an officer of
the Company within the meaning of Section 16 of the Securities Exchange Act of
1934 ("Section 16"), no election shall be effective for a Tax Date which occurs
within six (6) months of the grant (except that this limitation will not apply
in the event the death or disability of the participant occurs prior to the
expiration of the six (6) month period), and (e) if a participant is an officer
of the Company within the meaning of Section 16, such election must be made
(subject to certain exceptions) either six (6) months or more prior to the Tax
Date or during the period beginning on the third business day following the date
of the release for publication of quarterly or annual
31
<PAGE> 34
reports of the Company containing summary statements of sales and earnings and
ending on the twelfth business day following such date.
VOTE REQUIRED FOR APPROVAL OF THE AMENDMENTS TO THE 1994 STOCK PLAN
The approval of the amendments to the 1994 Stock Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE AMENDMENTS TO THE 1994 STOCK PLAN.
32
<PAGE> 35
PLAN BENEFITS -- 1994 STOCK PLAN
The following table sets forth, for each of the Executive Officers named in
the Summary Compensation Table and the groups identified below, information
regarding benefits that would have been received by each assuming the 1994 Stock
Plan, as proposed to be amended, was in effect as of January 1, 1993.1
<TABLE>
<CAPTION>
OPTIONS RESTRICTED STOCK
--------------------- --------------------
NUMBER NUMBER
OF DOLLAR OF DOLLAR
NAME AND POSITION UNITS2 VALUE3 UNITS2 VALUE3
- --------------------------------------------- ------- --------- ------ ---------
<S> <C> <C> <C> <C>
John G. Breen
Chairman and
Chief Executive Officer.................... 32,000 160,000 20,000 615,000
Thomas A. Commes
President and
Chief Operating Officer.................... 18,000 90,000 11,000 338,250
Larry J. Pitorak
Senior Vice President-Finance,
Treasurer and Chief Financial Officer...... 9,000 45,000 5,000 153,750
Louis E. Stellato
Vice President, General Counsel and
Secretary.................................. 5,000 25,000 4,000 123,000
Conway G. Ivy
Vice President-Corporate Planning and
Development................................ 5,000 25,000 4,000 123,000
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Executive Group.............................. 85,000 425,000 48,000 1,476,000
Non-Executive Director Group................. -0- -0- -0- -0-
Non-Executive Officer Employee Group......... 242,000 1,210,000 41,000 1,260,750
------- --------- ------ ---------
Totals....................................... 327,000 1,635,000 89,000 2,736,750
</TABLE>
- ---------------
1 Except for Messrs. Breen and Commes, none of the current Directors, nominees
for election as a Director, any associate of such persons or any associate of
an Executive Officer has received or is presently entitled to receive any
benefits under the Plan.
2 The number of units indicated represents an amount equal to the number of
options and shares of restricted stock which would have been granted in 1993
had the 1994 Stock Plan, as proposed to be amended, been in effect during 1993
(assuming termination of the 1984 Stock Plan). The number
33
<PAGE> 36
of options and shares of restricted stock indicated is the same as the number
actually granted in 1993 under the 1984 Plan.
3 The value of options is based on the number of options indicated multiplied by
the difference between the fair market value of the Company's Common Stock on
January 20, 1993 and on December 31, 1993. The value of restricted stock is
based on the number of shares of restricted stock indicated multiplied by the
fair market value of the Company's Common Stock on January 20, 1993. January
20, 1993 is the date on which options and shares of restricted stock would
have first been granted in 1993. The values indicated are not necessarily
indicative of the dollar values which may be realized by the named Executive
Officers and groups identified.
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Ernst & Young to examine the
consolidated financial statements and other records of the Company for the
fiscal year ending December 31, 1994. Representatives of Ernst & Young are
expected to be present at the Annual Meeting of Shareholders and will have an
opportunity to make a statement if they wish and to respond to appropriate
shareholders' questions.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five regular meetings during the fiscal year
ended December 31, 1993.
The Board of Directors has established an Audit Committee, a Board
Composition Committee and a Compensation and Management Development Committee.
The functions and members of these Committees are as follows:
Audit. The Audit Committee has the responsibility of reviewing the adequacy
of the Company's financial controls and the quality and integrity of its
financial reports. In addition, the Audit Committee recommends to the Board of
Directors independent public accountants to audit the books, records and
accounts of the Company for the ensuing fiscal year. The Committee reviews all
reports and recommendations of the independent public accountants with respect
to matters within their area of responsibility and reports to the Board of
Directors on the scope and depth of the
34
<PAGE> 37
audit. The Committee also makes inquiries into the Company's internal audit
functions and procedures.
The Audit Committee met twice during 1993 and is currently composed of five
outside Directors: R. C. Doban, D. E. Evans, W. G. Mitchell, A. M. Mixon, III
and R. K. Smucker.
Board Composition. The Board Composition Committee develops plans for the
composition and size of the Board of Directors. Matters considered by this
Committee include the ratio of inside to outside Directors, as well as the
skills and disciplines desired as represented by individual Directors. The
Committee also is charged with the responsibility to conduct searches for
individual members, interview prospective candidates and make selections and
recommendations to the Board of Directors. The Committee has not undertaken to
consider nominees recommended by shareholders but has and will continue to
employ professional search firms to assist it in identifying potential members
of the Board of Directors with the desired skills and disciplines.
The Board Composition Committee met once in 1993 and is currently composed
of three outside Directors: J. M. Biggar, L. Carter and W. G. Mitchell.
Compensation and Management Development. The Compensation and Management
Development Committee establishes general policies on an annual basis for
changes in compensation for all key employees of the Company. In addition, the
Committee sets the compensation for certain key employees and recommends to the
Board of Directors for approval the compensation of all elected officers.
The Committee administers the Company's Management Incentive Plan,
Executive Life Insurance Plan, Executive Disability Income Plan, Deferred
Compensation Savings Plan, Key Management Deferred Compensation Plan, Retirement
Equalization Program, Pension Investment Plan Equalization Program, 1984 Stock
Plan and 1994 Stock Plan and recommends to the Board of Directors for approval
other types of incentive compensation and similar plans.
35
<PAGE> 38
The Compensation and Management Development Committee met three times
during 1993 and is currently composed of five outside Directors: J. M. Biggar,
L. Carter, W. G. Mitchell, R. E. Schey and W. W. Williams.
STOCK OUTSTANDING
At the close of business on the record date, February 28, 1994, there were
outstanding 88,510,509 shares of Common Stock.
VOTING OF SHARES
Each share is entitled to one vote upon all matters presented at the Annual
Meeting. All proposals and other business as may properly come before the Annual
Meeting require the affirmative vote of the holders of a majority of the shares
of Common Stock present, in person or by proxy, and entitled to vote thereat.
Shares represented by properly executed proxies will be voted at the meeting in
accordance with the instructions thereon, and, unless authority to do so is
withheld or the shareholder abstains from voting, the shares represented by
proxies will be voted in favor of the proposals referred to in the Notice of
Annual Meeting. Such shares will be voted in the Proxies' discretion upon such
other business as may properly come before the Annual Meeting. Proxies marked as
withholding authority or abstaining will be treated as present for purposes of
determining a quorum for the Annual Meeting, but will not be counted as a vote
for any proposal as to which authority is withheld or abstention is indicated.
Proxies returned by brokers as "non-votes" will not be treated as present for
purposes of determining a quorum for the Annual Meeting and will not be counted
as a vote for any proposal as to which a non-vote is indicated, unless properly
voted by the broker.
REVOCABILITY OF PROXY
A proxy may be revoked at any time before a vote is taken or the authority
granted is otherwise exercised. Revocation may be accomplished by the execution
of a later proxy with regard to the same shares or by giving notice to the
Company in writing or in open meeting.
36
<PAGE> 39
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as to each Director and nominee, each
Executive Officer named in the Summary Compensation Table and all Directors and
Executive Officers as a group, information regarding shares of Common Stock held
by each as of December 31, 1993.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP1,2,3 CLASS
- ---------------------------- ----------------------- ---------------
<S> <C> <C> <C>
J. M. Biggar 6,600 direct *
800 indirect
J. G. Breen 379,666 direct *
178,433 indirect
L. Carter 1,640 indirect4 *
T. A. Commes 142,868 direct *
86,432 indirect
R. C. Doban 2,251 direct *
D. E. Evans 200 direct *
C. G. Ivy 67,338 direct *
65,916 indirect
W. G. Mitchell 3,882 direct *
A. M. Mixon, III 5,000 direct *
H. O. Petrauskas none
L. J. Pitorak 37,172 direct *
19,089 indirect
R. E. Schey 4,800 direct *
R. K. Smucker 1,000 direct *
L. E. Stellato 28,878 direct *
7,785 indirect
W. W. Williams 600 direct *
All Directors and Executive 745,983 direct 1.2920
Officers as a Group 400,495 indirect
</TABLE>
- ---------------
*Represents beneficial ownership of less than 1% of the total number of shares
of Common Stock outstanding.
1 Common Stock.
37
<PAGE> 40
2 The figures indicated include the following number of shares of Common Stock
for which the Executive Officers named in the Summary Compensation Table and
all Executive Officers as a group have the right to acquire beneficial
ownership, within sixty days from December 31, 1993, through the exercise of
stock options: Mr. Breen, 41,666; Mr. Commes, 50,001; Mr. Pitorak, 17,466; Mr.
Stellato, 21,865; Mr. Ivy, 48,592; and all Executive Officers as a group,
229,187.
3 Unless otherwise indicated, voting and investment power relating to the shares
of Common Stock indicated above is exercised solely by the beneficial owner or
shared by such owner and such owner's spouse or children.
4 All shares are held in trust for the benefit of Mr. Carter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as to each beneficial owner of more than
five percent of the Company's Common Stock, information regarding shares of
Common Stock held by each as of December 31, 1993.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP1 CLASS
- ------------------------- ------------------------- -------------
<S> <C> <C> <C>
Mellon Bank Corporation2
Mellon Bank Center
Pittsburgh, PA 15258 14,910,000 direct 16.78
</TABLE>
- ---------------
1 Common Stock.
2 All of the shares are beneficially owned by Mellon Bank Corporation and its
related affiliates in their various fiduciary capacities. Of the shares
indicated, Mellon Bank Corporation and its affiliates have sole voting power
over 1,339,000 shares, shared voting power over 119,000 shares, sole
dispositive power over 1,333,000 shares, and shared dispositive power over
866,000 shares. Of the shares indicated, 12,711,000 (14.31%) are beneficially
owned by Mellon Bank, N.A. as Trustee of the Company's Employee Stock Purchase
and Savings Plan. Mellon Bank, N.A. has no voting or dispositive power over
any shares held pursuant to such plan. Information set forth in this table is
based upon Mellon Bank Corporation's Schedule 13G, dated February 3, 1994.
38
<PAGE> 41
EXPENSE AND METHOD OF PROXY SOLICITATION
The enclosed proxy is solicited by the Board of Directors and the entire
cost of solicitation will be paid by the Company. In addition to the
solicitation of proxies by use of the mails, officers and regular employees of
the Company may solicit the return of proxies, and Kissel-Blake, Inc., New York,
N.Y., has been retained to aid in the solicitation of proxies, for which
services it will receive a fee estimated at $13,500. Proxies will be solicited
by personal interview, mail, telephone and telegraph.
REPORT OF BALLOTING AT 1993 SHAREHOLDERS' MEETING
There were outstanding and entitled to vote at the April 28, 1993 Annual
Meeting of Shareholders of the Company 88,656,825 shares of Common Stock. There
were present in person or by proxy and voting or withholding the authority to
vote in the election of Directors, holders of a total of 74,398,351 shares,
representing 83.9172% of the voting power of the Company.
The Resolution to establish the number of Directors at eleven and to elect
eleven Directors was passed with each of the eleven nominees receiving a
favorable vote of at least 99.3983% but not greater than 99.4455% of the shares
present in person or by proxy.
The proposed amendment to the Amended Articles of Incorporation of the
Company to increase the number of authorized shares of Common Stock to
300,000,000 shares received a 97.0317% favorable vote of the shares voting on
the amendment. The Resolution to approve the 1994 Stock Plan received a 93.9150%
favorable vote of the shares voting on the Resolution.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals must be received at the Company's headquarters, 101
Prospect Avenue, N.W., Cleveland, Ohio 44115-1075, Attention: Investor
Relations, on or before November 15, 1994 in order to be included
39
<PAGE> 42
in the proxy material relating to the 1995 Annual Meeting of Shareholders of the
Company. In order to remove any question as to the date on which a proposal was
received by the Board of Directors, it is suggested that proposals be submitted
by Certified Mail-Return Receipt Requested.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE TO EACH SHAREHOLDER WHO IS SOLICITED TO VOTE AT
THE 1994 ANNUAL MEETING OF SHAREHOLDERS, UPON THE WRITTEN REQUEST OF SUCH PERSON
AND WITHOUT CHARGE, A COPY OF THE COMPANY'S 1993 ANNUAL REPORT ON FORM 10-K.
PLEASE DIRECT REQUESTS TO THE COMPANY'S HEADQUARTERS, 101 PROSPECT AVENUE, N.W.,
CLEVELAND, OHIO 44115-1075, ATTENTION: INVESTOR RELATIONS.
40
<PAGE> 43
THE SHERWIN-WILLIAMS COMPANY
1994 STOCK PLAN
The Sherwin-Williams Company 1994 Stock Plan (the "Plan") is established
effective as of 12:00:01 a.m. on February 16, 1994. The purpose of the Plan is
to attract and retain key executive, managerial, technical and professional
personnel for The Sherwin-Williams Company and its subsidiaries by providing
incentives and rewards for superior performance by such personnel.
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings unless the context clearly indicates otherwise:
1.01 Appreciation Right. A right to receive from the Company, upon
surrender of the related stock option, an amount equal to the Spread in
accordance with Article IV.
1.02 Board of Directors. The Board of Directors of the Company.
1.03 Code. The Internal Revenue Code of 1986, as the same has been or may
be amended from time-to-time.
1.04 Committee. The Compensation and Management Development Committee of
the Board of Directors or such other committee composed of not less than three
(3) non-employee directors appointed by the Board of Directors.
1.05 Common Stock. Common Stock of the Company or any security into which
such Common Stock may be changed by reason of any transaction or event of the
type described in Article VIII.
1.06 Company. The Sherwin-Williams Company, or its corporate successor or
successors.
1.07 Date of Grant. The date specified by the Board of Directors on which
a grant of Option Rights or Appreciation Rights or a grant or sale of Restricted
Stock shall become effective (which date shall not be earlier than the date on
which the Board of Directors takes action with respect thereto).
1.08 Eligible Employees. Persons who are selected by the Board of
Directors and who are, at the time such persons are selected, officers
(including officers who are members of the Board of Directors) or other key
employees of the Company or any of its subsidiaries.
1.09 Fair Market Value. The average between the highest and the lowest
quoted selling price of the Company's Common Stock on the New York Stock
Exchange or any successor exchange.
1.10 ISO. An "incentive stock option" within the meaning of section 422 of
the Code.
1.11 Option Right. The right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Article III.
1.12 Participant. An Eligible Employee named in an agreement evidencing an
outstanding Option Right, Appreciation Right, sale or grant of Restricted Stock
or stock option granted under any stock option plan heretofore or hereafter
approved by the shareholders of the Company.
1.13 Plan. The Sherwin-Williams Company 1994 Stock Plan, as the same may
be amended from time-to-time.
1
<PAGE> 44
1.14 Restricted Stock. Shares of Common Stock granted or sold pursuant to
Article V as to which neither the substantial risk of forfeiture nor the
prohibition or restriction on transfer referenced to therein has lapsed,
terminated or been cancelled.
1.15 Section 16. Section 16 of the Securities Exchange Act of 1934, as the
same has been and may be amended from time-to-time.
1.16 Spread. The excess of the Fair Market Value per share of Common Stock
on the date when an Appreciation Right is exercised over the option price
provided for in the related stock option.
1.17 Subsidiary. Any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of the granting
of the Option Right, Appreciation Right or the grant or sale of Restricted
Stock, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
1.18 Tax Date. The date upon which the tax is first determinable.
ARTICLE II
COMMON STOCK AVAILABLE
2.01 Number of Shares. The shares of Common Stock which may be (a) sold
upon the exercise of Option Rights, (b) delivered upon the exercise of
Appreciation Rights, or (c) awarded or sold as Restricted Stock and released
from substantial risks of forfeiture thereof shall not exceed in the aggregate
2,000,000 shares plus the number of shares of Common Stock authorized pursuant
to the 1984 Stock Plan which are not granted pursuant to the 1984 Stock Plan as
of the expiration thereof, all subject to adjustment as provided in Articles VII
and VIII. Such shares may be shares of original issuance or treasury shares or a
combination of the foregoing.
2.02 Reuse of Shares. If an Option Right or portion thereof shall expire
or terminate for any reason without having been exercised in full, or if the
rights of a Participant in Restricted Stock shall terminate prior to the lapse
of the substantial risk of forfeiture relating thereto, the shares covered by
such Option Right or Restricted Stock grant not transferred to the Participant
shall be available for future grants of Option Rights and/or Restricted Stock.
In the event of a cancellation or amendment of Option Rights or Restricted Stock
grants, the Board of Directors may authorize the granting of new Option Rights
or Restricted Stock (which may or may not cover the same number of shares which
had been the subject of the prior grant) in such manner, at such price and
subject to the same terms, conditions and discretions as, under the Plan, would
have been applicable had the cancelled Option Rights or Restricted Stock not
been granted.
ARTICLE III
OPTION RIGHTS
3.01 Authorization and Terms. The Board of Directors may, from
time-to-time and upon such terms and conditions as it may determine, consistent
with the terms of the Plan, authorize the granting of options to Eligible
Employees to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations and shall be subject to all of the applicable
limitations set forth in the Plan, including the following:
(A) Each grant shall specify the number of shares of Common Stock to
which it pertains;
(B) Each grant shall specify an option price per share equal to the
Fair Market Value per share on the Date of Grant, and that such option
price shall be payable in full at the time
2
<PAGE> 45
of exercise of the option either (i) in cash, (ii) by exchanging for the
shares to be issued hereunder pursuant to the exercise of the option
previously acquired shares of the Company's Common Stock held for such
period of time, if any, as the Board of Directors may require and reflect
in the stock option certificate (valued at an amount equal to the Fair
Market Value of such stock on the date of exercise), or (iii) by a
combination of the payment methods specified in clauses (i) and (ii)
hereof. The proceeds of sale of Common Stock subject to Option Rights are
to be added to the general funds of the Company or to the shares of the
Common Stock held in treasury and used for the Company's corporate purposes
as the Board of Directors shall determine;
(C) Successive grants may be made to the same Eligible Employee
whether or not any Option Rights previously granted to such Eligible
Employee remain unexercised;
(D) Each grant shall specify the period or periods of continuous
employment by the Participant with the Company or any Subsidiary which is
necessary before the Option Rights or installments thereof will become
exercisable;
(E) The Option Rights may be either (i) options which are intended to
qualify under particular provisions of the Code, as in effect from
time-to-time, including, but not limited to, ISOs, (ii) options which are
not intended to so qualify or (iii) any combination of separate grants of
both (i) and (ii) above;
(F) The aggregate Fair Market Value of the stock (determined as of the
time the option with respect to such stock is granted) for which any
Eligible Employee may be granted options which are intended to qualify as
ISOs and which are exercisable for the first time by such Participants
during any calendar year (under all plans of the Company and its parent and
Subsidiary corporations, if any) shall not exceed $100,000;
(G) No Option Right shall be exercisable more than ten years from the
Date of Grant; and
(H) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer and delivered to and
accepted by the Eligible Employee and containing such terms and provisions,
consistent with the Plan, as the Board of Directors may approve.
ARTICLE IV
APPRECIATION RIGHTS
4.01 Generally. The Board of Directors may from time-to-time grant
Appreciation Rights in respect of any or all stock options heretofore or
hereafter granted (including stock options simultaneously granted) pursuant to
any stock option plan or employment agreement of the Company now or hereafter in
effect, whether or not such stock options are at such time exercisable, to the
extent that such stock options at such time have not been exercised and have not
been terminated. The Board of Directors may define the terms and provisions of
such Appreciation Rights, subject to the limitations and provisions of the Plan.
The amount which may be due the Participant at the time of the exercise of an
Appreciation Right may be paid by the Company in whole shares of Common Stock
(taken at their fair market value at the time of exercise), in cash or a
combination thereof, as the Board of Directors shall determine.
4.02 Exercise of Appreciation Rights. An Appreciation Right may be
exercised at any time when the related stock option may be exercised by the
surrender to the Company, unexercised, of the related stock option. Shares
covered by stock options so surrendered shall not be available for the granting
of further stock options under any stock option plan of the Company or a
Subsidiary, anything in such plan to the contrary notwithstanding.
3
<PAGE> 46
4.03 Limitation on Payments. The amount payable on the exercise of any
Appreciation Rights may not exceed 100% (or such lesser percentage as the Board
of Directors may determine) of the excess of (i) the Fair Market Value of the
shares of Common Stock covered by the related option as determined on the date
such Appreciation Right is exercised over (ii) the aggregate option price
provided for in the related stock option.
4.04 Termination of Appreciation Right. An Appreciation Right shall
terminate and may no longer be exercised upon the earlier of (i) exercise or
termination of the related stock option or (ii) any termination date specified
by the Board of Directors at the time of grant of such Appreciation Right.
ARTICLE V
RESTRICTED STOCK
5.01 Authorization and Terms. The Board of Directors may, from
time-to-time and upon such terms and conditions as it may determine, authorize
the granting or sale to Eligible Employees of Restricted Stock. Each grant or
sale may utilize any or all of the authorizations and shall be subject to all of
the following limitations:
(A) Each such grant or sale shall constitute an immediate transfer of
the ownership of shares of Common Stock to the Participant in consideration
of the performance of services and shall entitle such Participant to
voting, dividend and other ownership rights, as the Board of Directors may
determine, subject, however, to a substantial risk of forfeiture and
restrictions on transfer as the Board of Directors may determine;
(B) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is
less than the Fair Market Value per share at the Date of Grant;
(C) Each such grant or sale shall provide that the shares of
Restricted Stock covered by such grant or sale are subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the
Code and the regulations thereunder;
(D) Each such grant or sale shall provide that during the period for
which the substantial risk of forfeiture is to continue, the
transferability of the Restricted Stock shall be prohibited or restricted
in the manner and to the extent prescribed by the Board of Directors at the
Date of Grant; and
(E) Each grant or sale of Restricted Stock shall be evidenced by an
agreement executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall contain such terms and
provisions, consistent with the Plan, as the Board of Directors may
approve.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.01 Generally. The Plan shall be administered by the Board of Directors,
which may from time-to-time delegate all or any part of its authority under the
Plan to a Committee. The members of the Committee shall not be eligible and
shall not have been eligible for a period of at least one year prior to their
appointment, to participate in the Plan or in any other plan of the Company or
any Subsidiary entitling the participants therein to acquire Restricted Stock,
Option Rights or Stock Appreciation Rights. A majority of the Board of Directors
or the Committee, if applicable, shall constitute a quorum, and the action of
the members present at any meeting at which a quorum is present, or acts
unanimously approved in writing, shall be the acts of the Board of Directors or
the Committee, as applicable. No Restricted Stock, Option Right or
4
<PAGE> 47
Appreciation Right shall be granted or sold to any member of the Committee so
long as his membership continues.
6.02 Interpretation and Construction. The interpretation and construction
by the Board of Directors of any provision of the Plan or of any agreement,
notification or document evidencing the grant of Restricted Stock, Option Rights
or Appreciation Rights and any determination by the Board of Directors pursuant
to any provision of the Plan or of any such agreement, notification or document,
made in good faith, shall be final and conclusive. No member of the Board of
Directors shall be liable for any such action or determination made in good
faith.
ARTICLE VII
AMENDMENT AND TERMINATION
7.01 Amendment of the Plan. The Plan may be amended from time-to-time by
the Board of Directors without further approval by the shareholders of the
Company unless such amendment (i) increases the maximum number of shares
specified in Article II (except that adjustments authorized by Section 8.02
shall not be limited by this provision), (ii) changes the definition of
"Eligible Employees" or (iii) causes Rule 16b-3 issued under the Securities
Exchange Act of 1934 (or any successor rule to the same effect) to cease to be
applicable to the Plan.
7.02 Amendment of the Agreements. The Board of Directors may cancel or
amend any agreement evidencing Restricted Stock, Option Rights or Appreciation
Rights granted under the Plan provided that the terms and conditions of each
such agreement as amended are not inconsistent with the Plan.
7.03 Automatic Termination. The Plan will terminate at midnight on
February 16, 2003; provided, however, that Option Rights and Appreciation Rights
granted on or before that date may extend beyond that date and restrictions
imposed on Restricted Stock transferred on or before that date may extend beyond
such date.
ARTICLE VIII
MISCELLANEOUS
8.01 Transferability. No Option Right or Appreciation Right shall be
transferable by a Participant other than by will or the laws of descent and
distribution. Option Rights and Appreciation Rights shall be exercisable during
the Participant's lifetime only by the Participant. No right or interest of any
Participant granted under the Plan shall be subject to alienation, anticipation,
encumbrance, garnishment, attachment, any lien, obligation or liability of such
Participant, or execution or levy of any kind, voluntary or involuntary, except
as provided herein or required by law.
8.02 Adjustments. The Board of Directors may make or provide for such
adjustments in the exercise price, sale price and the number or kind of shares
of the Company's Common Stock or other securities covered by outstanding Option
Rights, Appreciation Rights or Restricted Stock grants as such Board of
Directors in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants that would otherwise result from (i) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, (ii) any merger, consolidation, separation,
reorganization or partial or complete liquidation, or (iii) any other corporate
transaction or event having an effect similar to any of the foregoing. The Board
of Directors may also make or provide for such adjustments in the number or kind
of shares of the Company's Common Stock or other securities which may be sold or
transferred under the Plan and in the maximum number of shares that may be
purchased or received by any person, as such
5
<PAGE> 48
Board of Directors in its sole discretion, exercised in good faith, may
determine is appropriate to reflect any event of the type described in clauses
(i) and/or (ii) of the preceding sentence.
8.03 Fractional Shares. The Company shall not be required to sell or
transfer any fractional share of Common Stock pursuant to the Plan. The Board of
Directors may provide for the elimination of fractions or for the settlement of
fractions in cash.
8.04 Withholding Taxes. The Company shall have the right to deduct from
any transfer of shares or other payment under this Plan an amount equal to the
Federal, state and local income taxes and employment taxes required to be
withheld by it with respect to such transfer and payment and, if the cash
portion of any such payment is less than the amount of taxes required to be
withheld, to require the Participant or other person receiving such transfer or
payment, to pay to the Company the balance of such taxes so required to be
withheld. Notwithstanding the foregoing, when a Participant is required to pay
to the Company an amount required to be withheld under applicable income and
employment tax laws, the Participant may elect to satisfy the obligation, in
whole or in part, by electing to have withheld, from the shares required to be
delivered to the Participant, shares of Common Stock having a value equal to the
amount required to be withheld (except in the case of Restricted Stock where an
election under Section 83(b) of the Code has been made), or by delivering to the
Company other shares of Common Stock held by such Participant. The shares used
for tax withholding settlement will be valued at an amount equal to the Fair
Market Value of such Common Stock on the Tax Date. Election by a Participant to
have shares withheld or to deliver other shares of Common Stock for this purpose
will be subject to the following restrictions: (i) such election must be made
prior to the Tax Date, (ii) such election will be irrevocable (subject to
certain exceptions), (iii) such election will be subject to the disapproval of
the Board of Directors, (iv) if a Participant is an officer of the Company
within the meaning of Section 16, no election shall be effective for a Tax Date
which occurs within six (6) months of the grant (except that this limitation
will not apply in the event death or disability of the Participant occurs prior
to the expiration of the six (6) month period) and (v) if a Participant is an
officer of the Company within the meaning of Section 16, such election must be
made (subject to certain exceptions) either six (6) or more months prior to the
Tax Date or during the period beginning on the third business day following the
date of the release for publication of quarterly or annual reports of the
Company containing summary statements of sales and earnings and ending on the
twelfth business day following such date.
8.05 Not an Employment Contract. This Plan shall not confer upon any
Eligible Employee or Participant any right with respect to continuance of
employment with the Company or any Subsidiary, nor shall it interfere in any way
with any right such Eligible Employee, Participant, the Company or any
Subsidiary would otherwise have to terminate such Participant or Eligible
Employee's employment at any time.
8.06 Invalidity of Provisions. Should any part of the Plan for any reason
be declared by any court of competent jurisdiction to be invalid, such decision
shall not affect the validity of any remaining portion, which remaining portion
shall continue in full force and effect as if the Plan had been adopted with the
invalid portion hereof eliminated, it being the intention of the Company that it
would have adopted the remaining portion of the Plan without including any such
part, parts or portion which may for any reason be hereafter declared invalid.
8.07 Effective Date. The Plan will become effective at 12:00:01 a.m. on
February 16, 1994 provided the Plan is approved by the affirmative vote of the
holders of a majority of the shares of Common Stock present, in person or by
proxy, and entitled to vote at any annual or special meeting of shareholders at
which a quorum is present. The Plan shall be deemed to be adopted on the date of
such meeting.
6
<PAGE> 49
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. G. Breen and T.
A. Commes as Proxies, each with the power to appoint
THE SHERWIN-WILLIAMS his substitute, and hereby authorizes them to represent
COMPANY and to vote, as designated below, all the shares of
Common Stock of The Sherwin-Williams Company held of
record by the undersigned on February 28, 1994, at the
annual meeting of shareholders to be held on
April 27, 1994 or any adjournment thereof.
[Logo Here]
<TABLE>
<S> <C>
COMMON
STOCK
PROXY
1. For election of 10 Directors to hold office until
the next Annual Meeting of Shareholders or until
their successors are elected; the Nominees are:
J. M. Biggar, J. G. Breen, L. Carter, T. A. Commes,
D. E. Evans, W. G. Mitchell, A. M. Mixon, III
H. O. Petrauskas, R. E. Schey and R. K. Smucker.
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES ON THE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE> 50
<TABLE>
<C> <S> <C>
X PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES
VOTES AS IN THIS
EXAMPLE.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
<TABLE>
<S> <C> <C> <C> <C>
WITHHELD
FOR ALL AS TO ALL
NOMINEES NOMINEES FOR AGAINST ABSTAIN
1. Election of / / / / 2. To amend the / / / / / / 3. In their discretion, the Proxies
Directors Company's 1994 are authorized to vote upon
(see reverse side) Stock Plan such other business as may
properly come before the meeting.
FOR, except vote withheld PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
as to the following Nominee(s): CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Change (If your address has changed, please mark the box at
of / / left and indicate your new address below)
Address
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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. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
SIGNATURE(S)____________________________________________ ________, 1994
(Date)
SIGNATURE(S)____________________________________________ ________, 1994
(Date)
</TABLE>
