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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
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[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ______ TO _______
</TABLE>
COMMISSION FILE NUMBER 1-4851
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THE SHERWIN-WILLIAMS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
(State or other jurisdiction of incorporation or organization)
34-0526850
(I.R.S. Employer Identification No.)
101 PROSPECT AVENUE, N.W., CLEVELAND, OHIO
(Address of principal executive offices)
44115-1075
(Zip Code)
(216) 566-2000
Registrant's telephone number, including area code
------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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9.875% Debentures due 2016 New York Stock Exchange
Common Stock, Par Value $1.00 New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of January 31, 1996, 85,523,699 shares of the Registrant's Common Stock,
with a par value of $1.00 each, were outstanding, net of treasury shares. The
aggregate market value of such voting stock held by non-affiliates of the
Registrant as of that date was $3,578,435,300.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement dated March 13, 1996, as regards certain
information required to be disclosed in Part III.
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<PAGE> 2
THE SHERWIN-WILLIAMS COMPANY
AND CONSOLIDATED SUBSIDIARIES
As used in this Form 10-K, the terms "Company" and "Registrant" mean The
Sherwin-Williams Company and its consolidated subsidiaries, taken as a whole,
unless the context indicates otherwise.
TABLE OF CONTENTS
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ITEM NO. PAGE NO.
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Part I
1. Business Segment Information
a. General Development of Business 1
b. Narrative Description of Business 1
c. Financial Information About Business Segments 7
d. Foreign and Domestic Operations and Export Sales 7
2. Description of Property 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 9
Part II
5. Market for Common Equity and Related Stockholder Matters 11
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
8. Financial Statements and Supplementary Data 18
9. Changes in and Disagreements on Accounting and Financial Disclosure 19
Part III
10. Directors and Executive Officers of the Registrant 20
11. Executive Compensation 20
12. Security Ownership of Certain Beneficial Owners and Management 20
13. Certain Relationships and Related Transactions 20
Part IV
14. Financial Statement Schedule, Reports on Form 8-K and Exhibits
a. Financial Statements, Financial Statement Schedule and Exhibits 21
b. Reports on Form 8-K 21
Signatures 39
Exhibit Index 41
Consent of Independent Auditors 45
</TABLE>
NOTE ON INCORPORATION BY REFERENCE
In Part III of this Form 10-K, various information and data are
incorporated by reference from the Company's Definitive Proxy Statement dated
March 13, 1996 ("Proxy Statement"). Any reference in this Form 10-K to
disclosures in the Proxy Statement shall constitute incorporation by reference
only of that specific information and data into this Form 10-K.
<PAGE> 3
PART I
ITEM 1. BUSINESS SEGMENT INFORMATION
GENERAL DEVELOPMENT OF BUSINESS
The Sherwin-Williams Company, which was first incorporated under the laws
of the State of Ohio eighteen years after its founding in 1866, is engaged in
the manufacture, distribution and sale of coatings and related products to
professional, industrial, commercial and retail customers primarily throughout
North America.
PAINT STORES SEGMENT
The Paint Stores Segment exclusively distributes Sherwin-Williams(R)
branded architectural coatings, industrial maintenance products and industrial
finishes produced by the Coatings Segment of the Company and similar coatings
and related items produced by others. Paint, wallcoverings, floorcoverings,
window treatments, spray equipment and other associated products are marketed by
store personnel and direct sale representatives to the do-it-yourself customer,
professional painter, contractor, industrial and commercial maintenance
customer, property manager, architect and manufacturer of products requiring a
factory finish. Competitors of the Segment are other paint and wallpaper stores,
mass merchandisers, home centers, independent hardware stores, hardware chains
and manufacturer-operated outlets. Product quality, service and price determine
the competitive advantage in the highly fragmented paint product market. The
loss of any single customer would not have a material adverse effect on the
business of the Segment.
In order to sustain continued growth in the competitive marketplace, the
Segment recognizes that the superior knowledge of, and service provided by, its
store employees are critical to success. Substantial progress was made during
1995 in employee selection, training, development and retention. All store
employees are required to complete an Employee Certification Process in order to
become certified in their position and eligible for promotion. This process,
coined internally as Sherwin-Williams University or "SWU", requires employees to
complete specific training in all areas of in-store activity, such as product
knowledge, product application, customer service and store operations. By the
end of 1995, virtually all paint store employees had received such certification
in their positions. While customers receive the ultimate benefit through
enhanced customer service, employees are also more knowledgeable and able to
better manage their operations. This training, along with a new job posting
system which allows employees to preview and apply for internal promotion
opportunities if they meet the certification and eligibility requirements, has
improved employee retention to approximately three times better than the
industry average in 1995. This investment in store employees will have an impact
on the future growth and success of the Paint Stores Segment.
During 1996, the Segment plans to introduce several new products, including
the following: Woodscapes(TM), a premium exterior stain line designed to provide
long-lasting color with an extended warranty; Healthspec(TM), an interior paint
product line with low odor characteristics which will permit application in
occupied commercial buildings such as hospitals, institutions and schools; and
LowTemp 35(TM), an exterior latex house paint to be marketed to contractors
which will permit application in temperatures as low as 35 degrees Fahrenheit,
extending their painting season up to 20 percent in some areas of the country.
In response to consumer demand, a semi-gloss has also been added to the
EverClean(R) product line. Marketing programs for this line expansion will be
targeted at both retail and wholesale customers in 1996. In addition to
promoting new products, aggressive advertising campaigns will also highlight the
wide selection of wallcovering products available with a low-price guarantee at
Sherwin-Williams stores, further emphasizing the wide array of products and
services available through the stores.
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COATINGS SEGMENT
The five divisions within the Coatings Segment (Coatings, Consumer Brands,
Automotive, Transportation Services and Diversified Brands) participate in the
manufacture, distribution or sale of coatings and related products.
The Segment has sales to certain customers that, individually, may be a
significant portion of its revenues. However, the loss of any single customer
would not have a material adverse effect on the overall business of the Segment.
All technical expenditures are sponsored by the Company and occur in the
Coatings Segment. The expenditures for research and development appear on page
26 of this report.
COATINGS DIVISION
The Coatings Division manufactures paint and paint-related products for
do-it-yourself customers, professional painters, contractors, industrial and
commercial maintenance accounts, and manufacturers of factory finished products.
Sherwin-Williams(R) branded architectural and industrial finishes are
manufactured exclusively for the Paint Stores Segment. Labels, color cards,
traffic paint, adhesives, private label and other branded products are
manufactured for the Paint Stores Segment, the Consumer Brands Division and
other divisions of the Company. Competitive factors for the Division are product
innovation, manufactured product quality, service, distribution and price.
Domestic competitors of the Division consist of other coatings manufacturers
located throughout the United States. There are approximately 900 such
manufacturers at the regional and national levels. The Coatings Division
continues to strive to be the lowest cost producer of high quality coatings to
gain an advantage over its competitors. The Coatings Division integrated the
Company's international architectural operations into the Division's operations
beginning in 1994. There are many competitors in each of the foreign markets
served as the Division sells its products around the world through subsidiaries
and joint ventures and licenses technology, trademarks and trade names. At
December 31, 1995, the Division had 41 licensing agreements in 32 foreign
countries. The majority of the licensees' sales are in South America, the
strongest market. New licensing agreements were signed in Belgium, Lebanon and
Vietnam in 1995. The Division increased the focus on international growth during
1995, acquiring Sherwin-Williams Argentina I. y C.S.A. (a former licensee) and
purchasing a manufacturing facility for its Brazilian operations. Additional new
business development will take place following a predetermined regional approach
for the establishment of subsidiaries, joint ventures and licensees in selected
countries.
During 1995, the Division integrated the manufacturing processes of several
newly-acquired companies into its operations. This integration includes
application of the Division's manufacturing quality standards to the new
operations to achieve overall production synergies which will increase effective
capacity while enhancing product quality. In 1995, the Division began full
operations at its Fort Wayne, Indiana powder coatings facility and also began
construction of a new powder coatings facility in Harrisburg, Pennsylvania.
Powder coatings technology represents an environmentally-friendly coating which
can be applied with minimal waste. The addition of these facilities into its
manufacturing base will allow the Division to meet the increasing demand for
powder coatings.
In 1996, the primary goal of the Division will involve integrating the
manufacturing operations of the Pratt & Lambert United, Inc. (Pratt & Lambert)
facilities which were acquired in January 1996 into the Division's core
operations. Raw material and conversion cost synergies are expected to be
achieved while increasing production volume. In addition, continued efforts will
be made toward improving product quality and customer service, as well as
continued attainment and/or renewal of ISO 9000 certification at all of the
Division's newly-acquired and existing facilities.
CONSUMER BRANDS DIVISION
The Consumer Brands Division is responsible for the sales and marketing of
branded and private label products by a direct sales staff to unaffiliated home
centers, mass merchandisers, independent dealers and distributors. Many of the
country's leading retailers are among the Division's regional and
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national customers. The Division's competition for sales to these leading
retailers comes from over 500 regional and national paint manufacturers and
distributors of branded and private label paint and associated products. The
competitive factors that will set the leaders apart from the rest are service,
brand recognition, distribution and price.
During 1995, the Division targeted the best regional home centers for paint
and stain partnerships to expand its distribution outlets throughout the United
States with notable success being achieved in previously under-represented
geographic regions. This progress took place despite the consolidation of
retailers in the home center and independent paint store categories. The
acquisition of F.L.R. Paints, Incorporated earlier in the year provided the
addition of the H&C(R) product line of concrete stains and sealers. This product
line is marketed nationally as a masonry coating with superior waterproofing and
color enhancing qualities. Also during 1995, the Division successfully launched
its own nationally-broadcast television show, Room by Room(TM), on the Home and
Garden Television Network. This advertising method allows the Division to reach
millions of potential customers while providing decorating suggestions for the
average do-it-yourselfer.
In 1996, the Division will build on its already strong marketing programs,
focusing on its new Ralph Lauren(TM) product line, which was first introduced at
the end of 1995. In addition, the Division will integrate marketing and sales
programs for Pratt & Lambert products, which have a strong presence in the
independently-owned paint and decorator stores. With continued emphasis on
demographically-targeted marketing programs and strategic product placement, the
Division looks forward to becoming the total paint and stain supplier to more
independent dealers, home centers and mass merchants across the United States in
the upcoming year.
AUTOMOTIVE DIVISION
The Automotive Division develops and manufactures motor vehicle finish and
refinish products which are marketed under the Sherwin-Williams(R) and other
branded labels in the United States and Canada through its network of 143
company-operated branches. The branches are supported by a direct sales staff,
and products are also marketed through jobbers and wholesale distributors. The
Division is the sole distributor of Standox(R) branded vehicle refinishing
paints in the United States and Canada for American Standox, Inc., a joint
venture. The Division sells directly to independent automotive body shops,
automotive dealerships, fleet owners and refinishers, production shops, body
builders and manufacturers requiring a factory finish (OEM). The Automotive
Division has numerous competitors in its domestic and foreign markets with broad
product offerings and several others with niche products. A subsidiary in
Jamaica generally markets a full line of products. Products manufactured in
Kingston, Jamaica are sold through 9 stores and other dealers and by a direct
sales force to independent dealers, painters, contractors, automotive body shops
and industrial and commercial maintenance accounts in Jamaica. A portion of the
income for the Division comes from the licensing of technology, trademarks and
trade names to foreign companies. The Division has 16 licensees in 15 foreign
countries, including new agreements signed in Syria and India in 1995. Key
competitive factors for the Automotive Division are distribution, product
quality, technology and service. Strong distribution and high quality products
have been the Division's greatest competitive advantages.
The Division opened its new state-of-the-art distribution service center in
Richmond, Kentucky during 1995 and achieved ISO 9002 combined
manufacturing/distribution certification at this site. The remaining
distribution facilities of the Division were also certified during 1995, which
emphasizes the Division's ongoing commitment to quality. New product development
and customer service also remain primary goals to the Division. Several new
products were introduced during the year to meet customer needs and
expectations, including the 3.5 volatile organic compounds (VOC) Acrylic
Urethane (WesThane(TM)) system and the new high solids 2.1 VOC clearcoats. These
technically-advanced products were successfully designed to meet customer
requirements while adhering to strict VOC environmental regulations.
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During 1996, the Division will continue the development of new products and
will introduce the spectrophotometer as an important sales aid at the jobber and
shop mixing locations. This color-reading device will be used to select colors
to exact specifications using the latest technological advances. In furtherance
of the Division's international growth, Productos Quimicos Y Pinturas, S.A. de
C.V. and its affiliated companies (Productos) were acquired in January 1996.
Productos is the second largest automotive paint distributor in Mexico,
manufacturing and marketing the Excelo(TM) brand product line for the vehicle
refinish market. The Division will concentrate on combining this acquisition
with its other international operations in 1996.
TRANSPORTATION SERVICES DIVISION
The Transportation Services Division provides warehousing, truckload
freight, pool assembly, freight brokerage and consolidation services primarily
for the Company and for certain external manufacturers, distributors and
retailers throughout the United States. This Division provides the Company with
total logistics service support which allows increased delivery schedules, lower
field inventory levels and fewer out-of-stocks.
The Transportation Services Division has many different and diverse
competitors. In the trucking industry, there are a few large carriers having
small or moderate market share while thousands of other carriers compete for the
balance of the market. The warehousing and distribution service market is
characterized by a large number of competitors with none having dominant share.
Since the primary business of the Division is to provide services for the
Company's other divisions, gaining market share is not of major significance.
The Division's new 1,000,000 square foot state-of-the-art distribution
service center in Fredericksburg, Pennsylvania began shipments in November 1995.
This facility replaces four smaller facilities and will serve Paint Stores,
Consumer Brands and Diversified Brands Divisions' customers throughout
northeastern United States and Canada. Expansion of the Midwest distribution
service center in Effingham, Illinois was also substantially completed, bringing
the total square footage at that site to 1,300,000. These facilities will bring
further efficiencies to the Division's overall distribution function while
maintaining its standard of quality service. To emphasize its commitment to
quality, the Division continued its pursuit of ISO 9003 certification during
1995, achieving such certification at all of its operating facilities except its
new Fredericksburg facility.
The Division's primary focus in 1996 will be to identify logistic synergies
and merge the distribution functions of Pratt & Lambert with the Company.
Efforts will be focused on implementing plans which will best serve customer
needs while achieving overall cost savings for the Company.
DIVERSIFIED BRANDS DIVISION
The Diversified Brands Division (formerly the Specialty Division) competes
in three areas: custom and industrial aerosols; paint applicators; and retail
and wholesale consumer aerosols. The Division participates in the retail and
wholesale paint, automotive, homecare products, institutional, insecticide and
industrial markets. A wide variety of aerosol products are filled, packaged and
distributed to regional and national customers. Approximately 8.1 percent of the
Division's total sales represent aerosols and paint applicators sold to the
Paint Stores Segment. The remaining products are marketed through mass
merchandisers, home centers, automotive chains and maintenance distribution
channels. There are various primary competitors in each of the Division's
product lines. The main competitive factors are technical know-how, quality,
service and price. Superior quality products, excellent regulatory-complying
products, leadership positions in electronic commerce and strong customer
relationships have enabled the Division to distinguish itself from the
competition.
Several new products were introduced by the Division during 1995, including
Krylon(R) Living Color(R) Latex Enamel. Living Color(R) enamel represents the
first spray product to deliver a latex paint in aerosol form while offering a
versatile color palette to meet a variety of decorating needs. The product
reinforces the Company's leadership in spray paint technology under the
Krylon(R) brand, offering superior gloss, low odor and soap and water clean-up
while being VOC compliant. Other
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product introductions during 1995 included the Dupli-Color(R) Flawless(TM) kit,
which makes it easier for consumers to make scratch repairs on their vehicles,
and Rust Tough(R) Water-Based Enamel, a corrosion-protectant coating. These
products exemplify the rewards of countless hours of research and development,
to which the Division is committed.
The new products introduced in 1995 will continue to be marketed via
extensive advertising efforts throughout 1996, including a national television
commercial featuring Krylon(R) Living Color(R), providing a positive impact on
sales. The Division will also continue its research and development activities
in search of products which meet or exceed customer expectations and which are
technologically advanced in relation to those of its competitors.
OTHER SEGMENT
The Other Segment is responsible for the acquisition, development, leasing
and management of properties for use by the Company and others. Obtaining real
estate in the proper location at the appropriate cost is a critical component
for achieving the desired operating success, particularly for paint stores and
distribution service centers. This Segment has many competitors consisting of
other real estate owners, developers and managers in certain states where we
currently hold property. The main competitive factors are the availability of
property and price.
At the end of 1995, the Retail Properties Division owned or leased 211
properties, representing over 1,700,000 square feet of space, which are
conducive to the sale of paint and associated products. Such properties include
131 freestanding buildings, for exclusive use by the Paint Stores Segment, and
80 multi-tenant properties, utilized when the basic needs of the paint store can
be met and where external rental opportunities can be profitably operated. The
paint store must be easily accessible to professional painters and contractors
with sufficient access to pickup and delivery areas. Multi-tenant properties are
usually smaller "strip" shopping centers with adequate parking and, generally,
the paint store will be located at the end of the shopping area for the most
convenient access. In 1996, the Division does not anticipate significant growth
in the number of owned retail properties needed by the Paint Stores Segment. The
occupancy rate for external space was 90.1 percent at December 31, 1995.
The Non-Retail Properties Division owned or leased 20 properties
approximating 3.7 million square feet. These properties consisted primarily of
office buildings, manufacturing facilities and distribution service centers at
the end of 1995. Occasionally, such properties are acquired or developed to
provide the lowest cost alternative for expansion of distribution operations.
Locations that have been utilized profitably in the past which can no longer
contribute to the Company's future plans are currently offered for sale or
lease. At the end of 1995, the Non-Retail Properties Division had achieved an
overall occupancy rate of 93.9 percent.
RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE
With respect to the Paint Stores Segment, there are sufficient suppliers of
each product purchased for resale that the Segment does not anticipate any
significant sourcing problems. For the Coatings Segment, raw materials and fuel
supplies are generally available from various sources in sufficient quantities
that the Segment does not anticipate any significant sourcing problems during
1996.
SEASONALITY
The majority of the sales for the Paint Stores Segment and Coatings Segment
traditionally occur during the second and third quarters. There is no
significant seasonality in sales for the Other Segment.
TRADEMARKS AND TRADE NAMES
Customer recognition of trademarks and trade names collectively contribute
significantly to the sales of the Company. The Paint Stores Segment is
identified with names such as Sherwin-Williams(R), SuperPaint(R), Pro Mar(R),
EverClean(R), Glas-Clad(R), Perma-Clad(R), Old Quaker(R), and Con-Lux(R). The
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Coatings Segment employs a variety of trade names and trademarks in marketing
its products, such as Sherwin-Williams(R), Dutch Boy(R), Kem-Tone(R),
Martin-Senour(R), Cuprinol(R), Old Quaker(R), H&C(R), White Lightning(R),
Acme(R), Krylon(R), Standox(R), Rust Tough(R), Rubberset(R) and Dupli-Color(R).
PATENTS
Although patents and licenses are not of material importance to the
business of the Company as a whole, the Automotive and Coatings Divisions'
international operations derive a substantial part of their income from the
license of technology, trademarks and trade names to foreign companies.
BACKLOG AND PRODUCTIVE CAPACITY
Backlog orders are not significant in the business of any Segment.
Sufficient productive capacity currently exists to fulfill the Company's needs
for paint products through 1996.
EMPLOYEES
The Company employed approximately 18,500 persons at December 31, 1995.
ENVIRONMENTAL COMPLIANCE
See Management's Discussion and Analysis of Financial Condition and Results
of Operations, on pages 11 through 17 of this report, for further details on
environmental compliance.
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BUSINESS SEGMENTS
(MILLIONS OF DOLLARS)
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1995 1994 1993
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NET EXTERNAL SALES
Paint Stores $ 2,131 $1,986 $1,830
Coatings 1,129 1,100 1,105
Other 14 14 14
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Segment totals $ 3,274 $3,100 $2,949
INTERSEGMENT TRANSFERS
Coatings $ 801 $ 720 $ 655
Other 19 18 17
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Segment totals $ 820 $ 738 $ 672
OPERATING PROFITS
Paint Stores $ 158 $ 141 $ 117
Coatings 202 201 194
Other 13 8 5
Corporate expenses -- net (55) (51) (52)
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Income before income taxes $ 318 $ 299 $ 264
IDENTIFIABLE ASSETS
Paint Stores $ 550 $ 517 $ 494
Coatings 846 757 730
Other 45 44 51
Corporate 700 644 640
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Consolidated totals $ 2,141 $1,962 $1,915
CAPITAL EXPENDITURES
Paint Stores $ 29 $ 26 $ 29
Coatings 68 46 28
Other 4 1 1
Corporate 7 6 5
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Consolidated totals $ 108 $ 79 $ 63
DEPRECIATION
Paint Stores $ 24 $ 23 $ 21
Coatings 31 30 27
Other 2 3 3
Corporate 6 5 4
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Consolidated totals $ 63 $ 61 $ 55
</TABLE>
NOTES TO SEGMENT TABLES
Operating profit is total revenue, including realized profit on
intersegment transfers, less operating costs and expenses. Intersegment
transfers are accounted for at values comparable to normal unaffiliated customer
sales. Corporate expenses include interest which is unrelated to real estate
leasing activities, certain provisions for disposition and termination of
operations and environmental remediation which are not directly associated with
or allocable to any operating segment, and other adjustments.
Identifiable assets are those directly identified with each segment's
operations. Corporate assets consist primarily of cash, investments, deferred
pension assets and headquarters' property, plant and equipment.
Export sales, sales of foreign subsidiaries and sales to any individual
customer were each less than 10% of consolidated sales to unaffiliated customers
during all years presented.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters are located in Cleveland, Ohio. The
Company's principal manufacturing and distribution facilities, operated by the
Coatings Segment, are located as set forth below.
<TABLE>
<CAPTION>
Leased
or
Manufacturing facilities Owned
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Anaheim, California Owned
Baltimore, Maryland Owned
Bedford Heights, Ohio Owned
Bradenton, Florida Leased
Chicago, Illinois Owned
Coffeyville, Kansas Owned
Columbus, Ohio Owned
Crisfield, Maryland Leased
Deshler, Ohio Owned
Edison, New Jersey Owned
Elk Grove, Illinois Owned
Emeryville, California Owned
Fort Wayne, Indiana Leased
Fountain Inn, South Carolina Owned
Garland, Texas Owned
Greensboro, North Carolina (2) Owned
Holland, Michigan Owned
Lawrenceville, Georgia Owned
Morrow, Georgia Owned
Newark, New Jersey Owned
Orlando, Florida Owned
Richmond, Kentucky Owned
Victorville, California Owned
Kingston, Jamaica Owned
</TABLE>
<TABLE>
<CAPTION>
Leased
or
Distribution facilities Owned
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<S> <C>
Bedford Heights, Ohio Leased
Buford, Georgia Leased
Dayton Valley, Nevada Owned
Effingham, Illinois Leased
Fredericksburg, Pennsylvania Owned
Hunt Valley, Maryland Leased
Lagrange, Georgia Owned
Reno, Nevada Leased
Richmond, Kentucky Owned
Sparks, Nevada Leased
Waco, Texas Leased
Winter Haven, Florida Owned
York, Pennsylvania Owned
Calgary, Alberta, Canada Leased
Mississauga, Ontario, Canada Leased
Richmond Hill, Ontario, Canada Leased
Scarborough, Ontario, Canada Owned
San Juan, Puerto Rico Leased
</TABLE>
In addition, the Coatings Segment operates 143 company-operated automotive
branches, of which 1 is owned, in the United States and Canada and 9 leased
stores in Jamaica.
There were 2,089 company-operated paint stores in the United States, Canada
and Puerto Rico at December 31, 1995, which constitute the entire operations of
the Paint Stores Segment. All stores are leased locations with 209 being leased
from the Company's Retail Properties Division in the Other Segment. At the end
of 1995, the Paint Stores Segment was comprised of four separate operating
geographic divisions: the Mid Western Division with 582 stores primarily located
in the midwestern and upper west coast states and western Canada; the Eastern
Division which has 449 stores along the upper east coast and New England states
and eastern Canada; the Southeastern Division which has 545 stores principally
covering the lower east and gulf coast states and Puerto Rico; and the South
Western Division with 513 stores in the plains and the lower west coast states.
The Paint Stores Segment opened 59 new stores in 1995, closed 16, relocated 44,
and re-merchandised 429, thereby completing the re-merchandising program which
began in 1993.
All property within the Other Segment is owned by the Company except for 2
land leases in the Retail Properties Division and one property lease in the
Non-Retail Properties Division.
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ITEM 3. LEGAL PROCEEDINGS
As previously reported in the Company's Quarterly Report for the period
ended June 30, 1993, on July 16, 1993, the United States Department of Justice,
on behalf of the United States Environmental Protection Agency, filed a
complaint against the Company in the United States District Court for the
Northern District of Illinois. The complaint alleges violations under various
environmental statutes concerning the Company's operations at its southeast
Chicago facility. The relief sought demands an undetermined amount of civil
penalties and further demands certain, unspecified corrective action be taken to
clean up the site.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF THE REGISTRANT
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
29, 1996 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 61 Chairman and Chief Executive 1979
Officer, Director
Thomas A. Commes 53 President and Chief Operating 1979
Officer, Director
John L. Ault 50 Vice President -- Corporate 1987
Controller
Frank E. Butler 60 President & General Manager, 1994
Coatings Division
Christopher M. Connor 39 President & General Manager, 1994
Diversified Brands Division
Conway G. Ivy 54 Vice President -- Corporate 1979
Planning and Development
T. Scott King 43 President & General Manager, 1994
Consumer Brands Division
Thomas Kroeger 47 Vice President -- Human Resources 1987
John C. Macatee 44 President, Paint Stores Group 1994
Larry J. Pitorak 49 Senior Vice President -- Finance, 1978
Treasurer and Chief Financial
Officer
Joseph M. Scaminace 42 President & General Manager, 1994
Automotive Division
Louis E. Stellato 45 Vice President, General Counsel and 1989
Secretary
</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.
9
<PAGE> 12
Mr. Commes has served as President and Chief Operating Officer since June
1986 and has served as a Director since April 1980.
Mr. Ault has served as Vice President -- Corporate Controller since January
1987.
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. Connor has served as President & General Manager, Diversified Brands
Division (formerly Specialty Division) since April 1994 prior to which he served
as Senior Vice President -- Marketing, Paint Stores Group commencing September
1992. From June 1986 to September 1992, Mr. Connor served as President & General
Manager, Western Division, Paint Stores Group.
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. 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. Kroeger has served as Vice President -- Human Resources since October
1987.
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. 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.
Mr. Scaminace has served as President & General Manager, Automotive
Division since April 1994 prior to which he served as President & General
Manager, Specialty Division commencing September 1985.
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.
There are no family relationships between any of the persons named.
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Sherwin-Williams Common Stock is listed on the New York Stock Exchange and
traded under the symbol SHW.
QUARTERLY STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
Quarter High Low Dividend
--------------------------------------------
<S> <C> <C> <C> <C>
1995 1ST $34.875 $32.000 $ .16
2ND 38.000 33.375 .16
3RD 37.125 34.125 .16
4TH 41.500 34.375 .16
1994 1st $35.750 $31.250 $ .14
2nd 32.500 29.500 .14
3rd 34.125 30.250 .14
4th 33.375 29.750 .14
</TABLE>
The number of shareholders of record for Sherwin-Williams Common Stock, par
value $1.00 each, as of January 31, 1996 was 12,074. The closing market value
per share as listed on the New York Stock Exchange as of the close of business
on January 31, 1996 was $42.125.
ITEM 6. SELECTED FINANCIAL DATA
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net Sales $3,274 $3,100 $2,949 $2,748 $2,541
Income before cumulative effects of changes
in accounting methods 201 187 165 145* 128
FINANCIAL POSITION
Total assets $2,141 $1,962 $1,915 $1,730 $1,612
Long-term debt 24 20 38 60 72
PER COMMON SHARE DATA
Income before cumulative effects of changes
in accounting methods $ 2.34 $ 2.15 $ 1.85 $ 1.63* $ 1.45
Cash dividends .64 .56 .50 .44 .42
</TABLE>
* Includes a reduction, beginning January 1, 1992, for the additional expense of
accruing postretirement benefits. Such additional expense was $5.7 million
after income taxes ($.06 per share) in 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HIGHLIGHTS
- -- Effective February 1, 1995, the Company acquired all outstanding shares of
F.L.R. Paints, Incorporated thus acquiring the H&C(R) brand of high
performance concrete stains and sealers.
11
<PAGE> 14
- -- Effective August 29, 1995, the Company acquired the assets of Con-Lux
Coatings, Inc., a manufacturer of environmentally-compliant, high
performance chemical coatings, industrial maintenance and architectural
finish products.
- -- Effective November 1, 1995, the Company acquired the assets of White
Lightning Products Corp., a manufacturer of high quality caulks and
sealants.
- -- Effective December 1, 1995, the Company acquired its licensee,
Sherwin-Williams Argentina I.y C.S.A., one of the top three paint companies
in the Argentine decorative coatings market.
- -- During the fourth quarter of 1995, an Agreement and Plan of Merger to
acquire all outstanding shares of common stock, at a price of $35 per share,
was entered into with Pratt & Lambert United, Inc. (Pratt & Lambert), a
manufacturer of coatings and adhesives sold to independent dealers, mass
merchandisers, home centers and specialty markets. On January 10, 1996, the
merger was effected, making Pratt & Lambert a wholly-owned subsidiary of the
Company.
FINANCIAL CONDITION -- 1995
The Company generated more than $282.7 million in cash flow from operations
during 1995 and ended the year financially strong. The Company's financial
strength entering 1995 and the year's cash flow allowed us to take advantage of
the opportunity to make several key acquisitions and to increase the Company's
investments in property and equipment which enhance manufacturing and
distribution efficiency. The Consolidated Balance Sheets and Statements of
Consolidated Cash Flows, on pages 23 and 24 of this report, present more detail
of the Company's strong financial position and operating cash flow. Cash and
short-term investments increased $18.1 million to $269.5 million at December 31,
1995. Increases and decreases in other components of working capital occurred
primarily due to increased sales and moderate increases in manufacturing
activity. Total assets grew by $179 million during 1995 to $2.1 billion. The
current ratio of 2.0 remained constant at December 31, 1995 and 1994.
Net property, plant and equipment increased $47.2 million from 1994.
Capital expenditures of $108.4 million and fixed assets acquired of $9.4 million
were partially offset by depreciation expense of $62.9 million and certain
retirements of assets. Capital expenditures in 1995 were principally for the
opening, remodeling or relocating of paint stores, the construction of
distribution service centers and the upgrading of manufacturing facilities and
research sites. Capital expenditures increased in the Paint Stores Segment
during 1995 primarily due to increased store openings. In the Coatings Segment,
capital expenditures increased due to completing the distribution service
centers in Fredericksburg, Pennsylvania and Richmond, Kentucky and costs of the
new powder coatings manufacturing facility currently under construction in
Harrisburg, Pennsylvania. Capital expenditures also increased in the Other
Segment primarily due to renovation costs at certain of the Company's managed
properties. In 1996, the most significant capital expenditures planned relate to
installation of new point-of-sale terminals in the Company's paint stores and
improvements to a manufacturing facility of S-W Brazil. We plan to continue
investing strategically in upgrading or expanding existing facilities, including
those obtained through acquisition. We do not anticipate the need for any
specific external financing to support our capital programs.
Intangible assets and other long-term investments associated with
acquisitions, including the Company's investment in its unconsolidated
subsidiary in Argentina, accounted for the majority of the increase in other
long-term assets. Intangible assets acquired during 1995 of $31.8 million
exceeded 1995 amortization expense of $15.0 million. The balance of deferred
pension assets of $233.6 million at December 31, 1995 represents the excess fair
market value of the assets of the defined benefit pension plans over the
actuarially-determined projected benefit obligations. The 1995 increase
represents the recognition of the current year net pension credit, whose
components are further described in Note 6 on page 30 of this report. Due to
decreased interest rates on high-quality, long-term investments, the assumed
discount rate used in computing the actuarial present value of the
12
<PAGE> 15
benefit obligations of these plans was lowered to 7.25 percent at December 31,
1995, thereby increasing the unrecognized net loss of the plans. The
unrecognized net loss represents the cumulative unamortized portion of items
deferred in previous years due to changes in assumptions or actual results which
differed from estimates in those years. These items are amortized as a component
of the net pension credit over the average remaining service lives of the
employees in the plans beginning in the year following their deferral. The
actual return on plan assets of the defined benefit pension plans during 1995
exceeded the assumed asset earnings rate primarily due to actual returns
realized on equity investments. These excess earnings are also deferred, causing
an offsetting decrease to the cumulative unrecognized net loss amount. The
effects of these changes, combined with an increased asset base, will increase
the net pension credit in the coming year.
The increase in long-term debt at December 31, 1995 was primarily due to
debt incurred on several 1995 acquisitions. Debt may be added to the Company
balance sheet if it exists on an acquired company and cannot be retired or if
debt instruments are issued to defer a portion of the purchase price provided
the seller. The Company did not incur any short-term borrowings during 1995 nor
incur any borrowings to finance current operations. As more fully explained in
Note 8, on page 33 of this report, the Company arranged additional financing
flexibility during 1995. In addition, in early 1996, the Company increased the
value of its commercial paper program to $600,000 and increased the value of its
shelf registration of debt securities to $450,000. Certain short-term borrowings
were incurred in January 1996 for the acquisition of Pratt & Lambert shares as
explained below and in Note 2, on page 28 of this report. It is expected that
the Company will remain in a borrowing position throughout 1996.
The long-term liability for postretirement benefits increased from the
excess of the net postretirement benefit expense, as determined in accordance
with Statement of Financial Accounting Standards (SFAS) No. 106, over the costs
for benefit claims incurred. The current portion of the accrued postretirement
benefit liability, amounting to $8.2 million at December 31, 1995, is included
in other accruals. Similar to the change in assumptions of the Company's defined
benefit pension plans, the assumed discount rate used to calculate the actuarial
present value of the accumulated postretirement benefit obligation was lowered
to 7.25 percent at December 31, 1995, causing a cumulative unrecognized net loss
for the postretirement plan. The effect of this change on the net postretirement
benefit expense for 1996 will be negligible as the cumulative unrecognized net
loss is below the threshold for required amortization. Plan amendments made
January 1, 1993 significantly reduced the accumulated postretirement benefit
obligation at that date, creating an unrecognized prior service credit. The
reduction of the annual postretirement benefit expense for these amendments
began in 1993 and will continue through 2004. See Note 7, on page 31 of this
report, for additional information concerning the Company's postretirement
benefit obligations.
Other long-term liabilities include accruals for environmental-related
liabilities and other non-current items. The decrease in these liabilities at
December 31, 1995 is due to the fulfillment of certain obligations during 1995
and the reclassification of certain amounts to current liabilities. See Note 10,
on page 34 of this report, for additional information concerning the Company's
other long-term liabilities.
The Company and certain other companies were named defendants in a number
of lawsuits arising from the manufacture and sale of lead pigments and lead
paints. It is possible that additional lawsuits may be filed against the Company
in the future with similar allegations. The various existing lawsuits seek
damages for personal injuries and property damages, along with costs incurred to
abate the lead related paint from buildings. The Company believes that such
lawsuits are without merit and is vigorously defending them. The Company does
not believe that any potential liability ultimately determined to be
attributable to the Company arising out of such lawsuits will have a material
adverse effect on the Company's business or financial condition.
The operations of the Company, like those of other companies in our
industry, are subject to various federal, state and local environmental laws and
regulations. These laws and regulations not only govern our current operations
and products, but also impose liability on the Company for past
13
<PAGE> 16
operations which were conducted utilizing practices and procedures considered
acceptable under the laws and regulations existing at that time. The Company
expects environmental laws and regulations to impose increasingly stringent
requirements upon the Company and our industry in the future. The Company
believes it conducts its operations in compliance with applicable environmental
laws and regulations and has implemented various programs designed to protect
the environment and ensure continued compliance.
The Company is involved with environmental compliance and remediation
activities at some of its current and former sites. The Company, together with
other parties, has also been designated a potentially responsible party under
federal and state environmental protection laws for the remediation of hazardous
waste at a number of third-party sites, primarily Superfund sites. The Company
may be similarly designated with respect to additional third-party sites in the
future.
The Company accrues for certain environmental remediation activities
relating to its past operations and third-party sites, including Superfund
sites, for which commitments or clean-up plans have been developed or for which
costs or minimum costs can be reasonably estimated. The Company continuously
assesses its potential liability for remediation activities with respect to its
past operations and third-party sites. Any potential liability ultimately
determined to be attributable to the Company, however, is subject to a number of
uncertainties including, among others, the number of parties involved with
respect to any given site, the volumetric contribution which may be attributed
to the Company relative to that attributable to other parties, the nature and
magnitude of the wastes involved, and the method and extent of remediation. The
Company's environmental-related accruals are adjusted as information becomes
available upon which more accurate costs can be reasonably estimated. Actual
costs incurred may vary from these estimates due to the inherent uncertainties
involved.
The Company is a defendant in a lawsuit filed by the United States
Department of Justice, on behalf of the United States Environmental Protection
Agency, regarding the Company's operations at its southeast Chicago facility.
The lawsuit, which alleges violations under various environmental statutes,
seeks an undeterminable amount of civil penalties and further demands that
certain, unspecified, corrective action be taken to clean up the site. The
Company is also a defendant in a lawsuit brought by PMC, Inc. regarding one of
the Company's former Chemical Division's manufacturing facilities. This facility
is located adjacent to the Company's southeast Chicago facility referenced above
and was sold to PMC, Inc. in 1985. PMC, Inc. is seeking an undisclosed amount
for environmental remediation costs and other damages based upon contractual and
tort theories, and under various environmental laws. The Company is vigorously
defending both of these lawsuits.
With respect to the Company's southeast Chicago facility and its former
manufacturing facility adjacent thereto, both referenced above, the Company has
evaluated its potential liability and, based upon its preliminary evaluation,
has accrued an appropriate amount. However, due to the uncertainties surrounding
these facilities, the Company's ultimate liability may result in costs that are
significantly higher than currently accrued. In such event, the recording of the
liability may result in a significant impact on net income for the annual or
interim period during which the additional costs are accrued.
In the opinion of the Company's management, any potential liability
ultimately attributed to the Company for its environmental-related matters will
not have a material adverse effect on the Company's financial condition,
liquidity, cash flow or, except as set forth in the preceding paragraph, net
income. See Note 10, on page 34 of this report, for discussion of the
environmental-related accruals included in the Company's consolidated balance
sheets.
Capital expenditures and expenses for ongoing environmental compliance
measures are included in the normal operating expenses of conducting business.
The Company's capital expenditures and other expenses for ongoing environmental
compliance measures were not material to the Company's financial condition or
net income during 1995, and the Company does not expect such capital
expenditures and other expenses to be material to the Company's financial
condition or net income in the future.
14
<PAGE> 17
Shareholders' equity increased $158.8 million during 1995 due primarily to
current year net income offset partially by dividends paid to shareholders. The
Company acquired 411,300 shares of its common stock in addition to shares
received in exchange for stock issued in accordance with the Company's stock
plans. Treasury stock amounting to 385,572 shares was issued to acquire the
assets of White Lightning Products Corp. We acquire our own stock for general
corporate purposes and, depending upon our cash position and market conditions,
we may acquire additional shares of stock in the future. See the Statements of
Consolidated Shareholders' Equity, on page 25 of this report, and Note 12, on
page 35 of this report, for equity and capital stock detail.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. Accounting for assets to be disposed is
also addressed by SFAS No. 121. The Company will adopt SFAS No. 121 during 1996
and, based on current circumstances, does not believe the effect of adoption
will be material.
At a meeting held February 21, 1996, the Board of Directors increased the
quarterly dividend to $.175 per share. This represents the seventeenth
consecutive increase and a compounded rate of increase of 28.9 percent since the
dividend was reinstated in the fourth quarter of 1979. The 1995 annual dividend
of $.64 per share marked the sixteenth consecutive year that the dividend
approximated our payout ratio target of 30 percent of the prior year's earnings.
The 1996 acquisition of Pratt & Lambert shares, for an approximate purchase
price of $400 million, will impact the short-term borrowing position of the
Company. The Company financed the merger through the use of available cash, a
$50 million floating term note and other available sources of financing. The
floating term note is accompanied by a two-year interest rate swap agreement.
The swap agreement involves the exchange of fixed and floating rate interest
payment obligations based upon a $50 million notional amount. Any market risk of
the swap agreement related to the fluctuation in interest rates will be offset
by a change to the interest payment obligation on the Company's floating term
note. Preliminary estimates of the fair market value of the net assets to be
recorded pursuant to the merger will approximate $58.3 million, with
approximately $337.6 million recorded as goodwill. These estimates are
tentative, pending completion of final appraisals. The goodwill ultimately
recorded for the purchase will be amortized over its estimated life. Immediately
after the merger, the Company repaid approximately $95 million of Pratt &
Lambert's outstanding debt via issuance of short-term commercial paper. See Note
2, on page 28 of this report, for further details of the merger, subsequent debt
repayment and related interest rate swap agreement.
RESULTS OF OPERATIONS -- 1995 VS 1994
Consolidated net sales increased 5.6 percent, to $3.27 billion, over 1994
due primarily to volume and price increases in the Paint Stores Segment.
Sales in the Paint Stores Segment increased 7.3 percent for the year as all
divisions achieved sales improvements, particularly in paint and paint-related
product lines. Comparable store sales increased 6.5 percent. Increased paint
gallons sold to wholesale customers, which includes professional painters,
contractors, and industrial and commercial maintenance accounts, generated the
majority of the sales increase. Volume sales to retail customers remained
sluggish. Selling price increases implemented to partially offset increased raw
materials costs also contributed to the sales improvements.
External sales in the Coatings Segment increased 2.7 percent over 1994. The
Consumer Brands Division was the primary contributor to this sales increase due
to increased gallon sales, particularly in its Dutch Boy(R) brand. In the
Automotive Division, sales increases in the automotive branches were partially
offset by declines in two of its major product lines which resulted from soft
automotive aftermarket sales throughout 1995. Reduced consumer demand in the
custom, automotive and industrial markets led to flat sales as compared to 1994
in the Diversified Brands Division. Revenue for the real estate operations in
the Other Segment increased slightly for the year.
15
<PAGE> 18
Consolidated gross profit as a percent of sales was slightly lower than
1994, decreasing to 42.7 percent from 42.8 percent. Margins increased slightly
in the Paint Stores Segment due to gallon sales improvement combined with
successful implementation of supplemental selling price increases during the
year to partially offset increased costs for raw materials. The Coatings
Segment's margins were lower than 1994 due to the adverse effects of raw
material cost increases combined with a sales mix toward lower-margin products
in the Automotive Division and production volume decreases in the Diversified
Brands Division.
Consolidated selling, general and administrative expenses as a percent of
sales declined to 32.8 percent from 32.9 percent in 1994. The Paint Stores
Segment carefully contained SG&A spending throughout 1995, leading to favorable
SG&A costs as a percent of sales. The Coatings Segment's SG&A expenses as a
percent of sales were higher than 1994 primarily due to increased market
penetration costs for new customers in the Consumer Brands Division and to the
marginally higher sales amount.
Consolidated operating profits increased 4.0 percent in 1995. In the Paint
Stores Segment, operating profits increased 12.7 percent over 1994 due to
increased volume and controlled SG&A spending. Operating profits in the Coatings
Segment improved 0.6 percent for the year. Increased raw material costs during
1995 combined with moderate production volume increases adversely impacted this
Segment's results. The operating profits of the Other Segment increased in 1995
due primarily to reduced interest expense on average long-term debt allocable to
its real estate operations combined with provisions incurred in 1994 for
disposition of certain non-retail properties. Corporate expenses increased in
1995 due primarily to various environmental and disposition provisions which are
not directly associated with or allocable to any individual segment. Refer to
pages 1 through 7 of this report for additional Business Segment information.
Interest expense decreased 21.3 percent for the year due to reduced average
long-term debt resulting from normal maturities and 1994 debt purchases. As a
result, interest coverage increased to 126.8 times from 93.8 times in 1994. Our
fixed charge coverage, which is calculated using interest and rent expense,
improved to 4.2 times from 4.1 times in 1994.
Interest and net investment income increased 40.1 percent in 1995 due
primarily to increased investment yields. Other costs and expenses decreased in
1995 primarily due to increased dividends and a net reduction of other expenses
as more fully described in Note 4 on page 29 of this report. The effective
income tax rate decreased in 1995, as shown in Note 14 on page 36 of this
report, primarily due to increased tax-exempt investment vehicles.
Net income increased 7.5 percent in 1995 to $200.7 million from $186.6
million in 1994. Net income per share increased 8.8 percent to $2.34 from $2.15.
We believe that the acquisition of Pratt & Lambert has long-term strategic
benefits for the Company and will be essentially earnings neutral for the year
1996.
RESULTS OF OPERATIONS -- 1994 VS 1993
Consolidated net sales increased in 1994 by $150.8 million to $3.1 billion,
an increase of 5.1 percent. The growth in sales was driven primarily by gains in
the Paint Stores Segment.
The Paint Stores Segment realized an 8.5 percent sales increase, despite
continued sluggish retail sales, as all operating divisions achieved sales
results better than the results of 1993. Comparable-store sales increased 7.8
percent. Strong emphasis was placed on store level pricing discipline, however,
continued competitive pressures allowed the implementation of only selective
price increases during the year. Most of the Segment's sales increase resulted
from increased paint gallons sold to wholesale customers, complemented by
wholesale sales increases in most other major product lines.
Sales of the Coatings Segment were essentially flat for 1994. Reduced
demand by certain large customers as they adjusted their inventories downward
affected many of the divisions within the Segment. The Consumer Brands Division
also was impacted by the loss of a portion of the business of
16
<PAGE> 19
a home center account. New customers added to our distribution base during 1994
partially offset the effect of the above declines. Improved 1994 sales for the
Automotive Division resulted primarily from sales growth in its branch
distribution network and strong gains at original equipment manufacturers.
Krylon(R) branded products provided the primary impetus for the improved sales
results of the Diversified Brands Division.
Consolidated gross profit dollars were 6.0 percent higher than 1993 while
gross profit as a percent of sales increased to 42.8 percent from 42.5 percent
in 1993. The Paint Stores Segment's 1994 gross margin remained constant in
comparison to 1993. Despite continued sales mix shifts to lower-margin items in
the Diversified Brands and Automotive Divisions, manufacturing efficiencies,
stable raw material costs for most of the year, cost containment and a favorable
sales mix in the Segment's other divisions led to an increase in the Coatings
Segment's 1994 gross margin.
Consolidated selling, general and administrative expenses decreased as a
percent of sales to 32.9 percent from 33.3 percent in 1993. The Paint Stores
Segment's SG&A costs as a percent of sales were below 1993 due primarily to
containment of selling and administrative expenses combined with the sales gain
achieved. The Coatings Segment's SG&A expenditures were approximately the same
in 1994 as in 1993. Due to this segment's flat sales, a slight increase in SG&A
costs as a percent of sales resulted.
As a result of the above, consolidated operating profits increased 14.0
percent over 1993. The Paint Stores Segment's operating profits improved 20.3
percent due primarily to volume gains and the containment of SG&A costs. Despite
sluggish sales, the Coatings Segment's operating profits increased 3.4 percent
due primarily to the favorable edge in gross margin. The operating profits of
the Other Segment increased in comparison to 1993 due primarily to reduced
interest expense on long-term debt allocable to the real estate operations as a
result of various debt purchases. Corporate expenses, which are not directly
associated with or allocable to any operating segment, were approximately the
same as 1993.
Total interest expense decreased 50.1 percent from 1993 due to purchases of
long-term debt and normal maturities. Correspondingly, our interest coverage
improved to 93.8 times in 1994 compared to 42.0 times in 1993. Our fixed charge
coverage, which is calculated using interest and rent expense, improved to 4.1
times in 1994 versus 3.7 times in 1993.
Interest and net investment income increased 17.1 percent to $8.2 million
primarily as a result of increased investment yields partially offset by reduced
cash and short-term investment balances resulting primarily from the purchase of
common stock for treasury purposes during the year. Other costs and expenses
increased in 1994 primarily due to increased costs related to financing and
investing activities which are further explained in Note 4 on page 29 of this
report. As shown in Note 14, on page 36 of this report, the effective income tax
rate remained the same in 1994 as in 1993.
Net income increased 12.9 percent to $186.6 million and net income per
share increased 16.2 percent to $2.15. Approximately $.04 of the increase in net
income per share over 1993 was due to the purchase of common stock for treasury
purposes at various times throughout 1994.
17
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Sherwin-Williams Company
Cleveland, Ohio
We have audited the accompanying consolidated balance sheets of The
Sherwin-Williams Company and subsidiaries as of December 31, 1995, 1994 and
1993, and the related statements of consolidated income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. Our audits also included the financial statement schedule listed at Item
14(a). The financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Sherwin-Williams Company and subsidiaries at December 31, 1995, 1994 and
1993, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents farily, in all material respects, the
information set forth therein.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 19, 1996
18
<PAGE> 21
REPORT OF MANAGEMENT
Shareholders
The Sherwin-Williams Company
We have prepared the accompanying consolidated financial statements and
related information included herein for the years ended December 31, 1995, 1994
and 1993. The primary responsibility for the integrity of the financial
information rests with management. This information is prepared in accordance
with generally accepted accounting principles based upon our best estimates and
judgments and giving due consideration to materiality.
The Company maintains accounting and control systems which are designed to
provide reasonable assurance that assets are safeguarded from loss or
unauthorized use and which produce records adequate for preparation of financial
information. There are limits inherent in all systems of internal control based
on the recognition that the cost of such systems should not exceed the benefits
to be derived. We believe our system provides this appropriate balance.
The Board of Directors pursues its responsibility for these financial
statements through the Audit Committee, composed exclusively of outside
directors. The Committee meets periodically with management, internal auditors
and our independent auditors to discuss the adequacy of financial controls, the
quality of financial reporting and the nature, extent and results of the audit
effort. Both the internal auditors and independent auditors have private and
confidential access to the Audit Committee at all times.
<TABLE>
<S> <C> <C>
/s/ J. G. Breen /s/ L. J. Pitorak /s/ J. L. Ault
J. G. Breen L. J. Pitorak J. L. Ault
Chairman and Senior Vice President -- Finance, Vice President --
Chief Executive Officer Treasurer and Chief Financial Officer Corporate Controller
</TABLE>
FINANCIAL STATEMENTS
See "Item 14 -- Financial Statement Schedule, Reports on Form 8-K and
Exhibits" for the required Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
19
<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The information required by Item 10 regarding Directors is contained under
the caption "Election of Directors" in the Proxy Statement which will be filed
with the Securities and Exchange Commission, pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year, which information under
such caption is incorporated herein by reference.
The information required by Item 10 regarding Executive Officers is
contained under the caption "Executive Officers of the Registrant" in Part I of
this Form 10-K which information under such caption is incorporated herein by
reference.
The information required by Item 10 regarding certain significant employees
is contained under the captions "Corporate Officers of the Company" and
"Operating Managers of the Company" (excluding the Executive Officers) in the
Proxy Statement which information under such captions is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is contained under certain captions and
tables in the Proxy Statement which information under such captions and tables
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by Item 12 is contained under the captions
"Security Ownership of Management" and "Security Ownership of Certain Beneficial
Owners" in the Proxy Statement which information under such captions is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
None
20
<PAGE> 23
PART IV
ITEM 14. FINANCIAL STATEMENT SCHEDULE, REPORTS ON FORM 8-K AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a)
(1) Financial Statements
(i) Statements of Consolidated Income for the Years Ended December 31, 1995, 1994
and 1993
(ii) Consolidated Balance Sheets at December 31, 1995, 1994 and 1993
(iii) Statements of Consolidated Cash Flows for the Years Ended December 31, 1995,
1994 and 1993
(iv) Statements of Consolidated Shareholders' Equity for the Years Ended December
31, 1995, 1994 and 1993
(v) Notes to Consolidated Financial Statements for the Years Ended December 31,
1995, 1994 and 1993
(2) Financial Statement Schedule
Financial Schedule No. II for the Years Ended December 31, 1995, 1994 and 1993
-- All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been omitted.
(3) Exhibits
See Exhibit Index at page 41 of this report which is incorporated herein by
reference.
</TABLE>
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during
the quarter ended December 31, 1995.
21
<PAGE> 24
STATEMENTS OF CONSOLIDATED INCOME
(Thousands of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Net sales $3,273,819 $3,100,069 $2,949,303
Costs and expenses:
Cost of goods sold 1,877,083 1,772,671 1,696,959
Selling, general and administrative
expenses 1,075,442 1,018,470 981,268
Interest expense 2,532 3,217 6,453
Interest and net investment income (11,518) (8,222) (7,020)
Other 11,782 15,420 7,279
- ------------------------------------------------------------------------------------------
2,955,321 2,801,556 2,684,939
- ------------------------------------------------------------------------------------------
Income before income taxes 318,498 298,513 264,364
Income taxes 117,844 111,942 99,137
- ------------------------------------------------------------------------------------------
Net income $ 200,654 $ 186,571 $ 165,227
===========================================================================================
Net income per share $ 2.34 $ 2.15 $ 1.85
===========================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 249,484 $ 251,415 $ 230,092
Short-term investments 20,000 39,700
Accounts receivable, less allowance 334,304 310,984 297,527
Inventories:
Finished goods 395,817 396,299 371,572
Work in process and raw materials 67,270 62,921 57,346
- ------------------------------------------------------------------------------------------
463,087 459,220 428,918
Deferred income taxes 71,583 73,956 58,705
Other current assets 100,440 93,049 96,145
- ------------------------------------------------------------------------------------------
Total current assets 1,238,898 1,188,624 1,151,087
Deferred pension assets 233,574 225,962 214,583
Intangibles and other assets 212,224 138,243 154,925
Property, plant and equipment:
Land 45,203 42,211 45,487
Buildings 282,011 227,390 219,395
Machinery and equipment 629,786 596,878 556,694
Construction in progress 30,434 26,074 17,178
- ------------------------------------------------------------------------------------------
987,434 892,553 838,754
Less allowances for depreciation 531,077 483,351 444,684
- ------------------------------------------------------------------------------------------
456,357 409,202 394,070
- ------------------------------------------------------------------------------------------
Total Assets $2,141,053 $1,962,031 $1,914,665
===========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 276,863 $ 258,930 $ 254,997
Compensation and taxes withheld 78,148 79,110 71,476
Other accruals 232,035 218,240 187,324
Accrued taxes 31,891 40,768 39,804
- ------------------------------------------------------------------------------------------
Total current liabilities 618,937 597,048 553,601
Long-term debt 24,018 20,465 37,901
Postretirement benefits other than pensions 175,766 172,114 166,025
Other long-term liabilities 110,206 119,060 123,967
Shareholders' equity:
Common stock -- $1.00 par value:
85,454,813, 84,825,830 and 88,506,337
shares outstanding at December 31, 1995,
1994 and 1993, respectively 101,110 100,370 99,994
Other capital 182,311 159,562 150,203
Retained earnings 1,242,167 1,096,066 957,858
Cumulative foreign currency translation
adjustment (20,657) (20,006) (20,384)
Treasury stock, at cost (292,805) (282,648) (154,500)
- ------------------------------------------------------------------------------------------
Total shareholders' equity 1,212,126 1,053,344 1,033,171
- ------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,141,053 $1,962,031 $1,914,665
===========================================================================================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
OPERATIONS
Net income $ 200,654 $ 186,571 $ 165,227
Non-cash adjustments:
Depreciation 62,947 60,571 55,063
Deferred income tax expense (3,316) (18,329) (21,873)
Provisions for disposition of operations 6,267 5,712 4,916
Provisions for environmental remediation 10,136 14,400 7,059
Amortization of intangible assets 14,971 13,153 13,753
Defined benefit pension plans net credit (7,612) (11,379) (16,113)
Net increase in postretirement liability 3,652 5,139 2,921
Other 10,077 15,099 23,746
Change in current items -- net:
Increase in accounts receivable (19,571) (13,836) (26,106)
Decrease (increase) in inventories 3,922 (28,748) (19,553)
Increase in accounts payable 17,283 3,933 23,458
Increase (decrease) in accrued taxes (8,877) 964 16,697
Increase in accrued employee welfare costs 8,246 6,991 14,957
Other current items (13,066) 19,751 13,067
Costs incurred for disposition of operations (4,703) (6,949) (5,767)
Other 1,715 (2,520) 4,528
- ---------------------------------------------------------------------------------------
Net operating cash 282,725 250,523 255,980
- ---------------------------------------------------------------------------------------
INVESTING
Capital expenditures (108,392) (78,660) (62,985)
Decrease (increase) in short-term investments (20,000) 39,700 (36,689)
Acquisitions of assets (72,349) (9,215) (3,157)
Increase in other investments (27,250)
Other 2,189 7,806 (5,213)
- ---------------------------------------------------------------------------------------
Net investing cash (225,802) (40,369) (108,044)
- ---------------------------------------------------------------------------------------
FINANCING
Payments of long-term debt (804) (19,607) (33,711)
Payments of cash dividends (54,553) (48,363) (44,373)
Proceeds from stock options exercised 11,104 6,301 9,535
Purchases of stock for treasury (17,367) (128,148) (16,144)
Other 2,766 986 2,148
- ---------------------------------------------------------------------------------------
Net financing cash (58,854) (188,831) (82,545)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (1,931) 21,323 65,391
Cash and cash equivalents at beginning of
year 251,415 230,092 164,701
- ---------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 249,484 $ 251,415 $ 230,092
=======================================================================================
Taxes paid on income $ 122,687 $ 132,573 $ 102,513
Interest paid on debt 2,526 3,314 7,886
- ---------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 27
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Thousands of Dollars)
<TABLE>
<CAPTION>
Cumulative
Common Other Retained Translation Treasury
Stock Capital Earnings Adjustment Stock
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Balance at January 1, 1993 $ 99,374 $134,901 $ 828,851 $(18,923) $(138,356)
Treasury stock acquired (13,841)
Stock issued 620 15,302 (2,303)
Net income 165,227
Cash dividends -- $.50 per share (44,373)
Increase in unfunded pension
losses -- net of taxes 8,153
Current year translation adjustment (1,461)
- --------------------------------------------------------------------------------------------------
Balance at December 31, 1993 99,994 150,203 957,858 (20,384) (154,500)
Treasury stock acquired (126,794)
Stock issued 376 9,359 (1,354)
Net income 186,571
Cash dividends -- $.56 per share (48,363)
Current year translation adjustment 378
- --------------------------------------------------------------------------------------------------
Balance at December 31, 1994 100,370 159,562 1,096,066 (20,006) (282,648)
Treasury stock acquired (14,404)
Stock issued 740 22,749 4,247
Net income 200,654
Cash dividends -- $.64 per share (54,553)
Current year translation adjustment (651)
- --------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 101,110 $182,311 $1,242,167 $(20,657) $(292,805)
==================================================================================================
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The consolidated financial statements include all significant
controlled subsidiaries. Inter-company accounts and transactions have been
eliminated.
Business segments. Business segment information appears on pages 1 through 7 of
this report.
Foreign currency translation. All consolidated foreign operations use the local
currency of the country of operation as the functional currency and translate
the local currency asset and liability accounts at year-end exchange rates while
income and expense accounts are translated at average exchange rates. The
resulting translation adjustments are accumulated as a separate component of
Shareholders' Equity titled "Cumulative foreign currency translation
adjustment".
Cash flows. The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
Nature of operations. The Company is engaged in the manufacture, distribution
and sale of coatings and related products to professional, industrial,
commercial and retail customers primarily in North America.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Environmental Matters. Capital expenditures for ongoing environmental compliance
measures are recorded in the consolidated balance sheets and related expenses
are included in the normal operating expenses of conducting business. The
Company is involved with environmental compliance and remediation activities at
some of its current and former sites and at a number of third-party sites. The
Company accrues for certain environmental remediation activities for which
commitments or clean-up plans have been developed or for which costs or minimum
costs can be reasonably estimated. All accrued amounts are recorded on an
undiscounted basis. See Note 4 and Note 10 for discussion of the
environmental-related expense and accruals included in the financial statements.
Property, plant and equipment. Property, plant and equipment is stated on the
basis of cost. Depreciation is provided principally by the straight-line method.
The major classes of assets and ranges of depreciation rates are as follows:
<TABLE>
<S> <C>
Buildings 2% - 6 2/3%
Machinery and equipment 4% - 20%
Furniture and fixtures 5% - 20%
Automobiles and trucks 10% - 33 1/3%
</TABLE>
Investment in Life Insurance. The Company invests in broad-based corporate owned
life insurance. The cash surrender value of the policies, net of policy loans,
are included in Other Assets. The net expense associated with such investment is
included in Other Costs and Expenses. Such expense is immaterial to income
before income taxes.
Intangibles. Intangible assets were $122,862, $105,821 and $115,765, net of
accumulated amortization of $65,114, $62,744 and $49,562, at December 31, 1995,
1994 and 1993, respectively. These assets are amortized by the straight-line
method over the expected period of benefit. The Company reviews such assets for
impairment and revises the related estimated remaining lives if necessary.
Technical expenditures. Total technical expenditures include research and
development costs, quality control, product formulation expenditures and other
similar items. Research and development costs
26
<PAGE> 29
included in technical expenditures were $17,238, $16,319 and $17,190 for 1995,
1994 and 1993, respectively.
Advertising expenses. The cost of advertising is expensed as incurred. The
Company incurred $152,588, $148,973 and $144,778 in advertising costs during
1995, 1994 and 1993, respectively.
Impact of Recently Issued Accounting Standards. In March 1995, the Financial
Accounting Standards Board issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
Net income per share. Net income per share was computed based on the average
number of shares and share equivalents outstanding during the year. See
computation on page 43 of this report.
Letters of credit. The Company occasionally enters into standby letter of credit
agreements to guarantee various operating activities. These agreements, which
expire in 1996, provide credit availability to the various beneficiaries if
certain contractual events occur. Amounts outstanding under these agreements
totaled $17,075, $20,091 and $24,656 at December 31, 1995, 1994 and 1993,
respectively.
Fair value of financial instruments. The following methods and assumptions were
used by the Company in estimating its fair value disclosures for financial
instruments:
Cash and cash equivalents: The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents approximate fair
value.
Short-term investments: The carrying amounts reported in the consolidated
balance sheets for marketable debt and equity securities are based on
quoted market prices and approximate fair value.
Investments in Securities: The Company maintains certain long-term
investments in a fund to provide for payment of health care benefits of
certain qualified employees. These investments are classified as
held-to-maturity securities with the related carrying amounts included in
Other Assets. The estimated fair values of these securities, shown below,
are based on quoted market prices.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Carrying amount $34,085 $37,726 $38,064
Fair value 34,709 37,668 43,235
-----------------------------------------------------------------------------------------
</TABLE>
Long-term debt (including current portion): The fair values of the
Company's publicly traded debentures, shown below, are based on quoted
market prices. The fair values of the Company's non-traded debt, also shown
below, are estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------------------
1995 1994 1993
---------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair Carrying Fair
AMOUNT VALUE Amount Value Amount Value
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Publicly traded debt $ 15,900 $20,065 $16,077 $17,643 $29,235 $37,071
Non-traded debt 8,715 6,162 5,083 3,243 10,084 7,446
---------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
Interest rate swaps: The Company occasionally enters into interest rate
swaps primarily to hedge against interest rate risks. These agreements
generally involve the exchange of fixed and floating rate interest payment
obligations without the exchange of the underlying principal amounts.
Counterparties to these agreements are major financial institutions.
Management believes the risk of incurring losses related to credit risk is
remote.
The fair values for the Company's off-balance-sheet instruments, shown
below, are based on pricing models or formulas using current assumptions
for comparable instruments. All fair value amounts shown represent a
liability position at the respective date.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Carrying amount $ 1,275 $1,802 $ 2,309
Fair value 943 1,996 1,094
Notional amount 9,711 9,446 35,009
Number of agreements outstanding 1 1 2
-----------------------------------------------------------------------------------------
</TABLE>
Non-traded investments: It was not practicable to estimate the fair value
of the Company's investment in certain non-traded investments because of
the lack of quoted market prices and the inability to estimate fair values
without incurring excessive costs. The carrying amounts, included in other
assets, of $31,491, $18,829 and $25,778 at December 31, 1995, 1994 and
1993, respectively, represent the Company's best estimate of current
economic values of these investments.
Reclassification. Certain amounts in the 1994 and 1993 financial statements have
been reclassified to conform with the 1995 presentation.
NOTE 2 -- SUBSEQUENT EVENTS
Acquisition. Effective January 8, 1996, the Company accepted for payment
10,825,550 shares of common stock (or approximately 96.3% of the total shares
outstanding) of Pratt & Lambert United, Inc. (Pratt & Lambert) pursuant to a
cash tender offer commenced on November 9, 1995 pursuant to the Agreement and
Plan of Merger dated as of November 4, 1995 (Merger Agreement) entered into
between the Company, SWACQ, Inc. (a wholly-owned subsidiary of the Company) and
Pratt & Lambert. The terms of the Merger Agreement provided that the Company
would acquire all of the outstanding shares of Pratt & Lambert for a cash price
of $35 per share, or a total purchase price of approximately $400,000. Pursuant
to the laws of the State of New York, the merger was effected on January 10,
1996 (merger date) without a vote of the shareholders. Effective on the merger
date, SWACQ, Inc. was merged into Pratt & Lambert, making Pratt & Lambert a
wholly-owned subsidiary of the Company. As a result of the merger, all shares
not tendered were converted into the right to receive $35 per share in cash,
without interest.
The acquisition was financed through the use of available cash, a $50,000
floating term note and other available sources of financing. The floating term
note is accompanied by a two-year interest rate swap agreement which involves
the exchange of fixed and floating rate interest payment obligations without the
exchange of the underlying principal amount. The notional amount upon which the
interest is based is $50,000. Any market risk of the swap agreement related to
the fluctuation in interest rates will be offset by a change to the interest
payment obligation on the Company's floating term note.
The merger will be accounted for under the purchase method of accounting,
and the results of operations of Pratt & Lambert will be included in the results
of operations of the Company beginning in 1996. Pratt & Lambert is principally
engaged in the production and sale of coatings and adhesives to the dealer, mass
merchandiser, home center and specialty markets. In August 1994, Pratt &
Lambert, Inc. merged with United Coatings, Inc., a supplier primarily to the
mass merchant market. Pratt & Lambert's annual sales during 1995 were
approximately $479,000.
28
<PAGE> 31
Debt Repayment. Subsequent to the merger, the Company repaid approximately
$95,000 of Pratt & Lambert's outstanding debt. The debt repayment was financed
through the issuance of short-term commercial paper. Depending on cash flows and
market conditions in 1996, a portion of the short-term commercial paper may be
refinanced into long-term debt.
NOTE 3 -- INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
principally on the last-in, first-out (LIFO) method which provides a better
matching of current costs and revenues. The following presents the effect on
inventories, net income and net income per share had the Company used the
first-in, first-out (FIFO) and average cost methods of inventory valuation
adjusted for income taxes at the statutory rate and assuming no other
adjustments. This information is presented to enable the reader to make
comparisons with companies using the FIFO method of inventory valuation.
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of total inventories on LIFO 97% 97% 97%
Excess of FIFO and average cost over LIFO $ 102,725 $ 80,199 $ 80,094
Increase (decrease) in net income due to LIFO (14,642) (68) 2,217
Increase (decrease) in net income per share due to LIFO (.17) -- .02
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE 4 -- OTHER COSTS AND EXPENSES
A summary of significant items included in other costs and expenses is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend and royalty income $ (10,433) $ (7,500) $ (5,445)
Net expense of financing and investing activities 9,376 12,660 4,155
Provisions for environmental remediation 10,136 4,700 6,059
Provisions for disposition and termination of
operations (see Note 5) 1,007 1,812 916
Miscellaneous 1,696 3,748 1,594
- -----------------------------------------------------------------------------------------------
$ 11,782 $ 15,420 $ 7,279
===============================================================================================
</TABLE>
The net expense of financing and investing activities represents the
realized gains or losses associated with disposing of fixed assets, the net gain
or loss associated with the investment of certain long-term asset funds, the
premium associated with the retirement or acquisition of certain outstanding
9.875 percent debentures during 1993 and 1994, and, in 1994 and 1995, the net
pre-tax expense associated with the Company's investment in broad-based
corporate owned life insurance.
During the three years ended December 31, 1995, provisions for
environmental remediation reflect the increased estimated costs of
environmental-related matters at current, former and third-party sites (see Note
10).
NOTE 5 -- DISPOSITION AND TERMINATION OF OPERATIONS
The Company is continually re-evaluating its operating facilities with
regard to the long-term strategic goals established by management and the board
of directors. Operating facilities which are not expected to sufficiently
contribute to the Company's future plans are closed or sold.
At the time of the decision to close or sell a facility, a provision is
made and the expense included in other costs and expenses to reduce property,
plant and equipment to its estimated net realizable value. Similarly, provisions
are made which reduce all other assets to their estimated net realizable values
and provide for all qualified exit costs such as lease cancellation penalties,
post-closure rent
29
<PAGE> 32
expenses and incremental post-closure expenses, and the estimated costs of
employee termination benefits if management has approved a termination plan and
communicated such plan to the affected employees. The expenses associated with
the provisions for such exit costs and termination benefits are included in cost
of goods sold. Adjustments to all previous accruals, as closure or disposition
occurs, are included in other costs and expenses. In prior years, the provisions
for disposition, actual costs and accruals balances in the table below included
certain amounts for environmental-related matters. All such matters are now
disclosed together in Note 10.
The provisions made in 1995 represent the reduction to net realizable value
for certain assets and exit costs associated with closing certain warehouses due
to distribution consolidations within the Company. In 1994, provisions were made
for the closing of certain warehouses which were replaced during 1995 by larger,
more efficient facilities. In 1993, provisions were made for the closing of
certain warehouses, small manufacturing facilities and selected unprofitable
retail paint stores as part of production and distribution consolidations.
A summary of the financial data related to the closing or sale of the
facilities is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning accruals -- January 1 $ 25,982 $ 26,110 $ 25,722
Provisions included in cost of goods sold 5,260 3,900 4,000
Provisions and adjustments to prior accruals included in
costs and expenses -- other 1,007 1,812 916
- -----------------------------------------------------------------------------------------------
Total provisions 6,267 5,712 4,916
Actual costs incurred (4,704) (5,840) (4,528)
- -----------------------------------------------------------------------------------------------
Ending accruals -- December 31 $ 27,545 $ 25,982 $ 26,110
===============================================================================================
Net after-tax provision $ 4,073 $ 3,713 $ 3,195
Net after-tax provision per share $ .05 $ .04 $ .04
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE 6--PENSION BENEFITS
Substantially all employees of the Company participate in noncontributory
defined benefit or defined contribution pension plans. Defined benefit plans
covering salaried employees provide benefits that are based primarily on years
of service and employees' compensation. The defined benefit plan covering hourly
employees generally provides benefits of stated amounts for each year of
service. Multi-employer plans are primarily defined benefit plans which provide
benefits of stated amounts for union employees. The Company's funding policy for
defined benefit pension plans is to fund at least the minimum annual
contribution required by applicable regulations. Plan assets consist primarily
of cash, equity and fixed-income securities. There were 969,400 shares of the
Company's stock included in these assets at December 31, 1995, 1994 and 1993.
Due to decreased rates of high-quality long-term investments, the assumed
discount rate was changed December 31, 1995, increasing the projected benefit
obligation. The decreased interest rates during 1995 positively impacted the
return on plan assets in the defined benefit pension trusts. The effect of the
change in the assumed discount rate and the increased earnings on plan assets
resulted in a net decrease in the unrecognized net loss, whose amortization will
be reduced beginning in 1996. Changes in the assumed discount rate and rate of
return on plan assets at December 31, 1994 and 1993 previously increased the
unrecognized net loss, whose amortization in 1995 and 1994, respectively,
reduced the net pension credit.
30
<PAGE> 33
The net pension credit for defined benefit plans and its components was as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,401 $ 2,800 $ 2,489
Interest cost 8,929 8,402 8,299
Actual return on plan assets (53,926) 7,418 (25,731)
Net amortization and deferral 34,984 (29,999) (1,170)
- -----------------------------------------------------------------------------------------------
Net pension credit $ (7,612) $ (11,379) $ (16,113)
===============================================================================================
</TABLE>
Based on the latest actuarial information available, the following table
sets forth the funded status and amounts recognized in the Company's
consolidated balance sheets for the defined benefit pension plans:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ (116,335) $ (103,860) $ (105,530)
Accumulated benefit obligation $ (118,585) $ (105,480) $ (107,530)
Projected benefit obligation $ (128,335) $ (111,650) $ (117,970)
Plan assets at fair value 323,216 277,841 293,076
- -----------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit
obligation 194,881 166,191 175,106
Unrecognized net asset at January 1, 1986, net of
amortization (9,865) (12,787) (15,708)
Unrecognized prior service cost 393 441 1,201
Unrecognized net loss 48,165 72,117 53,984
- -----------------------------------------------------------------------------------------------
Deferred pension assets recognized in the
consolidated balance sheets $ 233,574 $ 225,962 $ 214,583
===============================================================================================
Assumptions used in determining actuarial present
value of benefit obligations:
Discount rate 7.25% 8.25% 7.25%
Weighted-average rate of increase in future
compensation levels 5.00% 5.00% 5.00%
Long-term rate of return on plan assets 8.50% 8.50% 8.50%
- -----------------------------------------------------------------------------------------------
</TABLE>
The Company's annual contribution for its defined contribution pension
plans, which is based on a level percentage of compensation for covered
employees, offset the pension credit by $20,326 for 1995, $20,193 for 1994 and
$19,809 for 1993. The cost of multiemployer and foreign plans charged to income
was immaterial for the three years ended December 31, 1995.
NOTE 7 -- BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits under company-sponsored plans for active
and retired employees. The health care plans are contributory and contain
cost-sharing features such as deductibles and coinsurance. There were 14,823,
14,160 and 13,883 active employees entitled to receive benefits under these
plans as of December 31, 1995, 1994 and 1993, respectively. The cost of these
benefits for active employees is recognized as claims are incurred and amounted
to $37,194, $32,694 and $35,597 for 1995, 1994 and 1993, respectively. The
Company has a fund, to which it no longer intends to contribute, that provides
for payment of health care benefits of certain qualified employees.
Distributions from the fund amounted to $5,265 in 1995, $4,662 in 1994 and
$5,719 in 1993.
Substantially all employees of the Company who were hired prior to January
1, 1993 and who are not members of a collective bargaining unit are eligible for
certain health care and life insurance benefits upon retirement from active
service with the Company. There were 4,008, 4,093 and 4,126
31
<PAGE> 34
retired employees entitled to receive benefits as of December 31, 1995, 1994 and
1993, respectively. The plans are unfunded.
The assumed discount rate used in determining the actuarial present value
of the accumulated postretirement benefit obligation was 7.25% in 1995 and 1993
and 8.25% in 1994. The change in the assumed discount rate at December 31, 1995,
caused by decreased interest rates of high-quality long-term investments,
increased the accumulated postretirement benefit obligation, the effect of which
increased the unrecognized net loss. Amortization of the loss will begin in
1996. The assumed weighted-average annual rate of increase in the per capita
cost of covered benefits (i.e., the health care cost trend rate) is 8.5 percent
for 1996 and decreases gradually to 5.5 percent for 2003 and thereafter. The
assumed health care cost trend rate was lowered one percentage point at December
31, 1993 for each year thereafter, which decreased the accumulated
postretirement benefit obligation. The health care cost trend rate has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rate by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1995 by $11,667 and the aggregate service and interest cost components of net
periodic postretirement benefit cost for 1995 by $1,036.
Based on the latest actuarial information available, the following table
sets forth the amounts recognized in the Company's consolidated balance sheets
for postretirement benefits other than pensions:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $ (105,200) $ (93,049) $ (94,000)
Fully eligible active participants (17,590) (14,240) (19,900)
Other active participants (49,120) (41,811) (40,680)
- -----------------------------------------------------------------------------------------------
(171,910) (149,100) (154,580)
Effect of changes in the accumulated postretirement
benefit obligation to be amortized over future
years:
Unrecognized prior service credit (24,268) (26,961) (29,655)
Unrecognized net (gain) loss 12,262 (4,203) 9,110
- -----------------------------------------------------------------------------------------------
Total accrued postretirement benefit liability $ (183,916) $ (180,264) $ (175,125)
===============================================================================================
Accrued postretirement benefit liabilities
recognized in the consolidated balance sheets:
Amount included in current liabilities $ (8,150) $ (8,150) $ (9,100)
Amount of long-term postretirement benefits
other than pensions (175,766) (172,114) (166,025)
- -----------------------------------------------------------------------------------------------
Total accrued postretirement benefit liability $ (183,916) $ (180,264) $ (175,125)
===============================================================================================
The expense for postretirement benefit plans and
its components was as follows:
Service cost $ 2,723 $ 3,112 $ 2,450
Interest cost 11,998 11,459 11,420
Net amortization of unrecognized prior service
credit (2,693) (2,693) (2,693)
Net amortization and deferral 61
- -----------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 12,028 $ 11,939 $ 11,177
===============================================================================================
</TABLE>
32
<PAGE> 35
NOTE 8 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
Sinking Fund/
Interim Payments Amount Outstanding
------------------------ ---------------------------------------------
Due Date Amount Commence 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9.875% Debentures 2016 $5,000 2007 $ 15,900 $ 15,900 $ 29,000
8% to 12% Mortgage Notes Through Varies Payable 2,632 3,365 4,418
secured by certain land and 2005 currently
buildings and other
8.5% Promissory Note 2004 Varies 1996 978 1,000
8.15% Promissory Note 2000 1,000
8% Promissory Notes Through Varies 1996 3,350
1999
Floating Rate Broward County
Industrial Revenue Bond 3,994
6.25% Convertible Subordinated
Debentures (Convertible into
common stock at $2.875 a share) 235
Other Obligations 158 200 254
- ------------------------------------------------------------------------------------------------------------------------------
$ 24,018 $ 20,465 $ 37,901
==============================================================================================================================
</TABLE>
Maturities of long-term debt are as follows for the next five years: $755
in 1996; $662 in 1997; $467 in 1998; $2,506 in 1999; and $1,178 in 2000.
Interest expense on long-term debt amounted to $2,387, $2,768 and $6,136
for 1995, 1994 and 1993, respectively. There were no interest charges
capitalized during the periods presented.
The Company had the following other financing arrangements available at
December 31, 1995 outlined below. There were no outstanding borrowings under
these arrangements at the end of 1995.
Under a 364-day revolving credit agreement with a group of thirteen banks
effective August 31, 1995, the Company may borrow up to $100,000. The agreement
may be extended for additional 364-day periods under the terms thereof.
Under a five-year revolving credit agreement with the same group of
thirteen banks effective August 31, 1995, as amended November 30, 1995, the
Company may borrow up to $500,000. The agreement may be extended for additional
one-year periods under the terms thereof. Amounts outstanding under the
agreement may be converted into two-year term loans at any time.
Both revolving credit agreements contain net worth and certain
non-financial covenants. There are no compensating balance arrangements.
The Company has a commercial paper program under which $280,000 aggregate
principal amount of unsecured short-term notes can be issued.
Under a shelf registration with the Securities and Exchange Commission
covering $200,000 of unsecured debt securities with maturities ranging from nine
months to thirty years, the Company may issue securities from time to time in
one or more series and will offer the securities on terms determined at the time
of sale.
Subsequent to the date of the financial statements, the Company issued a
$50,000 term note and approximately $205,000 in other available sources of
financing as more fully explained in Note 2.
NOTE 9 -- LEASES
The Company leases certain stores, warehouses, office space and equipment.
Renewal options are available on the majority of leases and, under certain
conditions, options exist to purchase some properties. Rental expense for
operating leases was $95,536, $93,637 and $91,672 for 1995, 1994 and 1993,
respectively. Certain store leases require the payment of contingent rentals
based on sales in excess of specified minimums. Contingent rentals included in
rent expense were $9,102 in 1995, $8,985
33
<PAGE> 36
in 1994 and $9,234 in 1993. Rental income, as lessor, from real estate leasing
activities and sublease rental income for all years presented was not
significant.
Following is a schedule, by year and in the aggregate, of future minimum
lease payments under noncancellable operating leases having initial or remaining
terms in excess of one year at December 31, 1995:
<TABLE>
<S> <C>
1996 $ 72,026
1997 61,097
1998 47,739
1999 35,275
2000 23,775
Later years 61,157
--------
Total minimum lease payments $301,069
========
</TABLE>
NOTE 10 -- OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Environmental-related $ 70,310 $ 71,049 $ 65,755
Other 39,896 48,011 58,212
- --------------------------------------------------------------------------------------------
$110,206 $119,060 $123,967
============================================================================================
</TABLE>
The Company has provided for the estimated costs associated with
environmental remediation activities at some of its current and former sites.
Also, the Company, together with other parties, has been designated a
potentially responsible party under federal and state environmental protection
laws for the remediation of hazardous waste at a number of third-party sites,
primarily Superfund sites. In general, these laws provide that potentially
responsible parties may be held jointly and severally liable for investigation
and remediation costs regardless of fault. The Company provides for its
estimated potential liability for investigation and remediation costs with
respect to such third-party sites.
The Company initially provides for the estimated cost of certain
environmental-related activities relating to its current, former and third-party
sites when minimum costs can be reasonably estimated. These estimates are
determined based on currently-available facts regarding each site. If the best
estimate of costs can only be identified within a range and no specific amount
within that range can be determined more likely than any other amount within the
range, the minimum of the range is accrued. Actual costs incurred may vary from
these estimates due to the inherent uncertainties involved. The Company believes
that any additional liability in excess of amounts provided which may result
from the resolution of these matters will not have a material adverse effect on
the financial condition, liquidity or cash flow of the Company.
In addition to the long-term portion of environmental-related accruals
shown above, current accruals for certain environmental-related liabilities
associated with current, former and third-party sites are included in other
accruals in current liabilities on the consolidated balance sheets.
NOTE 11 -- STOCK PURCHASE PLAN
As of December 31, 1995, 11,203 employees participated through regular
payroll deductions in the Company's Employee Stock Purchase and Savings Plan.
The Company's contribution charged to income amounted to $26,795, $22,242 and
$20,658 for 1995, 1994 and 1993, respectively. Additionally, the Company made
contributions on behalf of participating employees, which represent salary
34
<PAGE> 37
reductions for income tax purposes, amounting to $12,775 in 1995, $11,456 in
1994 and $10,335 in 1993.
At December 31, 1995, there were 13,075,095 shares of the Company's stock
being held by this plan, representing 15.3 percent of the total number of shares
outstanding. Shares of company stock credited to each member's account under the
plan are voted by the trustee under confidential instructions from each
individual plan member. Shares for which no instructions are received are voted
by the trustee in the same proportion as those for which instructions are
received.
NOTE 12 -- CAPITAL STOCK
<TABLE>
<CAPTION>
Shares Shares
in Treasury Outstanding
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1993 10,993,257 88,380,906
Stock issued upon:
Exercise of stock options 73,224 462,736
Conversion of 6.25% Convertible Subordinated Debentures 8,695
Restricted stock grants 75,500
Treasury stock acquired 421,500 (421,500)
- -------------------------------------------------------------------------------------------
Balance at December 31, 1993 11,487,981 88,506,337
Stock issued upon:
Exercise of stock options 42,292 319,124
Conversion of 6.25% Convertible Subordinated Debentures 20,169
Cancellation of restricted stock grants (6,000)
Treasury stock acquired 4,013,800 (4,013,800)
- -------------------------------------------------------------------------------------------
Balance at December 31, 1994 15,544,073 84,825,830
Stock issued upon:
Exercise of stock options 85,613 521,043
Conversion of 6.25% Convertible Subordinated Debentures 61,668
Restricted stock grants 72,000
Treasury Stock:
Acquired 411,300 (411,300)
Issued for acquisition (385,572) 385,572
- -------------------------------------------------------------------------------------------
Balance at December 31, 1995 15,655,414 85,454,813
==========================================================================================
</TABLE>
An aggregate of 4,889,865, 5,663,772 and 4,087,364 shares of stock at
December 31, 1995, 1994 and 1993, respectively, were reserved for future
restricted stock grants, the exercise and future grants of stock options, and,
prior to their expiration in February 1995, the conversion of convertible
subordinated debentures. At December 31, 1995, there were 300,000,000 shares of
common stock and 30,000,000 shares of serial preferred stock authorized for
issuance.
The Company has a shareholders' rights plan which designates 1,000,000
shares of the authorized serial preferred stock as cumulative redeemable serial
preferred stock which may be issued if the Company becomes the target of
coercive and unfair takeover tactics.
NOTE 13 -- STOCK PLAN
The Company's stock plan permits the granting of stock options, stock
appreciation rights and restricted stock to eligible employees. The 1994 Stock
Plan succeeded the 1984 Stock Plan which expired on February 15, 1994. Although
no further grants may be made under the 1984 Stock Plan, all rights granted
under such plan remain. The 1994 Stock Plan authorized an additional 2,000,000
shares to be added to authorized shares of the 1984 Stock Plan which were not
granted as of the 1984 Stock Plan's expiration date. Non-qualified and incentive
stock options have been granted to certain officers and key employees under the
plans at prices not less than fair market value of the shares, as
35
<PAGE> 38
defined by the plans, at the date of grant. The options generally become
exercisable to the extent of one-third of the optioned shares for each full year
of employment following the date of grant and generally expire ten years after
the date of grant.
Restricted stock grants, with an outstanding balance of 186,000 shares at
December 31, 1995, were awarded to certain officers and key employees which
require four years of continuous employment from the date of grant before
receiving the shares without restriction. The number of shares to be received
without restriction is based on the Company's performance relative to a peer
group of companies. There were 104,000 and 121,500 shares issued without
restriction pursuant to these grants during 1995 and 1993, respectively.
Unamortized deferred compensation expense with respect to the restricted stock
amounted to $4,024 at December 31, 1995, $1,612 at December 31, 1994 and $3,760
at December 31, 1993 and is being amortized over the four-year vesting period.
Deferred compensation expense aggregated $1,563, $1,416 and $3,271 in 1995, 1994
and 1993, respectively. No stock appreciation rights have been granted.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
PRICE Price Price
SHARES RANGE Shares Range Shares Range
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock Options:
Outstanding beginning of
year 2,606,459 $10.94 - $35.88 2,671,545 $ 7.72-$35.88 2,944,255 $ 7.72-$28.88
Granted 504,200 32.69 - 36.56 334,400 32.19- 35.06 327,000 30.75- 35.88
Exercised (606,656) 10.94 - 33.25 (361,416) 7.72- 31.63 (535,960) 9.22- 28.38
Canceled (15,869) 25.13 - 35.31 (38,070) 12.56- 33.25 (63,750) 10.94- 30.75
- -------------------------------------------------------------------------------------------------------------------------
Outstanding end of year 2,488,134 $10.94 - $36.56 2,606,459 $10.94-$35.88 2,671,545 $ 7.72-$35.88
- -------------------------------------------------------------------------------------------------------------------------
Exercisable 1,671,194 1,969,569 1,579,103
Reserved for future
grants 2,401,731 2,995,630 1,333,963
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 14--INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes". Under SFAS No. 109, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
currently in effect.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1995, 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation $ 21,630 $ 23,829 $30,580
Deferred employee benefit items 26,360 26,494 24,109
- -------------------------------------------------------------------------------------------
Total deferred tax liabilities $ 47,990 $ 50,323 $54,689
===========================================================================================
Deferred tax assets:
Dispositions, environmental and other similar
items $ 32,425 $ 36,076 $30,044
Other items (each less than 5% of total assets) 82,193 77,013 65,721
- -------------------------------------------------------------------------------------------
Total deferred tax assets $114,618 $113,089 $95,765
===========================================================================================
</TABLE>
36
<PAGE> 39
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 97,936 $106,132 $100,121
Foreign 2,470 1,775 1,483
State and Local 20,754 22,364 19,406
- -------------------------------------------------------------------------------------------
Total Current 121,160 130,271 121,010
Deferred:
Federal (3,062) (15,465) (18,467)
Foreign
State and Local (254) (2,864) (3,406)
- -------------------------------------------------------------------------------------------
Total Deferred (3,316) (18,329) (21,873)
- -------------------------------------------------------------------------------------------
Total income tax expense $117,844 $111,942 $ 99,137
===========================================================================================
</TABLE>
A reconciliation of the statutory federal income tax rate and the effective
tax rate follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
Effect of:
State and local taxes 4.2 4.2 3.9
Investment vehicles (2.6) (2.0) (1.1)
Other, net 0.4 0.3 (0.3)
- ----------------------------------------------------------------------------------------------
Effective tax rate 37.0% 37.5% 37.5%
==============================================================================================
</TABLE>
It is the Company's intention to reinvest undistributed earnings of foreign
subsidiaries; accordingly, no deferred income taxes have been provided thereon.
At December 31, 1995, such undistributed earnings amounted to $4,500. Included
in the Company's deferred tax assets are valuation reserves of $17,784, $14,021
and $9,758 at December 31, 1995, 1994 and 1993, respectively, resulting from the
uncertainty as to future recognition of certain foreign net operating losses and
other foreign assets.
NOTE 15--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
1995
- ---------------------------------------------------------------------
NET
NET GROSS NET INCOME
QUARTER SALES PROFIT INCOME PER SHARE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------
1ST $ 716,796 $ 292,559 $ 18,733 $ .22
2ND 904,729 387,947 73,207 .85
3RD 911,387 390,498 74,948 .87
4TH 740,907 325,732 33,766 .39
</TABLE>
Year-end adjustments during the fourth quarter of $1,565 increased net
income by $1,017 ($.01 per share). Cost of goods sold decreased by a net of
$8,268 ($5,374 after-tax, $.06 per share) as a result of physical inventory
adjustments of $13,528 ($8,793 after-tax, $.10 per share) which were partially
offset by certain provisions for the disposition and termination of operations
of $5,260 ($3,419 after-tax, $.04 per share). Administrative expenses were
increased by $60 ($39 after-tax, no per share effect) due to other year-end
adjustments. Other costs and expenses increased $6,643 ($4,318 after-tax, $.05
per share) due to the provisions for environmental-related matters at certain
current, former and third-party sites of $7,136 ($4,638 after-tax, $.05 per
share) which were partially
37
<PAGE> 40
offset by reductions to prior accruals for the disposition and termination of
operations of $493 ($320 after-tax, no per share effect).
<TABLE>
<CAPTION>
1994
- --------------------------------------------------------------------
Net
Net Gross Net Income
Quarter Sales Profit Income per Share
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------
1st $ 639,157 $261,890 $ 15,508 $.17
2nd 880,531 378,775 69,155 .80
3rd 876,743 377,529 71,229 .83
4th 703,638 309,204 30,679 .36
</TABLE>
Net income for the fourth quarter was reduced $809 ($.01 per share) due to
certain year-end adjustments. A net decrease in cost of goods sold resulted from
physical inventory adjustments of $19,017 ($12,361 after-tax, $.14 per share)
which were partially offset by certain provisions for the disposition and
termination of operations of $13,600 ($8,840 after-tax, $.10 per share). A net
increase in administrative expenses due to other year-end adjustments of $2,150
($1,398 after-tax, $.01 per share) and in other costs and expenses due to the
remaining provisions for the disposition and termination of operations of $1,812
($1,178 after-tax, $.02 per share) and provisions for environmental remediation
at certain sites of $2,700 ($1,755 after-tax, $.02 per share) more than offset
the gain in cost of goods sold.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(SCHEDULE II)
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 10,820 $ 8,589 $ 1,983
Bad debt expense 13,793 11,801 16,514
Net uncollectible accounts written off (9,459) (9,570) (9,908)
- ------------------------------------------------------------------------------------------------
Ending balance $ 15,154 $ 10,820 $ 8,589
================================================================================================
</TABLE>
Activity related to other asset reserves:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 80,853 $ 54,079 $ 40,124
Charges to expense 15,672 20,850 13,785
Other additions (deductions) (12,628) 5,924 170
- ------------------------------------------------------------------------------------------------
Ending balance $ 83,897 $ 80,853 $ 54,079
================================================================================================
</TABLE>
Charges to expense consist primarily of amortization of intangibles and, in
1994, adjustments to reduce certain assets to their estimated net realizable
values. Other additions (deductions) consist primarily of actual costs incurred
and balance sheet reclassifications and, in 1995, removal of fully-amortized
items.
38
<PAGE> 41
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Cleveland, and State of Ohio, on the 13th day of March, 1996.
THE SHERWIN-WILLIAMS COMPANY
By: /s/ L. E. STELLATO
------------------------------------------
L. E. Stellato, Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on March 13, 1996.
<TABLE>
<CAPTION>
SIGNATURE
---------
<S> <C>
* J. G. BREEN Chairman and Chief Executive Officer,
- ----------------------------------- Director (Principal Executive Officer)
J. G. Breen
* T. A. COMMES President and Chief Operating Officer,
- ----------------------------------- Director
T. A. Commes
* L. J. PITORAK Senior Vice President -- Finance,
- ----------------------------------- Treasurer and Chief Financial Officer
L. J. Pitorak (Principal Financial Officer)
* J. L. AULT Vice President -- Corporate Controller
- ----------------------------------- (Principal Accounting Officer)
J. L. Ault
* J. M. BIGGAR Director
- -----------------------------------
J. M. Biggar
* L. CARTER Director
- -----------------------------------
L. Carter
* D. E. COLLINS Director
- -----------------------------------
D. E. Collins
* D. E. EVANS Director
- -----------------------------------
D. E. Evans
* R. W. MAHONEY Director
- -----------------------------------
R. W. Mahoney
* W. G. MITCHELL Director
- -----------------------------------
W. G. Mitchell
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
SIGNATURE
---------
<S> <C>
* A. M. MIXON, III Director
- -----------------------------------
A. M. Mixon, III
* H. O. PETRAUSKAS Director
- -------------------------------
H. O. Petrauskas
* R. K. SMUCKER Director
- -------------------------------
R. K. Smucker
</TABLE>
* The undersigned, by signing his name hereto, does sign this report on behalf
of the designated Officers and Directors of The Sherwin-Williams Company
pursuant to Powers of Attorney executed on behalf of each such Officer and
Director.
<TABLE>
<S> <C>
By: /s/ L. E. STELLATO March 13, 1996
-----------------------------------
L. E. Stellato, Attorney-in-fact
</TABLE>
40
<PAGE> 43
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
2. Not applicable.
3. (a) Amended Articles of Incorporation, as amended April 28, 1993, filed as Exhibit
4(a) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and
incorporated herein by reference.
(b) Regulations of the Company, as amended, dated April 27, 1988, filed as Exhibit
4(b) to Post-Effective Amendment No. 1, dated April 29, 1988, to Form S-8
Registration Statement Number 2-91401, and incorporated herein by reference.
4. (a) Indenture between the Company and Chemical Bank, as Trustee, dated as of February
1, 1996, filed as Exhibit 4(a) to Form S-3 Registration Statement Number
333-01093, dated February 20, 1996 (also deemed to be filed as Exhibit 4(b) to
Form S-3 Registration Statement Number 33-22705, dated June 24, 1988), and
incorporated herein by reference.
(b) 364-Day Revolving Credit Agreement, by and among the Company and several banking
institutions, dated August 31, 1995, filed as Exhibit (b)(1) to the Tender Offer
Statement on Schedule 14D-1/Schedule 13D filed November 9, 1995, as amended, and
incorporated herein by reference.
(c) Five Year Revolving Credit Agreement, by and among the Company and several
banking institutions, dated August 31, 1995, filed as Exhibit (b)(2) to the
Tender Offer Statement on Schedule 14D-1/Schedule 13D filed November 9, 1995, as
amended, and incorporated herein by reference.
(d) Addendum to Five Year Revolving Credit Agreement, by and among the Company and
several banking institutions, dated November 30, 1995 (filed herewith).
(e) Term Loan/Bankers' Acceptance Agreement, by and between the Company and SunTrust
Bank, Atlanta, dated January 9, 1996 (filed herewith).
(f) Term Loan/Bankers' Acceptance Agreement, by and between the Company and SunTrust
Bank, Atlanta, dated February 1, 1996 (filed herewith).
(g) Indenture between Sherwin-Williams Development Corporation, as issuer, the
Company, as guarantor, and Harris Trust and Savings Bank, as Trustee, dated June
15, 1986, filed as Exhibit 4(b) to Form S-3 Registration Statement Number
33-6626, dated June 20, 1986, and incorporated herein by reference.
(h) Rights Agreement between the Company and Ameritrust Company National Association,
dated January 25, 1989, filed as Exhibit 2.1 to Form 8-A, dated January 26, 1989,
and incorporated herein by reference.
9. Not applicable.
10. *(a) Form of Director and Officer Indemnification Agreement filed as Exhibit 28(a) to
Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and
incorporated herein by reference.
*(b) Employment Agreements with J.G. Breen, T.A. Commes and C.G. Ivy filed as Exhibit
28(b) to Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and
incorporated herein by reference.
*(c) Amendments to Employment Agreements with J.G. Breen, T.A. Commes and C.G. Ivy
(filed herewith).
*(d) Form of Severance Pay Agreements filed as Exhibit 10(c) to Form 10-K dated March
13, 1990, and incorporated herein by reference.
*(e) The Sherwin-Williams Company Deferred Compensation Savings Plan filed as Exhibit
10(d) to Form 10-K dated March 13, 1992, and incorporated herein by reference.
*(f) Amendment No. 1 to The Sherwin-Williams Company Deferred Compensation Plan (filed
herewith).
</TABLE>
41
<PAGE> 44
<TABLE>
<S> <C> <C>
*(g) The Sherwin-Williams Company Key Management Deferred Compensation Plan (1994
Amendment and Restatement) (filed herewith).
(h) Asset Purchase Agreement, dated July 17, 1990, as amended, between the Company
and DeSoto, Inc., for the purchase of certain assets of DeSoto, Inc.'s U.S.
Consumer Paint Business filed as Exhibit 10(g) to Form 10-K dated March 15, 1991,
and incorporated herein by reference.
*(i) Form of Executive Disability Income Plan filed as Exhibit 10(g) to Form 10-K
dated March 13, 1992, and incorporated herein by reference.
*(j) Form of Executive Life Insurance Plan filed as Exhibit 10(h) to Form 10-K dated
March 13, 1992, and incorporated herein by reference.
*(k) Form of Directors' Deferred Fee Plan filed as Exhibit 10(i) to Form 10-K dated
March 13, 1992, and incorporated herein by reference.
(l) License Agreement, dated February 1, 1991, as amended, between the Company and
SWIMC, Inc. filed as Exhibit 10(j) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
(m) License Agreement, dated February 1, 1991, as amended, between the Company and
DIMC, Inc. filed as Exhibit 10(k) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
*(n) Form of The Sherwin-Williams Company Management Compensation Program filed as
Exhibit 10(l) to Form 10-K dated March 15, 1995, and incorporated herein by
reference.
*(o) The Sherwin-Williams Company 1994 Stock Plan, as amended and restated in its
entirety, effective April 27, 1994, filed as Exhibit 4(d) to Form S-8
Registration Statement No. 33-52227 dated February 10, 1994, and incorporated
herein by reference.
(p) Agreement and Plan of Merger, dated as of November 4, 1995, by and among the
Company, SWACQ, Inc. and Pratt & Lambert United, Inc., filed as Exhibit(c)(1) to
the Tender Offer Statement on Schedule 14D-1/Schedule 13D filed November 9, 1995,
as amended, and incorporated herein by reference.
11. Computation of Net Income Per Share -- Page 43.
12. Not applicable.
13. Not applicable.
16. Not applicable.
18. Not applicable.
21. Subsidiaries -- Page 44.
22. Not applicable.
23. Consent of Independent Auditors -- Page 45.
24. Powers of Attorney (filed herewith).
27. Financial Data Schedule.
28. Not applicable.
99. Not applicable.
*Management contract or compensatory plan or arrangement required to be filed as an exhibit
pursuant to Item 14(c) of Form 10-K.
</TABLE>
42
<PAGE> 1
Exhibit 4(d)
ADDENDUM TO FIVE YEAR REVOLVING CREDIT AGREEMENT
This Addendum to that certain Five Year Revolving Credit Agreement
("Agreement") dated August 31, 1995 by and among The Sherwin-Williams Company
("Company"), whose principal place of business is located at 101 Prospect
Avenue, N.W., Cleveland, Ohio 44115, Bank of America National Trust and
Savings Association ("BOA"), as Administrative Agent, and the financial
institutions listed on Addendum Schedule A hereto, together with each of their
successors and assigns (collectively referred to as "Banks" and individually a
"Bank") is made and entered into this 22nd day of November, 1995 and is
effective November 30, 1995.
W I T N E S S E T H:
WHEREAS, on August 31, 1995, the Company, BOA and the Banks entered into
the Agreement pursuant to which the Banks agreed to make Loans (as such term is
defined in the Agreement) to the Company in such aggregate amounts as the
Company may request; provided, however, that in no event shall the aggregate
principal amount of all Loans outstanding under the Agreement during the
Commitment Period (as such term is defined in the Agreement) be in excess of
$250 million; and
WHEREAS, on October 20, 1995 the Board of Directors of the Company
authorized the Company to increase the principal amount of the indebtedness
which the Company may have outstanding under the Agreement, at any one time,
from $250 million to $500 million during the Commitment Period; and
WHEREAS, the Company and the Banks desire to amend the Agreement as
provided herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
SECTION ONE
Capitalized terms used but not defined herein shall have the same meaning
ascribed to them in the Agreement.
SECTION TWO
The following paragraph of Section 2.1 of the Agreement dated as of August
31, 1995, shall be deleted in its entirety and the following shall be
substituted therefor:
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms
and conditions of this Agreement, each Bank will participate to
the extent hereinafter provided in making Loans to the Company in
such aggregate amounts as the Company may request; provided,
however, that in no event shall the aggregate principal amount of
all Loans outstanding under this Agreement during
the Commitment Period be in excess of $500 million.
<PAGE> 2
SECTION THREE
Attached hereto as Addendum Schedule A is the name and Commitment of each
Bank revised to reflect this Addendum as well as the percentage of total
Commitments of each such Bank pursuant to the Agreement.
SECTION FOUR
Except as otherwise specifically provided in Section Two of this Addendum,
all other terms and conditions of the Agreement shall remain in full force and
effect.
SECTION FIVE
Neither BOA nor any Bank shall issue any press release regarding this
Addendum or the Agreement without the prior written consent of the Company.
SECTION SIX
This Addendum may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and when taken
together shall constitute one and the same Agreement.
SECTION SEVEN
This Addendum, taken together with the Agreement, supersedes any prior
agreements or understandings of the parties hereto, and contains the entire
agreement of the parties hereto, with respect to the matters covered hereby.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
indicated above.
The Sherwin-Williams Company
<TABLE>
<S> <C>
By: /s/ Larry J. Pitorak
-------------------------------------
Larry J. Pitorak
Senior Vice President - Finance,
Treasurer and Chief Financial Officer
By: /s/ James J. Sgambellone
-------------------------------------
James J. Sgambellone
Assistant Secretary and Corporate
Director of Taxes
</TABLE>
<PAGE> 3
ADDENDUM SCHEDULE A
THE SHERWIN-WILLIAMS COMPANY
FIVE-YEAR REVOLVING CREDIT AGREEMENT
AS AMENDED
<TABLE>
<CAPTION>
BANK COMMITMENT PERCENT
(000'S)
<S> <C> <C>
Trust Company Bank $ 57,142,857.14 11.4286%
Bank of America, Illinois 57,142,857.14 11.4286%
National City Bank 50,000,000.00 10.0000%
Society National Bank 50,000,000.00 10.0000%
First National Bank of Chicago 35,714,285.71 7.1429%
First Interstate Bank of California 35,714,285.71 7.1429%
The Bank of Nova Scotia 35,714,285.71 7.1429%
Chemical Bank 35,714,285.71 7.1429%
NationsBank, N.A. (Carolinas) 28,571,428.57 5.7143%
Deutsche Bank AG 28,571,428.57 5.7143%
First Union National Bank of North Carolina 28,571,428.57 5.7143%
The Bank of New York 28,571,428.57 5.7143%
ABN-AMRO Bank N.V. 28,571,428.57 5.7143%
TOTAL $500,000,000.00 100.000%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$57,142,857.14 11.4286% Trust Company Bank
By: /s/ Ruther E. Whitner
------------------------
Name: Ruth E. Whitner
Title: Assistant Vice President
By: /s/ Brian K. Peters
------------------------
Name: Brian K. Peters
Title: Vice President
Trust Company Bank
P.O. Box 4418, Center 128
Atlanta, Georgia 30302
Telephone: (404) 588-7915
Facsimile: (404) 827-6270
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
-------------- -------------
<S> <C> <C>
$57,142,857.14 11.4286% Bank of America, Illinois
By: /s/ M. Kathleen McVay
-------------------------
Name: M. Kathleen McVay
Title: Authorized Officer
Bank of America, Illinois
231 S. LaSalle Street
Chicago, Illinois 60697
Telephone: (312) 828-3077
Facsimile: (312) 987-0303
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$50,000,000.00 10.0% National City Bank
By: /s/ Robert E. Little
----------------------------
Name: Robert E. Little
Title: V.P. and Sr. Lending Officer
National City Bank
National City Center
Box 5756
Cleveland, Ohio 44101-0756
Telephone: (216) 575-3018
Facsimile: (216) 575-9396
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$50,000,000.00 10.0% Society National Bank
By: /s/ Marianne T. Meil
-------------------------
Name: Marianne T. Meil
Title: Assistant Vice President
Society National Bank
127 Public Square
Cleveland, Ohio 44ll4
Telephone: (216) 689-3549
Facsimile: (216) 689-4981
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$35,714,285.71 7.1429% First National Bank of Chicago
By: /s/ Marguerite Canestraro
-------------------------
Name: Marguerite Canestraro
Title: Authorized Agent
First National Bank of Chicago
1301 East Ninth Street
Suite 2150
Cleveland, Ohio 44114-1824
Telephone: (216) 574-9845
Facsimile: (216) 574-9278
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$35,714,285.71 7.1429% First Interstate Bank of California
By: /s/ Peter G. Olson
---------------------
Name: Peter G. Olson
Title: Senior Vice President
First Interstate Bank of California
222 W. Adams Street
Suite 2180
Chicago, Illinois 60606
Telephone: (312) 553-2353
Facsimile: (312) 553-4783
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
-------------- -------------
<S> <C> <C>
$35,714,285.71 7.1429% The Bank of Nova Scotia
By: /s/ J.H. Youssef
---------------------------------
Name: J.H. Youssef
Title: Senior Manager
Finance & Administration
The Bank of Nova Scotia
181 West Madison Street
Suite 3700
Chicago, Illinois 60602
Telephone: (312) 201-4100
Facsimile: (312) 201-4108
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$35,714,285.71 7.1429% Chemical Bank
By: /s/ John F. Gehebe
------------------------
Name: John F. Gehebe
Title: Assistant Vice President
Chemical Bank
270 Park Avenue
New York, New York 10017
Telephone: (212) 270-3531
Facsimile: (212) 270-4711
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$28,571,428.57 5.7143% NationsBank, N.A. (Carolinas)
By: /s/ Michael D. Monte
---------------------
Name: Michael D. Monte
Title: Senior Vice President
NationsBank, N.A. (Carolinas)
Corporate Bank
100 North Tryon Street
NC1-007-08-04
Charlotte, North Carolina 28255
Telephone: (704) 386-9015
Facsimile: (704) 386-3271
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
- ---------- -------------
<S> <C> <C>
$28,571,428.57 5.7143% Deutsche Bank AG
By: /s/ Jean Hannigan Hans-Josef Thiele
---------------------------------------
Name: Jean M. Hannigan Hans-Josef Thiele
Title: Assistant Vice Vice President
President
Deutsche Bank AG
New York Branch
31 West 52nd Street
New York, New York 10019
Telephone: (212) 474-8648
Facsimile: (212) 474-8212
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$28,571,428.57 5.7143% First Union National Bank of North Carolina
By: /s/ Mark M. Harden
----------------------
Name: Mark M. Harden
Title: Vice President
First Union National Bank of
North Carolina
301 South College Street
TW-19 Floor
Charlotte, North Carolina 28288-0745
Telephone: (704) 374-2420
Facsimile: (704) 374-2802
Attn: Laurie Hart
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$28,571,428.57 5.7143% The Bank of New York
By: /s/ Robert J. Joyce
-----------------------------
Name: Robert J. Joyce
Title: Vice President
The Bank of New York
One Wall Street
New York, New York 10286
Telephone: (212) 635-7919
Facsimile: (212) 635-6434
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Amount of Percentage of
Commitment Commitments
---------- -------------
<S> <C> <C>
$28,571,428.57 5.7143% ABN-AMRO Bank N.V.
By: /s/ JM Janovsky Dennis F. Lennor
-------------------------------------
Name: J.M. Janovsky / Dennis F. Lennor
Title: Group V.P. / Vice President
ABN-AMRO Bank N.V.
Pittsburgh Branch
One PPG Place
Suite 2950
Pittsburgh, Pennsylvania 15222-5400
Telephone: (412) 566-2269
Facsimile: (412) 566-2266
</TABLE>
16
<PAGE> 1
EXHIBIT 4(e)
TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT
THIS TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT is made and entered into
this 9th day of January, 1996, by and between The Sherwin-Williams Company, a
corporation organized and existing under the laws of the State of Ohio
("Borrower"), and SunTrust Bank, Atlanta, a Georgia banking corporation, and
its successors and assigns ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower has requested Bank to establish a two (2) year
$50,000,000 term loan/bankers' acceptance facility to finance working capital,
capital expenditures, and other general corporate purposes, including, but not
limited to, acquisitions of stock, assets or other ownership interests of
Borrower; and
WHEREAS, Bank is willing to establish said term loan/bankers'
acceptance facility in the foregoing amount, subject to the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meaning:
"ACCEPTANCES" shall have the meaning set forth in Section 3.1 hereof.
"ACCEPTANCE OBLIGATIONS" shall mean the aggregate outstanding face amount of
all Acceptances (whether matured or unmatured) in respect of which no
payment, conversion or deposit has been made.
"ACCEPTANCE RATE" shall mean for any Interest Period the all-in discount rate
(including any acceptance commission of Bank) equal to the equivalent
of LIBOR, plus 0.20% per annum.
"AGREEMENT" shall mean this Term Loan/Bankers' Acceptance Agreement, either as
originally executed or as it may be from time to time supplemented,
amended, renewed or extended.
"AGREEMENT DATE" shall mean January 9, 1996.
1
<PAGE> 2
"ALTERNATE BASE RATE" shall mean the higher of: (i) the rate of interest in
effect for any given day as publicly announced from time to time by
Bank as its "reference rate" and (ii) the Federal Funds Rate plus 50
basis points. Any change by Bank of its "reference rate" shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"ALTERNATE BASE RATE LOAN" shall mean the Term Loan bearing interest at the
Alternate Base Rate.
"BANK" shall mean SunTrust Bank, Atlanta and any successor or assign thereto.
"BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which
Atlanta banks are open for the transaction of business.
"BUSINESS DAY" shall mean, with respect to a LIBOR Loan, any day other than a
Saturday, Sunday or a day on which commercial banks are required or
authorized to close of domestic or international business, including
dealings in Dollar deposits, in Atlanta, Georgia or London, England
and with respect to all other matters, any day other than a Saturday,
Sunday or a day on which commercial banks are required or authorized
to close in Atlanta, Georgia.
"CONSOLIDATED NET WORTH" shall mean the excess of the net book value of the
assets of Borrower and its Consolidated Subsidiaries over all of their
liabilities (other than Subordinated Indebtedness), as determined on a
consolidated basis in accordance with generally accepted accounting
principles as applied by Borrower in the calculation of such amount in
Borrower's then most recent financial statements furnished to its
stockholders, plus the aggregate value of all treasury stock purchased
after the Agreement Date (at cost) by Borrower (to the extent that the
aggregate value of such treasury stock for purposes of this
calculation does not exceed Two Hundred Fifty Million Dollars
($250,000,000)). The calculation of Consolidated Net Worth shall
exclude any amounts which would otherwise be required to be included
therein as a result of the future adoption by the Financial Accounting
Standards Board of any policy, statement, rule or regulation requiring
Borrower to record an accumulative liability on its Financial
Report(s).
"CONSOLIDATED SUBSIDIARY" shall mean, at any particular time, every Subsidiary
which is consolidated in Borrower's financial statements contained in
its then most recent Financial Report.
"DEBT" shall mean, collectively, all indebtedness at any one time outstanding
hereunder and owed by Borrower to Bank pursuant to this Agreement and
includes the principal of and interest on the Term Note, any
Acceptance Obligations and any funding indemnities incurred under
Section 4.4 of this Agreement.
2
<PAGE> 3
"EVENT OF DEFAULT" shall mean any of the events referred to in Article VII
hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York
(including any such successor, "H.15(519)") on the preceding Banking
Day opposite the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such preceding
Banking Day, the rate for such day shall be the arithmetic mean, as
determined by Bank, of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on such day
by each of three leading brokers of Federal funds transactions in New
York City selected by Bank.
"FINANCIAL REPORT" shall mean the annual or periodic report prepared in
accordance with generally accepted accounting principles, except as
otherwise indicated, filed by Borrower with the Securities and
Exchange Commission (or any governmental body or agency succeeding to
the functions of such Commission) on Form 10-K or 10-Q pursuant to the
Securities Exchange Act of 1934 ("Exchange Act"), as then in effect
(or any comparable forms under similar Federal statutes then in
force), and the most recent financial statements furnished by Borrower
to its stockholders (which annual financial statement shall be
certified by Borrower's independent certified public accountants).
"INDEMNIFIED PERSONS" shall have the meaning set forth in Section 3.4 hereof.
"INTEREST PERIOD" shall mean, with respect to the Term Loan, a period of 3
months; provided, that (i) the first and last day of an Interest
Period must be a Quarter Date, and (ii) no Interest Period shall
extend beyond the Maturity Date.
"LIBOR" shall mean with respect to each Interest Period for a LIBOR Loan, the
rate per annum equal to the quotient of (i) the rate offered for
deposits in Dollars of amounts equal or comparable to the principal
amount of such LIBOR Loan offered for a term comparable to such
Interest Period, which rate appears on the Telerate Page 3750 as of
11:00 A.M. (London, England) time, two (2) Business Days prior to the
first day of such Interest Period; provided that, if no such offered
rates appear on such page, the rate used for such Interest Period
shall be the arithmetic average (rounded upward, if necessary, to the
next higher 1/16th of 1%) of rates offered to Bank by not less than
two major banks in London, England at approximately 10:00 A.M.
(Atlanta, Georgia time), two (2) Business Days prior to the first day
of such Interest Period for deposits in Dollars in the London
interbank market for a period comparable to such Interest Period in an
amount comparable to the principal amount of such LIBOR Loan, (ii)
divided by a number equal to 1.00 minus the Reserve Percentage. The
rate so determined in accordance herewith shall be rounded upwards to
the nearest whole multiple of 1/100th of 1%. "Telerate Page 3750"
shall mean the display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that service
or another service as may be
3
<PAGE> 4
nominated by the British Bankers' Association as the information
vendor for the purpose of displaying British bankers' Association
Interest Settlement Rate for Dollars).
"LIBOR LOAN" shall mean the Term Loan bearing interest based on LIBOR.
"LOAN DOCUMENTS" shall mean and include, as the context requires, this
Agreement, the Term Note, the Acceptances, the SWAP Agreement and any
and all other instruments, agreements, documents and writings
contemplated hereby or executed in connection herewith.
"MATERIAL" shall mean the measure of a matter of significance which shall be
determined as being an amount equal to five percent (5%) or more of
Borrower's Consolidated Net Worth.
"MATURITY DATE" shall mean January 9, 1998, or such later date as the parties
may agree that the unpaid principal and all accrued interest and all
other amounts due hereunder shall be paid in full.
"PLAN" shall mean any employee pension benefit plan within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended from time to time ("ERISA") sponsored and maintained by
Borrower, any Consolidated Subsidiary, or of any member of a
controlled group of corporations, as the term "controlled group of
corporations" is defined in Section 1563 of the Internal Revenue Code
of 1986, as amended, of which Borrower or any Consolidated Subsidiary
is a part, for employees thereof.
"POSSIBLE DEFAULT" shall mean an event, condition or thing known to Borrower
which constitutes, or which with the lapse of any applicable grace
period or the giving of notice or both would constitute, any Event of
Default and which has not been appropriately waived by Bank in writing
or fully corrected prior to becoming an Event of Default.
"QUARTER DATE" shall mean the last day of each March, June, September and
December.
"REPORTABLE EVENT" shall mean a reportable event as that term is defined in
Title IV of ERISA except actions of general applicability by the
Secretary of Labor under Section 110 of ERISA.
"RESERVE PERCENTAGE" shall mean, for any day, the stated maximum rate
(expressed as a decimal) of all reserves required to be maintained
with respect to liabilities or assets consisting of or
including"eurocurrency liabilities", as prescribed by Regulation D of
the Board of Governors of the Federal Reserve System (or by any other
governmental body having jurisdiction with respect thereto), including
without limitation any basic, marginal, emergency, supplemental,
special, transitional or other reserves, the rate so determined to be
rounded upward to the nearest whole multiple of 1/100 of 1%.
4
<PAGE> 5
"SUBORDINATED INDEBTEDNESS" shall mean indebtedness which has been subordinated
(by written terms or agreement being in form and substance reasonably
satisfactory to Bank) in favor of the prior payment in full of
Borrower's Debt to Bank.
"SUBSIDIARY" shall mean an existing or future corporation(s), the majority of
the outstanding capital stock or voting power, or both, of which is
(or upon the exercise of all outstanding warrants, options and other
rights would be) owned at the time in question by Borrower or by
another such corporation(s) or by any combination of Borrower and such
corporation(s).
"SWAP AGREEMENT" shall mean that certain Interest Rate and Currency Exchange
Agreement, dated January 9, 1996, and the Schedule thereto by and
between Borrower and Bank.
"TERM LOAN" shall have the meaning set forth in Section 2.1 hereof.
"TERM NOTE" shall mean the promissory note executed by Borrower payable to the
order of Bank, in substantially the form of Exhibit A attached hereto,
evidencing the Term Loan, either as originally executed or as it may
from time to time be supplemented, modified, amended, renewed or
extended.
"VOTING STOCK" shall mean stock of a corporation of a class or classes having
general voting power under ordinary circumstances to elect a majority
of the board of directors, managers or trustees of such corporation
(irrespective of whether or not the stock of any other class or
classes shall have or might have voting power by reason of the
happening of any contingency).
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" shall mean each Consolidated Subsidiary
all of whose outstanding stock, other than directors' qualifying
shares, shall at the time be owned by Borrower and/or by one or more
Wholly-Owned Consolidated Subsidiaries.
ARTICLE II
AMOUNT AND TERMS OF TERM LOAN/BANKERS' ACCEPTANCE FACILITY
SECTION 2.1. TERM LOAN. Bank agrees, on the terms and subject to the
conditions contained herein, to make a term loan ("Term Loan") to
Borrower on the Agreement Date in the principal amount of Fifty
Million and 00/100 Dollars ($50,000,000). The Term Loan shall be
evidenced by the Term Note or by Acceptances if funded at the
Acceptance Rate; provided, that at no time shall a LIBOR Loan and
Acceptances be outstanding hereunder simultaneously. On the Agreement
Date, Bank shall credit the amount of the Term Loan in immediately
available funds to an account of Borrower with Bank or otherwise
transfer said amount in immediately available funds in accordance with
Borrower's instructions.
5
<PAGE> 6
SECTION 2.2. INTEREST. Interest shall accrue on the unpaid principal
amount of the Term Loan at the following rates per annum: (a) LIBOR
for an Interest Period of three months, plus 0.20% per annum or (b)
the Acceptance Rate, as the case may be.
SECTION 2.3. INTEREST PAYMENT DATES. Interest on the Term Loan shall be
payable (a) on a Quarter Date and (b) on the Maturity Date.
SECTION 2.4. REPAYMENT OF THE TERM LOAN. Borrower shall repay the
principal amount of the Term Loan on the Maturity Date.
SECTION 2.5. OPTIONAL PREPAYMENTS. At the option of Borrower, Borrower may
prepay the Term Loan, in whole or in part from time to time, without
premium or penalty, but with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, that (a) each
partial prepayment shall be in the minimum principal amount of
$1,000,000; (b) each partial prepayment of the Term Loan may occur
only on the last day of the then current Interest Period with respect
to a LIBOR Loan or on the maturity date of the relevant Acceptances;
and (c) each partial prepayment shall be applied to installments of
principal in the inverse order of their maturities.
SECTION 2.6. SELECTION OF SUCCESSIVE INTEREST RATES; CONVERSION. Bank may
request, and Borrower shall agree if so requested, that on the last
day of any Interest Period the Term Loan be continued as a LIBOR Loan
or be converted into Acceptances in the same principal amount or in a
principal amount as reduced by any repayment made pursuant to Section
2.4 hereof, or that on the maturity date of any Acceptances the Term
Loan be continued as Acceptances or be converted into a LIBOR Loan in
the same principal amount or in a principal amount as reduced by any
repayment made pursuant to Section 2.4 hereof, it being agreed by
Borrower that this right of Bank to select the interest rates/funding
mechanics on the Term Loan hereunder is a part of the consideration
for entering into this Agreement and the other Loan Documents.
Notwithstanding the foregoing, if an Event of Default shall exist at
the end of an Interest Period applicable to a LIBOR Loan or on the
maturity date of any Acceptances, such outstanding LIBOR Loan or such
outstanding Acceptances shall be converted to an Alternate Base Rate
Loan.
ARTICLE III
ACCEPTANCES
SECTION 3.1. ACCEPTANCES. In the event Bank elects to fund the Term Loan
with Acceptances, Bank may in its sole discretion in each instance as
provided in this Agreement, accept, in accordance with their tenor,
drafts denominated in minimum denominations of $1,000,000 or such
amounts as Bank may require, drawn on Bank by Borrower in accordance
with Section 3.2(b) hereof and payable to the order of Bank
("Acceptances"). Such drafts presented for acceptance shall be equal
to the principal amount of the Term Loan then outstanding plus an
amount equal to the amount of interest that will accrue for the term
of the
6
<PAGE> 7
then current Interest Period. Such interest shall be calculated at
the Acceptance Rate and adjusted for being calculated on a discount
basis. All such drafts shall have a tenor of approximately ninety
(90) days with each date of acceptance being a Quarter Date. The
maturity date of each Acceptance shall be a Quarter Date. No
Acceptance will be created hereunder if its maturity date would
otherwise extend beyond the Maturity Date unless otherwise agreed to
by the parties. In no event shall the aggregate Acceptance
Obligations (net of any discounted interest calculated at the
Acceptance Rate deducted upon acceptance) of Bank at any time exceed
the outstanding principal amount of the Term Loan.
SECTION 3.2. CREATION AND DISCOUNT OF ACCEPTANCES. (a) In the event Bank
elects to fund the Term Loan with Acceptances then, prior to 11:00
A.M. (Atlanta, Georgia time) on any Quarter Date, Bank, in its sole
discretion, may request that Borrower elect the Acceptance Rate. Upon
such election, Bank shall promptly (a) complete the drafts specified
in Section 3.2(b) hereof, (b) duly accept such draft(s), (c) discount
the drafts at the Acceptance Rate, (d) provide Borrower with written
or telephonic notice (i) of Bank's creation of such Acceptances
(specifying the date, the face amount and the maturity date thereof)
and (ii) the Acceptance Rate, and (e) fund the outstanding Term Loan
with the proceeds of such Acceptances.
(b) In the event Bank elects to fund the Term Loan with
Acceptances, Borrower shall either (i) deliver, or cause to be
delivered to Bank, fully executed drafts for acceptance by Bank, or
(ii) authorize Bank by telephone to complete, or cause to be
completed, pre-signed drafts previously delivered to Bank by Borrower
or (iii) authorize Bank by telephone to act as Borrower's agent to
complete and sign drafts as provided hereunder. Borrower hereby
appoints any officer (or any employee under the direct supervision of
an officer) of Bank to act as its agent for the limited purpose of
representing and acting as Borrower's attorney-in-fact in the
completion of any such drafts (including, but not limited to, date,
place of issuance, amount, draft number, date of maturity and
transaction information) and the issuance and safekeeping of any such
drafts. Neither Bank nor its agent(s) shall be liable to Borrower for
executing, failing to execute or for any error in the execution of any
orders or instructions from Borrower, except in the case of Bank's
gross negligence or willful misconduct.
SECTION 3.3. MATURITY. On the maturity date of each Acceptance, Borrower
shall pay to Bank an amount equal to the face amount of each
Acceptance (including all discounted interest deducted upon
acceptance).
SECTION 3.4. SPECIAL INDEMNIFICATION. Borrower shall indemnify and hold
Bank and Bank's affiliates, shareholders, directors, officers,
employees and agents ("Indemnified Persons") harmless from any and all
claims, demands, losses, costs, damages, liabilities and expense,
including attorneys' fees (excluding consequential, incidental or
special damages), which any Indemnified Person may suffer or incur (a)
by reason of Borrower's failure to perform any of the Acceptance
Obligations arising under this Agreement or under any Acceptances
properly created in accordance with Section 3.2 hereof; or (b) arising
out of any transaction or contract
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to which any Acceptance relates, or any goods or documents involved
therein. The indemnity contained in this Section 3.4 shall survive
termination of this Agreement.
ARTICLE IV
GENERAL PAYMENT PROVISIONS
SECTION 4.1. USE OF PROCEEDS. The proceeds of the Term Loan and any
Acceptance shall be used by Borrower solely to finance working capital
of Borrower and other general corporate purposes including, but not
limited to, the acquisition of assets, stock or other ownership
interests.
SECTION 4.2. ILLEGALITY. Notwithstanding any other provisions of this
Agreement, if the introduction of, or any change in the interpretation
or application of any applicable law, regulation or directive shall
make it unlawful for Bank to make, maintain or fund any LIBOR Loan,
the obligation of Bank hereunder to make, maintain or fund such LIBOR
Loan shall forthwith be suspended for the duration of such illegality,
and Borrower shall, at its option, if any LIBOR Loan is then
outstanding, prepay such LIBOR Loan or convert such LIBOR Loan to an
Alternate Base Rate Loan, subject to Section 4.4 hereof.
SECTION 4.3. INCREASED COSTS. In the event that the introduction of, or
any change in or in the interpretation of or application of, any
applicable law, treaty or governmental regulation, or the compliance
by Bank with any guideline, request or directive (whether or not
having the force of law) from any central bank or other U.S. or
foreign financial, monetary or other governmental authority, shall:
(a) subject Bank to any tax of any kind whatsoever with respect to
this Agreement, the Term Loan or any Acceptance or change the basis of
taxation of payments to Bank of principal, interest, fees or any other
amount payable hereunder (except for changes in the rate of tax in the
overall net income of Bank); (b) impose, modify, or hold applicable
any reserve, special deposit, assessment or similar requirement
against assets held by, or deposits in or for the account of,
advances, loans or acceptances by, or other credit extended by or
committed to be extended by, any office of Bank (other than any change
by way of imposition or increase of reserve requirements under
Regulation D of the Board of Governors of the Federal Reserve System
in the case of a LIBOR Loan included in the Reserve Percentage); or
(c) impose on Bank or on the London interbank market any other
condition with respect to this Agreement, the Term Note or any LIBOR
Loan thereunder or any Acceptance; and the result of any of the
foregoing is to increase the cost to Bank of making or committing to
make, renewing or maintaining any LIBOR Loan or any Acceptance or to
reduce the amount of any payment (whether of principal, interest or
otherwise) in respect of any LIBOR Loan or any Acceptance, THEN, IN
ANY CASE, Borrower shall promptly pay from time to time, upon demand
of Bank, such additional amounts as will compensate Bank for such
additional cost or such reduction, as the case may be. Bank shall
certify the amount of such additional cost or reduced amount to
Borrower, including a description of the calculation thereof in
reasonable detail, and such certification shall be conclusive absent
manifest error.
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SECTION 4.4. INDEMNITY. Borrower hereby agrees to indemnify Bank and hold
Bank harmless from any loss, cost or expense (excluding incidental,
consequential or special damages) it may sustain or incur as a direct
consequence of the payment or conversion of a LIBOR Loan on a day
other than the last day of the Interest Period applicable thereto,
including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired or deemed acquired by Bank to fund such LIBOR Loan. Bank
shall certify the amount of its loss or expense to Borrower, and such
certification shall be conclusive absent manifest error.
SECTION 4.5. MAKING OF PAYMENTS. All payments of principal of, or interest
on, the Term Note or of the Acceptance Obligations shall be made in
immediately available funds to Bank at its principal office in
Atlanta, Georgia. All payments due on a date which is not a Business
Day shall be deemed to be due on the next following Business Day,
unless such Business Day falls in the next calendar month, in which
case the due date will be the first preceding Business Day. All such
payments shall be made not later than 11:00 A.M. (Atlanta, Georgia
time) and funds received after that hour shall be deemed to have been
received by Bank on the next following Business Day.
SECTION 4.6. DEFAULT RATE OF INTEREST. If Borrower shall fail to pay on
the due date therefor, whether by acceleration or otherwise, any
principal owing under the Term Note or this Agreement or the face
amount of any Acceptance on its maturity date, then interest shall
accrue on such unpaid principal from the due date until and including
the date on which such principal or other amount is paid in full at
(i) the then applicable interest rate with respect to a LIBOR Loan
until the end of the Interest Period applicable thereto plus an
additional two per cent (2%) per annum and (ii) thereafter and with
respect to Acceptances or Alternate Base Rate Loans, a rate of
interest equal to the Alternate Base Rate plus an additional two
percent (2.0) per annum ("Default Rate").
SECTION 4.7. CALCULATION OF INTEREST. Interest payable on the Term Note
and the discount determined on each Acceptance shall be calculated on
the basis of a year of 360 days and shall be paid for the actual
number of days elapsed.
SECTION 4.8. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In the event Bank shall have determined, in good
faith and reasonably, that United States dollar deposits of the
relevant amount for the relevant Interest Period for LIBOR Loans are
not available to the Bank in the London Interbank Eurodollar market or
that, by reason of circumstances affecting such market, adequate and
reasonable means do not exist for ascertaining LIBOR applicable to
such determination to Borrower then (i) any notice of the Term Loan to
a LIBOR Loan previously given and not yet converted shall be deemed a
notice to make an Alternate Base Rate Loan unless Borrower notifies
Bank to the contrary, and (ii) Borrower shall be obligated either to
prepay or to convert any outstanding LIBOR Loan on the last day of the
then current Interest Period with respect thereto.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank that:
SECTION 5.1. CORPORATE EXISTENCE. Borrower is a corporation duly organized
and in good standing under the laws of the State of Ohio.
SECTION 5.2. AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance by Borrower of this Agreement, the Term Note and all other
Loan Documents are within Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not and will not
contravene or conflict with any provision of applicable law in effect
on the date hereof or of the Amended Articles of Incorporation or
Regulations of Borrower or of any agreement for borrowed money or
other material agreement binding upon Borrower. Borrower has duly
executed and delivered this Agreement.
SECTION 5.3. VALIDITY AND BINDING NATURE. This Agreement, the Term Note
and all other Loan Documents are legal, valid and binding obligations
of Borrower enforceable against Borrower in accordance with their
respective terms.
SECTION 5.4. LITIGATION AND LIENS. To the best of Borrower's knowledge, no
litigation or proceeding is pending which would, if successful, have a
Material adverse impact on the financial condition of Borrower and the
Consolidated Subsidiaries taken as a whole, which is not already
reflected in Borrower's Financial Reports delivered to Bank prior to
the date of this Agreement. The Internal Revenue Service has not
alleged any Material default by Borrower in the payment of any tax or
threatened to make any Material assessment in respect thereof which
would have or reasonably could have a Material adverse impact on the
financial condition of Borrower and the Consolidated Subsidiaries,
taken as a whole.
SECTION 5.5. ERISA COMPLIANCE. Neither Borrower nor any Consolidated
Subsidiary has incurred any Material accumulated funding deficiency
within the meaning of ERISA and the regulations thereunder. No
Reportable Event has occurred with respect to any Plan which would
have a Material adverse financial impact on Borrower or any of its
Consolidated Subsidiaries, taken as a whole. The Pension Benefit
Guaranty Corporation, established under ERISA, has not asserted that
Borrower or any Consolidated Subsidiary has incurred any Material
liability in connection with any Plan. No Material lien has been
attached and no person has threatened to attach such a lien on any
property of Borrower and any Consolidated Subsidiary as a result of
Borrower's or any Consolidated Subsidiary's failure to comply with
ERISA.
SECTION 5.6. ENVIRONMENTAL MATTERS. To the best of Borrower's knowledge,
Borrower and each Subsidiary is in substantial compliance with all
applicable existing laws and regulations (other than laws and
regulations the validity or applicability of which are being contested
by Borrower or a Subsidiary, as the case may be, in good faith by
appropriate
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proceedings diligently prosecuted) relating to environmental control
in all jurisdictions where Borrower or any Subsidiary is presently
doing business and Borrower and each Subsidiary (to the extent
applicable to its operations) is in substantial compliance with the
Occupational Safety and Health Act of 1970 and all rules, regulations
and applicable orders thereunder (other than rules, regulations and
orders the validity or applicability of which are being contested by
Borrower or a Subsidiary, as the case may be, in good faith by
appropriate proceedings diligently prosecuted).
SECTION 5.7. FINANCIAL REPORTS. The Financial Reports of Borrower and the
Consolidated Subsidiaries, furnished to Bank prior to the date of this
Agreement or from time to time pursuant to this Agreement shall be
true and complete, prepared in accordance with generally accepted
accounting principles, except as stated therein, and fairly present
Borrower's and its Consolidated Subsidiaries' financial condition and
the results of their operations for the period encompassed by such
Financial Reports. Since the dates of Borrower's most recent
Financial Reports until the date of this Agreement there has been no
material adverse change in the consolidated financial condition of
Borrower and the Consolidated Subsidiaries taken as a whole.
SECTION 5.8. REGULATION U. Neither Borrower nor any of its Consolidated
Subsidiaries is generally engaged in the business of purchasing or
selling margin stock or extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U issued by
the Board of Governors of the Federal Reserve System). Bank
represents and warrants to Borrower that it is not relying on and will
not rely on any margin stock (as described above) in determining
whether to extend a loan to Borrower under this Agreement.
SECTION 5.9. GOVERNMENT REGULATION. Neither Borrower nor any of its
Consolidated Subsidiaries is registered or is required to be
registered as a public utility under the Public Utility Holding
Company Act of 1935 or as an investment company under the Investment
Company Act of 1940.
SECTION 5.10. TAXES. Borrower and its Consolidated Subsidiaries have filed
all United States federal income tax returns and all other material
tax returns which are required to have been filed by them (subject to
any available extensions) and have paid all taxes indicated as due on
such returns except for any such taxes being contested by Borrower or
a Subsidiary, as the case may be, in good faith by appropriate
proceedings diligently prosecuted (Borrower has made adequate and
reasonable provision for all material taxes not yet due and payable),
if any, and all material assessments, if any.
SECTION 5.11. DEFAULTS. No Possible Default exists which would have or
reasonably could have a Material adverse impact on the financial
condition of Borrower and the Consolidated Subsidiaries, taken as a
whole.
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ARTICLE VI
COVENANTS
Until all obligations of Borrower hereunder, under the Term Note and
under all Acceptances are satisfied and paid in full, Borrower agrees that,
unless at any time Bank shall otherwise expressly agree in writing:
SECTION 6.1. INSURANCE. Borrower will (a) maintain insurance to such
extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated, and (b) upon Bank's
written request, furnish to Bank such information about Borrower's and
its Consolidated Subsidiaries' insurance as Bank may from time to time
reasonably request, which information shall be prepared in form and
detail reasonably satisfactory to Bank.
SECTION 6.2. FINANCIAL REPORTS. Borrower will furnish to Bank:
(i) within sixty (60) days after the end of each of the
first three quarter-annual periods of each of its
fiscal years (and, in any event, in each case as soon
as available), the quarterly Financial Report of
Borrower and the Consolidated Subsidiaries as at the
end of that period, prepared on a consolidated basis;
(ii) within ninety (90) days after the end of each of its
fiscal years (and, in any event, in each case as soon
as available), the annual Financial Report of
Borrower and the Consolidated Subsidiaries for that
year prepared on a consolidated basis;
(iii) within sixty (60) days after the end of each of its
quarterly accounting periods and within ninety (90)
days after the end of its annual accounting period, a
statement signed by a financial officer of Borrower
reflecting compliance with Section 6.3 hereof and to
the effect that no Event of Default has occurred and
is continuing or, if there is any such event,
describing it and the steps being taken, if any, to
cure such event;
(iv) promptly after filing with the Securities and
Exchange Commission, any Form 8-K or Schedule 13D
filings applicable to Borrower (or any successor
forms or schedules promulgated by the Securities and
Exchange Commission from time to time which encompass
the matters currently addressed in Form 8-K and
Schedule 13D);
(v) written notice of any change in the rating assigned
to Borrower's senior unsecured long-term debt by
Moody's, S&P or Duff & Phelps within thirty (30) days
of such change; and
(vi) such other financial information regarding Borrower
as Bank may reasonably request.
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SECTION 6.3. NET WORTH. Borrower will not permit its Consolidated Net
Worth at any time to fall below Eight Hundred Million Dollars
($800,000,000).
SECTION 6.4. REGULATIONS U AND X. Borrower will not nor will it permit any
Subsidiary to take any action that would result in any non-compliance
of the loan made hereunder with Regulation U and X of the Board of
Governors of the Federal Reserve System. Borrower's use of proceeds
from the loan made pursuant to this Agreement will not cause a
violation of Regulation U or X.
SECTION 6.5. MERGER AND SALE OF ASSETS. Borrower will not merge or
consolidate with nor permit any Consolidated Subsidiary to merge or
consolidate with any other corporation or sell, lease or transfer or
otherwise dispose of all or, during any twelve (12) month period, a
substantial part of its assets to any person or entity (except as
otherwise provided herein); provided, however, if no Possible Default
shall then exist or immediately thereafter will begin to exist:
(i) Any Consolidated Subsidiary may merge with (a)
Borrower (provided that Borrower shall be the
continuing or surviving corporation) or (b) any one
or more other Consolidated Subsidiaries provided that
either the continuing or surviving corporation shall
be a Wholly-Owned Consolidated Subsidiary, or after
giving effect to any merger pursuant to this
sub-clause (b), Borrower and/or one or more
Wholly-Owned Consolidated Subsidiaries shall own not
less than the same percentage of the outstanding
Voting Stock of the continuing or surviving
corporation as Borrower and/or one or more
Wholly-Owned Consolidated Subsidiaries owned of the
merged Consolidated Subsidiary immediately prior to
such merger,
(ii) Any Consolidated Subsidiary may sell, lease, transfer
or otherwise dispose of any of its assets to (a)
Borrower, (b) any Wholly-Owned Consolidated
Subsidiary or (c) any Consolidated Subsidiary of
which Borrower and/or one or more Wholly-Owned
Consolidated Subsidiaries shall own not less than the
same percentage of Voting Stock as Borrower and/or
one or more Wholly-Owned Consolidated Subsidiaries
then own of the Consolidated Subsidiary making such
sale, lease, transfer or other disposition,
(iii) Borrower may sell the stock or assets of any
Consolidated Subsidiary if such sale or other
disposition is determined by the board of directors
of Borrower to be in the best interests of Borrower
and such sale is for a consideration which represents
the fair value (as determined in good faith by the
board of directors of Borrower) thereof at the time
of such sale of such stock or assets,
(iv) Borrower may merge with any other corporation,
provided that Borrower shall be the surviving
corporation,
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(v) Borrower or any Consolidated Subsidiary may sell all
or any part of the assets of any of its divisions or
operations to a third party if such sale or other
disposition is determined by the board of directors
of Borrower and/or such Consolidated Subsidiary, as
the case may be, to be in the best interests of
Borrower and/or such Consolidated Subsidiary, as the
case may be, and such sale is for a consideration
which represents the fair value (as determined in
good faith by the board of directors of Borrower)
thereof at the time of such sale or other disposition
of such assets,
(vi) Borrower or any Subsidiary may sell or transfer all
or any part of the assets of any of its divisions or
operations to any Subsidiary.
In the event there occurs a Change in Control of Borrower, the Term
Loan or all Acceptance Obligations, as the case may be, shall be
immediately due and payable without notice to Borrower. For purposes
of this paragraph, a "Change of Control" shall occur if:
(a) there shall be consummated (i) any
consolidation or merger of Borrower in which Borrower
is not the continuing or surviving corporation or
pursuant to which shares of Borrower's common stock
would be converted into cash, securities or other
property, other than a merger of Borrower in which
the holders of Borrower's common stock immediately
prior to the merger have substantially the same
proportionate ownership of common stock of the
surviving corporation immediately after the merger,
or (ii) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of
fifty percent (50%) or more of the assets or earning
power of Borrower;
(b) any "person" (as such term is used in
Sections as 13(d) and 14(d)(2) of the Exchange Act,
as amended, other than Borrower or any employee
benefit or stock ownership plan sponsored by
Borrower, or any person or entity organized,
appointed or established by Borrower for or pursuant
to the terms of any such Plan, shall become the
beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of securities of Borrower
representing fifteen percent (15%) or more of the
combined voting power of Borrower's then outstanding
securities ordinarily (and apart from rights accruing
in special circumstances) having the right to vote in
the election of directors, as a result of a tender or
exchange offer, open market purchases, privately
negotiated purchases or otherwise; or
(c) during any period of two (2) consecutive
years, individuals who at the beginning of such
period constituted the board of directors of Borrower
and any new director whose election by such board of
directors or nomination for election by Borrower's
shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute a majority thereof.
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Notwithstanding subparagraph (a) through (c) above,
with respect to the transactions set forth in subparagraphs
(a) and (b) above, a Change of Control shall not be deemed to
have occurred if any such transaction (i) is approved by a
vote of at least two-thirds (2/3) of the directors of
Borrower and (ii) at the time of such vote, at least
two-thirds (2/3) of such directors then in office were
members of the board of directors of Borrower immediately
prior to such transaction.
SECTION 6.6. NOTICE. As long as any indebtedness of Borrower remains
outstanding hereunder, Borrower will cause its treasurer, or in his
absence another representative of Borrower designated by the
treasurer, to promptly notify Bank whenever any Material Possible
Default may occur or any warranty made in Article V hereof or
elsewhere in this Agreement may for any reason cease in any Material
respect to be true and complete.
SECTION 6.7. LIENS. Borrower will not and will not permit any Consolidated
Subsidiary to create, assume or suffer to exist any lien upon any of
its property or assets (hereinafter "Properties") whether now owned or
hereafter acquired without effectively providing that any borrowings
under this Agreement shall be secured equally and ratably with all
other indebtedness thereby secured; provided that this Section shall
not apply to the following:
(i) liens for taxes not yet due or which are being
actively contested in good faith by appropriate
proceedings,
(ii) other liens incidental to the conduct of its business
or the ownership of its Properties which were not
incurred in connection with the borrowing of money or
the obtaining of advances or credit, and which do not
in the aggregate materially detract from the value of
its Properties or materially impair the use thereof
in the operation of its business,
(iii) liens on Properties of a Consolidated Subsidiary to
secure obligations of such Consolidated Subsidiary to
Borrower or another Consolidated Subsidiary,
(iv) liens on Properties of Borrower and/or its
Consolidated Subsidiaries existing on the date hereof,
(v) any lien existing on any Properties of any
corporation at the time it becomes a Consolidated
Subsidiary, existing prior to the time of acquisition
upon any Properties acquired by Borrower or any
Consolidated Subsidiary through purchase, merger,
consolidation or otherwise, whether or not assumed by
Borrower or such Consolidated Subsidiary,
(vi) any lien placed upon any asset other than real
property (hereinafter in this subparagraph (vi)
"Asset") at the time of acquisition by Borrower or
any Consolidated Subsidiary to secure all or a
portion of [or to secure indebtedness
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incurred prior to, at the time of, or (in the case of
any Asset acquired with the intent to obtain
subsequent financing thereof secured by a lien)
within one (1) year after the acquisition of such
Asset for the purpose of financing all or a portion
of] the purchase price thereof, provided that any
such lien shall not encumber any other Properties of
Borrower or such Consolidated Subsidiary,
(vii) any lien placed upon any real property now owned or
hereafter acquired by Borrower or any of its
Subsidiaries securing indebtedness in an amount up to
eighty percent (80%) of the fair market value of such
real property,
(viii) liens in favor of the United States of America or any
department or agency thereof, or in favor of any
state government or political subdivision thereof, or
in favor of a prime contractor under a government
contract of the United States, or of any state
government or any political subdivision thereof, and,
in each case, resulting from acceptance of partial,
progress, advance or other payments in the ordinary
course of business under government contracts of the
United States, or of any state government or any
political subdivision thereof, or subcontracts
thereunder,
(ix) liens created, assumed or existing in connection with
a tax-free financing,
(x) any lien renewing, extending or refunding any lien
permitted by clauses (iv), (v), (vi), (vii), (viii)
and (ix) above, provided that the principal amount
secured is not materially increased, and the lien is
not extended to other Properties, and
(xi) liens other than those permitted by clauses (i)
through (x) above, provided that the aggregate amount
of all indebtedness secured by liens permitted by
this clause (xi) shall not at any time exceed fifteen
percent (15%) of Consolidated Net Worth.
SECTION 6.8. ERISA COMPLIANCE. Neither Borrower nor any Consolidated
Subsidiary will incur any Material accumulated funding deficiency
within the meaning of the ERISA and the regulations thereunder, or any
Material liability to the Pension Benefit Guaranty Corporation or any
successor thereto in connection with any Plan. Borrower will furnish
to Bank as soon as possible and in any event within thirty (30) days
after Borrower or such Consolidated Subsidiary knows or has reason to
know that any Material Reportable Event with respect to any Plan has
occurred a statement of the chief financial officer of Borrower or
such Consolidated Subsidiary setting forth details as to such
Reportable Event and the action which Borrower or such Consolidated
Subsidiary proposes to take with respect thereto, together with a copy
of the notice of such Reportable Event given to the Pension Benefit
Guaranty Corporation if a copy of such notice is available to Borrower
or such Consolidated Subsidiary.
SECTION 6.9. NOTICE OF DEFAULT. Borrower will, and will cause each
Consolidated Subsidiary to, give prompt notice in writing to Bank of
the occurrence of any Possible Default
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and of any other development, financial or otherwise, with respect to
which there is a significant probability of a Material adverse impact
on Consolidated Net Worth or on Borrower's ability to repay its
obligation to Bank hereunder.
SECTION 6.10. CONDUCT OF BUSINESS. Borrower will, and will cause each
Consolidated Subsidiary to, carry on and conduct its business in
substantially the same manner as it is presently conducted and to do
all things necessary to remain duly incorporated, validly existing and
in good standing as a corporation in its jurisdiction of incorporation
and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
SECTION 6.11. TAXES. Borrower will, and will cause each Consolidated
Subsidiary to, pay when due all taxes, assessments and governmental
charges and levies upon it or its income, profits or property, except
those which are being contested in good faith by appropriate
proceedings.
SECTION 6.12. ENVIRONMENTAL. Borrower will use its best good faith efforts
to comply and to cause each Subsidiary to comply with all such laws
and regulations (other than laws and regulations the validity or
applicability of which are being contested by Borrower or a
Subsidiary, as the case may be, in good faith by appropriate
proceedings diligently prosecuted) which may be legally imposed in the
future in jurisdictions in which Borrower or any Subsidiary may then
be doing business.
ARTICLE VII
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default:
SECTION 7.1. NON-PAYMENT OF TERM NOTE OR INTEREST. If the interest on the
Term Note shall not be paid in full when due and payable and shall
remain unpaid for a period of three (3) consecutive business days
after written notice thereof to Borrower from Bank. If the principal
on the Term Note or the Acceptance Obligations shall not be paid in
full when due and payable.
SECTION 7.2. COVENANTS. If Borrower shall fail or omit to perform and
observe any agreement or other provision (other than those referenced
in Section 7.1 hereof) contained or referred to in this Agreement or
in any Related Writing that is on Borrower's part to be complied with,
and such failure or omission, if not fully corrected within thirty
(30) days after the giving of written notice thereof to Borrower by
Bank that such failure or omission would have or reasonably could have
a Material adverse impact on the financial condition of Borrower and
the Consolidated Subsidiaries, taken as a whole (provided, however,
that the financial covenant in Section 6.3 shall be applied without
regard to any materiality standard).
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SECTION 7.3. WARRANTIES. If any representation, warranty or statement made
in or pursuant to this Agreement or any Related Writing or any other
information furnished by Borrower to Bank or any other holder of the
Term Note, shall be false or erroneous in any respect which would have
or reasonably could have a Material adverse impact on the financial
condition of Borrower and the Consolidated Subsidiaries, taken as a
whole.
SECTION 7.4. CROSS DEFAULT. If Borrower or any of its Consolidated
Subsidiaries (i) default in the payment of principal or interest due
and owing upon any other Material obligation for borrowed money beyond
any period of grace provided with respect thereto or (ii) default in
the performance of any other agreement, term or condition contained in
any agreement under which such obligation is created, and any such
default is not waived by the holders of such agreement or instrument,
and if the effect of such unwaived default would (a) accelerate the
maturity of such indebtedness or permit the holder thereof to cause
such indebtedness to become due prior to its stated maturity and (b)
have or reasonably could have a Material adverse impact on the
financial condition of Borrower and the Consolidated Subsidiaries,
taken as a whole.
SECTION 7.5. TERMINATION OF OPERATIONS, BANKRUPTCY OR INSOLVENCY. If
Borrower or a Consolidated Subsidiary representing in excess of ten
percent (10%) of total consolidated assets of Borrower and the
Consolidated Subsidiaries shall (i) discontinue business (except as
permitted under Section 6.5 hereof) or (ii) generally not pay (or
admit in writing its inability to pay) its debts as such debts become
due, or (iii) make a general assignment for the benefit of creditors,
or (iv) apply for or consent to the appointment of a receiver, a
custodian, a trustee, an interim trustee or a liquidator of all or a
substantial part of its assets, or (v) be adjudicated an insolvent
debtor or have entered against it an order for relief under Title 11
of the United States Code, as the same may be amended from to time to
time, or (vi) file a voluntary petition in bankruptcy or file a
petition or an answer seeking reorganization or an arrangement with
creditors or seeking to take advantage of any other law (whether
federal or state) relating to relief of debtors, or admit (by answer,
by default or otherwise) the substantive allegations of a petition
filed against it in any bankruptcy, reorganization, insolvency or
other comparable proceeding (whether federal or state) relating to
relief of debtors, or (vii) suffer or permit to continue unstayed and
in effect for sixty (60) consecutive days any judgment, decree or
order entered by a court of competent jurisdiction, which approves a
petition seeking its reorganization or appoints a receiver, custodian,
trustee, interim trustee or liquidator of all or a substantial part of
its assets.
ARTICLE VIII
EFFECT OF DEFAULT
SECTION 8. EFFECT OF EVENT OF DEFAULT. Upon the occurrence and
continuance of any Event of Default, the principal and all accrued
interest due under the Term Note or the Acceptance Obligations shall
become immediately due and payable, without notice and Bank may
exercise any remedies available under law or in equity.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. BANK'S INDEPENDENT INVESTIGATION. Bank, by its signature to
this Agreement, acknowledges and agrees that it has made its own
independent investigation of the creditworthiness, financial condition
and affairs of Borrower and any Subsidiary in connection with the Term
Loan.
SECTION 9.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of
dealing on the part of Bank or the holder of the Term Note in
exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The
remedies herein provided are cumulative and in addition to any other
rights, powers or privileges held by operation of law, by contract or
otherwise.
SECTION 9.3. AMENDMENTS. Except as otherwise specifically provided herein,
no amendment, modification, termination, or waiver of any provision of
this Agreement or the Term Note, nor consent to any variance
therefrom, shall be effective unless the same shall be in writing and
signed by Borrower Bank and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
SECTION 9.4. CONFIDENTIALITY. Unless Borrower otherwise agrees in writing,
Bank hereby agrees to keep all Proprietary Information (as defined
below) confidential and not to disclose or reveal any Proprietary
Information to any person or entity other than Bank's directors,
officers, employees, affiliates, and agents, and then only on a
confidential need-to-know basis; provided, however that Bank may
disclose Proprietary Information (a) as required by law, rule,
regulation, or judicial process, (b) to its attorneys and accountants,
(c) as requested or required by a state, federal, or foreign authority
or examiner regulating banks or banking, or (d) to actual or potential
assignees or participants as permitted by Section 9.9 hereof who agree
to be bound by the provisions of this Section. For purposes of this
Agreement, the term "Proprietary Information" shall include all
information about Borrower, any Subsidiary, or any of their respective
affiliates which has been furnished by Borrower, any Subsidiary, or
any of their respective affiliates, whether furnished before or after
the date hereof, and regardless of the manner furnished; provided,
however, that Proprietary Information shall not include information
which (x) is or becomes generally available to the public other than
as a result of a disclosure by Bank not permitted by this Agreement,
(y) was available to Bank on a nonconfidential basis prior to its
disclosure to Bank by Borrower, any Subsidiary, or any of their
respective affiliates, or (z) becomes available to Bank on a
nonconfidential basis from a person and/or entity other than Borrower,
any Subsidiary, or any of their respective affiliates who, to the best
knowledge of Bank, is not otherwise bound by a confidentiality
agreement with Borrower, any Subsidiary, or any of their respective
affiliates, or, to the best knowledge of Bank, is not otherwise
prohibited from transmitting the information to Bank.
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<PAGE> 20
SECTION 9.5. NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and, if to
Borrower or a Subsidiary, mailed or delivered to it, addressed to it
at the address of Borrower herein specified, and if to Bank, mailed or
delivered to it, addressed to the address of Bank specified in this
Agreement. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or
made when received.
<TABLE>
<S> <C>
If to Bank: SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attention: Ruth E. Whitner,
Assistant Vice President
Telephone: (404) 588-7915
Telecopy: (404) 827-6270
If to Borrower: The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Attention: Cynthia D. Brogan,
Director, Treasury Services
Telephone: (216) 566-2106
Telecopy: (216) 566-2984
</TABLE>
SECTION 9.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and when taken together
shall constitute one and the same agreement.
SECTION 9.7. ENTIRE AGREEMENT. This Agreement supersedes any prior
agreement or understanding of the parties hereto, and contains the
entire agreement of the parties hereto, with respect to the matters
covered hereby.
SECTION 9.8. GOVERNING LAW. This Agreement, and the Term Note shall be
governed by and construed in accordance with the laws of the State of
Georgia and the respective rights and obligations of Borrower and Bank
shall be governed by Georgia law.
SECTION 9.9. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. The several captions to sections
and subsections herein are inserted for convenience only and shall be
ignored in interpreting the provisions of this Agreement.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date indicated above.
<TABLE>
THE SHERWIN-WILLIAMS COMPANY SUNTRUST BANK, ATLANTA
<S> <C> <C>
By: /s/ Larry J. Pitorak By: /s/ Ruth E. Whitner
------------------------------------------- -----------------------------------
LARRY J. PITORAK RUTH E. WHITNER
Title: SENIOR VICE PRESIDENT- Title: ASSISTANT VICE PRESIDENT
FINANCE, TREASURER AND
CHIEF FINANCIAL OFFICER
By: /s/ James J. Sgambellone By: /s/ Brian K. Peter
---------------------------------------- -------------------------------------
JAMES J. SGAMBELLONE BRIAN K. PETER
Title: ASSISTANT SECRETARY AND Title: VICE PRESIDENT
CORPORATE DIRECTOR OF TAXES
</TABLE>
21
<PAGE> 1
EXHIBIT 4(f)
TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT
THIS TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT is made and entered into this
1st day of February, 1996, by and between The Sherwin-Williams Company, a
corporation organized and existing under the laws of the State of Ohio
("Borrower"), and SunTrust Bank, Atlanta, a Georgia banking corporation, and
its successors and assigns ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower has requested Bank to establish a three (3) year
$50,000,000 term loan/bankers' acceptance facility to finance working capital,
capital expenditures, and other general corporate purposes, including, but not
limited to, acquisitions of stock, assets or other ownership interests of
Borrower; and
WHEREAS, Bank is willing to establish said term loan/bankers' acceptance
facility in the foregoing amount, subject to the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meaning:
"ACCEPTANCES" shall have the meaning set forth in Section 3.1 hereof.
"ACCEPTANCE OBLIGATIONS" shall mean the aggregate outstanding face amount of
all Acceptances (whether matured or unmatured) in respect of which no
payment, conversion or deposit has been made.
"ACCEPTANCE RATE" shall mean for any Interest Period the all-in discount rate
(including any acceptance commission of Bank) equal to the equivalent of
LIBOR, plus 0.20% per annum.
"AGREEMENT" shall mean this Term Loan/Bankers' Acceptance Agreement, either as
originally executed or as it may be from time to time supplemented, amended,
renewed or extended.
"AGREEMENT DATE" shall mean February 1, 1996.
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<PAGE> 2
"ALTERNATE BASE RATE" shall mean the higher of: (i) the rate of interest in
effect for any given day as publicly announced from time to time by Bank as
its "reference rate" and (ii) the Federal Funds Rate plus 50 basis points.
Any change by Bank of its "reference rate" shall take effect at the opening
of business on the day specified in the public announcement of such change.
"ALTERNATE BASE RATE LOAN" shall mean the Term Loan bearing interest at the
Alternate Base Rate.
"BANK" shall mean SunTrust Bank, Atlanta and any successor or assign thereto.
"BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which
Atlanta banks are open for the transaction of business.
"BUSINESS DAY" shall mean, with respect to a LIBOR Loan, any day other than a
Saturday, Sunday or a day on which commercial banks are required or
authorized to close of domestic or international business, including dealings
in Dollar deposits, in Atlanta, Georgia or London, England and with respect
to all other matters, any day other than a Saturday, Sunday or a day on which
commercial banks are required or authorized to close in Atlanta, Georgia.
"CONSOLIDATED NET WORTH" shall mean the excess of the net book value of the
assets of Borrower and its Consolidated Subsidiaries over all of their
liabilities (other than Subordinated Indebtedness), as determined on a
consolidated basis in accordance with generally accepted accounting
principles as applied by Borrower in the calculation of such amount in
Borrower's then most recent financial statements furnished to its
stockholders, plus the aggregate value of all treasury stock purchased after
the Agreement Date (at cost) by Borrower (to the extent that the aggregate
value of such treasury stock for purposes of this calculation does not exceed
Two Hundred Fifty Million Dollars ($250,000,000)). The calculation of
Consolidated Net Worth shall exclude any amounts which would otherwise be
required to be included therein as a result of the future adoption by the
Financial Accounting Standards Board of any policy, statement, rule or
regulation requiring Borrower to record an accumulative liability on its
Financial Report(s).
"CONSOLIDATED SUBSIDIARY" shall mean, at any particular time, every Subsidiary
which is consolidated in Borrower's financial statements contained in its
then most recent Financial Report.
"DEBT" shall mean, collectively, all indebtedness at any one time outstanding
hereunder and owed by Borrower to Bank pursuant to this Agreement and
includes the principal of and interest on the Term Note, any Acceptance
Obligations and any funding indemnities incurred under Section 4.4 of this
Agreement.
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<PAGE> 3
"EVENT OF DEFAULT" shall mean any of the events referred to in Article VII
hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Banking Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Banking Day, the rate for such day shall be
the arithmetic mean, as determined by Bank, of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York
time) on such day by each of three leading brokers of Federal funds
transactions in New York City selected by Bank.
"FINANCIAL REPORT" shall mean the annual or periodic report prepared in
accordance with generally accepted accounting principles, except as otherwise
indicated, filed by Borrower with the Securities and Exchange Commission (or
any governmental body or agency succeeding to the functions of such
Commission) on Form 10-K or 10-Q pursuant to the Securities Exchange Act of
1934 ("Exchange Act"), as then in effect (or any comparable forms under
similar Federal statutes then in force), and the most recent financial
statements furnished by Borrower to its stockholders (which annual financial
statement shall be certified by Borrower's independent certified public
accountants).
"INDEMNIFIED PERSONS" shall have the meaning set forth in Section 3.4 hereof.
"INTEREST PERIOD" shall mean, with respect to the Term Loan, a period of 3
months; provided, that (i) the first and last day of an Interest Period must
be a Quarter Date, and (ii) no Interest Period shall extend beyond the
Maturity Date.
"LIBOR" shall mean with respect to each Interest Period for a LIBOR Loan, the
rate per annum equal to the quotient of (i) the rate offered for deposits in
Dollars of amounts equal or comparable to the principal amount of such LIBOR
Loan offered for a term comparable to such Interest Period, which rate
appears on the Telerate Page 3750 as of 11:00 A.M. (London, England) time,
two (2) Business Days prior to the first day of such Interest Period;
provided that, if no such offered rates appear on such page, the rate used
for such Interest Period shall be the arithmetic average (rounded upward, if
necessary, to the next higher 1/16th of 1%) of rates offered to Bank by not
less than two major banks in London, England at approximately 10:00 A.M.
(Atlanta, Georgia time), two (2) Business Days prior to the first day of such
Interest Period for deposits in Dollars in the London interbank market for a
period comparable to such Interest Period in an amount comparable to the
principal amount of such LIBOR Loan, (ii) divided by a number equal to 1.00
minus the Reserve Percentage. The rate so determined in accordance herewith
shall be rounded upwards to the nearest whole multiple of 1/100th of 1%.
"Telerate Page 3750" shall mean the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service
or another service as may be
3
<PAGE> 4
nominated by the British Bankers' Association as the information vendor for
the purpose of displaying British bankers' Association Interest Settlement
Rate for Dollars).
"LIBOR LOAN" shall mean the Term Loan bearing interest based on LIBOR.
"LOAN DOCUMENTS" shall mean and include, as the context requires, this
Agreement, the Term Note, the Acceptances and any and all other instruments,
agreements, documents and writings contemplated hereby or executed in
connection herewith.
"MATERIAL" shall mean the measure of a matter of significance which shall be
determined as being an amount equal to five percent (5%) or more of
Borrower's Consolidated Net Worth.
"MATURITY DATE" shall mean February 5, 1999, or such later date as the parties
may agree that the unpaid principal and all accrued interest and all other
amounts due hereunder shall be paid in full.
"PLAN" shall mean any employee pension benefit plan within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended from time to time ("ERISA") sponsored and maintained by Borrower, any
Consolidated Subsidiary, or of any member of a controlled group of
corporations, as the term "controlled group of corporations" is defined in
Section 1563 of the Internal Revenue Code of 1986, as amended, of which
Borrower or any Consolidated Subsidiary is a part, for employees thereof.
"POSSIBLE DEFAULT" shall mean an event, condition or thing known to Borrower
which constitutes, or which with the lapse of any applicable grace period or
the giving of notice or both would constitute, any Event of Default and which
has not been appropriately waived by Bank in writing or fully corrected prior
to becoming an Event of Default.
"QUARTER DATE" shall mean the fifth day of each February, May, August and
November beginning May 5, 1996.
"REPORTABLE EVENT" shall mean a reportable event as that term is defined in
Title IV of ERISA except actions of general applicability by the Secretary of
Labor under Section 110 of ERISA.
"RESERVE PERCENTAGE" shall mean, for any day, the stated maximum rate
(expressed as a decimal) of all reserves required to be maintained with
respect to liabilities or assets consisting of or including"eurocurrency
liabilities", as prescribed by Regulation D of the Board of Governors of the
Federal Reserve System (or by any other governmental body having jurisdiction
with respect thereto), including without limitation any basic, marginal,
emergency, supplemental, special, transitional or other reserves, the rate so
determined to be rounded upward to the nearest whole multiple of 1/100 of 1%.
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<PAGE> 5
"SUBORDINATED INDEBTEDNESS" shall mean indebtedness which has been subordinated
(by written terms or agreement being in form and substance reasonably
satisfactory to Bank) in favor of the prior payment in full of Borrower's
Debt to Bank.
"SUBSIDIARY" shall mean an existing or future corporation(s), the majority of
the outstanding capital stock or voting power, or both, of which is (or upon
the exercise of all outstanding warrants, options and other rights would be)
owned at the time in question by Borrower or by another such corporation(s)
or by any combination of Borrower and such corporation(s).
"TERM LOAN" shall have the meaning set forth in Section 2.1 hereof.
"TERM NOTE" shall mean the promissory note executed by Borrower payable to the
order of Bank, in substantially the form of Exhibit A attached hereto,
evidencing the Term Loan, either as originally executed or as it may from
time to time be supplemented, modified, amended, renewed or extended.
"VOTING STOCK" shall mean stock of a corporation of a class or classes having
general voting power under ordinary circumstances to elect a majority of the
board of directors, managers or trustees of such corporation (irrespective of
whether or not the stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" shall mean each Consolidated Subsidiary
all of whose outstanding stock, other than directors' qualifying shares,
shall at the time be owned by Borrower and/or by one or more Wholly-Owned
Consolidated Subsidiaries.
ARTICLE II
AMOUNT AND TERMS OF TERM LOAN/BANKERS' ACCEPTANCE FACILITY
SECTION 2.1. TERM LOAN. Bank agrees, on the terms and subject to the
conditions contained herein, to make a term loan ("Term Loan") to
Borrower on the Agreement Date in the principal amount of Fifty Million and
00/100 Dollars ($50,000,000). The Term Loan shall be evidenced by the Term
Note or by Acceptances if funded at the Acceptance Rate; provided, that at no
time shall a LIBOR Loan and Acceptances be outstanding hereunder
simultaneously. On the Agreement Date, Bank shall credit the amount of the
Term Loan in immediately available funds to an account of Borrower with Bank
or otherwise transfer said amount in immediately available funds in accordance
with Borrower's instructions.
SECTION 2.2. INTEREST. Interest shall accrue on the unpaid principal amount
of the Term Loan at the following rates per annum: (a) LIBOR for an Interest
Period of three months, plus 0.20% per annum or (b) the Acceptance Rate,
as the case may be.
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<PAGE> 6
SECTION 2.3. INTEREST PAYMENT DATES. Interest on the Term Loan shall be
payable (a) on a Quarter Date and (b) on the Maturity Date.
SECTION 2.4. REPAYMENT OF THE TERM LOAN. Borrower shall repay the principal
amount of the Term Loan on the Maturity Date.
SECTION 2.5. OPTIONAL PREPAYMENTS. At the option of Borrower, Borrower may
prepay the Term Loan, in whole or in part from time to time, without premium or
penalty, but with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, that (a) each partial prepayment shall be
in the minimum principal amount of $1,000,000; (b) each partial prepayment of
the Term Loan may occur only on the last day of the then current Interest
Period with respect to a LIBOR Loan or on the maturity date of the relevant
Acceptances; and (c) each partial prepayment shall be applied to installments
of principal in the inverse order of their maturities.
SECTION 2.6. SELECTION OF SUCCESSIVE INTEREST RATES; CONVERSION. Bank may
request, and Borrower shall agree if so requested, that on the last day of any
Interest Period the Term Loan be continued as a LIBOR Loan or be converted into
Acceptances in the same principal amount or in a principal amount as reduced by
any repayment made pursuant to Section 2.4 hereof, or that on the maturity date
of any Acceptances the Term Loan be continued as Acceptances or be converted
into a LIBOR Loan in the same principal amount or in a principal amount as
reduced by any repayment made pursuant to Section 2.4 hereof, it being agreed
by Borrower that this right of Bank to select the interest rates/funding
mechanics on the Term Loan hereunder is a part of the consideration for
entering into this Agreement and the other Loan Documents. Notwithstanding the
foregoing, if an Event of Default shall exist at the end of an Interest Period
applicable to a LIBOR Loan or on the maturity date of any Acceptances, such
outstanding LIBOR Loan or such outstanding Acceptances shall be converted to an
Alternate Base Rate Loan.
ARTICLE III
ACCEPTANCES
SECTION 3.1. ACCEPTANCES. In the event Bank elects to fund the Term Loan with
Acceptances, Bank may in its sole discretion in each instance as provided in
this Agreement, accept, in accordance with their tenor, drafts denominated in
minimum denominations of $1,000,000 or such amounts as Bank may require, drawn
on Bank by Borrower in accordance with Section 3.2(b) hereof and payable to the
order of Bank ("Acceptances"). Such drafts presented for acceptance shall be
equal to the principal amount of the Term Loan then outstanding plus an amount
equal to the amount of interest that will accrue for the term of the then
current Interest Period. Such interest shall be calculated at the Acceptance
Rate and adjusted for being calculated on a discount basis. All such drafts
shall have a tenor of approximately ninety (90) days with each date of
acceptance being a Quarter Date. The maturity date of each Acceptance shall be
a Quarter Date. No Acceptance will be created hereunder if
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<PAGE> 7
its maturity date would otherwise extend beyond the Maturity Date unless
otherwise agreed to by the parties. In no event shall the aggregate Acceptance
Obligations (net of any discounted interest calculated at the Acceptance Rate
deducted upon acceptance) of Bank at any time exceed the outstanding principal
amount of the Term Loan.
SECTION 3.2. CREATION AND DISCOUNT OF ACCEPTANCES. (a) In the event Bank
elects to fund the Term Loan with Acceptances then, prior to 11:00 A.M.
(Atlanta, Georgia time) on any Quarter Date, Bank, in its sole discretion, may
request that Borrower elect the Acceptance Rate. Upon such election, Bank
shall promptly (a) complete the drafts specified in Section 3.2(b) hereof, (b)
duly accept such draft(s), (c) discount the drafts at the Acceptance Rate, (d)
provide Borrower with written or telephonic notice (i) of Bank's creation of
such Acceptances (specifying the date, the face amount and the maturity date
thereof) and (ii) the Acceptance Rate, and (e) fund the outstanding Term Loan
with the proceeds of such Acceptances.
(b) In the event Bank elects to fund the Term Loan with Acceptances, Borrower
shall either (i) deliver, or cause to be delivered to Bank, fully executed
drafts for acceptance by Bank, or (ii) authorize Bank by telephone to complete,
or cause to be completed, pre-signed drafts previously delivered to Bank by
Borrower or (iii) authorize Bank by telephone to act as Borrower's agent to
complete and sign drafts as provided hereunder. Borrower hereby appoints any
officer (or any employee under the direct supervision of an officer) of Bank to
act as its agent for the limited purpose of representing and acting as
Borrower's attorney-in-fact in the completion of any such drafts (including,
but not limited to, date, place of issuance, amount, draft number, date of
maturity and transaction information) and the issuance and safekeeping of any
such drafts. Neither Bank nor its agent(s) shall be liable to Borrower for
executing, failing to execute or for any error in the execution of any orders
or instructions from Borrower, except in the case of Bank's gross negligence or
willful misconduct.
SECTION 3.3. MATURITY. On the maturity date of each Acceptance, Borrower
shall pay to Bank an amount equal to the face amount of each Acceptance
(including all discounted interest deducted upon acceptance).
SECTION 3.4. SPECIAL INDEMNIFICATION. Borrower shall indemnify and hold Bank
and Bank's affiliates, shareholders, directors, officers, employees and agents
("Indemnified Persons") harmless from any and all claims, demands, losses,
costs, damages, liabilities and expense, including attorneys' fees (excluding
consequential, incidental or special damages), which any Indemnified Person may
suffer or incur (a) by reason of Borrower's failure to perform any of the
Acceptance Obligations arising under this Agreement or under any Acceptances
properly created in accordance with Section 3.2 hereof; or (b) arising out of
any transaction or contract to which any Acceptance relates, or any goods or
documents involved therein. The indemnity contained in this Section 3.4 shall
survive termination of this Agreement.
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<PAGE> 8
ARTICLE IV
GENERAL PAYMENT PROVISIONS
SECTION 4.1. USE OF PROCEEDS. The proceeds of the Term Loan and any
Acceptance shall be used by Borrower solely to finance working capital of
Borrower and other general corporate purposes including, but not limited to,
the acquisition of assets, stock or other ownership interests.
SECTION 4.2. ILLEGALITY. Notwithstanding any other provisions of this
Agreement, if the introduction of, or any change in the interpretation or
application of any applicable law, regulation or directive shall make it
unlawful for Bank to make, maintain or fund any LIBOR Loan, the obligation of
Bank hereunder to make, maintain or fund such LIBOR Loan shall forthwith be
suspended for the duration of such illegality, and Borrower shall, at its
option, if any LIBOR Loan is then outstanding, prepay such LIBOR Loan or
convert such LIBOR Loan to an Alternate Base Rate Loan, subject to Section 4.4
hereof.
SECTION 4.3. INCREASED COSTS. In the event that the introduction of, or any
change in or in the interpretation of or application of, any applicable law,
treaty or governmental regulation, or the compliance by Bank with any
guideline, request or directive (whether or not having the force of law) from
any central bank or other U.S. or foreign financial, monetary or other
governmental authority, shall: (a) subject Bank to any tax of any kind
whatsoever with respect to this Agreement, the Term Loan or any Acceptance or
change the basis of taxation of payments to Bank of principal, interest, fees
or any other amount payable hereunder (except for changes in the rate of tax in
the overall net income of Bank); (b) impose, modify, or hold applicable any
reserve, special deposit, assessment or similar requirement against assets held
by, or deposits in or for the account of, advances, loans or acceptances by, or
other credit extended by or committed to be extended by, any office of Bank
(other than any change by way of imposition or increase of reserve requirements
under Regulation D of the Board of Governors of the Federal Reserve System in
the case of a LIBOR Loan included in the Reserve Percentage); or (c) impose on
Bank or on the London interbank market any other condition with respect to this
Agreement, the Term Note or any LIBOR Loan thereunder or any Acceptance; and
the result of any of the foregoing is to increase the cost to Bank of making or
committing to make, renewing or maintaining any LIBOR Loan or any Acceptance or
to reduce the amount of any payment (whether of principal, interest or
otherwise) in respect of any LIBOR Loan or any Acceptance, THEN, IN ANY CASE,
Borrower shall promptly pay from time to time, upon demand of Bank, such
additional amounts as will compensate Bank for such additional cost or such
reduction, as the case may be. Bank shall certify the amount of such
additional cost or reduced amount to Borrower, including a description of the
calculation thereof in reasonable detail, and such certification shall be
conclusive absent manifest error.
SECTION 4.4. INDEMNITY. Borrower hereby agrees to indemnify Bank and hold
Bank harmless from any loss, cost or expense (excluding incidental,
consequential or special damages) it may sustain or incur as a direct
consequence of the payment or conversion of a LIBOR Loan
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on a day other than the last day of the Interest Period applicable thereto,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired or deemed
acquired by Bank to fund such LIBOR Loan. Bank shall certify the amount of its
loss or expense to Borrower, and such certification shall be conclusive absent
manifest error.
SECTION 4.5. MAKING OF PAYMENTS. All payments of principal of, or interest
on, the Term Note or of the Acceptance Obligations shall be made in immediately
available funds to Bank at its principal office in Atlanta, Georgia. All
payments due on a date which is not a Business Day shall be deemed to be due on
the next following Business Day, unless such Business Day falls in the next
calendar month, in which case the due date will be the first preceding Business
Day. All such payments shall be made not later than 11:00 A.M. (Atlanta,
Georgia time) and funds received after that hour shall be deemed to have been
received by Bank on the next following Business Day.
SECTION 4.6. DEFAULT RATE OF INTEREST. If Borrower shall fail to pay on the
due date therefor, whether by acceleration or otherwise, any principal owing
under the Term Note or this Agreement or the face amount of any Acceptance on
its maturity date, then interest shall accrue on such unpaid principal from the
due date until and including the date on which such principal or other amount
is paid in full at (i) the then applicable interest rate with respect to a
LIBOR Loan until the end of the Interest Period applicable thereto plus an
additional two per cent (2%) per annum and (ii) thereafter and with respect to
Acceptances or Alternate Base Rate Loans, a rate of interest equal to the
Alternate Base Rate plus an additional two percent (2.0) per annum ("Default
Rate").
SECTION 4.7. CALCULATION OF INTEREST. Interest payable on the Term Note and
the discount determined on each Acceptance shall be calculated on the basis of
a year of 360 days and shall be paid for the actual number of days elapsed.
SECTION 4.8. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE.
In the event Bank shall have determined, in good faith and reasonably, that
United States dollar deposits of the relevant amount for the relevant Interest
Period for LIBOR Loans are not available to the Bank in the London Interbank
Eurodollar market or that, by reason of circumstances affecting such market,
adequate and reasonable means do not exist for ascertaining LIBOR applicable to
such determination to Borrower then (i) any notice of the Term Loan to a LIBOR
Loan previously given and not yet converted shall be deemed a notice to make an
Alternate Base Rate Loan unless Borrower notifies Bank to the contrary, and
(ii) Borrower shall be obligated either to prepay or to convert any outstanding
LIBOR Loan on the last day of the then current Interest Period with respect
thereto.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank that:
SECTION 5.1. CORPORATE EXISTENCE. Borrower is a corporation duly organized
and in good standing under the laws of the State of Ohio.
SECTION 5.2. AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance by Borrower of this Agreement, the Term Note and all other Loan
Documents are within Borrower's corporate powers, have been duly authorized by
all necessary corporate action, and do not and will not contravene or conflict
with any provision of applicable law in effect on the date hereof or of the
Amended Articles of Incorporation or Regulations of Borrower or of any
agreement for borrowed money or other material agreement binding upon Borrower.
Borrower has duly executed and delivered this Agreement.
SECTION 5.3. VALIDITY AND BINDING NATURE. This Agreement, the Term Note and
all other Loan Documents are legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
SECTION 5.4. LITIGATION AND LIENS. To the best of Borrower's knowledge, no
litigation or proceeding is pending which would, if successful, have a Material
adverse impact on the financial condition of Borrower and the Consolidated
Subsidiaries taken as a whole, which is not already reflected in Borrower's
Financial Reports delivered to Bank prior to the date of this Agreement. The
Internal Revenue Service has not alleged any Material default by Borrower in
the payment of any tax or threatened to make any Material assessment in respect
thereof which would have or reasonably could have a Material adverse impact on
the financial condition of Borrower and the Consolidated Subsidiaries, taken as
a whole.
SECTION 5.5. ERISA COMPLIANCE. Neither Borrower nor any Consolidated
Subsidiary has incurred any Material accumulated funding deficiency within the
meaning of ERISA and the regulations thereunder. No Reportable Event has
occurred with respect to any Plan which would have a Material adverse financial
impact on Borrower or any of its Consolidated Subsidiaries, taken as a whole.
The Pension Benefit Guaranty Corporation, established under ERISA, has not
asserted that Borrower or any Consolidated Subsidiary has incurred any Material
liability in connection with any Plan. No Material lien has been attached and
no person has threatened to attach such a lien on any property of Borrower and
any Consolidated Subsidiary as a result of Borrower's or any Consolidated
Subsidiary's failure to comply with ERISA.
SECTION 5.6. ENVIRONMENTAL MATTERS. To the best of Borrower's knowledge,
Borrower and each Subsidiary is in substantial compliance with all applicable
existing laws and regulations (other than laws and regulations the validity or
applicability of which are being contested by Borrower or a Subsidiary, as the
case may be, in good faith by appropriate
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proceedings diligently prosecuted) relating to environmental control in all
jurisdictions where Borrower or any Subsidiary is presently doing business and
Borrower and each Subsidiary (to the extent applicable to its operations) is in
substantial compliance with the Occupational Safety and Health Act of 1970 and
all rules, regulations and applicable orders thereunder (other than rules,
regulations and orders the validity or applicability of which are being
contested by Borrower or a Subsidiary, as the case may be, in good faith by
appropriate proceedings diligently prosecuted).
SECTION 5.7. FINANCIAL REPORTS. The Financial Reports of Borrower and the
Consolidated Subsidiaries, furnished to Bank prior to the date of this
Agreement or from time to time pursuant to this Agreement shall be true and
complete, prepared in accordance with generally accepted accounting principles,
except as stated therein, and fairly present Borrower's and its Consolidated
Subsidiaries' financial condition and the results of their operations for the
period encompassed by such Financial Reports. Since the dates of Borrower's
most recent Financial Reports until the date of this Agreement there has been
no material adverse change in the consolidated financial condition of Borrower
and the Consolidated Subsidiaries taken as a whole.
SECTION 5.8. REGULATION U. Neither Borrower nor any of its Consolidated
Subsidiaries is generally engaged in the business of purchasing or selling
margin stock or extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System). Bank represents and warrants to
Borrower that it is not relying on and will not rely on any margin stock (as
described above) in determining whether to extend a loan to Borrower under this
Agreement.
SECTION 5.9. GOVERNMENT REGULATION. Neither Borrower nor any of its
Consolidated Subsidiaries is registered or is required to be registered as a
public utility under the Public Utility Holding Company Act of 1935 or as an
investment company under the Investment Company Act of 1940.
SECTION 5.10. TAXES. Borrower and its Consolidated Subsidiaries have filed
all United States federal income tax returns and all other material tax returns
which are required to have been filed by them (subject to any available
extensions) and have paid all taxes indicated as due on such returns except for
any such taxes being contested by Borrower or a Subsidiary, as the case may be,
in good faith by appropriate proceedings diligently prosecuted (Borrower has
made adequate and reasonable provision for all material taxes not yet due and
payable), if any, and all material assessments, if any.
SECTION 5.11. DEFAULTS. No Possible Default exists which would have or
reasonably could have a Material adverse impact on the financial condition of
Borrower and the Consolidated Subsidiaries, taken as a whole.
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ARTICLE VI
COVENANTS
Until all obligations of Borrower hereunder, under the Term Note and under
all Acceptances are satisfied and paid in full, Borrower agrees that, unless at
any time Bank shall otherwise expressly agree in writing:
SECTION 6.1. INSURANCE. Borrower will (a) maintain insurance to such extent
and against such hazards and liabilities as is commonly maintained by companies
similarly situated, and (b) upon Bank's written request, furnish to Bank such
information about Borrower's and its Consolidated Subsidiaries' insurance as
Bank may from time to time reasonably request, which information shall be
prepared in form and detail reasonably satisfactory to Bank.
SECTION 6.2. FINANCIAL REPORTS. Borrower will furnish to Bank:
(i) within sixty (60) days after the end of each of the first three
quarter-annual periods of each of its fiscal years (and, in any event,
in each case as soon as available), the quarterly Financial Report of
Borrower and the Consolidated Subsidiaries as at the end of that period,
prepared on a consolidated basis;
(ii) within ninety (90) days after the end of each of its fiscal years (and,
in any event, in each case as soon as available), the annual Financial
Report of Borrower and the Consolidated Subsidiaries for that year
prepared on a consolidated basis;
(iii) within sixty (60) days after the end of each of its quarterly
accounting periods and within ninety (90) days after the end of its
annual accounting period, a statement signed by a financial officer of
Borrower reflecting compliance with Section 6.3 hereof and to the
effect that no Event of Default has occurred and is continuing or, if
there is any such event, describing it and the steps being taken, if
any, to cure such event;
(iv) promptly after filing with the Securities and Exchange Commission, any
Form 8-K or Schedule 13D filings applicable to Borrower (or any
successor forms or schedules promulgated by the Securities and Exchange
Commission from time to time which encompass the matters currently
addressed in Form 8-K and Schedule 13D);
(v) written notice of any change in the rating assigned to Borrower's senior
unsecured long-term debt by Moody's, S&P or Duff & Phelps within thirty
(30) days of such change; and
(vi) such other financial information regarding Borrower as Bank may
reasonably request.
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SECTION 6.3. NET WORTH. Borrower will not permit its Consolidated Net Worth
at any time to fall below Eight Hundred Million Dollars ($800,000,000).
SECTION 6.4. REGULATIONS U AND X. Borrower will not nor will it permit any
Subsidiary to take any action that would result in any non- compliance of the
loan made hereunder with Regulation U and X of the Board of Governors of the
Federal Reserve System. Borrower's use of proceeds from the loan made pursuant
to this Agreement will not cause a violation of Regulation U or X.
SECTION 6.5. MERGER AND SALE OF ASSETS. Borrower will not merge or
consolidate with nor permit any Consolidated Subsidiary to merge or consolidate
with any other corporation or sell, lease or transfer or otherwise dispose of
all or, during any twelve (12) month period, a substantial part of its assets
to any person or entity (except as otherwise provided herein); provided,
however, if no Possible Default shall then exist or immediately thereafter will
begin to exist:
(i) Any Consolidated Subsidiary may merge with (a) Borrower (provided that
Borrower shall be the continuing or surviving corporation) or (b) any
one or more other Consolidated Subsidiaries provided that either the
continuing or surviving corporation shall be a Wholly-Owned Consolidated
Subsidiary, or after giving effect to any merger pursuant to this
sub-clause (b), Borrower and/or one or more Wholly-Owned Consolidated
Subsidiaries shall own not less than the same percentage of the
outstanding Voting Stock of the continuing or surviving corporation as
Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries owned
of the merged Consolidated Subsidiary immediately prior to such merger,
(ii) Any Consolidated Subsidiary may sell, lease, transfer or otherwise
dispose of any of its assets to (a) Borrower, (b) any Wholly-Owned
Consolidated Subsidiary or (c) any Consolidated Subsidiary of which
Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries shall
own not less than the same percentage of Voting Stock as Borrower and/or
one or more Wholly-Owned Consolidated Subsidiaries then own of the
Consolidated Subsidiary making such sale, lease, transfer or other
disposition,
(iii) Borrower may sell the stock or assets of any Consolidated Subsidiary
if such sale or other disposition is determined by the board of
directors of Borrower to be in the best interests of Borrower and such
sale is for a consideration which represents the fair value (as
determined in good faith by the board of directors of Borrower)
thereof at the time of such sale of such stock or assets,
(iv) Borrower may merge with any other corporation, provided that Borrower
shall be the surviving corporation,
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(v) Borrower or any Consolidated Subsidiary may sell all or any part of the
assets of any of its divisions or operations to a third party if such
sale or other disposition is determined by the board of directors of
Borrower and/or such Consolidated Subsidiary, as the case may be, to be
in the best interests of Borrower and/or such Consolidated Subsidiary,
as the case may be, and such sale is for a consideration which
represents the fair value (as determined in good faith by the board of
directors of Borrower) thereof at the time of such sale or other
disposition of such assets,
(vi) Borrower or any Subsidiary may sell or transfer all or any part of the
assets of any of its divisions or operations to any Subsidiary.
In the event there occurs a Change in Control of Borrower, the Term Loan or all
Acceptance Obligations, as the case may be, shall be immediately due and
payable without notice to Borrower. For purposes of this paragraph, a "Change
of Control" shall occur if:
(a) there shall be consummated (i) any consolidation or merger of Borrower
in which Borrower is not the continuing or surviving corporation or pursuant
to which shares of Borrower's common stock would be converted into cash,
securities or other property, other than a merger of Borrower in which the
holders of Borrower's common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (ii) any sale, lease,
exchange or transfer (in one transaction or a series of related
transactions) of fifty percent (50%) or more of the assets or earning power
of Borrower;
(b) any "person" (as such term is used in Sections as 13(d) and 14(d)(2)
of the Exchange Act, as amended, other than Borrower or any employee benefit
or stock ownership plan sponsored by Borrower, or any person or entity
organized, appointed or established by Borrower for or pursuant to the terms
of any such Plan, shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of Borrower representing
fifteen percent (15%) or more of the combined voting power of Borrower's
then outstanding securities ordinarily (and apart from rights accruing in
special circumstances) having the right to vote in the election of
directors, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise; or
(c) during any period of two (2) consecutive years, individuals who at the
beginning of such period constituted the board of directors of Borrower
and any new director whose election by such board of directors or nomination
for election by Borrower's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof.
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Notwithstanding subparagraph (a) through (c) above, with respect to the
transactions set forth in subparagraphs (a) and (b) above, a Change of
Control shall not be deemed to have occurred if any such transaction (i) is
approved by a vote of at least two-thirds (2/3) of the directors of
Borrower and (ii) at the time of such vote, at least two-thirds (2/3) of
such directors then in office were members of the board of directors of
Borrower immediately prior to such transaction.
SECTION 6.6. NOTICE. As long as any indebtedness of Borrower remains
outstanding hereunder, Borrower will cause its treasurer, or in his absence
another representative of Borrower designated by the treasurer, to promptly
notify Bank whenever any Material Possible Default may occur or any warranty
made in Article V hereof or elsewhere in this Agreement may for any reason
cease in any Material respect to be true and complete.
SECTION 6.7. LIENS. Borrower will not and will not permit any Consolidated
Subsidiary to create, assume or suffer to exist any lien upon any of its
property or assets (hereinafter "Properties") whether now owned or hereafter
acquired without effectively providing that any borrowings under this Agreement
shall be secured equally and ratably with all other indebtedness thereby
secured; provided that this Section shall not apply to the following:
(i) liens for taxes not yet due or which are being actively contested in good
faith by appropriate proceedings,
(ii) other liens incidental to the conduct of its business or the ownership
of its Properties which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and which do
not in the aggregate materially detract from the value of its Properties
or materially impair the use thereof in the operation of its business,
(iii) liens on Properties of a Consolidated Subsidiary to secure obligations
of such Consolidated Subsidiary to Borrower or another Consolidated
Subsidiary,
(iv) liens on Properties of Borrower and/or its Consolidated Subsidiaries
existing on the date hereof,
(v) any lien existing on any Properties of any corporation at the time it
becomes a Consolidated Subsidiary, existing prior to the time of
acquisition upon any Properties acquired by Borrower or any Consolidated
Subsidiary through purchase, merger, consolidation or otherwise,
whether or not assumed by Borrower or such Consolidated Subsidiary,
(vi) any lien placed upon any asset other than real property (hereinafter in
this subparagraph (vi) "Asset") at the time of acquisition by Borrower
or any Consolidated Subsidiary to secure all or a portion of [or to
secure indebtedness
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incurred prior to, at the time of, or (in the case of any Asset acquired
with the intent to obtain subsequent financing thereof secured by a
lien) within one (1) year after the acquisition of such Asset for the
purpose of financing all or a portion of] the purchase price thereof,
provided that any such lien shall not encumber any other Properties
of Borrower or such Consolidated Subsidiary,
(vii) any lien placed upon any real property now owned or hereafter acquired
by Borrower or any of its Subsidiaries securing indebtedness in an
amount up to eighty percent (80%) of the fair market value of such
real property,
(viii) liens in favor of the United States of America or any department or
agency thereof, or in favor of any state government or political
subdivision thereof, or in favor of a prime contractor under a
government contract of the United States, or of any state government
or any political subdivision thereof, and, in each case, resulting
from acceptance of partial, progress, advance or other payments in
the ordinary course of business under government contracts of the
United States, or of any state government or any political
subdivision thereof, or subcontracts thereunder,
(ix) liens created, assumed or existing in connection with a tax-free
financing,
(x) any lien renewing, extending or refunding any lien permitted by clauses
(iv), (v), (vi), (vii), (viii) and (ix) above, provided that the
principal amount secured is not materially increased, and the lien is
not extended to other Properties, and
(xi) liens other than those permitted by clauses (i) through (x) above,
provided that the aggregate amount of all indebtedness secured by liens
permitted by this clause (xi) shall not at any time exceed fifteen
percent (15%) of Consolidated Net Worth.
SECTION 6.8. ERISA COMPLIANCE. Neither Borrower nor any Consolidated
Subsidiary will incur any Material accumulated funding deficiency within the
meaning of the ERISA and the regulations thereunder, or any Material liability
to the Pension Benefit Guaranty Corporation or any successor thereto in
connection with any Plan. Borrower will furnish to Bank as soon as possible
and in any event within thirty (30) days after Borrower or such Consolidated
Subsidiary knows or has reason to know that any Material Reportable Event with
respect to any Plan has occurred a statement of the chief financial officer of
Borrower or such Consolidated Subsidiary setting forth details as to such
Reportable Event and the action which Borrower or such Consolidated Subsidiary
proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event given to the Pension Benefit Guaranty Corporation if a
copy of such notice is available to Borrower or such Consolidated Subsidiary.
SECTION 6.9. NOTICE OF DEFAULT. Borrower will, and will cause each
Consolidated Subsidiary to, give prompt notice in writing to Bank of the
occurrence of any Possible Default
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and of any other development, financial or otherwise, with respect to which
there is a significant probability of a Material adverse impact on Consolidated
Net Worth or on Borrower's ability to repay its obligation to Bank hereunder.
SECTION 6.10. CONDUCT OF BUSINESS. Borrower will, and will cause each
Consolidated Subsidiary to, carry on and conduct its business in substantially
the same manner as it is presently conducted and to do all things necessary to
remain duly incorporated, validly existing and in good standing as a
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
SECTION 6.11. TAXES. Borrower will, and will cause each Consolidated
Subsidiary to, pay when due all taxes, assessments and governmental charges and
levies upon it or its income, profits or property, except those which are being
contested in good faith by appropriate proceedings.
SECTION 6.12. ENVIRONMENTAL. Borrower will use its best good faith efforts to
comply and to cause each Subsidiary to comply with all such laws and
regulations (other than laws and regulations the validity or applicability of
which are being contested by Borrower or a Subsidiary, as the case may be, in
good faith by appropriate proceedings diligently prosecuted) which may be
legally imposed in the future in jurisdictions in which Borrower or any
Subsidiary may then be doing business.
ARTICLE VII
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default:
SECTION 7.1. NON-PAYMENT OF TERM NOTE OR INTEREST. If the interest on the
Term Note shall not be paid in full when due and payable and shall remain
unpaid for a period of three (3) consecutive business days after written notice
thereof to Borrower from Bank. If the principal on the Term Note or the
Acceptance Obligations shall not be paid in full when due and payable.
SECTION 7.2. COVENANTS. If Borrower shall fail or omit to perform and observe
any agreement or other provision (other than those referenced in Section 7.1
hereof) contained or referred to in this Agreement or in any Related Writing
that is on Borrower's part to be complied with, and such failure or omission,
if not fully corrected within thirty (30) days after the giving of written
notice thereof to Borrower by Bank that such failure or omission would have or
reasonably could have a Material adverse impact on the financial condition of
Borrower and the Consolidated Subsidiaries, taken as a whole (provided,
however, that the financial covenant in Section 6.3 shall be applied without
regard to any materiality standard).
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SECTION 7.3. WARRANTIES. If any representation, warranty or statement made in
or pursuant to this Agreement or any Related Writing or any other information
furnished by Borrower to Bank or any other holder of the Term Note, shall be
false or erroneous in any respect which would have or reasonably could have a
Material adverse impact on the financial condition of Borrower and the
Consolidated Subsidiaries, taken as a whole.
SECTION 7.4. CROSS DEFAULT. If Borrower or any of its Consolidated
Subsidiaries (i) default in the payment of principal or interest due and owing
upon any other Material obligation for borrowed money beyond any period of
grace provided with respect thereto or (ii) default in the performance of any
other agreement, term or condition contained in any agreement under which such
obligation is created, and any such default is not waived by the holders of
such agreement or instrument, and if the effect of such unwaived default would
(a) accelerate the maturity of such indebtedness or permit the holder thereof
to cause such indebtedness to become due prior to its stated maturity and (b)
have or reasonably could have a Material adverse impact on the financial
condition of Borrower and the Consolidated Subsidiaries, taken as a whole.
SECTION 7.5. TERMINATION OF OPERATIONS, BANKRUPTCY OR INSOLVENCY. If Borrower
or a Consolidated Subsidiary representing in excess of ten percent (10%) of
total consolidated assets of Borrower and the Consolidated Subsidiaries shall
(i) discontinue business (except as permitted under Section 6.5 hereof) or (ii)
generally not pay (or admit in writing its inability to pay) its debts as such
debts become due, or (iii) make a general assignment for the benefit of
creditors, or (iv) apply for or consent to the appointment of a receiver, a
custodian, a trustee, an interim trustee or a liquidator of all or a
substantial part of its assets, or (v) be adjudicated an insolvent debtor or
have entered against it an order for relief under Title 11 of the United States
Code, as the same may be amended from to time to time, or (vi) file a voluntary
petition in bankruptcy or file a petition or an answer seeking reorganization
or an arrangement with creditors or seeking to take advantage of any other law
(whether federal or state) relating to relief of debtors, or admit (by answer,
by default or otherwise) the substantive allegations of a petition filed
against it in any bankruptcy, reorganization, insolvency or other comparable
proceeding (whether federal or state) relating to relief of debtors, or (vii)
suffer or permit to continue unstayed and in effect for sixty (60) consecutive
days any judgment, decree or order entered by a court of competent
jurisdiction, which approves a petition seeking its reorganization or appoints
a receiver, custodian, trustee, interim trustee or liquidator of all or a
substantial part of its assets.
ARTICLE VIII
EFFECT OF DEFAULT
SECTION 8. EFFECT OF EVENT OF DEFAULT. Upon the occurrence and continuance
of any Event of Default, the principal and all accrued interest due under the
Term Note or the Acceptance Obligations shall become immediately due and
payable, without notice and Bank may exercise any remedies available under law
or in equity.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. BANK'S INDEPENDENT INVESTIGATION. Bank, by its signature to this
Agreement, acknowledges and agrees that it has made its own independent
investigation of the creditworthiness, financial condition and affairs of
Borrower and any Subsidiary in connection with the Term Loan.
SECTION 9.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing
on the part of Bank or the holder of the Term Note in exercising any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies herein provided are cumulative and in addition
to any other rights, powers or privileges held by operation of law, by contract
or otherwise.
SECTION 9.3. AMENDMENTS. Except as otherwise specifically provided herein, no
amendment, modification, termination, or waiver of any provision of this
Agreement or the Term Note, nor consent to any variance therefrom, shall be
effective unless the same shall be in writing and signed by Borrower Bank and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 9.4. CONFIDENTIALITY. Unless Borrower otherwise agrees in writing,
Bank hereby agrees to keep all Proprietary Information (as defined below)
confidential and not to disclose or reveal any Proprietary Information to any
person or entity other than Bank's directors, officers, employees, affiliates,
and agents, and then only on a confidential need-to-know basis; provided,
however that Bank may disclose Proprietary Information (a) as required by law,
rule, regulation, or judicial process, (b) to its attorneys and accountants,
(c) as requested or required by a state, federal, or foreign authority or
examiner regulating banks or banking, or (d) to actual or potential assignees
or participants as permitted by Section 9.9 hereof who agree to be bound by the
provisions of this Section. For purposes of this Agreement, the term
"Proprietary Information" shall include all information about Borrower, any
Subsidiary, or any of their respective affiliates which has been furnished by
Borrower, any Subsidiary, or any of their respective affiliates, whether
furnished before or after the date hereof, and regardless of the manner
furnished; provided, however, that Proprietary Information shall not include
information which (x) is or becomes generally available to the public other
than as a result of a disclosure by Bank not permitted by this Agreement, (y)
was available to Bank on a nonconfidential basis prior to its disclosure to
Bank by Borrower, any Subsidiary, or any of their respective affiliates, or (z)
becomes available to Bank on a nonconfidential basis from a person and/or
entity other than Borrower, any Subsidiary, or any of their respective
affiliates who, to the best knowledge of Bank, is not otherwise bound by a
confidentiality agreement with Borrower, any Subsidiary, or any of their
respective affiliates, or, to the best knowledge of Bank, is not otherwise
prohibited from transmitting the information to Bank.
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SECTION 9.5. NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing and, if to Borrower or a Subsidiary,
mailed or delivered to it, addressed to it at the address of Borrower herein
specified, and if to Bank, mailed or delivered to it, addressed to the address
of Bank specified in this Agreement. All notices, statements, requests,
demands and other communications provided for hereunder shall be deemed to be
given or made when received.
If to Bank: SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attention: Ruth E. Whitner,
Assistant Vice President
Telephone: (404) 588-7915
Telecopy: (404) 827-6270
If to Borrower: The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
Attention: Cynthia D. Brogan,
Director, Treasury Services
Telephone: (216) 566-2106
Telecopy: (216) 566-2984
SECTION 9.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and when taken together shall constitute one and the
same agreement.
SECTION 9.7. ENTIRE AGREEMENT. This Agreement supersedes any prior agreement
or understanding of the parties hereto, and contains the entire agreement of
the parties hereto, with respect to the matters covered hereby.
SECTION 9.8. GOVERNING LAW. This Agreement, and the Term Note shall be
governed by and construed in accordance with the laws of the State of Georgia
and the respective rights and obligations of Borrower and Bank shall be
governed by Georgia law.
SECTION 9.9. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. The several captions to sections and subsections herein are
inserted for convenience only and shall be ignored in interpreting the
provisions of this Agreement.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date indicated above.
THE SHERWIN-WILLIAMS COMPANY SUNTRUST BANK, ATLANTA
By: /s/ Larry J. Pitorak By: /s/ Ruth E. Whitner
-------------------------- --------------------------
LARRY J. PITORAK RUTH E. WHITNER
Title: SENIOR VICE PRESIDENT- Title: ASSISTANT VICE PRESIDENT
FINANCE, TREASURER AND
CHIEF FINANCIAL OFFICER
By: /s/ James J. Sgambellone By: /s/ Frank R. Collison
-------------------------- --------------------------
JAMES J. SGAMBELLONE FRANK R. COLLISON
Title: ASSISTANT SECRETARY AND Title: VICE PRESIDENT
CORPORATE DIRECTOR OF TAXES
21
<PAGE> 1
EXHIBIT 10(c)
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into this 22nd
day of February, 1996, by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio
corporation ("Sherwin-Williams") and JOHN G. BREEN (the "Employee") to amend
and clarify that certain Employment Agreement between the parties dated January
15, 1979 (the "Agreement").
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 8 of the Agreement is amended by adding at the end thereof the
following:
As used in this Section 8, the term "annual assured compensation" shall mean
an amount equal to the sum of:
(i) twenty-six (26) times the Employee's highest regular bi-weekly salary
in effect within the three (3) year period preceding the date of
termination (before reduction for any withholding, deduction or salary
deferral, including but not limited to any deduction for withholding
income or FICA taxes and/or any deduction or deferral pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended); and
(ii) any incentive or bonus payments made or to be made to the Employee
under any incentive or bonus plan of Sherwin-Williams, a subsidiary or
affiliate under which the Employee is or was covered at any time
preceding the change of control (an "Incentive Plan") determined based
upon the greater of: (1) the highest incentive or bonus payment paid
or payable to the Employee at any time during the three (3) year
period preceding the date of termination; or (2) the target incentive
or bonus the Employee would have received for the calendar year in
which the change of control occurred if the Employee had reached one
hundred percent (100%) of any stated goals under any or all Incentive
Plans.
2. Section 9 of the Agreement is amended by adding at the end thereof the
following:
As used in this Section 9, the term "total compensation" shall mean the
Employee's annual salary and any incentive or bonus payments paid or payable
to the Employee pursuant to an Incentive Plan for the same period.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first written above.
/s/ John G. Breen
----------------------------------------
John G. Breen
THE SHERWIN-WILLIAMS COMPANY
By: /s/ Thomas Kroeger
-------------------------------
Thomas Kroeger
Title: Vice President - Human Resources
<PAGE> 2
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into this 22nd
day of February, 1996, by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio
corporation ("Sherwin-Williams") and THOMAS A. COMMES (the "Employee") to amend
and clarify that certain Employment Agreement between the parties dated March
16, 1979 (the "Agreement").
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 6 of the Agreement is amended by adding at the end thereof the
following:
As used in this Section 6, the term "annual assured compensation" shall mean
an amount equal to the sum of:
(i) twenty-six (26) times the Employee's highest regular bi-weekly salary
in effect within the three (3) year period preceding the date of
termination (before reduction for any withholding, deduction or salary
deferral, including but not limited to any deduction for withholding of
income or FICA taxes and/or any deduction or deferral pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended); and
(ii) any incentive or bonus payments made or to be made to the Employee
under any incentive or bonus plan of Sherwin-Williams, a subsidiary or
affiliate under which the Employee is or was covered at any time
preceding the change of control (an "Incentive Plan") determined based
upon the greater of: (1) the highest incentive or bonus payment paid
or payable to the Employee at any time during the three (3) year
period preceding the date of termination; or (2) the target incentive
or bonus the Employee would have received for the calendar year in
which the change of control occurred if the Employee had reached one
hundred percent (100%) of any stated goals under any or all Incentive
Plans.
2. Section 7 of the Agreement is amended by adding at the end thereof the
following:
As used in this Section 7, the term "total compensation" shall mean the
Employee's annual salary and any incentive or bonus payments paid or payable
to the Employee pursuant to an Incentive Plan for the same period.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first written above.
/s/ Thomas A. Commes
----------------------------------------
Thomas A. Commes
THE SHERWIN-WILLIAMS COMPANY
By: /s/ Thomas Kroeger
-------------------------------
Thomas Kroeger
Title: Vice President - Human Resources
<PAGE> 3
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into this 22nd
day of February, 1996, by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio
corporation ("Sherwin-Williams") and CONWAY G. IVY (the "Employee") to amend
and clarify that certain Employment Agreement between the parties dated March
16, 1979 (the "Agreement").
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 7 of the Agreement is amended by adding at the end thereof the
following:
As used in this Section 7, the term "annual assured compensation" shall mean
an amount equal to the sum of:
(i) twenty-six (26) times the Employee's highest regular bi-weekly salary
in effect within the three (3) year period preceding the date of
termination (before reduction for any withholding, deduction or salary
deferral, including but not limited to any deduction for withholding of
income or FICA taxes and/or any deduction or deferral pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended); and
(ii) any incentive or bonus payments made or to be made to the Employee
under any incentive or bonus plan of Sherwin-Williams, a subsidiary or
affiliate under which the Employee is or was covered at any time
preceding the change of control (an "Incentive Plan") determined based
upon the greater of: (1) the highest incentive or bonus payment paid
or payable to the Employee at any time during the three (3) year
period preceding the date of termination; or (2) the target incentive
or bonus the Employee would have received for the calendar year in
which the change of control occurred if the Employee had reached one
hundred percent (100%) of any stated goals under any or all Incentive
Plans.
2. Section 8 of the Agreement is amended by adding at the end thereof the
following:
As used in this Section 8, the term "total compensation" shall mean the
Employee's annual salary and any incentive or bonus payments paid or payable
to the Employee pursuant to an Incentive Plan for the same period.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first written above.
/s/ Conway G. Ivy
---------------------------------------
Conway G. Ivy
THE SHERWIN-WILLIAMS COMPANY
By: /s/ Thomas Kroeger
------------------------------
Thomas Kroeger
Title: Vice President - Human Resources
<PAGE> 1
EXHIBIT 10(f)
AMENDMENT NO. 1 TO THE SHERWIN-WILLIAMS COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
This Amendment No. 1 to The Sherwin-Williams Company Deferred
Compensation Savings Plan (the "Plan") is made effective as of January 1, 1993.
WITNESSETH:
WHEREAS, The Sherwin-Williams Company (the "Company") established the
Plan effective January 1, 1991;
WHEREAS, pursuant to Article X of the Plan, the Company retains the
right to amend the Plan at any time in whole or in part; and
WHEREAS, the Company wishes to amend the investment direction
provisions of the Plan to permit participants who are eligible to diversify
investments under The Sherwin-Williams Company Employee Stock Ownership and
Savings Plan (the "Stock Plan") to diversify the investment of such
participant's Accrued Benefit among various additional investment accounts
authorized in the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows, effective
January 1, 1993:
1. ARTICLE I of the Plan is hereby amended by adding thereto the
following definitions in appropriate alphabetical order and
renumbering the existing definitions accordingly:
1. ___ FIXED INCOME ACCOUNT. The investment account
established pursuant to Section 4.4.
1. ___ GOVERNMENT ACCOUNT. The investment account
established pursuant to Section 4.4.
1. ___ MUTUAL EOUITY ACCOUNT. The investment account
established pursuant to Section 4.4.
2. Section 4.4 of the Plan is deleted in its entirety and the
following Section 4.4 is adopted in lieu thereof:
4.4 INVESTMENT ACCOUNTS. The Administrator shall establish
the following investment accounts under the Plan:
(a) DEFERRED CASH ACCOUNT. The Deferred Cash
Account shall accrue interest computed using the
base lending rate of interest as announced by
Society National Bank, Cleveland, Ohio, or its
successor, in effect on the Valuation Date
<PAGE> 2
immediately preceding the month for which
interest is accrued. The interest shall be computed
on the "Average Balance" of the Deferred Cash Account
for such month. For purposes hereof, the Average
Balance shall be determined by averaging the
beginning and ending balance of the Deferred Cash
Account.
(b) SHADOW STOCK ACCOUNT. The Shadow Stock Account shall
be credited with a quantity of Shadow Stock units
and fractions thereof (to the nearest thousandths)
equal to the amount of Common Stock that could have
been purchased with the amount of Participant's
Accrued Benefit credited to the Shadow Stock Account
on each Valuation Date based on the Fair Market Value
of Common Stock on such Valuation Date. There will be
credited to the Shadow Stock Account amounts equal
to the cash dividends, and other distributions, paid
on shares of issued and outstanding Common Stock
represented by the Shadow Stock Account which
Participants would have received had they been a
record owner of a number of shares of Common Stock
equal to the amount of Shadow Stock in the Shadow
Stock Account at the time of payment of such cash
dividends or other distributions. The amounts
credited to the Shadow Stock Account shall be
converted to a quantity of Shadow Stock units and
fractions thereof (to the nearest thousandths) that
could have been purchased with the dividends or other
distributions based on the Fair Market Value of
Common Stock on the date of payment of such dividends
or other distributions.
(c) FIXED INCOME ACCOUNT. The Fixed Income Account shall
be credited with earnings and losses computed
using the return on the Fixed Income Fund as
described in Section 4.06 of the Stock Plan in effect
for the Valuation Date immediately preceding the
month for which earnings are accrued. The earnings
shall be computed on the Average Balance of the Fixed
Income Account for such month. The Average Balance
shall be determined by averaging the beginning and
ending balance of the Fixed Income Account for that
month.
(d) GOVERNMENT ACCOUNT. The Government Account shall be
credited with earnings and losses computed
using the return on the Government Fund as described
in Section 4.06 of the Stock
<PAGE> 3
Plan, in effect for the Valuation Date immediately
preceding the month for which earnings are accrued.
The earnings shall be computed on the Average Balance
of the Government Fund for such month. The Average
Balance shall be determined by averaging the
beginning and ending balance of the Government
Account for that month.
(e) MUTUAL EQUITY ACCOUNT. The Mutual Equity Account
shall be credited with earnings and losses
computed using the return on the Mutual Equity Fund
as described in Section 4.06 of the Stock Plan, in
effect for the Valuation Date immediately preceding
the month for which earnings are accrued. The
earnings shall be computed on the Average Balance of
the Mutual Equity Fund for such month. The Average
Balance shall be determined by averaging the
beginning and ending balance of the Mutual Equity
Account for that month.
3. Article IV of the Plan is hereby amended by adding thereto a new
Section 4.5:
4.5 INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such
limitations as may from time-to-time be required by law, or
contained elsewhere in the Plan, each Participant, except as
provided in Section 4.6 hereof, may direct the Company prior to
the Plan Year for which such direction is to become effective as
to how his Accrued Benefit should be invested between the
Deferred Cash Account and the Shadow Stock Account. A
Participant's investment direction shall specify the percentage
of his Accrued Benefit which is to be invested in each of the
Deferred Cash Account and the Shadow Stock Account.
A Participant's investment direction pursuant to this Section
4.5 is irrevocable with respect to his benefits accrued for the
Plan Year and such amounts cannot be transferred between
investment accounts. If a Participant fails to direct the
investment of any of his Accrued Benefit, all such undirected
amounts will be credited to the Shadow Stock Account.
Notwithstanding any other provisions herein to the contrary,
for the Plan Year ending January 1, 1991, Participants may not
direct the Company as to how their Accrued Benefits should be
invested. All amounts previously held in the Equalization Plan
and Key Management Plan which are transferred to
<PAGE> 4
the Plan as of January 1, 1991 will be invested
in the Deferred Cash Account or Shadow Stock
Account in the same manner as such amounts were
held in the Equalization Plan and Key Management
Plan. All amounts deferred during the 1991 Plan
Year shall be invested in the Shadow Stock
Account.
4. Article IV of the Plan is hereby amended by adding thereto a
new Section 4.6:
4.6 DIVERSIFICATION OF INVESTMENTS. Notwithstanding
anything contained in the Plan to the contrary,
a Participant who is eligible to diversify
investments pursuant to Section 8.05(A) of the Stock
Plan shall be permitted to direct the Company
beginning with the Plan Year following the Plan Year
in which the Participant satisfies the age and
service requirements set forth in such Section to
invest his Accrued Benefit allocated to the Shadow
Stock Account to the same extent and subject to the
same limitations as set forth in Section 8.05, in the
Deferred Cash Account, the Fixed Income Account, the
Government Account and the Mutual Equity Account,
except that any such direction shall be given prior
to the Plan Year for which such direction is to
become effective. A Participant's investment
direction shall specify the percentage of his Accrued
Benefit which is to be invested in each of the
investment accounts.
A Participant's investment direction is
irrevocable with respect to his benefits accrued for
the Plan Year and such amounts cannot be transferred
between investment accounts. If a Participant fails
to direct the investment of any of his Accrued
Benefit, all such undirected amounts will be credited
to the Shadow Stock Account.
5. Section 6.2 of the Plan is deleted in its entirety and the
following Section 6.2 is adopted in lieu thereof:
6.2 FORM OF PAYMENT. The amount to which a Participant
(or his Beneficiary) is entitled shall be distributed
in cash. A Participant's Accrued Benefit will be
paid by the Company to him or, in the event of his
death, to the Participant's Beneficiary, in a manner
elected by the Participant, either (i) in a cash lump
sum or (ii) in substantially equal monthly cash
installments over a period not exceeding one hundred
twenty (120) months. When a Participant first enrolls
in the Plan, he shall elect the form in which his
Accrued Benefit will be paid. Such election will be
irrevocable, and will not be subject to change,
<PAGE> 5
except in accordance with Section 6.3. If a Participant fails
to elect a manner of payment, the Participant shall receive a
cash lump sum. Upon the commencement of installment payments
hereunder, an amount equal to the aggregate value (as determined
in accordance with Section 6.1) of the Participant's Shadow
Stock Account, Fixed Income Account, Government Account and
Mutual Equity Account shall be credited to his Deferred Cash
Account and the Participant's Shadow Stock Account, Fixed Income
Account, Government Account and Mutual Equity Account shall be
eliminated. Amounts held pending distribution pursuant to this
paragraph shall continue to be credited with interest in
accordance with the provisions of Section 4.4.(a).
IN WITNESS WHEREOF, pursuant to the action of its Board of Directors at
a meeting held the 21st day of October, 1992, the Company has caused this
amendment to be executed by its duly authorized officer.
ATTEST/WITNESS: THE SHERWIN-WILLIAMS COMPANY
/s/ Diane Hale Hupp By: /s/ Louis E. Stellato
- ------------------- -----------------------------------
Print Name: Louis E. Stellato
---------------------------
Title: Vice President, General Counsel
-------------------------------
and Secretary
<PAGE> 1
EXHIBIT 10(g)
THE SHERWIN-WILLIAMS COMPANY
----------------------------
KEY MANAGEMENT DEFERRED COMPENSATION PLAN
-----------------------------------------
(1994 AMENDMENT AND RESTATEMENT)
The Sherwin-Williams Company, an Ohio corporation, hereby amends and
restates in its entirety, effective as of January 1, 1994, The Sherwin-Williams
Company Key Management Deferred Compensation Plan (the "Plan"), which was
originally established effective January 1, 1980. All deferred compensation
credited to a Participant's account under this Plan or any predecessor plan
shall continue to be governed by the terms and conditions of this Plan or the
predecessor plan, as applicable, as such plan was in effect at the time such
deferred compensation was credited.
ARTICLE I
DEFINITIONS
-----------
As used herein, the following words and phrases shall have the
respective meanings set forth below unless a different meaning is plainly
required by the context:
(1) ACCOUNT(S). The account or accounts established and
maintained by the Committee (or the person, group or entity
designated by the Committee) to record a Participant's
interest in the Plan as set forth in Section 4.01.
(2) AWARD DATE. The date on which a Participant would have
otherwise received a salary payment or Incentive Award but for
an election to defer such salary or Incentive Award made
pursuant to Article III of the Plan.
(3) BENEFICIARY(IES). Any person or persons designated in
accordance with the provisions of Article VI.
(4) BOARD. The Board of Directors of the Company.
(5) COMMITTEE. The committee which administers the Plan as
provided for in Article IX.
(6) COMMON STOCK. The common stock of the Company, par value
$1.00 per share.
(7) COMPANY. The Sherwin-Williams Company, a corporation duly
organized and existing under the laws of the State of Ohio, and
its successors and assigns.
<PAGE> 2
(8) DEFERRED CASH ACCRUAL ACCOUNT. The Account established and
maintained for a Participant with respect to any amounts of
Deferred Compensation which are to be so invested pursuant to
Article IV.
(9) DEFERRED COMPENSATION. The amount of a Participant's salary
and/or Incentive Award which such Participant elects to defer
pursuant to Article III of the Plan.
(10) DISTRIBUTABLE INTEREST. The balance in a Participant's
Accounts on his Settlement Date determined in accordance with
Section 5.01.
(11) EFFECTIVE DATE. The effective date of the Plan is January 1,
1980.
(12) ELIGIBLE EMPLOYEE(S). Eligible Employees shall include: (i)
certain officers (including officers who are members of the
Board of Directors) and other key employees of the Company and
(ii) such key employees of any Subsidiary which, with the
consent of the Board of Directors of the Company, adopts this
Plan by resolution of its Board of Directors.
(13) EMPLOYMENT PERIOD. The period commencing on the later of:
(i) the Effective Date of this Plan or (ii) the Participant's
employment date, and ending on the Participant's Settlement
Date.
(14) FAIR MARKET VALUE. The value determined with respect to
Common Stock on the applicable date, in accordance with the
following:
(a) If the Common Stock is quoted on an established
securities market, the closing price of Common Stock
on such established securities market on the relevant
date or, if there were no sales on such date, the
closing price on the nearest preceding date on which
there were such sales; or
(b) If the Common Stock is not quoted on an established
securities market, the fair market value determined
by an independent appraiser in accordance with
regulations prescribed by the Secretary of the
Treasury.
(15) INCENTIVE AWARD. A bonus award granted under an Incentive
Plan.
(16) INCENTIVE PLAN. Any employee bonus program maintained by The
Sherwin-Williams Company or a Subsidiary pursuant to which
Incentive Awards are granted in connection with the
achievement of certain performance related goals.
2
<PAGE> 3
(17) PLAN. The Sherwin-Williams Company Key Management Deferred
Compensation Plan, as amended from time-to-time.
(18) PARTICIPANT. Any person so designated in accordance with the
provisions of Article II.
(19) PLAN YEAR. The twelve (12) consecutive month period
commencing January 1 of any year and ending December 31 of the
same year.
(20) SETTLEMENT DATE. The date on which a Participant ceases to
receive salary payments from the Company and every Subsidiary
by reason of permanent termination of employment.
(21) SHADOW STOCK. A unit of measure equivalent to one share of
Common Stock.
(22) SHADOW STOCK ACCOUNT. The Account established and maintained
for a Participant with respect to any amounts of Deferred
Compensation which the Participant elects to be so invested
pursuant to Article IV.
(23) SUBSIDIARY. Any corporation in which the Company owns,
directly or indirectly, a majority of the outstanding voting
stock.
(24) TRUST. The trust fund established pursuant to Section 8.1.
(25) VALUATION DATE. The last business day of each calendar month.
ARTICLE II
PARTICIPATION
-------------
Participation in the Plan is voluntary. An Eligible Employee shall
become a Participant in the Plan as of the first Plan Year for which such
Eligible Employee is so designated by the Committee, in its sole discretion,
and such Eligible Employee elects, pursuant to Article III hereof, to defer
salary and/or an Incentive Award to the Plan. Once an Eligible Employee
becomes a Participant, he shall remain a Participant (regardless of whether he
elects to defer further salary or Incentive Awards in future Plan Years) until
the later of: (i) his Settlement Date or (ii) the date of his final payment if
the Participant elects payments over a period of years pursuant to Article V.
3
<PAGE> 4
ARTICLE III
ELECTION TO DEFER COMPENSATION AND/OR INCENTIVE AWARDS
------------------------------------------------------
3.01 ELECTION TO DEFER. For each Plan Year or portion thereof during
the Employment Period, a Participant may elect (subject to the
limitations set forth herein) to defer (i) a portion of his salary not
to exceed 25% per Plan Year and/or (ii) all or a portion of the
Participant's Incentive Award to be paid in such Plan Year, as the
Participant may determine, with respect to such Plan Year.
3.02 TIME OF ELECTION. An election to defer any portion of a Participant's
salary for a particular Plan Year and/or Incentive Award to be paid in
a particular Plan Year pursuant to Section 3.01 must be made by the
Participant at the time and in the manner specified by the Committee;
provided, however, that each such election must be made prior to the
beginning of the particular Plan Year to which it applies.
Notwithstanding the foregoing, an individual who initially qualifies
as a Participant by reason of either (i) being a newly hired employee;
or (ii) promotion, may elect to defer salary and/or an Incentive Award
(provided such Incentive Award has not yet been determined as of the
date of his election to defer pursuant to Section 3.01) by making such
election within thirty (30) days of such qualification.
ARTICLE IV
ACCOUNTS
--------
4.01 ESTABLISHMENT OF ACCOUNTS. The Committee shall establish and maintain
the following Accounts, in the form of special ledger accounts, which
shall reflect the interest, and any increases or decreases thereto, of
each Participant in the Plan:
(a) DEFERRED CASH ACCRUAL ACCOUNT. The Deferred Cash Accrual
Account shall accrue interest computed using the base
lending rate of interest as announced by Society National
Bank, Cleveland, Ohio, or its successor, in effect on the
Valuation Date immediately preceding the month for which
interest is accrued. The interest shall be computed on the
"average balance" of the Deferred Cash Accrual Account for
such month. The "average balance" shall be determined by
averaging the beginning and ending balance of the Deferred
Cash Accrual Account for such month.
4
<PAGE> 5
(b) SHADOW STOCK ACCOUNT. The Shadow Stock Account shall be
credited with a quantity of Shadow Stock units and fractions
thereof (to the nearest thousandths) equal to the amount of
Common Stock that could have been purchased with the amount of
the Participant's Deferred Compensation credited to the Shadow
Stock Account on the Valuation Date based on the Fair Market
Value of Common Stock on such Valuation Date. There will be
credited to the Shadow Stock Account amounts equal to the cash
dividends, and other distributions, paid on shares of issued
and outstanding Common Stock represented by the Shadow Stock
Account which Participants would have received had they been a
record owner of the number of shares of Common Stock equal to
the amount of Shadow Stock in the Shadow Stock Account at the
time of payment of such cash dividends or other distributions.
The amounts credited to the Shadow Stock Account shall be
converted to a quantity of Shadow Stock units and fractions
thereof (to the nearest thousandths) that could have been
purchased with the dividends or other distributions based on
the Fair Market Value of Common Stock on the date of payment
of such dividends or other distributions.
4.02 INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such limitations as
may from time-to-time be required by law, or contained elsewhere in
the Plan, each Participant may direct the Company, prior to the Plan
Year for which such direction is to become effective, as to how his
Deferred Compensation should be allocated between the Shadow Stock
Account and the Deferred Cash Accrual Account. A Participant's
investment direction shall designate the percentage of his Deferred
Compensation which is to be invested in each Account. A Participant's
investment direction is irrevocable with respect to his Deferred
Compensation for the Plan Year and such amounts cannot be transferred
between Accounts. If a Participant fails to direct the investment of
any of his Deferred Compensation, all such undirected amounts shall be
credited to the Participant's Deferred Cash Accrual Account.
4.03 CREDITING OF ACCOUNTS. Each Participant's Accounts shall be credited
on each Award Date with an amount equal to that portion of his
salary and/or Incentive Award, if any, in accordance with his
investment directions pursuant to Section 4.02.
5
<PAGE> 6
ARTICLE V
PAYMENT OF BENEFITS
-------------------
5.01 DETERMINING DISTRIBUTABLE INTEREST. A Participant's Distributable
Interest shall be sum of:
(a) an amount equal to the sum of the Fair Market Value of the
units of Shadow Stock allocated to his Shadow Stock Account as
of the Participant's Settlement Date; and
(b) the total amount allocated to his Deferred Cash Accrual
Account as of the Participant's Settlement Date.
5.02 TRANSFER OF ACCOUNT BALANCE. Upon a Participant's Settlement Date,
the balance, if any, of his Shadow Stock Account shall be credited
to his Deferred Cash Accrual Account and his Shadow Stock Account
charged accordingly.
5.03 ENTITLEMENT TO BENEFITS.
(a) If a Participant's Settlement Date occurs by reason of his
termination of employment for any reason other than his death,
his Distributable Interest determined in accordance with
Section 5.01 shall be distributed to the Participant.
(b) If a Participant's Settlement Date occurs by reason of the
Participant's death, his Distributable Interest determined in
accordance with Section 5.01 shall be distributed to the
Participant's designated Beneficiary or as otherwise provided
in Section 5.07.
5.04 FORMS OF DISTRIBUTION.
(a) A Participant may elect the form of distribution in which the
Participant's Distributable Interest will be paid to such
Participant or his Beneficiary, and may revoke such election
and make a new election, at any time prior to the
Participant's Settlement Date. A Participant's Distributable
Interest shall be distributed (to the Participant or his
Beneficiary), in either of the following forms, as may be
elected by the Participant in accordance with this Subsection
5.04:
(i) a lump sum cash distribution; or
6
<PAGE> 7
(ii) substantially equal cash installments, over a period
not exceeding ten years;
provided, however, if as of the Participant's Settlement Date the
Participant has not elected a form of distribution, the Participant's
Distributable Interest shall be automatically paid to the Participant
or Beneficiary in a lump sum cash distribution. Amounts held pending
distribution pursuant to this Section 5.04 shall continue to be
credited with interest in accordance with the provisions of Section
4.01(a). The payment of such Distributable Interest shall be
made, or shall commence, as soon as reasonably practicable following
the end of the calendar month in which occurs the Participant's
Settlement Date.
5.05 HARDSHIP DISTRIBUTIONS. Upon thirty (30) days prior written
application, a Participant may be permitted to make a lump sum
withdrawal in cash from his Accounts prior to attaining his Settlement
Date in accordance with the following rules:
(a) An application for approval of such a withdrawal shall be
made in writing on a form provided for such purpose by the
Committee.
(b) Withdrawals shall be approved only for an Unforeseeable
Emergency. An "Unforeseeable Emergency" is a severe financial
hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or a
dependent (as defined in Section 152(a) of the Internal
Revenue Code of 1986, as amended) of the Participant, loss of
the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a
result of an event beyond the control of the Participant.
Unforeseeable Emergencies shall not include obtaining funds to
send a Participant's child to college or to purchase a home.
(c) Withdrawals of amounts because of Unforeseeable Emergency are
limited to the amount reasonably necessary to satisfy the
need.
(d) Withdrawal shall not be permitted to the extent that such
hardship is or may be relieved through any of the following
means:
(i) Through reimbursement or compensation by insurance or
otherwise;
7
<PAGE> 8
(ii) By liquidation of the Participant's assets to the
extent the liquidation of such assets would not
itself cause severe financial hardship; or
(iii) By cessation of deferrals under the Plan.
5.06 DISABILITY DISTRIBUTIONS. Upon thirty (30) days prior written
application, a Participant may be permitted to receive a complete
distribution in cash from his Accounts in one of the forms permitted
by Section 5.04 prior to attaining his Settlement Date in accordance
with the following rules:
(a) An application for approval of such Disability distribution
shall be made in writing on a form provided for such purpose by
the Committee.
(b) Distribution shall be approved only in the event the
Participant has a Total and Permanent Disability. For
purposes of this Section 5.06(a), Total and Permanent
Disability shall mean a physical or mental condition that, in
the sole discretion of the Committee, renders the Participant
totally and permanently unable to perform the duties and
obligations of such Participant's position for a consecutive
period of twenty-six (26) weeks. The Committee shall have the
right to request such information supporting a Participant's
claim for a Total and Permanent Disability distribution as the
Committee shall deem necessary, including, but not limited to,
a physician's statement of disability, in such form as the
Committee may provide.
5.07 DEATH PRIOR TO COMPLETE DISTRIBUTION. If a Participant or Beneficiary
dies before receiving a complete distribution of his Distributable
Interest under the Plan under any of the following circumstances:
(a) without designating a Beneficiary therefor;
(b) if there is no designated Beneficiary living upon the death of
a Participant; or
(c) if all such designated Beneficiaries die prior to the full
distribution of his interest; then the undistributed balance of such
Distributable Interest shall be distributed to the Participant or
Beneficiary's surviving spouse, if any, and if there is no surviving
spouse, then to the Participant or Beneficiary's estate in the manner
and such one or combination of the ways set forth in Section 5.04 as
the Committee, in its sole discretion, shall determine.
8
<PAGE> 9
5.08 FORFEITURE OF BENEFITS. Notwithstanding anything in the Plan to the
contrary, all rights to participate and all rights to any
benefit hereunder shall immediately terminate and become null and void
in the event the Committee shall determine that the Participant was
involved in:
(a) theft, embezzlement or unauthorized appropriation of Company
property or the willful destruction of Company property, or
(b) fraud against the Company.
5.09 FACILITY OF PAYMENT. Whenever and as often as any person entitled to
payments hereunder shall be determined by the Committee, in its sole
discretion, to be physically, mentally or legally incompetent or
otherwise unable to apply such payments to his own best interest and
advantage, the Committee, in its sole discretion, may direct all or
any portion of such payments to be made in any one or more of the
following ways: (i) directly to such person; (ii) to his legal
guardian or representative; or (iii) to his spouse or to any other
person responsible for the maintenance of such Participant, to be
expended for his benefit. The decision of the Committee shall in each
case be final and binding upon all persons in interest and neither the
Company nor the Committee shall be under any duty to see to the proper
application of such funds.
5.10 NOTICE. Each Participant and each Beneficiary of a deceased
Participant shall file with the Committee from time-to-time in writing
his post office address and each change of post office address. Any
communication, statement or notice addressed to such person at his
last post office address filed with the Committee, or if no such
address was filed with the Committee, then at his last post office
address as shown in the Company's records, if any, shall be binding on
such person for all purposes of the Plan, and neither the Company nor
the Committee shall be obligated to search for or ascertain the
whereabouts of any Participant, former Participant or beneficiary.
5.11 MISSING PARTICIPANTS/BENEFICIARIES. If all or any part of the
interest of any Participant, former Participant or Beneficiary becomes
distributable hereunder and the whereabouts of such Participant,
former Participant or Beneficiary is then unknown to the Committee
9
<PAGE> 10
and the Committee fails to receive a claim for such distribution from
the person entitled thereto or from any other person validly acting in
his behalf within one (1) year thereafter, then such distribution may,
in the discretion of the Committee, be disposed of as follows:
(1) If the whereabouts of the person next entitled thereto is
known to the Committee, or is disclosed to the Committee
within a period of two (2) years thereafter, distribution may
be made as though such Participant or Beneficiary had died at
the end of said one (1) year period;
(2) If the Committee is unable to complete distribution in the
manner provided in paragraph (1) of this Section 5.11, but the
whereabouts of one or more of the next of kin or surviving
spouse of the Participant or former Participant whose interest
hereunder is subject to distribution is known to the
Committee, then distribution of such Distributable Interest
then remaining undistributed hereunder may be made to any one
or more or all of such next of kin and surviving spouse, and
in such proportions, as the Committee determines;
(3) If the Committee is unable to complete distribution pursuant
to the provisions of either paragraph (1) or paragraph (2) of
this Section 5.11 within the time limit therein designated,
then at the end of the three (3) year period therein referred
to the interest of such Participant or former Participant then
remaining undistributed will be cancelled and no further
payments with respect thereto will be made.
If the last post office address of a Participant or Beneficiary, whose
interest is subject to distribution by the terms of this Section 5.11
is known to the Committee, then the Committee will notify such person
of any action contemplated by it pursuant to this Section 5.11, by
letter addressed to him at such last known address.
ARTICLE VI
BENEFICIARIES
-------------
6.01 DESIGNATION OF BENEFICIARIES. A Participant may, by instrument in
writing executed and delivered to the Committee during his lifetime,
designate a Beneficiary or Beneficiaries to whom his Distributable
Interest under the Plan shall be distributed in the event of his death
prior to the full receipt of his interest under this Plan, and he may
designate the
10
<PAGE> 11
proportions to be distributed to each such Beneficiary if more than
one Beneficiary is designated. Any such designation may be revoked or
changed by the Participant at any time and from time-to-time, by
similar instrument in writing delivered as aforesaid.
6.02 ASSUMPTION OF DEATH. If the Committee, after reasonable inquiry, is
unable within one (1) year to determine whether any Beneficiary did in
fact survive the event that entitled him to receive distribution of
any sum hereunder, it shall be conclusively presumed that such
Beneficiary did in fact die prior to such event.
ARTICLE VII
RIGHTS TO PAYMENTS
------------------
Neither a Participant nor a beneficiary hereunder or personal
representative of either shall under any circumstances have any option or right
to require payments hereunder otherwise than in accordance with the terms
hereof or have any rights in or to the amounts in the Accounts except as
specifically provided herein. The amounts in the Accounts shall remain the
sole property of the Company unless and until required to be distributed in
accordance with the provisions of the Plan, and shall not constitute a trust or
be deemed to be held in trust for the benefit of any Participant or Beneficiary
hereunder or any of their personal representatives.
ARTICLE VIII
THE TRUST
---------
8.1. ESTABLISHMENT OF TRUST. The Company has established an irrevocable
trust fund for the purpose of providing a source from which to pay
benefits under the Plan; provided, however, that the Trust is at all
times subject to the claims of the Company's creditors in the event of
the Company's insolvency or bankruptcy.
8.2 CONTRIBUTIONS TO THE TRUST. Contributions shall be made to the Trust
in one or more installments during the Plan Year or as soon as
practicable after the close of the Plan Year, but in no event later
than ninety (90) days after the close of the Plan Year. An amount
equal to the interest, earnings and appreciation of Shadow Stock shall
be contributed to the Trust before the end of the calendar quarter
immediately following the calendar quarter in which such interest,
earnings and appreciation were credited in accordance with the terms
of the Plan.
11
<PAGE> 12
8.03 SPENDTHRIFT PROVISION. Although amounts held in the Trust are
held subject to the claims of the Company's creditors in the
event of the Company's insolvency or bankruptcy, no amount payable to
a Participant or Beneficiary under the Plan will be subject in any
manner to anticipation, alienation, attachment, garnishment, sale ,
transfer, assignment (either at law or in equity), levy, executions,
pledge, encumbrance, charge or any other legal or equitable process by
a Participant or Beneficiary, and any attempt to do so will be void;
nor will any benefit be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the person
entitled thereto. However, (i) the withholding of taxes from Plan
benefit payments, (ii) the recovery by the Plan of overpayment of
benefits previously made to a Participant, or (iii) the direct deposit
of benefit payments to an account in a banking institution (if not
actually part of an arrangement constituting an assignment or
alienation) shall not be construed as an assignment or alienation.
ARTICLE IX
COMMITTEE
---------
9.01 COMPOSITION OF COMMITTEE. This Plan shall be administered by a
Committee composed of not less than three (3) members of the
Board, as shall from time-to-time be duly appointed by the Board and
who shall each thereafter serve, without compensation, until death,
resignation or removal from such office. Any member of the Committee
may resign at any time by notice in writing to the Company, and to the
remaining members of the Committee. The Board may remove any member
of the Committee at any time by written notice to him and to the
remaining members of the Committee. In the event of the resignation,
removal, death, inability or failure to act or continue to act of any
member of the Committee at any time, a successor to such Member shall
be appointed. It is the intention of the Company that there shall be
at all times at least three Committee members acting hereunder, and
that all vacancies shall be filled promptly. Nevertheless, in the
event of and during any such vacancy, the remaining Committee members
or member shall have and may exercise all powers of the Committee.
12
<PAGE> 13
9.02 POWERS AND DUTIES OF COMMITTEE. Except as otherwise expressly
provided in this Plan, the Committee shall have the full power and
authority, within the limits provided by the Plan:
(a) to construe the Plan and determine all questions
arising in the administration of the Plan, including
the power to determine the rights or eligibility of employees
and Participants and their beneficiaries, and the amount of
their respective interests, and to make equitable adjustments
for any mistakes or errors made in the administration of the
Plan, and its decisions and actions made in good faith shall
be final and binding upon all persons hereunder;
(b) to adopt such rules and regulations as it may deem reasonably
necessary for the proper and efficient administration of the
Plan and consistent with its purposes;
(c) to enforce the Plan, in accordance with its terms and with the
rules and regulations adopted by the Committee; and
(d) to do all other acts which in its judgment are necessary or
desirable for the proper and advantageous administration of
the Plan.
9.03 COMMITTEE ACTION. The Committee shall act by the vote or concurrence
of a majority of its members; but no member who is a Participant shall
act on any matter that has particular reference to his own interest
hereunder. No member of the Committee shall have any personal
liability to anyone, either as such member or as an individual, for
anything done or omitted to be done in good faith in carrying out the
provisions of this Plan.
9.04 INDEMNIFICATION. In addition to such other rights of indemnification
as the Committee members may have as members of the Board or as
members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with
any appeal therein, to which the Committee members or any of one or
more of them may be a party by reason of any action taken or failure
to act under or in connection with the Plan, and against all amounts
paid by them in settlement thereof (provided such settlement is
approved by the Company), or paid by them in satisfaction of a
judgment in any such
13
<PAGE> 14
action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for gross misconduct in his duties;
provided that within sixty (60) days after the institution of such
action, suit or proceeding, such Committee member shall in writing
offer the Company the opportunity, at its own expense, to handle and
defend the same.
ARTICLE X
AMENDMENTS AND TERMINATION
--------------------------
The Board may at any time terminate the Plan or may from time-to-time
amend any provision hereof in such manner and to such extent as the Board may
in its sole discretion deem to be advisable and in the best interest of the
Company; provided, that no such amendment shall divest any Participant, former
Participant or Beneficiary or diminish his then interest hereunder. In the
event the Plan is terminated, the amount of each Participant's Distributable
Interest shall be determined in accordance with the provisions of Article V as
if such Participant's service with the Company and every Subsidiary had
terminated by reason of his termination of employment on the date of such Plan
termination. Such interest so determined shall be fully vested in such
Participant and shall be immediately distributable to him, or his Beneficiary,
as the case may be, in one lump sum in cash.
ARTICLE XI
CHANGE OF CONTROL
-----------------
In the event of a Change of Control, the amounts to which Participants
are entitled under Section 5.01 of this Plan shall be immediately distributed
in a lump sum cash payment to Participants. For purposes of this Plan, a
Change of Control shall be deemed to have occurred if:
(a) there shall be consummated (i) any consolidation or merger of
the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock
immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving
14
<PAGE> 15
corporation, immediately after the merger, or (ii) any sale,
lease, exchange or transfer (in one transaction or a series of
related transactions) of fifty percent (50%) or more of the
assets or earning power of the Company;
(b) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended,
hereinafter the "Exchange Act") other than the Company or any
employee benefit or stock ownership plan sponsored by the
Company, or any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any
such plan, shall become the beneficial owner (within the
meaning of Rule 13d-3 of the Exchange Act) of securities of
the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing in
special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases
or otherwise; or
(c) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board and any new
director whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, ceased for any reason to constitute a
majority thereof.
Notwithstanding subsections (a) through (c) above, with respect to the
transactions set forth in subsections (a) and (b) above, a Change of
Control shall not be deemed to have occurred if any such transaction
(i) is approved by a vote of at least two-thirds (2/3) of the Board,
and (ii) at the time of such vote, at least two-thirds (2/3) of the
Board then in office were members of the Board immediately prior to
such transaction. Any such approval pursuant to the preceding
sentence shall provide that such approval is being given for the
purpose of not triggering the benefits under this Plan.
15
<PAGE> 16
ARTICLE XII
MISCELLANEOUS
-------------
12.01 EFFECT OF IRS DETERMINATION. Notwithstanding anything in this Plan to
the contrary, in the event the Internal Revenue Service rules
unfavorably as to the tax consequences of deferrals made under this
Plan for any Fiscal Year, the Board may take any such action as it
deems necessary or appropriate, including action to restore
Participants to substantially the same position they would have
enjoyed had this Plan not been effective for such Fiscal Year.
12.02 ENFORCEABILITY. If any provision of this Plan is finally adjudicated
by a court of competent jurisdiction as being illegal or
unenforceable, this Plan shall be interpreted and administered as
though said illegal or unenforceable provisions had been deleted from
the Plan.
12.03 CLAIMS PROCEDURE. Any Participant who believes that he is entitled to
a benefit under the Plan which he has not received because the
Committee has denied the benefit in whole or in part, may file with
the Committee a written claim specifying the basis of his complaint
and the facts upon which he relies in making such claim. Such claim
must be witnessed by the claimant or his authorized representative
and shall be deemed filed when received by the Committee. Unless such
claim is allowed in total by the Committee, the Committee shall
respond in writing to the claimant advising him of the total or
partial denial of his claim. Such notice shall include:
(a) The reasons for denial of the claim;
(b) Reference to the provisions of the Plan upon which the denial
of the claim was based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material and information is necessary;
and
(d) An explanation of the review procedure.
Within six (6) months after the mailing of such notice of denial, the
claimant can appeal such denial by filing with a special review
committee appointed by the Committee his written request for the
review of said claim. A special review committee shall consist
16
<PAGE> 17
of no less than three (3) disinterested parties to the claimant
who are not part of the Committee. If an appeal is so filed within
the six (6) month period, the special review committee shall conduct a
full and fair review of such claim and mail to the claimant not later
than sixty (60) days after receipt of a request for review a written
decision of the matter based upon the facts and pertinent provisions
of the Plan. Such decision shall state the reason for the decision as
well as references to the pertinent Plan provisions in which the
decision is based. During the full review, the claimant shall be
given the opportunity to review documents that are pertinent to his
claim and to submit issues and comments in writing to the special
review committee, or, if he requests a hearing, to present his case in
person or by an authorized representative at a hearing scheduled by
the special review committee. In the event the claimant requests a
hearing, the time period for the special review committee to render a
decision upon a claim shall be extended from sixty (60) to one hundred
twenty (120) days after receipt of request for review.
12.04 DECISIONS INVOLVING OWN BENEFITS. Notwithstanding any other
provisions in this Plan, a Participant or Beneficiary, who has
decision making or other administrative authority with respect to the
Plan may not decide matters affecting his or her own benefits under
the Plan as a Participant functioning in such capacity.
12.05 LIMITATIONS ON LIABILITY OF COMPANY. Neither the establishment of the
Plan or any modification thereof, or the creation of any fund or
account, or the payment of any benefits shall be construed as giving
to any Participant or other person any legal or equitable right
against the Company or any officer or employee thereof, except as
provided by law or by any Plan provision. The Company does not in
any way guarantee the Participant's benefits from loss or
depreciation. In no event shall the Company's employees, officers,
directors or stockholders be liable to any person on account of any
claim arising by reason of the provisions of the Plan or of any
instrument or instruments implementing its provisions, or fo rthe
failure of any Participant, Beneficiary or other person to be entitled
to any particular tax consequences with respect to the Plan, any
contribution thereto or distribution therefrom.
17
<PAGE> 18
12.06 UNFUNDED PLAN. The Plan is intended to be an unfunded plan for
purposes of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The establishment of the Trust shall not cause
this Plan to be deemed funded for the purposes of ERISA. All payments
to be made hereunder shall be made in cash from either the Trust or
the general revenues and assets of the Company. To the extent that
any Participant or other person acquires a right to receive payments
under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
12.07 PAYMENT OF ADMINISTRATIVE EXPENSES. Expenses incurred in the
administration and operating of the Plan shall be paid by the Company.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed
effective as of the 1st day of January, 1993.
ATTEST: THE SHERWIN-WILLIAMS COMPANY
Diane Hale Hupp By: /s/ Thomas Kroeger
- --------------------------- ----------------------------------
Title: Vice President - Human Resources
--------------------------------
18
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(Thousands of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
FULLY DILUTED
Average shares outstanding 85,189,406 86,295,514 88,716,976
Options -- treasury stock method 636,278 579,924 744,892
Assumed conversion of 6.25% Convertible
Subordinated Debentures 3,971 70,870 84,899
- --------------------------------------------------------------------------------------------
Average fully diluted shares 85,829,655 86,946,308 89,546,767
============================================================================================
Net income $200,654 $186,571 $165,227
Add 6.25% Convertible Subordinated Debentures
interest -- net of tax (1) -- 8 10
- --------------------------------------------------------------------------------------------
Net income applicable to fully diluted shares $200,654 $186,579 $165,237
============================================================================================
Net income per share $2.34 $2.15 $1.85
============================================================================================
PRIMARY
Average shares outstanding 85,189,406 86,295,514 88,716,976
Options -- treasury stock method 553,867 566,222 718,920
- --------------------------------------------------------------------------------------------
Average shares and equivalents 85,743,273 86,861,736 89,435,896
============================================================================================
Net income applicable to shares and
equivalents $200,654 $186,571 $165,227
===========================================================================================
Net income per share $2.34 $2.15 $1.85
============================================================================================
<FN>
(1) All 6.25% Convertible Subordinated Debentures outstanding at December 31,
1994 were converted to common stock during the first quarter of 1995 without
incurring further interest.
</TABLE>
43
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
FOREIGN SUBSIDIARIES
Sherwin-Williams Argentina I. y C.S.A.*
Sherwin-Williams do Brasil Industria e Comercio Ltda., Sao Paulo, Brazil*
Sherwin-Williams Canada Inc., Toronto, Ontario, Canada
147926 Canada Inc., Gravenhurst, Ontario, Canada
Compania Sherwin-Williams, S.A. de C.V., Mexico City, Mexico*
Sherwin-Williams Cayman Islands Ltd., Grand Cayman*
The Sherwin-Williams Co. Resources Limited, Kingston, Jamaica
Sherwin-Williams (Caribbean) N.V., Curacao
Sherwin-Williams (West Indies) Ltd., Kingston, Jamaica
Sherwin-Williams Foreign Sales Corporation Limited, Charlotte Amalie, Virgin
Islands
UNITED STATES SUBSIDIARIES
Contract Transportation Systems Company
DIMC, Inc.
Dupli-Color Products Company
F.L.R. Paints, Incorporated
INCO International Company
Sherwin-Williams Acceptance Corporation
Sherwin-Williams Automotive Finishes Corp.
Sherwin-Williams Diversified Brands, Inc.
Sherwin-Williams International Company
SWIMC, Inc.
*Unconsolidated
44
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated January
19, 1996, with respect to the consolidated financial statements and schedule of
The Sherwin-Williams Company included in the Annual Report (Form 10-K) for the
year ended December 31, 1995, in the following registration statements and
related prospectuses:
<TABLE>
<CAPTION>
REGISTRATION
NUMBER DESCRIPTION
- ------------ -----------
<S> <C>
333-01093 The Sherwin-Williams Company Form S-3 Registration Statement
333-00725 The Sherwin-Williams Company Form S-4 Registration Statement
33-64543 The Sherwin-Williams Company Form S-3 Registration Statement
33-62229 The Sherwin-Williams Company Employee Stock Purchase and Savings Plan
Form S-8 Registration Statement
2-80510 Post-Effective Amendment Number 5 to Form S-8 Registration Statement relating
to The Sherwin-Williams Company Employee Stock Purchase and Savings Plan
33-52227 The Sherwin-Williams Company 1994 Stock Plan Form S-8 Registration
Statement
33-28585 The Sherwin-Williams Company 1984 Stock Plan Form S-8 Registration
Statement
33-22705 The Sherwin-Williams Company Form S-3 Registration Statement
</TABLE>
Cleveland, Ohio
March 11, 1996
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
45
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Officer and Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints T.A. Commes, L.J. Pitorak
and L.E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 19, 1996 /s/ J.G. Breen
---------------------------------------
J.G. Breen
Chairman of the Board and Chief
Executive Officer, Director
<PAGE> 2
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Officer and Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, L.J. Pitorak and
L.E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 19, 1996 /s/ T.A. Commes
----------------------------------------
T.A. Commes
President and Chief Operating
Officer, Director
<PAGE> 3
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Officer of The Sherwin-Williams Company, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, and any rules and regulations of the Securities and
Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995,
hereby constitutes and appoints J.G. Breen, T.A. Commes and L.E. Stellato, or
any of them, with full power of substitution and resubstitution, as attorneys
or attorney to sign for me and in my name, in the capacities indicated below,
said proposed Form 10-K and any and all amendments, supplements, and exhibits
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission or any national securities exchange
pertaining thereto, with full power and authority to do and perform any and all
acts and things whatsoever required and necessary to be done in the premises,
hereby ratifying and approving the acts of said attorneys and any of them and
any such substitute.
Executed the date set opposite my name.
Date: January 19, 1996 /s/ L.J. Pitorak
--------------------------------------------
L.J. Pitorak
Senior Vice President - Finance, Treasurer
and Chief Financial Officer
<PAGE> 4
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Officer of The Sherwin-Williams Company, an Ohio corporation,
which corporation anticipates filing with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, as amended, and any rules and regulations of the Securities and
Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995,
hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E.
Stellato, or any of them, with full power of substitution and resubstitution,
as attorneys or attorney to sign for me and in my name, in the capacities
indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 19, 1996 /s/ J.L. Ault
---------------------------------------
J.L. Ault
Vice President - Corporate Controller
<PAGE> 5
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 21, 1996 /s/ J.M. Biggar
---------------------------------------
J.M. Biggar
Director
<PAGE> 6
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 19, 1996 /s/ Leigh Carter
----------------------------------------
L. Carter
Director
<PAGE> 7
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: February 1, 1996 /s/ D.E. Collins
------------------------------------------
D.E. Collins
Director
<PAGE> 8
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 21, 1996 /s/ D.E. Evans
------------------------------------------
D.E. Evans
Director
<PAGE> 9
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 22, 1996 /s/ R.W. Mahoney
-----------------------------------------
R.W. Mahoney
Director
<PAGE> 10
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 21, 1996 /s/ W.G. Mitchell
-----------------------------------------
W.G. Mitchell
Director
<PAGE> 11
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 21, 1996 /s/ A.M. Mixon
-------------------------------------------
A.M. Mixon
Director
<PAGE> 12
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 24, 1996 /s/ H.O. Petrauskas
------------------------------------------
H.O. Petrauskas
Director
<PAGE> 13
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
----------------------------
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, and any rules and regulations of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ended
December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes,
L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution
and resubstitution, as attorneys or attorney to sign for me and in my name, in
the capacities indicated below, said proposed Form 10-K and any and all
amendments, supplements, and exhibits thereto, and any and all applications or
other documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 24, 1996 /s/ R.K. Smucker
----------------------------------------
R.K. Smucker
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DEC. 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000089800
<NAME> THE SHERWIN-WILLIAMS COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 249,484
<SECURITIES> 20,000
<RECEIVABLES> 349,458
<ALLOWANCES> 15,154
<INVENTORY> 463,087
<CURRENT-ASSETS> 1,238,898
<PP&E> 987,434
<DEPRECIATION> 531,077
<TOTAL-ASSETS> 2,141,053
<CURRENT-LIABILITIES> 618,937
<BONDS> 24,018
<COMMON> 101,110
0
0
<OTHER-SE> 1,111,016
<TOTAL-LIABILITY-AND-EQUITY> 2,141,053
<SALES> 3,273,819
<TOTAL-REVENUES> 3,273,819
<CGS> 1,877,083
<TOTAL-COSTS> 1,877,083
<OTHER-EXPENSES> 11,782
<LOSS-PROVISION> 13,793
<INTEREST-EXPENSE> 2,532
<INCOME-PRETAX> 318,498
<INCOME-TAX> 117,844
<INCOME-CONTINUING> 200,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200,654
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
</TABLE>
