<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 1-4851
----------------------------
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:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
<S> <C>
9.875% Debentures due 2016 New York Stock Exchange
Common Stock, Par Value $1.00 New York Stock Exchange
Preferred Stock Purchase Rights 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 ]
At January 31, 2000, 165,719,211 shares of common stock were outstanding,
net of treasury shares. The aggregate market value of such voting stock held by
non-affiliates on January 31, 2000 was $2,902,095,029.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 1999 ("1999 Annual Report") are incorporated by reference into
Parts I, II and IV of this report.
Portions of the Proxy Statement for the 2000 Annual Meeting of Shareholders
("Proxy Statement") are incorporated by reference into Part III of this report.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
The Sherwin-Williams Company, founded in 1866 and incorporated in 1884, is
engaged in the manufacture, distribution and sale of coatings and related
products to professional, industrial, commercial and retail customers primarily
in North and South America. As used in this report, the terms "Sherwin-Williams"
and "Company" mean The Sherwin-Williams Company and its consolidated
subsidiaries unless the context indicates otherwise.
BASIS OF REPORTABLE SEGMENTS
During the fourth quarter of 1999, following the appointment of a new chief
operating decision maker, the Company adopted revised segment reporting
guidelines that changed the number and composition of its reportable segments
and changed the value of goods that are transferred domestically between
segments. Effective for the fourth quarter and year 1999, the Company will
report financial information for five reportable segments -- the Paint Stores,
Consumer, Automotive Finishes, International Coatings (collectively, the
"Operating Segments") and Administrative Segments. The value assigned to goods
that are transferred domestically between segments represents the approximate
fully absorbed manufactured cost plus distribution costs. Previously reported
annual Reportable Segment Information for years 1995 through 1998 was restated
to conform to the Company's 1999 presentation which is shown on page 13 of the
1999 Annual Report, which is incorporated herein by reference. Unaudited
quarterly Reportable Segment Information for 1999 and 1998, which was reported
in the Company's 1999 quarterly reports filed with the Securities and Exchange
Commission on Form 10-Q, has also been restated as described in Note 14 on pages
36 and 37 of the 1999 Annual Report, which is incorporated herein by reference.
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information," requires an enterprise
to report segment information in the same way that management internally
organizes its business for assessing performance and making decisions regarding
allocation of resources. One of the characteristics identified by SFAS No. 131
that must be considered in the determination of reportable segments is the
regular review of performance by the enterprise's chief operating decision
maker. The Company's chief operating decision maker has been identified as the
Chief Executive Officer because he has final authority over performance
assessment and resource allocation decisions. Each reportable segment identified
by the Company meets the SFAS No. 131 criteria for external reporting in the
same way that current management internally has organized the Company. The new
segment reporting meets other SFAS No. 131 characteristics of earning revenue
and incurring expenses in carrying out a business activity and making discrete
financial information about the business component available to the chief
operating decision maker.
Because of the global, diverse operations of the Company, the chief
operating decision maker regularly receives discrete financial information about
each operating segment as well as a significant amount of additional financial
information about certain aggregated divisions, operating units and subsidiaries
of the Company. The chief operating decision maker uses all such financial
information for performance assessment and resource allocation decisions.
Factors considered in determining the five reportable segments of the
Company include the nature of the business activities, existence of managers
responsible for the operating and administrative activities and information
presented to the Board of Directors. Information about net sales, operating
profits and assets attributable to the United States and to all foreign
consolidated subsidiaries can be found on pages 12 and 13 of the 1999 Annual
Report, which is incorporated herein by reference. Revenues and operating
profits attributable to any individual country outside the United States are not
material.
The Company evaluates the performance of each operating segment and
allocates resources based on profit or loss and cash generated from operations
before income taxes, excluding corporate expenses and financing gains and
losses. The accounting policies of the reportable segments are the same as those
described in Note 1 --
1
<PAGE> 3
Significant Accounting Policies on pages 28 and 29 of the 1999 Annual Report,
which is incorporated herein by reference.
PAINT STORES SEGMENT
The Paint Stores Segment consists of four geographically divided domestic
domiciled divisions -- Eastern, Southeastern, Mid Western and South
Western -- which include all paint stores in the United States, Canada, the
Virgin Islands and Puerto Rico. The domestic divisions have the same business
activity of selling identical national and similar regional products through
company-operated specialty paint stores to the same types of customers. The
Paint Stores Segment now includes the manufacturing and technical operations of
the Product Finishes Business Unit that produces original equipment manufacturer
(OEM) product finishes sold through the paint stores and by direct outside sales
representatives. These operations were previously reported in the Coatings
Segment. The Paint Stores Segment also consists of certain operations in Mexico
that include a manufacturing facility, distribution activities, specialty paint
stores and outside selling functions to dealers and other distributors. The
Mexico operations were also previously reported as part of the Coatings Segment.
The Paint Stores Segment consisted of 2,396 company-operated paint stores in the
United States, Canada, the Virgin Islands, Puerto Rico and Mexico on December
31, 1999. The Paint Stores Segment is the exclusive North American marketer and
seller of Sherwin-Williams(R) branded architectural coatings, industrial
maintenance and marine products, and related items produced by the Consumer
Segment and the Paint Stores Segment's Mexican manufacturing operations. This
Segment is also the exclusive North American marketer and seller of
Sherwin-Williams(R) branded industrial OEM product finishes produced by its
manufacturing facilities. In addition, this Segment markets and sells
Con-Lux(R), Old Quaker(TM), Mercury(TM), Brod Dugan(TM), Pro-Line(R),
SeaGuard(R), JetGlo(R), AcryGlo(R), other control-branded coatings, and related
products also manufactured by the Consumer Segment. Complementary coatings and
associated products manufactured by third parties are sold through the Paint
Stores Segment to complete its product offering.
Paint, applicators, wallcoverings, floorcoverings, spray equipment and
associated products are marketed and sold by store personnel and direct sales
representatives to the do-it-yourself customer, professional painting
contractor, home builder, property manager, industrial maintenance and marine
customer, aviation market, OEM customer, and product finishing job shop
customer. The loss of any single customer would not have a material adverse
effect on the business of this Segment.
During 1999, the Segment opened 73 net new stores, remodeled 81 and
relocated 41. Included in the 73 net new stores were 66 stores in the United
States, one each in Canada, the Virgin Islands and Puerto Rico, and four in
Mexico. There were 64 net new stores opened in 1998 (55 in the United States)
and 47 net new stores in 1997 (36 in the United States). This Segment introduced
many new national and regional architectural products, industrial maintenance
and marine products, and industrial OEM product finishes in 1999. The exterior
paint "Duration(TM)" was launched in March 1999 and exceeded its first year
sales forecasts. This product was well accepted by the painting contractor
looking for long-lasting durability, ease of application and excellent
appearance. It was also well accepted by the do-it-yourself customer looking for
superior performance and a one-coat application. Growth in the faux finishing
area, which is used to achieve unique finishes for home remodeling projects and
new home construction, has continued. In addition to introducing new products in
this area, this Segment added several well-received customer services such as an
in-store merchandiser, application tools, in-store clinics and "how to"
brochures and videos.
In 2000, the Paint Stores Segment plans to open approximately 80 net new
stores while investing in new sales territories and field technical personnel.
Service levels will continue to improve through added investments in staffing,
color matching equipment and other productivity improving equipment. This
Segment will also invest in a key project designed to dramatically enhance color
offering and product consistency. This multi-year project will launch in 2000
with the introduction of an "Extra White" base, a brighter and cleaner white
base, which will allow Sherwin-Williams(R) products to be tinted to a wider
range of colors than ever before. Projects to enhance existing product lines
while introducing new technology will continue, as product quality remains a key
issue to both new and existing customers.
2
<PAGE> 4
The Company launched its extremely successful web site,
"www.sherwin-williams.com" in January 1999. It has received favorable reviews
from a number of internet trade publications and won the Dow Jones Directory's
site of the month award in August 1999. Customer and employee feedback included
high marks for ease of navigation, logical organization structure, and breadth
and depth of content. By the end of 1999, the site consisted of more than 12,000
pages of information and received 5.5 million hits per month with 165,000 user
sessions. This site will be expanded to further leverage the existing store
distribution platform by enabling customers and vendors to conduct business
electronically.
The successful advertising campaign theme, "Ask How, Ask Now, Ask
Sherwin-Williams" will continue in 2000. The campaign capitalizes on the strong
brand name recognition and quality perception inherent in the Sherwin-Williams
name.
CONSUMER SEGMENT
The Consumer Segment develops, manufactures and distributes architectural
paints, stains, varnishes, industrial maintenance products, wood finishing
products, paint applicators, corrosion inhibitors, and paint-related products in
the United States and Canada. In addition, a wide variety of cleaning products
and custom, industrial and automotive aerosols are filled, packaged, distributed
and sold by this Segment. The Consumer Segment employs a wide variety of trade
names and trademarks in pursuit of its business. Sherwin-Williams(R), Dutch
Boy(R), Krylon(R), Minwax(R), Cuprinol(R), Thompson's(R), Formby's(R), Red
Devil(R), Kem-Tone(R), Martin Senour(R), Pratt & Lambert(R), H&C(R), White
Lightning(R), Dupli-Color(R), Rust Tough(R), Rubberset(R), Sprayon(R),
Moly-White(R), Cello(R) and Tri-Flow(TM) are some of the trade names and
trademarks that have high national customer recognition and collectively
contribute significantly to the external sales of the Consumer Segment.
Domestically, Sherwin-Williams(R) branded architectural coatings, stains,
varnishes, industrial maintenance products, wood finishing products, paint
applicators, aerosols, adhesives and related products are manufactured solely
for the Paint Stores Segment. Approximately 40 percent of the total sales,
including intersegment transfers, of the Consumer Segment in 1999 represented
products sold through the Paint Stores Segment.
Certain control-branded, other branded and private label coatings, stains,
varnishes, wood finishing products, paint applicators, aerosols and related
products are manufactured for and distributed through many of the leading mass
merchandisers, home centers, independent dealers and industrial maintenance
distributors. Sales and marketing of these branded and private label products is
performed by a direct sales staff. The products distributed through these
third-party customers are intended for resale to the ultimate end-user of the
product. Cleaning products and custom, industrial and automotive aerosols
produced by this Segment are distributed through various mass merchandisers and
the homecare products, institutional, insecticide and industrial markets.
The Consumer Segment has sales to certain customers that, individually, may
be a significant portion of the sales of the Segment. However, the loss of any
single customer would not have a material adverse effect on the overall
profitability of the Segment. This Segment incurs most of the Company's capital
expenditures related to ongoing environmental compliance measures.
During 1999, the Consumer Segment's sales and marketing organizations began
to benefit from the consolidation of the former Consumer Brands, Coatings,
Transportation Services and Diversified Brands Divisions that started in 1998.
The consolidation was precipitated by customer expectations for improved
service, the necessity to lower operating costs, and the need for additional
field service personnel to support the customers' businesses. In 1999, a new
sales and marketing organization was put in place to provide proper focus to the
key brands as well as this Segment's large, diverse customer base. Technology
changes throughout the Consumer Segment allowed for the complete integration of
marketing and sales information into a data warehouse for acquired brands as
well as core business brands. This Segment also installed supply chain software
into many of its manufacturing and distribution sites to speed up the supply
chain process and increase responsiveness to customer demand.
In 1999, the Consumer Segment's Chicago Emulsion Plant was accepted into
the Occupational Safety and Health Administration's Voluntary Protection Program
as a "Star" site. This program recognizes U.S. facilities that have designed and
implemented outstanding health and safety practices. This acceptance marks the
first time
3
<PAGE> 5
that a U.S. coatings manufacturer has achieved this status. The Consumer Segment
continued its promotion of the unique Dutch Boy(R) ClimateGUARD(TM) exterior
house paint product line. Climatological research identifies five U.S. regions
with distinctively different climates. Five unique ClimateGUARD(TM) formulas
were developed for each different weather condition it guards against and are
all backed by the Company's 20-year limited warranty.
In 2000, several new marketing and sales programs will be initiated. The
Segment has launched a new Thompson's(R) exterior architectural paint program.
This program is a premium branded program that leverages the well-known
Thompson's(R) brand name at a leading mass merchandiser. The product is being
supported with a lifetime warranty for moisture resistance. This program
provides a branded paint program along side the customer's private label paint
program. Additionally, the Consumer Segment will introduce an extension pole
program for the professional contractor. This program will involve separate
sizes of extension poles for paint rollers with a lifetime warranty on the
patent-pending pin lock mechanism on the extension poles.
AUTOMOTIVE FINISHES SEGMENT
The Automotive Finishes Segment develops, manufactures and distributes
motor vehicle finish, refinish and touch-up products primarily throughout North
and South America and the Caribbean Islands. This Segment also licenses certain
technology and trade names worldwide. This Segment employs a variety of trade
names and trademarks worldwide in pursuit of its business. Sherwin-Williams(R),
Martin Senour(R), Western(R), Lazzuril(TM), Excelo(TM) and Marson(TM) are some
of the trade names and trademarks that have high national and international
customer recognition and collectively contribute significantly to the sales of
the Automotive Finishes Segment. Sherwin-Williams(R) branded automotive finish
and refinish products are distributed throughout North America solely through
this Segment's network of company-operated automotive branches. At December 31,
1999, the Segment consisted of a network of 172 company-operated automotive
branches worldwide. In the United States there were 121 branches open at that
date and 51 foreign branches in Canada (21), Jamaica (12) and Chile (18). Some
control-branded, other branded and private label refinish and touch-up products
are manufactured for and distributed through many of the leading independent
dealers, automotive program distributors, automotive jobbers, independent
jobbers, wholesale distributors, automotive body shops, automotive dealerships,
fleet owners and refinishers, production shops, body builders and manufacturers
requiring a factory-applied finished product. At December 31, 1999, the
Automotive Finishes Segment included nine foreign wholly-owned subsidiaries in
five foreign countries and 12 foreign licensing agreements in 29 countries
outside the United States.
During 1999, the Automotive Finishes Segment opened five new branches - one
in the United States and two each in Chile and Jamaica. This Segment also
acquired thirteen branches in 1999 - ten in Canada, two in Chile and one in the
United States. The branch network continued to increase sales and gain market
share in the collision shop sector. Unique sales programs, national account
management and the high performing Ultra 7000(TM) system were key factors
contributing to sales increases in the branch network. Sales and profits
increased significantly in product lines sold to suppliers to the automotive and
truck OEM businesses. Genesis(TM) high solids urethane systems for OEM heavy
truck and bus application was launched during 1999, adding to the growth in that
business. Increased unit builds and new product approvals by automobile parts
suppliers and truck manufacturers were key to the growth in the OEM business.
In 2000, the Automotive Finishes Segment will continue to focus on sales
growth in the OEM business and expansion of its branch network. The development
of additional, improved color technology in international markets will aid in
sales growth as well. This Segment will continue to pursue growing market
opportunities including international business to better compete on a global
basis.
INTERNATIONAL COATINGS SEGMENT
The International Coatings Segment develops, licenses, manufactures and
distributes architectural paints, stains, varnishes, industrial maintenance
products, product finishes, wood finishing products and paint-related products
worldwide. In addition, custom, industrial and automotive aerosols are filled,
packaged, distributed and sold by this Segment. The International Coatings
Segment employs a wide variety of trade names and trademarks worldwide in
pursuit of its business. Sherwin-Williams(R), Dutch Boy(R), Krylon(R),
Kem-Tone(R), Pratt & Lambert(R), Minwax(R), Ronseal(TM), Colorgin(TM),
Globo(TM), Sumare(R), Andina(TM) and Marson(TM) are some of the trade names and
4
<PAGE> 6
trademarks that have high customer recognition and collectively contribute
significantly to the sales of the International Coatings Segment. Some other
branded and private label coatings, stains, varnishes, wood finishing products,
paint applicators, aerosols, adhesives and related products are manufactured for
and distributed through various marketing channels. The International Coatings
Segment manufactures, distributes and sells its products primarily through
wholly-owned subsidiaries, joint ventures and licensees of technology,
trademarks and trade names. At December 31, 1999, this Segment included ten
foreign wholly-owned subsidiaries in seven foreign countries, four foreign joint
ventures and 32 licensing agreements in 24 foreign countries. This Segment also
sells its products through 33 company-operated specialty paint stores in Chile
and ten in Brazil. The majority of the sales from licensees and subsidiaries
occur in South America, the Segment's most important international market.
The economic climate throughout South America was difficult in 1999.
Despite Brazil's maxi-devaluation of its currency in January, and the resultant
impact on the economy, improved sales and operating profits were achieved in
local currency. In spite of the harsh economic climate and recessions in
Argentina and Chile, the operations in these countries managed to increase
market share. S-W Argentina achieved record sales and profits. In the United
Kingdom, Ronseal achieved record sales and profits with continued growth in its
do-it-yourself and home improvement market.
In 2000, the less-than-favorable economic conditions in South America are
expected to continue although some improvement may be realized in Brazil and
Chile. Nonetheless, cost containment remains a focal point of the businesses in
South America, especially in Argentina where a continuation of the recession is
possible. Additionally, proper servicing of key accounts, new product
introductions, entry into new market segments and a broadening of distribution
will be necessary to achieve planned goals.
ADMINISTRATIVE SEGMENT
The Company and certain consolidated subsidiaries have corporate
headquarters expenses that are considered part of the Administrative Segment and
not a part of an Operating Segment. The Administrative Segment includes the
expenses of headquarter sites, interest expense which is unrelated to certain
financing activities of the Operating Segments, investment income, certain
foreign currency transaction losses related to dollar-denominated debt and other
financing activities, certain provisions for disposition and
environmental-related matters, and other expenses which are not directly
associated with any Operating Segment.
The Administrative Segment expenses and assets reconcile Operating Segment
data to total consolidated income before income taxes, identifiable assets,
capital expenditures and depreciation.
Also included in the Administrative Segment is a real estate management
unit that is responsible for the ownership, management, leasing of non-retail
properties held primarily for use by the Company, including the Company's
headquarters site, and disposal of idle facilities. Sales of the Administrative
Segment represent external leasing revenue of excess headquarters space or
leasing of facilities no longer used by the Company in its operations. Gains and
losses from the sale of property are not a significant factor in determining the
performance of this Segment. At the end of 1999, this Segment owned 22 and
leased two properties consisting of office buildings, distribution service
centers, idle manufacturing facilities and vacant land. Occasionally, such
properties are acquired or developed to provide the lowest cost alternative for
expansion of distribution operations by the Consumer or Automotive Finishes
Segments. Locations that have been utilized profitably in the past that can no
longer contribute to the Company's future plans are offered for sale or lease.
If a location is no longer in usable condition, all buildings on the property
are razed and the vacant land is then offered for sale or lease. During 1999,
two owned properties were sold and early termination of a lease was successfully
negotiated at a third site. Sales agreements are currently being pursued for
three other facilities with anticipated sale dates in 2000. The second phase of
a demolition plan was completed at a former manufacturing facility in 1999. The
occupancy rate for external non-retail office space was 95 percent at December
31, 1999. For 2000, the lease expiration of a large tenant in the Company's
headquarters building and the reduction in leased space of another tenant will
result in decreased revenue for the near term.
5
<PAGE> 7
RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE
Raw materials and fuel supplies are generally available from various
sources in sufficient quantities that none of the Segments anticipates any
significant sourcing problems during 2000. There are sufficient suppliers of
each product purchased for resale that none of the Segments anticipates any
significant sourcing problems during 2000.
SEASONALITY
The majority of the sales for the Paint Stores, Consumer and Automotive
Finishes Segments traditionally occur during the second and third quarters. The
International Coatings Segment's fourth quarter sales have traditionally been
greater than the sales for any of the first three quarters. There is no
significant seasonality in sales for the Administrative Segment.
TRADEMARKS AND TRADE NAMES
Customer recognition of Company 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(TM), Pro-Line(R), SeaGuard(R), JetGlo(R), AcryGlo(R),
Con-Lux(R), Mercury(TM) and Brod-Dugan(TM).
The Consumer Segment employs a variety of trade names and trademarks in
marketing its products, such as Sherwin-Williams(R), Thompson's(R), Dutch
Boy(R), Kem-Tone(R), Martin Senour(R), Cuprinol(R), Pratt & Lambert(R), H&C(R),
Rubberset(R), Dupli-Color(R), Rust Tough(R), Sprayon(R), Minwax(R), White
Lightning(R), Krylon(R), Cello(R), Moly-White(R), Formby's(R), Red Devil(R) and
Tri-Flow(TM).
The Automotive Finishes Segment utilizes various trade names and trademarks
in pursuit of its business, including Sherwin-Williams(R), Martin Senour(R),
Western(R), Lazzuril(TM), Excelo(TM) and Marson(TM).
The International Coatings Segment uses trade names and trademarks in the
conduct of its business including Sherwin-Williams(R), Dutch Boy(R), Krylon(R),
Kem-Tone(R), Pratt & Lambert(R), Minwax(R), Ronseal(TM), Colorgin(TM),
Globo(TM), Sumare(R), Andina(TM) and Marson(TM).
PATENTS
Although patents and licenses are not of material importance to the
business of the Company as a whole or any Segment, the International Coatings
Segment and the international operations of the Automotive Finishes Segment
derive a portion 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 since
there is normally a short period of time between the placing of an order and
shipment. Sufficient productive capacity currently exists to fulfill the
Company's needs for paint and coatings products through 2000.
COMPETITION
The Company experiences competition from many local, regional, national and
international competitors of various sizes in the manufacture, distribution and
sale of its coatings and related products. The Company is a leading manufacturer
and retailer of coatings and related products to professional, industrial,
commercial and retail customers, however, the Company's competitive position
varies for its different products and markets.
In the Paint Stores Segment, competitors include other paint and wallpaper
stores, mass merchandisers, home centers, independent hardware stores, hardware
chains and manufacturer-operated direct outlets. Product quality, service and
price determine the competitive advantage for this Segment. In the Consumer and
6
<PAGE> 8
International Coatings Segments, domestic and foreign competitors include
manufacturers and distributors of branded and private labeled coatings products.
Technology, product quality, product innovation, breadth of product line,
technical expertise, distribution, service and price are the key competitive
factors for these Segments. The Automotive Finishes Segment has numerous
competitors in its domestic and foreign markets with broad product offerings and
several others with niche products. Key competitive factors for this Segment
include technology, product quality, distribution, service and price. The
Administrative Segment has many competitors consisting of other real estate
owners, developers and managers in areas in which this Segment owns property.
The main competitive factors are the availability of property and price.
EMPLOYEES
The Company employed 25,697 persons at December 31, 1999.
ENVIRONMENTAL COMPLIANCE
For additional information regarding environmental matters, see pages 15
through 17 of the 1999 Annual Report under the caption entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 1, 4 and 9 of the Notes to Consolidated Financial Statements on pages 28,
30 and 33, respectively, of the 1999 Annual Report, which is incorporated herein
by reference.
SEGMENT INFORMATION AND FOREIGN OPERATIONS
For additional information regarding the Company's Reportable Segments and
foreign operations, see the financial table and the notes thereto on pages 12
and 13 of the 1999 Annual Report, which is incorporated herein by reference.
Additional information regarding risks attendant to foreign operations is set
forth on pages 18 and 20 of the 1999 Annual Report under the caption entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which is incorporated herein by reference.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Business" and elsewhere in this
report constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements are based upon management's expectations
and beliefs concerning future events and discuss, among other things,
anticipated future performance and revenues, expected growth and future business
plans. Words and phrases such as "expects", "anticipates", "believes", "will
likely result", "will continue", "plans to" and similar expressions are intended
to identify forward-looking statements. Readers are cautioned not to place undue
reliance on any forward-looking statements. Forward-looking statements are
necessarily subject to risks, uncertainties and other factors, many of which are
outside the control of the Company, that could cause actual results to differ
materially from such statements. These uncertainties and other factors include
such things as: general business conditions, strengths of retail economies and
the growth in the coatings industry; competitive factors, including pricing
pressures and product innovation and quality; raw material availability and
pricing; changes in the Company's relationships with customers and suppliers;
the ability of the Company to successfully integrate recent and future
acquisitions into its existing operations; changes in general domestic economic
conditions such as inflation rates, interest rates and tax rates; risks and
uncertainties associated with the Company's expansion into foreign markets,
including inflation rates, recessions, foreign currency exchange rates, foreign
investment and repatriation restrictions and other external economic and
political factors; increasingly stringent domestic and foreign governmental
regulations including those affecting the environment; inherent uncertainties
involved in assessing the Company's potential liability for environmental
remediation-related activities; the nature, cost, quantity and outcome of
pending and future litigation and other claims, including the lead pigment and
lead paint lawsuits; and unusual weather conditions.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise.
7
<PAGE> 9
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns its corporate headquarters located in Cleveland, Ohio. The
Company's principal manufacturing and distribution facilities are located as set
forth below. The Company believes its manufacturing and distribution facilities
are well-maintained and are suitable and adequate, and have sufficient
productive capacity, to meet its current needs.
PAINT STORES SEGMENT
Manufacturing Facilities
-------------------------
Arlington, Texas Owned
Calgary, Alberta, Canada Leased
Columbus, Ohio Owned
Edison, New Jersey Owned
Fort Wayne, Indiana Leased
Greensboro, North Carolina Owned
Grimsby, Ontario, Canada Owned
Harrisburg, Pennsylvania Leased
Memphis, Tennessee Owned
Mexico City, Mexico Owned
Ontario, California Leased
Portsmouth, Virginia Owned
Rockford, Illinois Leased
San Diego, California Leased
Spartanburg, South Carolina Leased
Wichita, Kansas Owned
Distribution Facilities
----------------------
Mexico City, Mexico Owned
Vancouver, Alberta, Canada Leased
CONSUMER SEGMENT
Manufacturing Facilities
-------------------------
Baltimore, Maryland Owned
Bedford Heights, Ohio Owned
Chicago, Illinois Owned
Coffeyville, Kansas Owned
Crisfield, Maryland Leased
Deshler, Ohio Owned
Elk Grove, Illinois Owned
Emeryville, California Owned
Ennis, Texas Leased
Flora, Illinois Owned
Fort Erie, Ontario, Canada Owned
Fountain Inn, South Carolina Owned
Garland, Texas Owned
Greensboro, North Carolina Owned
Havre de Grace, Maryland Owned
Holland, Michigan Owned
Lawrenceville, Georgia Owned
Morrow, Georgia Owned
Olive Branch, Mississippi Owned
Orlando, Florida Owned
Victorville, California Owned
Distribution Facilities
----------------------
Bedford Heights, Ohio Leased
Buford, Georgia Leased
Cranberry Run, Maryland Leased
Dayton Valley, Nevada Owned
Effingham, Illinois Leased
Fredericksburg, Pennsylvania Owned
Reno, Nevada Owned
San Juan, Puerto Rico Leased
Vaughan, Ontario, Canada Leased
Waco, Texas Leased
Winter Haven, Florida Owned
AUTOMOTIVE FINISHES SEGMENT
Manufacturing Facilities
------------------------
Arica, Chile Owned
Kingston, Jamaica Owned
Richmond, Kentucky Owned
Santiago, Chile* Owned
Sao Paulo, Brazil Owned
Texcocco, Mexico Owned
8
<PAGE> 10
Distribution Facilities
----------------------
Kingston, Jamaica Owned
Reno, Nevada Leased
Richmond, Kentucky Owned
Santiago, Chile* Owned
Sao Paulo, Brazil Owned
Zaragoza, Mexico Owned
INTERNATIONAL COATINGS SEGMENT
Manufacturing Facilities
-------------------------
Buenos Aires, Argentina Owned
Santiago, Chile* Owned
Sao Paulo, Brazil(4) Owned
Sheffield, England Owned
Distribution Facilities
----------------------
Buenos Aires, Argentina Owned
Santiago, Chile* Owned
Santiago, Chile Leased
Sao Paulo, Brazil(4) Owned
Lima, Peru Leased
* This facility is shared between the Automotive Finishes and International
Coatings Segments.
The operations of the Paint Stores Segment included 2,396 company-operated
paint stores, of which 215 were owned, in the United States, Canada, Virgin
Islands, Puerto Rico and Mexico at December 31, 1999. The Paint Stores Segment
is divided into four separate operating divisions and certain operations in
Mexico, each of which is responsible for the paint stores located within its
geographical region. At the end of 1999, the Mid Western Division operated 645
paint stores primarily located in the midwestern and upper west coast states and
western Canada, the Eastern Division operated 481 paint stores along the upper
east coast and New England states and eastern Canada, the Southeastern Division
operated 624 paint stores principally covering the lower east and gulf coast
states and Puerto Rico, and the South Western Division operated 573 paint stores
in the plains and the lower west coast states. The Paint Stores Segment also
included 73 paint stores in Mexico. The Paint Stores Segment opened 73 net new
paint stores in 1999 and relocated 41.
The Automotive Finishes Segment included 121 company-operated automotive
branches, of which one was owned, in the United States and 51 leased
company-operated stores and branches in Canada, Chile, Brazil and Jamaica at
December 31, 1999. The International Coatings Segment included 43
company-operated specialty paint stores, of which 4 were owned, in Chile and
Brazil. All real property within the Administrative Segment is owned by the
Company except for one warehouse lease. For additional information regarding
real property within the Administrative Segment, see the information set forth
in Item 1 of this report, which is incorporated herein by reference. For
additional information regarding real property leases, see Note 8 of the Notes
to Consolidated Financial Statements on page 33 of the 1999 Annual Report, which
is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to the legal proceeding brought by the Michigan
Department of Environmental Quality, which was reported in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999. On
May 3, 1999, the Michigan Department of Environmental Quality issued a letter of
violation regarding the Company's Holland, Michigan facility. The Company
believes it has resolved this matter with the Department of Environmental
Quality in satisfaction of both federal and state requirements. The Company
expects to enter into a consent decree pursuant to which the Company will pay a
civil penalty of $176,500 and agree to adhere to a compliance program and to
perform certain recordkeeping, reporting and testing regarding the Company's
operations at the facility.
For additional information regarding environmental matters and other legal
proceedings, see pages 15 through 17 of the 1999 Annual Report under the caption
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes 1, 4 and 9 of the Notes to Consolidated
Financial Statements on pages 28, 30 and 33, respectively, of the 1999 Annual
Report, which is incorporated herein by reference.
9
<PAGE> 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is the name, age and present position of each of the
Executive Officers at February 29, 2000, as well as all prior positions held by
each during the last five years.
<TABLE>
<CAPTION>
Name Age Present Position
---- --- ----------------
<S> <C> <C>
John G. Breen 65 Chairman, Director
Christopher M. Connor 43 Vice Chairman and Chief Executive Officer,
Director
Joseph M. Scaminace 46 President and Chief Operating Officer, Director
Larry J. Pitorak 53 Senior Vice President -- Finance, Treasurer and
Chief Financial Officer
John L. Ault 54 Vice President -- Corporate Controller
Michael A. Galasso 52 President & General Manager, Automotive
Division
Thomas E. Hopkins 42 Vice President -- Human Resources
Conway G. Ivy 58 Vice President -- Corporate Planning and
Development
John G. Morikis 36 President, Paint Stores Group
Thomas W. Seitz 51 President, Consumer Group
Louis E. Stellato 49 Vice President, General Counsel and Secretary
</TABLE>
Mr. Breen has served as Chairman since April 1980. Mr. Breen served as
Chief Executive Officer from January 1979 to October 1999 and President from
March 1999 to October 1999. Mr. Breen has served as a Director since April 1979.
Mr. Connor has served as Vice Chairman and Chief Executive Officer since
October 1999. Mr. Connor served as President, Paint Stores Group from August
1997 to October 1999 and President & General Manager, Diversified Brands
Division from April 1994 to August 1997. Mr. Connor has served as a Director
since October 1999.
Mr. Scaminace has served as President and Chief Operating Officer since
October 1999. Mr. Scaminace served as President, Consumer Group from July 1998
to October 1999, President & General Manager, Coatings Division from June 1997
to July 1998, and President & General Manager, Automotive Division from April
1994 to June 1997. Mr. Scaminace has served as a Director since October 1999.
Mr. Pitorak has served as Senior Vice President -- Finance, Treasurer and
Chief Financial Officer since April 1992.
Mr. Ault has served as Vice President -- Corporate Controller since January
1987.
Mr. Galasso has served as President & General Manager, Automotive Division
since June 1997. Mr. Galasso served as Vice President & Director -- Operations,
Automotive Division from May 1992 to June 1997.
Mr. Hopkins has served as Vice President -- Human Resources since August
1997. Mr. Hopkins served as Vice President -- Human Resources, Paint Stores
Group from February 1996 to August 1997 and Director of Human Resources, Paint
Stores Group from November 1989 to February 1996.
Mr. Ivy has served as Vice President -- Corporate Planning and Development
since April 1992.
Mr. Morikis has served as President, Paint Stores Group since October 1999.
Mr. Morikis served as President & General Manager, Eastern Division, Paint
Stores Group from July 1998 to October 1999, Senior Vice
10
<PAGE> 12
President & Director -- Marketing, Paint Stores Group from September 1997 to
July 1998 and Division Vice President -- Sales, Eastern Division, Paint Stores
Group from April 1994 to September 1997.
Mr. Seitz has served as President, Consumer Group since October 1999. Mr.
Seitz served as Vice President of Operations, Consumer Group from July 1998 to
October 1999, Vice President of Operations, Coatings Division from December 1995
to July 1998 and Vice President of Logistics, Coatings Division from December
1994 to December 1995.
Mr. Stellato has served as Vice President, General Counsel and Secretary
since July 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Sherwin-Williams common stock is listed on the New York Stock Exchange and
traded under the symbol SHW. The number of shareholders of record at February
28, 2000 was 11,412. Information regarding market prices and dividend
information with respect to Sherwin-Williams common stock is set forth on page
39 of the 1999 Annual Report under the caption entitled "Shareholder
Information," which is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
(Millions of Dollars, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997 1996(a) 1995(b)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $5,004 $4,934 $4,881 $ 4,133 $ 3,274
Net income 304 273 261 229 201
FINANCIAL POSITION
Total assets $4,052 $4,065 $4,036 $ 2,995 $ 2,141
Long-term debt 624 730 844 143 24
PER COMMON SHARE DATA
Net income -- basic(c) $ 1.81 $ 1.58 $ 1.51 $ 1.34 $ 1.18
Net income -- diluted(c) 1.80 1.57 1.50 1.33 1.17
Cash dividends .48 .45 .40 .35 .32
</TABLE>
(a) Pre-acquisition amounts for Thompson Minwax Holding Corp., acquired on
January 7, 1997 using the purchase method of accounting, are not included.
Therefore, amounts are not comparable to 1997 and beyond. See Note 2 of the
Notes to Consolidated Financial Statements on page 29 of the 1999 Annual
Report, which is incorporated herein by reference, for further acquisition
and merger information.
(b) Pre-acquisition amounts for Thompson Minwax Holding Corp. and Pratt &
Lambert United, Inc., acquired on January 7, 1997 and January 10, 1996,
respectively, using the purchase method of accounting, are not included.
Therefore, amounts are not comparable to 1996 and beyond.
(c) Amounts reflect adoption of Statement of Financial Accounting Standards No.
128, "Earnings Per Share," effective December 31, 1997. All amounts shown
for periods prior to adoption have been restated. See Note 1 and Note 15 of
the Notes to Consolidated Financial Statements on pages 29 and 37,
respectively, of the 1999 Annual Report, which are incorporated herein by
reference, for further per share information.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth on pages 14 through 21
of the 1999 Annual Report under the caption entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which is
incorporated herein by reference.
11
<PAGE> 13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk through various financial
instruments, including fixed rate debt instruments. The Company does not believe
that any potential loss related to these financial instruments will have a
material adverse effect on the Company's financial condition, results of
operations or liquidity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on pages 24 through 37 of
the 1999 Annual Report under the captions entitled "Statements of Consolidated
Income," "Consolidated Balance Sheets," "Statements of Consolidated Cash Flows,"
"Statements of Consolidated Shareholders' Equity," and "Notes to Consolidated
Financial Statements," which is incorporated herein by reference. Unaudited
quarterly data is set forth in Note 14 of the Notes to Consolidated Financial
Statements on pages 36 and 37 of the 1999 Annual Report, which is incorporated
herein by reference. The Report of Independent Auditors is set forth on page 14
of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding Directors is set forth under the caption entitled
"Election of Directors" in the Proxy Statement, which is incorporated herein by
reference.
The information regarding Executive Officers is set forth under the caption
entitled "Executive Officers of the Registrant" in Part I of this report, which
is incorporated herein by reference.
The information regarding compliance with Section 16 of the Securities
Exchange Act of 1934 is set forth under the caption entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Proxy Statement, which is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth on pages 6 through 17 of
the Proxy Statement and under the caption entitled "Compensation of Directors"
in the Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is set forth under the captions
entitled "Security Ownership of Management" and "Security Ownership of Certain
Beneficial Owners" in the Proxy Statement, which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the captions
entitled "Certain Relationships and Related Transactions" and "Compensation
Committee Interlocks and Insider Participation" in the Proxy Statement, which
information is incorporated herein by reference.
12
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C> <C>
(a) (1) Financial Statements
The following consolidated financial statements of the Company
included in the 1999 Annual Report are incorporated by reference in
Item 8. The Report of Independent Auditors is set forth on page 14
of this report.
(i) Statements of Consolidated Income for the years ended
December 31, 1999, 1998 and 1997 (page 24 of the 1999 Annual
Report)
(ii) Consolidated Balance Sheets at December 31, 1999, 1998 and
1997 (page 25 of the 1999 Annual Report)
(iii) Statements of Consolidated Cash Flows for the years ended
December 31, 1999, 1998 and 1997 (page 26 of the 1999 Annual
Report)
(iv) Statements of Consolidated Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997 (page 27 of the
1999 Annual Report)
(v) Notes to Consolidated Financial Statements for the years
ended December 31, 1999, 1998 and 1997 (pages 28 through 37
of the 1999 Annual Report)
(2) Financial Statement Schedule
Schedule No. II -- Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 1999, 1998 and
1997 is set forth on page 14 of this report. 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 the Exhibit Index on pages 17 and 18 of this report.
</TABLE>
(b) Reports on Form 8-K -- The Company filed a Current Report on Form 8-K, dated
October 25, 1999, reporting under Item 5 certain changes in the management
and Board of Directors of the Company.
13
<PAGE> 15
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, 1999, 1998 and
1997, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1999. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, 1999, 1998 and
1997, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ Ernst & Young LLP
Cleveland, Ohio
January 25, 2000
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(SCHEDULE II)
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 25,393 $ 26,891 $ 22,631
Bad debt expense 32,819 15,176 15,741
Net uncollectible accounts written off (34,620) (16,674) (11,481)
- --------------------------------------------------------------------------------------------
Ending balance $ 23,592 $ 25,393 $ 26,891
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
Bad debt expense increase for 1999 is primarily due to increased activity
in accounts doubtful of collection and charges to expense to reconcile open
prior years' accounts receivable balances of certain customers.
Activity related to other asset reserve is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $203,606 $153,580 $111,921
Charges to expense 53,063 52,103 49,499
Other additions (deductions) (8,859) (2,077) (7,840)
- --------------------------------------------------------------------------------------------
Ending balance $247,810 $203,606 $153,580
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
Charges to expense consist primarily of amortization of goodwill and
intangibles. Other additions (deductions) consist primarily of actual costs
incurred and balance sheet reclassifications and, in 1999 and 1997, removal of
fully-amortized items.
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 15th day of
March, 2000.
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 15, 2000.
<TABLE>
<S> <C>
* J. G. BREEN Chairman, Director
- -----------------------------------------------------------
J. G. Breen
* C. M. CONNOR Vice Chairman and Chief Executive Officer,
- ----------------------------------------------------------- Director (Principal Executive Officer)
C. M. Connor
* J. M. SCAMINACE President and Chief Operating Officer,
- ----------------------------------------------------------- Director
J. M. Scaminace
* 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. C. BOLAND Director
- -----------------------------------------------------------
J. C. Boland
* 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
* A. M. MIXON, III Director
- -----------------------------------------------------------
A. M. Mixon, III
* C. E. MOLL Director
- -----------------------------------------------------------
C. E. Moll
</TABLE>
15
<PAGE> 17
<TABLE>
<S> <C>
* 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 15, 2000
- -----------------------------------------------------------
L. E. Stellato, Attorney-in-fact
</TABLE>
16
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<C> <C> <S>
3. (a) Amended Articles of Incorporation, as amended April 25,
1997, filed as Exhibit 3(i) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
1997, 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 333-01093, dated February 20,
1996, and incorporated herein by reference.
(b) Amended and Restated 364-Day Revolving Credit Agreement,
dated December 31, 1999, between the Company, Chase Bank of
Texas, National Association, formerly known as Texas
Commerce Bank National Association, as Administrative Agent,
The Chase Manhattan Bank, as Competitive Advance Facility
Agent, and the financial institutions which are signatories
thereto (filed herewith).
(c) Amended and Restated Five Year Revolving Credit Agreement,
dated January 3, 2000, between the Company, Chase Bank of
Texas, National Association, formerly known as Texas
Commerce Bank National Association, as Administrative Agent,
The Chase Manhattan Bank, as Competitive Advance Facility
Agent, and the financial institutions which are signatories
thereto (filed herewith).
(d) 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.
(e) Rights Agreement between the Company and The Bank of New
York, as successor Rights Agent to KeyBank National
Association, dated April 23, 1997, filed as Exhibit 1 to
Form 8-A, dated April 24, 1997, and incorporated herein by
reference.
10. *(a) Form of Director and Corporate Officer Indemnity Agreement
filed as Exhibit 10(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference.
*(b) Employment Agreements with J.G. Breen 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 and C.G.
Ivy filed as Exhibit 10(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, and
incorporated herein by reference.
*(d) Forms of Severance Pay Agreements, filed as Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997, and incorporated
herein by reference.
*(e) Schedule of Certain Executive Officers who are Parties to
the Severance Pay Agreements in the forms referred to in
Exhibit 10(d) (filed herewith).
*(f) The Sherwin-Williams Company Deferred Compensation Savings
Plan (1997/1999 Amendment and Restatement) (filed herewith).
*(g) The Sherwin-Williams Company Key Management Deferred
Compensation Plan (1997/1999 Amendment and Restatement)
(filed herewith).
*(h) Form of Executive Disability Income Plan filed as Exhibit
10(g) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, and incorporated herein
by reference.
*(i) Form of Executive Life Insurance Plan filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, and incorporated herein by
reference.
*(j) Form of The Sherwin-Williams Company Management Compensation
Program (filed herewith).
</TABLE>
17
<PAGE> 19
<TABLE>
<C> <C> <S>
*(k) The Sherwin-Williams Company 1994 Stock Plan, as amended and
restated in its entirety, effective April 23, 1997, filed as
Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997, and
incorporated herein by reference.
*(l) The Sherwin-Williams Company 1997 Stock Plan for Nonemployee
Directors, dated April 23, 1997, filed as Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997, and incorporated
herein by reference.
*(m) The Sherwin-Williams Company Director Deferred Fee Plan
(1997 Amendment and Restatement), dated April 23, 1997,
filed as Exhibit 10(a) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997, and
incorporated herein by reference.
*(n) Split-Dollar Agreement, dated March 25, 1996, among the
Company, National City Bank and John G. and Mary Breen filed
as Exhibit 10(q) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, and
incorporated herein by reference.
*(o) The Sherwin-Williams Company Estate Protection Plan Trust,
dated November 15, 1996, between the Company and National
City Bank filed as Exhibit 10(r) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, and incorporated herein by reference.
13. Portions of the 1999 Annual Report incorporated herein by
reference (filed herewith). With the exception of those
portions of the 1999 Annual Report which are specifically
incorporated by reference in this report, the 1999 Annual
Report shall not be deemed "filed" as part of this report.
21. Subsidiaries (filed herewith).
23. Consent of Ernst & Young LLP, Independent Auditors (filed
herewith).
24. (a) Powers of Attorney (filed herewith).
(b) Certified Resolution Authorizing Signature by Power of
Attorney (filed herewith).
27. Financial Data Schedule.
*Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.
</TABLE>
18
<PAGE> 1
EXHIBIT 4(b)
AMENDED AND RESTATED
364-DAY REVOLVING CREDIT AGREEMENT
This Amended and Restated 364-Day Revolving Credit Agreement is made
and entered into this 31st day of December, 1999 by and among The
Sherwin-Williams Company ("Company") whose principal place of business is
located at 101 Prospect Avenue, N.W., Cleveland, Ohio 44115, Chase Bank of
Texas, National Association, formerly known as Texas Commerce Bank National
Association ("CBT"), as Administrative Agent, The Chase Manhattan Bank
("Chase"), as the Competitive Advance Facility Agent, and the financial
institutions listed on Schedule A hereto together with each of their successors
and assigns (collectively referred to as the "Lenders" and individually a
"Lender").
W I T N E S S E T H:
-------------------
WHEREAS, the Company, CBT, Chase and certain of the Lenders previously
entered into that certain 364-Day Revolving Credit Agreement, dated January 3,
1997, which agreement was subsequently amended effective March 31, 1997 and
January 1, 1999, pursuant to which the Lenders agreed to make available to the
Company a certain principal amount of money to be used by the Company for
general corporate purposes including, but not limited to, commercial paper
backup, general working capital, acquisitions of assets, stock or other
ownership interests and repurchases or redemptions of securities; and
WHEREAS, the Company, CBT, Chase and the Lenders desire to amend and
restate such 364-Day Revolving Credit Agreement, as amended, on the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein the parties agree as follows:
ARTICLE I: DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"ADMINISTRATIVE AGENT" shall mean Chase Bank of Texas, National Association, or
any successor Lender appointed by the Company and approved by the
holders of fifty-one percent (51%) by amount of the Commitments.
"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 the
Administrative Agent as its "prime rate" and (ii) the Federal Funds
Rate plus 50 basis points. Any change by the Administrative Agent of
its "prime 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 a Loans bearing interest at the Alternate
Base Rate.
"BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which New
York banks are open for the transaction of business.
<PAGE> 2
"COMMITMENT" shall mean the obligation of each Lender to make Loans, under
Section 2.1A up to the amount set opposite the name of such Lender as
set forth on such Lender's signature page hereto (or such lesser amount
as shall be determined pursuant to Section 2.5 hereof).
"COMMITMENT PERIOD" shall mean the period which commences on the Effective Date
and terminates on the Termination Date.
"COMPETITIVE ADVANCE FACILITY AGENT" shall mean The Chase Manhattan Bank.
"COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive Loan in
accordance with Section 2.1C.
"COMPETITIVE BID RATE" shall mean, with respect to any Competitive Bid, the
Competitive Libor Rate or the Fixed Rate, as applicable, offered by the
Lender making such Competitive Bid.
"COMPETITIVE BID REQUEST" shall mean a request by the Company for Competitive
Bids in accordance with Section 2.1C.
"COMPETITIVE BORROWING" shall mean a borrowing by the Company in response to a
Competitive Bid Request.
"COMPETITIVE LIBOR INTEREST PERIOD" shall mean a period of one, two, three, six
or, if available to all of the Lenders, twelve months (as selected by
the Company) commencing on the applicable borrowing date of each
Competitive Libor Loan hereunder; provided, however, that no
Competitive Libor Interest Period shall end after the Termination Date.
"COMPETITIVE LIBOR LOAN" shall mean a Competitive Loan bearing interest at a
rate based on LIBOR.
"COMPETITIVE LIBOR RATE" shall mean, with respect to a Competitive LIBOR Loan,
LIBOR plus the applicable margin specified by the Lender making such
Competitive Loan in its Competitive Bid.
"COMPETITIVE LOAN" shall mean a Loan made pursuant to Section 2.1C.
"COMPETITIVE NOTE" shall mean a Note or Notes executed and delivered pursuant to
Section 2.1C.
"CONSOLIDATED NET WORTH" shall mean the excess of the net book value of the
assets of the Company 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 the Company in the calculation of
such amount in the Company's then most recent financial statements
furnished to its stockholders, plus the aggregate value of all treasury
stock purchased after January 3, 1997 (at cost) by the Company (to the
extent that the aggregate value of such treasury stock for purposes of
this calculation does not exceed Two Hundred Fifty Million Dollars
($250,000,000)). The calculation of Consolidated Net Worth shall
exclude any amounts which would otherwise be required to be included
therein as a result of the future adoption by the Financial Accounting
Standards Board of any policy, statement, rule or regulation requiring
the Company to record an accumulative liability on its Financial
Report(s).
"CONSOLIDATED SUBSIDIARY" shall mean, at any particular time, every Subsidiary
which is consolidated in the Company's financial statements contained
in its then most recent Financial Report.
<PAGE> 3
"DEBT" shall mean, collectively, all indebtedness at any one time outstanding
hereunder and owed by the Company to the Lenders pursuant to this
Agreement and includes the principal of and interest on all Notes and
each conversion, extension, renewal or refinancing thereof in whole or
in part, the Facility Fees and any prepayment premium due under Section
2.1A(x).
"DOLLARS" or "$" shall mean any lawful currency of the United States of America.
"EFFECTIVE DATE" shall mean December 31, 1999.
"EUROCURRENCY" shall mean any freely transferrable and convertible currency on
deposit outside the country of issuance.
"EVENT OF DEFAULT" shall mean any of the events referred to in Article VII
hereof.
"FACILITY FEE" shall mean the sum to be paid by the Company to the
Administrative Agent on behalf of each Lender on the last Banking Day
of each calendar quarter prior to the termination of the Commitments
and the repayment of the outstanding Loans, calculated, for each day,
as the product of each Lender's Commitment (or, after the termination
of such Commitments, each Lender's outstanding Loans), on such day, and
during the Commitment Period, and upon the termination of the
Commitments, calculated, for each day, as the product of each Lender's
Commitment, on such day and five (5) basis points.
"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 the Administrative Agent, 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 the Administrative
Agent.
"FINANCIAL REPORT" shall mean the annual or periodic report prepared in
accordance with generally accepted accounting principles, except as
otherwise indicated therein, filed by the Company 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 the Company to
its stockholders (which annual financial statements shall be certified
by the Company's independent certified public accountants).
"FIXED RATE LOANS" shall mean a Competitive Loan bearing interest at a Fixed
Rate.
"FIXED RATE" shall mean, with respect to any Competitive Loan (other than a
Competitive Libor Loan), the fixed rate of interest per annum specified
by the Lender making such Competitive Loan in its related Competitive
Bid.
"INTEREST ADJUSTMENT DATE" shall mean the last day of each LIBOR Interest
Period.
"LIBOR" shall mean the average (rounded upward to the nearest 1/16 of 1%) of
the per annum rates at which deposits in immediately available funds in
Dollars for the number of months in the relevant LIBOR Interest Period
and in the amount of the LIBOR Loan or Competitive Libor
3
<PAGE> 4
Loan to be disbursed or to remain outstanding during such LIBOR
Interest Period, as the case may be, are offered to the Administrative
Agent or the Competitive Advance Facility Agent, as the case may be, by
the Reference Lenders in the London Interbank Eurodollar market,
determined as of 11:00 a.m. London time, two (2) London Banking Days
prior to the beginning of the relevant LIBOR Interest Period pertaining
to a LIBOR Loan or Competitive Libor Loan hereunder, as appropriately
adjusted by dividing such average rate by 1.00 minus the applicable
Reserve Percentage then in effect.
"LIBOR INTEREST PERIOD" shall mean a period of one, two, three, six or, if
available to the Lenders, twelve months (as selected by the Company)
commencing on the applicable borrowing date of each LIBOR Loan or
Competitive Libor Loan hereunder; provided, however, that if any such
period would be affected by a reduction in Commitments as provided in
Section 2.5, prepayment as provided in Section 3.5 or maturity of a
LIBOR Loan or Competitive Libor Loan as provided in Sections 2.1A or
2.1C, such period shall end on such date; and provided further that no
such LIBOR Interest Period shall end after the Termination Date.
"LIBOR LOAN" shall mean a Loan bearing interest at a rate based on LIBOR.
"LOAN" shall mean the indebtedness of the Company with respect to each advance
of funds by a Lender hereunder.
"LONDON BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which
banks are open for business in London, England and New York, New York
quoting deposit rates for Dollar deposits.
"MAJORITY LENDERS" shall mean Lenders with an aggregate of sixty-six and
two-thirds percent (66 2/3%) or more of the Commitments (or, if the
Commitments have been terminated, outstanding Loans) on the relevant
date.
"MARGIN" shall mean seventeen and one-half (17 1/2) basis points.
"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
Consolidated Net Worth.
"MONEY MARKET NOTE" shall mean a Note or Notes executed and delivered pursuant
to Section 2.1B.
"MONEY MARKET RATE" shall mean, with respect to any period of days selected by
the Company commencing on the applicable borrowing date for a Money
Market Rate Loan, the rate of interest per annum quoted by any Lender
to the Company for such Money Market Rate Loan.
"MONEY MARKET RATE LOAN" shall mean a Loan with an interest rate equal to the
Money Market Rate and as otherwise defined in Section 2.1B.
"NOTE" or "NOTES" shall mean a note or notes executed and delivered pursuant to
Sections 2.1A, 2.1B or 2.1C.
"NOTICE" shall mean a notice given pursuant to Section 10.5.
"OTHER FEES" shall mean the annual administration fee to be paid by the Company
to CBT and the auction administration fee to be paid by the Company to
Chase pursuant to the Fee Letter ("Fee Letter") dated November 12, 1996
by and among the Company, CBT, Chase and Chase Securities, Inc.
4
<PAGE> 5
"OUTSTANDING MAJORITY LENDERS" shall mean Lenders with an aggregate of sixty-six
and two-thirds percent (66 2/3%) or more of the principal amount of
Loans on the relevant date.
"PERCENTAGE" shall mean, as to any Lender (as set forth on such Lender's
signature page hereof), the percentage of such Lender's share of the
total Commitments of all Lenders; provided that if the Commitments are
terminated or reduced pursuant to this Agreement, then "Percentage"
shall mean the percentage of such Lender's share of the total
Commitments of all Lenders immediately prior to the termination or
after the reduction of Commitments (giving effect to any subsequent
assignments pursuant to Section 10.9).
"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 the
Company, any Consolidated Subsidiary, or 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 the Company or any Consolidated Subsidiary is a part,
for employees thereof.
"POSSIBLE DEFAULT" shall mean an event, condition or thing known to the Company
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 the Lenders in
writing or fully corrected prior to becoming an Event of Default.
"REFERENCE LENDER" shall mean Chase or any successor Lender appointed by the
Company, and satisfactory to the holders of fifty-one percent (51%) by
amount of the Commitments or Loans, as the case may be, at any time,
upon thirty (30) days prior written notice to the Lenders, to act as
the Reference Lender pursuant to the terms of this Agreement.
"REGULATORY CHANGE" shall mean, as to any Lender, any change in United States
federal, state or foreign laws or regulations or the adoption or making
of any interpretations, directives, guidelines or requests of or under
any United States federal, state or foreign laws, treaties or
regulations, in each case, enacted after the Effective Date (whether or
not having the force of law) by any court or governmental authority
charged with the interpretation or administration thereof.
"RELATED WRITING" shall mean any assignment, mortgage, security agreement,
subordination agreement, financial statement, audit report or other
writing furnished by the Company or any of its officers to the Lenders
pursuant to or otherwise in connection with this Agreement.
"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, that percentage (expressed as a
decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the reserve requirement (including, but not limited to, any
margin reserve requirement and taking into account any transitional
adjustments or other scheduled changes in reserve requirements) which
is imposed on (a) commercial time deposits having an original maturity
of one (1) year or less and which is applicable to the class of banks
of which the Administrative Agent is a member; or (b) a Lender with
respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits, as the case may be.
"REVOLVING CREDIT LOAN" shall mean a Loan evidenced by a Revolving Credit Note.
5
<PAGE> 6
"REVOLVING CREDIT NOTE" shall mean a Note evidencing a Loan described in Section
2.1A.
"SUBORDINATED INDEBTEDNESS" shall mean an indebtedness which has been
subordinated (by written terms or agreement being in form and substance
reasonably satisfactory to the holders of fifty-one percent (51%) by
amount of the Commitments) in favor of the prior payment in full of the
Company's Debt to the Lenders.
"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 the Company or by another
such corporation(s) or by any combination of the Company and such
corporation(s).
"TERMINATION DATE" shall mean 12:01 a.m. New York time on such date which is
three hundred sixty-four (364) days from the Effective Date; provided,
however, the Company may within ninety (90) days prior to the
Termination Date, by notice to the Administrative Agent, make written
requests to the Lenders to extend the scheduled Termination Date for an
additional period of three hundred sixty-four (364) days. The
Administrative Agent shall give prompt written notice to each Lender of
the receipt of such request. Each Lender shall make a determination not
more than sixty (60) nor less than fifty-five (55) days prior to the
Termination Date whether it will extend the Termination Date as
requested; provided, however, the failure by any Lender to make a
timely response to the Company's request for an extension shall be
deemed to constitute a refusal by such Lender to extend the Termination
Date. If, in response to a request for an extension of the Termination
Date one or more Lenders fail to agree to the requested extension
("Disapproving Lenders"), then the Company may elect to either (a)
continue this Agreement at the same level of Commitments by replacing
each of the Disapproving Lenders in accordance with Section 2.5, or (b)
provided the requested extension is approved by at least fifty-one
percent (51%) of the Lenders with Commitments hereunder (including for
purposes hereof any replacement Lender(s) which may replace a
Disapproving Lender ("Approving Lenders")), extend and continue this
Agreement at a lower aggregate amount equal to the Commitments held by
the Approving Lenders. In any such case, (i) the Termination Date
relating to the Commitments held by the Disapproving Lenders shall
remain as then in effect with repayment of any Notes held by such
Disapproving Lenders being due on their due date and the termination of
their respective Commitments on the Termination Date, and (ii) the
Termination Date relating to the Commitments held by the Approving
Lenders shall be extended by an additional period of three hundred
sixty-four (364) days.
"TRANSACTIONS" shall mean the execution, delivery and performance by the Company
of this Agreement and the borrowings contemplated hereunder.
"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 the Company and/or by one or more
Wholly-Owned Consolidated Subsidiaries.
6
<PAGE> 7
"FIVE YEAR FACILITY" shall mean the Amended and Restated Five Year Revolving
Credit Agreement, dated January 3, 2000, by and among the Company as
borrower, CBT as Administrative Agent, Chase as the Competitive Advance
Facility Agent and certain or all of the Lenders.
Any accounting term not specifically defined in this Article shall have
the meaning ascribed thereto by generally accepted accounting principles in
effect as of the date of the Company's then most recent Financial Reports unless
otherwise indicated.
The foregoing definitions shall be applicable to the singular and
plural of such defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and conditions
of this Agreement each Lender will participate to the extent
hereinafter provided in making Loans to the Company in such aggregate
amounts as the Company shall 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 the
Commitments which, on the date hereof, total One Hundred Thirty-Four
Million Four Hundred Thousand Dollars ($134,400,000).
A. REVOLVING CREDIT LOANS
(i) BORROWING RIGHTS AND RESTRICTIONS: Subject to the terms and
conditions of this Agreement, during the Commitment Period
each Lender will make a Loan or Loans to the Company, pursuant
to this Section 2.1A, in such amount or amounts as the Company
may request from time to time but not exceeding in aggregate
principal amount, at any one time outstanding hereunder, the
Commitment of such Lender. Subject to the provisions of this
Agreement, the Company shall be entitled under this Paragraph
A to borrow funds, repay the same in whole or in part, and
reborrow hereunder at any time and from time to time during
the Commitment Period. Each Loan made under this Paragraph A
shall be made pro-rata according to the Lenders' respective
Commitments.
(ii) LOAN AMOUNTS: The Company shall have the option, subject to
the terms and conditions set forth herein, to borrow under
this Section 2.1A up to the total of all the Commitments by
means of any combination of:
(a) Alternate Base Rate Loans which shall be payable on
their respective due dates and shall be drawn down in
aggregate amounts of not less than Five Million
Dollars ($5,000,000) or any greater amount evenly
divisible by One Million Dollars ($1,000,000); and
(b) LIBOR Loans, which shall be payable on the last day
of the relevant LIBOR Interest Period and shall be
drawn down in aggregate amounts of not less than Five
Million Dollars ($5,000,000) or any greater amount
evenly divisible by One Million Dollars ($1,000,000).
(iii) PROCEDURE FOR BORROWING: The procedure for borrowing under
this Section 2.1A shall be as follows:
(a) Each such borrowing shall be made upon the Company's
written notice ("Notice") to the Administrative Agent
(which Notice must be received by the Administrative
Agent prior to 11:00 a.m. New York time three (3)
London
7
<PAGE> 8
Banking Days prior to the requested borrowing date in
the event of a LIBOR Loan and by 11:00 a.m. New York
time on the same Banking Day of the proposed date of
such borrowing in the event of an Alternate Base Rate
Loan). The Notice shall specify:
(1) the amount of such borrowing;
(2) the requested borrowing date which shall be
a Banking Day or a London Banking Day, as
the case may be;
(3) the type of Loan(s) comprising such
borrowing; and
(4) the duration of the LIBOR Interest Period
for any LIBOR Loan(s) and the maturity date
of any Alternate Base Rate Loan(s) (which in
either case shall not be later than the
Termination Date).
(b) The Administrative Agent shall promptly notify each
Lender of (i) its receipt of a Notice of borrowing,
(ii) the amount of each Lender's pro-rata share of
such borrowing, and (iii) the name of the Company's
bank, the Company's account number and American
Banking Association routing number of the bank at
which the Company's account is maintained and to
which such pro-rata shares shall be routed.
(c) Each Lender's pro-rata share of each Revolving Credit
Loan shall be delivered by each such Lender to the
Company not later than 3:00 p.m. New York time on the
requested borrowing date, time being of the essence,
in immediately available Dollars by wire transfer to
an account of the Company designated by the Company,
from time to time in writing to the Administrative
Agent, with the account number and American Banking
Association routing number of the bank at which such
account is maintained.
(iv) INTEREST RATES: The Company shall pay interest on Revolving
Credit Loans:
(a) at the Alternate Base Rate on the unpaid principal
amount of Alternate Base Rate Loans outstanding from
time to time from the date of receipt of funds by the
Company until paid, payable on the last Banking Day
of each calendar quarter and on the maturity date,
computed on the basis of a 365 or 366 day year as the
case may be; and
(b) at LIBOR plus the applicable Margin (converted to
percentage points) on the unpaid principal amount of
LIBOR Loans outstanding from time to time from the
date on which funds are received by the Company until
paid (computed on the basis of a year having 360 days
calculated on the basis of the actual number of days
elapsed), payable (a) on the last day of the LIBOR
Interest Period or (b) every three (3) months in the
event any such LIBOR Interest Period exceeds three
(3) months.
(v) PAYMENTS ON REVOLVING CREDIT NOTES, ETC.: All payments of
principal and interest shall be made to the Administrative
Agent in immediately available funds for the account of the
Lenders by no later than 3:00 p.m. (New York time) on the
applicable payment date. The Administrative Agent shall
promptly distribute to each Lender its ratable share of the
principal and interest received by it
8
<PAGE> 9
for the account of such Lender. Each Lender shall endorse each
Revolving Credit Note held by it or otherwise make appropriate
book entries evidencing each payment of principal made
thereon, it being understood, however, that any Lender's
failure to record appropriate information on the grid(s)
attached to any such Note shall in no way affect the
obligation of the Company under this Agreement or under any
such Note. Whenever any payment to be made hereunder,
including without limitation, any payment to be made on any
Note, shall be stated to be due on a day which is not a
Banking Day, such payment may be made on the next Banking Day
(but in any event not later than its maturity date) and such
extension of time shall in each case be included in the
computation of the interest payable on such Note.
Notwithstanding the previous sentence, in the case of any
LIBOR Loan, if the next Banking Day is in a month other than
the month the payment was originally due, such payment may be
made on the immediately preceding Banking Day and such
reduction of time shall in each case be considered in the
computation of the interest payable on such Note.
(vi) REVOLVING CREDIT NOTES: The obligation of the Company to repay
the Alternate Base Rate Loans and the LIBOR Loans made by each
Lender and to pay interest thereon shall be evidenced by
non-negotiable Revolving Credit Notes of the Company
substantially in the form of Schedule B hereto, with
appropriate insertions, dated the date of execution thereof by
the Company and payable to the order of such Lender on the
maturity date of such Loan, in the principal amount indicated
thereon. The principal amount of the Alternate Base Rate Loans
and the LIBOR Loans made by each Lender under this Section
2.1A and all prepayments thereof and the applicable dates with
respect thereto shall be recorded by such Lender from time to
time on the grid(s) attached to such Note or by appropriate
book entry. The aggregate unpaid amount of Alternate Base Rate
Loans and LIBOR Loans set forth on the grid(s) attached to
each Revolving Credit Note shall be rebuttable presumptive
evidence of the principal amount owing and unpaid on such
Note, it being understood, however, that any Lender's failure
to so record appropriate information on the grid(s) attached
to its respective Revolving Credit Note shall in no way affect
the obligations of the Company under this Agreement or such
Note.
(vii) INTEREST ON LATE PAYMENTS: If any Revolving Credit Note shall
not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision or
acceleration of maturity therein or herein contained, the
principal thereof and the accrued and unpaid interest thereon
shall bear interest, until paid, at a rate per annum which
shall be 1.1 times the Alternate Base Rate from time to time
in effect.
(viii) LOAN REFINANCINGS: If any Revolving Credit Loan is not repaid
when due, unless otherwise directed by the Company, and
provided no Event of Default exists, (and the Commitment
Period has not terminated), the Lenders shall refinance such
Loans with Alternate Base Rate Loans unless otherwise provided
in this Agreement. Such automatic Loans shall be deemed to
have repaid the principal in full of each prior Loan such that
no Event of Default would exist.
(ix) CONVERSION: At the Company's option, the Company may at any
time or from time to time, except if an Event of Default
exists, convert a LIBOR Loan or an Alternate Base Rate Loan to
any one of the other types of Loans; provided, however, in the
case of LIBOR Loans any such conversion may only be made on
the Interest Adjustment Date applicable thereto. Such
conversion shall not be deemed to be a prepayment. The
provisions of this subsection shall apply with respect to
voluntary
9
<PAGE> 10
conversions or conversions required hereunder. The Company,
through the Administrative Agent, shall give written or
telephonic notice to the Banks of each conversion by 11:00
a.m., New York time (a) on the date of such conversion if such
conversion is to Alternate Base Rate Loans, and (b) at least
two (2) London Banking Days prior to the date of such
conversion if such conversion is to LIBOR Loans. Each such
notice shall be effective upon receipt by the relevant Lender
and shall specify the date and amount of such conversion, the
type of Loans to be converted and the type of Loans to be
converted into. Each conversion shall be in an aggregate
amount of not less than Five Million Dollars ($5,000,000) or
any greater amount evenly divisible by One Million Dollars
($1,000,000).
(x) PREPAYMENT.
(a) As to Alternate Base Rate Loans, the Company shall
have the right at any time or from time to time, upon
one (1) Banking Days' prior written notice to the
Administrative Agent, without the payment of any
premium or penalty to prepay on a pro-rata basis, all
or any part of the principal amount of the Revolving
Credit Notes then outstanding as designated by the
Company plus interest accrued on the amount so
prepaid to the date of such prepayment.
(b) As to LIBOR Loans, the Company shall have the right
at any time or from time to time, upon four (4)
London Banking Days' prior written notice to the
Administrative Agent, to prepay on a pro-rata basis,
all or any part of the principal amount of the
Revolving Credit Notes then outstanding as designated
by the Company, plus interest accrued on the amount
so prepaid to the date of such prepayment. If LIBOR,
as determined as of 11:00 a.m. London time three (3)
London Banking Days prior to the date of prepayment
(hereinafter "Prepayment LIBOR"), shall be lower than
the last LIBOR previously determined for the LIBOR
Loan(s), with respect to which prepayment is intended
to be made (hereinafter "Last LIBOR"), then the
Company shall promptly pay each of the Lenders, in
immediately available funds, a prepayment premium
measured by a rate (the "Prepayment Premium Rate")
which shall be equal to the difference between the
Last LIBOR and the Prepayment LIBOR. In determining
the Prepayment LIBOR, the Company shall apply a rate
equal to LIBOR (for a deposit approximately equal to
the amount of such prepayment) which would be
applicable to a LIBOR Interest Period commencing on
the date of such prepayment and having a duration
equal to the LIBOR Interest Period described in
Article I hereof with a length closest to the
remaining duration of the actual LIBOR Interest
Period during which such prepayment is to be made.
The Prepayment Premium Rate shall be applied to all
or such part of the principal amount of the Revolving
Credit Notes as related to the LIBOR Loans to be
prepaid, and the prepayment premium shall be computed
for the period commencing with the date on which said
prepayment is to be made to that date which coincides
with the last day of the LIBOR Interest Period
previously established when the LIBOR Loans, which
are to be prepaid, were made. Each prepayment of a
LIBOR Loan shall be in the aggregate principal sum of
not less than One Million Dollars ($1,000,000).
Notwithstanding the above, no prepayment premium
shall be due and owing by the Company if the Company
makes such payment on the Interest Adjustment Date
applicable to the Loan being paid. In the event the
Company fails to borrow or convert into a proposed
LIBOR Loan subsequent to the delivery to the Lenders
of the notice of the proposed date,
10
<PAGE> 11
aggregate amount and initial LIBOR Interest Period of
such Loan, but prior to the draw down of funds
thereunder, such failure to borrow or convert shall
be treated as a prepayment subject to such prepayment
premium.
B. MONEY MARKET RATE LOANS
(i) BORROWING RESTRICTIONS: Subject to the terms and conditions of
this Agreement, during the Commitment Period each Lender may
make (but is not obligated to make) a Money Market Rate Loan
to the Company in such amount or amounts as the Company may
from time to time request, provided that the sum of the total
Loans outstanding under Sections 2.1A and 2.1B plus the
aggregate principal amount of outstanding Competitive Loans at
any time shall not exceed the Commitments which, as of the
date hereof, total One Hundred Thirty-Four Million Four
Hundred Thousand Dollars ($134,400,000). Subject to the
provisions of this Agreement, the Company shall be entitled
under this Paragraph B to borrow funds, repay the same in
whole or in part and reborrow hereunder at any time and from
time to time from any Lender making Money Market Rate Loans to
the Company. The Administrative Agent shall not be involved,
in its capacity as such agent, in any borrowing(s) by the
Company under this Section 2.1B; provided, however, the
Administrative Agent shall be advised by the Company of each
such borrowing hereunder. The procedures for any such Loan
shall be as agreed upon by the Company and each Lender making
a Loan under this Paragraph B.
(ii) LOAN AMOUNTS: The Company shall have the option, subject to
the terms and conditions set forth herein, to borrow under
this Section 2.1B from any Lender that agrees to make such a
Loan, an amount not to exceed the total of all Commitments in
amounts of not less than Five Million Dollars ($5,000,000) or
any greater amount evenly divisible by One Million Dollars
($1,000,000).
(iii) INTEREST RATES: The Company shall pay interest on the unpaid
principal amount of any Money Market Rate Loan outstanding
from time to time from the date on which funds are received by
the Company until paid, at the Money Market Rate. Except as
may be otherwise agreed by the Company and the Lender making a
Money Market Rate Loan, interest shall be payable at the
maturity of such Loan and shall be computed on the basis of a
365 or 366 day year, as the case may be.
(iv) MONEY MARKET NOTES: The obligation of the Company to repay
Money Market Rate Loans and to pay interest thereon, shall be
evidenced by a Money Market Note substantially in the form of
Schedule C hereto, dated the date of execution thereof by the
Company and payable to the order of the applicable Lender in
accordance with the terms and conditions of such Money Market
Note.
(v) PAYMENT: All payments of principal and interest due on Money
Market Rate Loans shall be paid by the Company directly to any
Lender making a Money Market Rate Loan to the Company. Any
such Loans hereunder shall be paid on the date specified in
the applicable Money Market Note.
(vi) INTEREST ON LATE PAYMENTS: If any Money Market Note shall not
be paid at maturity, whether such maturity occurs by reason of
lapse of time or by operation of any provision of acceleration
of maturity therein contained, the principal thereof and the
unpaid interest thereon shall bear interest, until paid, at a
rate per annum which shall be 1.1 times the Alternate Base
Rate from time to time in effect.
11
<PAGE> 12
C. COMPETITIVE BID LOANS
(i) BORROWING RIGHTS AND RESTRICTIONS: Subject to the terms and
conditions of this Agreement, during the Commitment Period the
Company may request Competitive Bids and may (but shall not
have any obligation to) accept Competitive Bids and borrow
Competitive Loans provided that the sum of the total Loans
outstanding under Sections 2.1A and 2.1B plus the aggregate
principal amount of outstanding Competitive Loans at any time
shall not exceed the Commitments which, on the date hereof,
total One Hundred Thirty-Four Million Four Hundred Thousand
Dollars ($134,400,000). Subject to the provisions of this
Agreement, the Company may, if a Competitive Bid is submitted
by a Lender, borrow funds under this Paragraph C, repay the
same in whole or in part, and reborrow hereunder at any time
and from time to time during the Commitment Period.
(ii) LOAN AMOUNTS: The Company shall have the option, subject to
the terms and conditions set forth herein, to borrow under
this Section 2.1C up to the principal amount of the
Commitments which, on the date hereof, total One Hundred
Thirty-Four Million Four Hundred Thousand Dollars
($134,400,000) by means of any combination of:
(a) Fixed Rate Loans which shall be payable on their
respective due dates and shall be drawn down in
aggregate amounts of not less than Five Million
Dollars ($5,000,000) or any greater amount evenly
divisible by One Million Dollars ($1,000,000); and
(b) Competitive Libor Loans which shall be payable on the
last date of their Competitive Libor Interest Period
and shall be drawn down in aggregate amounts of not
less than Five Million Dollars ($5,000,000) or any
greater amount evenly divisible by One Million
Dollars ($1,000,000).
(iii) PROCEDURE FOR BORROWING: The procedure for borrowing under
this Section 2.1C shall be as follows:
(a) Each such borrowing shall be made by Notice to the
Competitive Advance Facility Agent (which Notice must
be received by the Competitive Advance Facility Agent
prior to 11:00 a.m. New York time four (4) London
Banking Days prior to the requested borrowing date in
the event of a Competitive Libor Loan and by 11:00
a.m. New York time one Banking Day prior to the
proposed date of such borrowing in the event of a
Fixed Rate Loan). Such Notice shall specify:
(1) the amount of such borrowing;
(2) the requested borrowing date which shall be
a Banking Day or a London Banking Day, as
the case may be;
(3) the type of Loan(s) comprising such
borrowing; and
(4) the duration of the Competitive Libor
Interest Period for any Competitive Libor
Loan and the maturity date of any Fixed Rate
Loan(s).
12
<PAGE> 13
(b) The Competitive Advance Facility Agent shall promptly
notify each Lender of its receipt of a request for a
Competitive Loan thereby inviting the Lenders to
submit Competitive Bids. Any such notice shall
identify the name of the Company's bank, the
Company's account number and American Banking
Association routing number of the bank at which the
Company's account is maintained and to which the
proceeds from any Competitive Loan shall be routed.
(c) Each Lender may (but shall not have any obligation
to) make one or more Competitive Bids to the Company
in response to a Competitive Bid Request. Each
Competitive Bid by a Lender must be in a form
approved by the Competitive Advance Facility Agent
and must be received by the Competitive Advance
Facility Agent by telecopy, in the case of a
Competitive Libor Loan, not later than 10:00 a.m.,
New York time, three (3) London Banking Days before
the proposed date of such Competitive Borrowing, and
in the case of an Fixed Rate Loan, not later than
10:00 a.m., New York time, on the proposed date of
such Competitive Borrowing. Competitive Bids that do
not conform substantially to the form approved by the
Competitive Advance Facility Agent may be rejected by
the Competitive Advance Facility Agent, and the
Competitive Advance Facility Agent shall notify the
applicable Lender as promptly as practicable. Each
Competitive Bid shall be in aggregate amounts of not
less than Five Million Dollars ($5,000,000) or any
greater amount evenly divisible by One Million
Dollars ($1,000,000) and may equal the entire
principal amount of the Competitive Borrowing
requested by the Company. Each Competitive Bid shall
specify (i) the Competitive Bid Rate(s) at which the
Lender is prepared to make such Loan or Loans
(expressed as a percentage rate per annum in the form
of a decimal to no more than four decimal places) and
(ii) in the case of a Competitive Libor Loan, the
Competitive Libor Interest Period applicable to each
such Loan and the last day thereof.
(d) The Competitive Advance Facility Agent shall promptly
notify the Company by telecopy of the Competitive Bid
Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that
made such Competitive Bid.
(e) Subject only to the provisions of this paragraph, the
Company may accept or reject any Competitive Bid. The
Company shall notify the Competitive Advance Facility
Agent by telephone, confirmed by telecopy in a form
approved by the Competitive Advance Facility Agent,
whether and to what extent it has decided to accept
or reject each Competitive Bid, in the case of a
Competitive Libor Loan, not later than 11:00 a.m.,
New York time, three (3) London Banking Days before
the date of the proposed Competitive Borrowing, and
in the case of a Fixed Rate Loan, not later than
11:00 a.m., New York time, on the proposed date of
the Competitive Borrowing; provided that (i) the
failure of the Company to give such notice shall be
deemed to be a rejection of each Competitive Bid,
(ii) the Company shall not accept a Competitive Bid
made at a particular Competitive Bid Rate if the
Company rejects a Competitive Bid made at a lower
Competitive Bid Rate, (iii) the aggregate amount of
the Competitive Bids accepted by the Company shall
not exceed the aggregate amount of the requested
Competitive
13
<PAGE> 14
Borrowing specified in the related Competitive Bid
Request, (iv) to the extent necessary to comply with
clause (iii) above, the Company may accept
Competitive Bids at the same Competitive Bid Rate in
part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall
be made pro-rata in accordance with the amount of
each such Competitive Bid, and (v) except as
otherwise provided in clause (iv) above, no
Competitive Bid shall be accepted for a Competitive
Loan unless such Competitive Loan is in a minimum
principal amount of Five Million Dollars ($5,000,000)
or any greater amount evenly divisible by One Million
Dollars ($1,000,000); provided further that if a
Competitive Loan must be in an amount less than Five
Million Dollars ($5,000,000) because of the
provisions of clause (iv) above, such Competitive
Loan may be for a minimum of One Million Dollars
($1,000,000) or any integral multiple thereof, and in
calculating the pro-rata allocation of acceptances of
portions of multiple Competitive Bids at a particular
Competitive Bid Rate pursuant to clause (iv) the
amounts shall be rounded to integral multiples of One
Million Dollars ($1,000,000) in a manner determined
by the Company.
(f) The Competitive Advance Facility Agent shall promptly
notify each bidding Lender by telecopy whether or not
its Competitive Bid has been accepted (and, if so,
the amount and Competitive Bid Rate so accepted), and
each successful bidder will thereupon become bound,
subject to the terms and conditions hereof, to make
the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(g) If the Competitive Advance Facility Agent shall elect
to submit a Competitive Bid in its capacity as a
Lender, it shall submit such Competitive Bid directly
to the Company at least one quarter of an hour
earlier than the time by which the other Lenders are
required to submit their Competitive Bids to the
Competitive Advance Facility Agent pursuant to
paragraph (b) of this Section.
(iv) INTEREST RATES: Interest shall accrue at the Competitive Bid
Rate specified in the applicable Competitive Bid, unless
otherwise agreed by the Lender submitting such Competitive Bid
and the Company.
(v) PAYMENTS ON COMPETITIVE NOTES: All payments of principal and
interest shall be made to the Competitive Advance Facility
Agent in immediately available funds for the account of the
Lenders by no later than 3:00 p.m. (New York time) on the
applicable payment date which date shall be specified on the
applicable Competitive Note. The Competitive Advance Facility
Agent shall promptly distribute to each Lender the principal
and interest received by it for the account of such Lender.
Each Lender having made a Competitive Loan hereunder shall
endorse each Competitive Note held by it or otherwise make
appropriate book entries evidencing each payment of principal
made thereon, it being understood, however, that any Lender's
failure to record appropriate information on the grid(s)
attached to any such Note shall in no way affect the
obligation of the Company under this Agreement or under any
such Note. Whenever any payment to be made hereunder,
including without limitation, any payment to be made on any
Note, shall be stated to be due on a day which is not a
Banking Day, or a London Banking Day as the case may be, such
payment shall be made on the next Banking Day (but in any
event not later than its maturity date) and such extension of
time shall in each case be included in the computation of the
interest payable on such Note. Notwithstanding the previous
14
<PAGE> 15
sentence, in the case of any Competitive Libor Loan, if the
next London Banking Day is in a month other than the month the
payment was originally due, such payment may be made on the
immediately preceding London Banking Day and such reduction of
time shall in each case be considered in the computation of
the interest payable on such Note.
(vi) COMPETITIVE NOTES: The obligation of the Company to repay the
Fixed Rate Loans and the Competitive Libor Loans made by any
Lender and to pay interest thereon shall be evidenced by
non-negotiable Competitive Notes of the Company substantially
in the form of Schedule D hereto, with appropriate insertions,
dated the date of execution thereof by the Company and payable
to the order of such Lender on the maturity date of such Loan,
in the principal amount indicated thereon. The principal
amount of the Fixed Rate Loans and the Competitive Libor Loans
made by each Lender under this Section 2.1C and all
prepayments thereof and the applicable dates with respect
thereto shall be recorded by such Lender from time to time on
the grid(s) attached to such Note or by appropriate book
entry. The aggregate unpaid amount of Fixed Rate Loans and
Competitive Libor Loans set forth on the grid(s) attached to
each Competitive Note shall be rebuttable presumptive evidence
of the principal amount owing and unpaid on such Note, it
being understood, however, that any Lender's failure to so
record appropriate information on the grid(s) attached to its
respective Competitive Note shall in no way affect the
obligations of the Company under this Agreement or such Note.
(vii) PREPAYMENT: The Company shall not have any right to prepay any
Competitive Loan without the prior consent of the Lender
having made such Loan.
SECTION 2.2. CONDITIONS TO CERTAIN LOANS OR CONVERSIONS. The obligation or right
of each Lender to make any of the Loans or to convert any of the Loans
described in Sections 2.1A, 2.1B or 2.1C hereunder is conditioned, in
the case of each borrowing or conversion hereunder, upon:
(i) the fact that no Possible Default or Event of Default shall
then exist or immediately after such Loan is made would exist;
and
(ii) the fact that the representations and warranties contained in
Article IV hereof shall be true and correct in all material
respects with the same force and effect as if made on and as
of the date of such borrowing or conversion.
Each borrowing or conversion by the Company hereunder shall be deemed
to be a representation and warranty by the Company as of the date of
such borrowing or conversion as to the facts specified in Sections 2.2
(i) and (ii) above.
SECTION 2.3. FACILITY FEE. The Company agrees to pay to each Lender a Facility
Fee, for the period from and including the date of this Agreement until
the Commitments have terminated and the outstanding Loans have been
repaid. The first payment of the Facility Fee shall be made no later
than March 31, 1997 for the period January 3, 1997 to March 31, 1997.
All payments of the Facility Fee shall be made to the Administrative
Agent in immediately available funds for the account of the Lenders by
no later than 3:00 p.m. (New York time) on the applicable payment date.
The Administrative Agent shall promptly distribute to each Lender its
ratable share of the Facility Fee received by it for the account of
such Lender.
15
<PAGE> 16
SECTION 2.4. COMPUTATION OF FACILITY FEES. Facility Fees shall be computed for
the actual number of days elapsed on the basis of a 360 day year.
SECTION 2.5. TERMINATION OF COMMITMENTS AND RIGHT OF SUBSTITUTION.
(i) The Company may at any time or from time to time terminate in
whole or ratably in part the Commitments of all of the Lenders
to an amount not less than the aggregate principal amount of
the Loans then outstanding under this Agreement, by giving the
Lenders and the Administrative Agent not less than two (2)
Banking Days' notice of the aggregate amount of such
termination (which shall not be less than Five Million Dollars
($5,000,000) or any greater amount evenly divisible by One
Million Dollars ($1,000,000)) and such Lender's proportionate
amount of such termination. If the Company terminates in whole
the Commitments of the Lenders, on the effective date of such
termination (provided the Company has prepaid in full the
unpaid principal balance, if any, of the Notes outstanding
together with all accrued and unpaid interest, if any,
Facility Fees accrued and unpaid, and any applicable
prepayment premiums) all of the Notes outstanding shall be
delivered to the Company marked "Cancelled". Any termination
of the Commitments shall be irrevocable during the remainder
of the Commitment Period.
(ii) The Company may at any time or from time to time terminate or
reduce the Commitment of any Lender hereunder to an amount not
less than the aggregate principal amount of the Loans then
outstanding held by such Lender under this Agreement:
(a) immediately if such Lender satisfies any of the
criteria for insolvency described in Section 7.5
hereof; or
(b) upon not less than two (2) Banking Days' notice to
such Lender and the Administrative Agent if the
Company, in its sole discretion, elects to terminate
the Commitment of such Lender for any reason
including, but not limited to, the default of such
Lender under the terms of this Agreement.
(iii) In the event the Commitment of any Lender is terminated by the
Company, the Company shall replace such Lender with a
successor Lender or banks (including any Lender or Lenders
which is a party to this Agreement with the consent of such
Lender or Lenders) with a Commitment not to exceed the
Commitment of the terminated Lender(s); provided that such
successor Lender shall, pursuant to a written instrument in
form and substance satisfactory to the Company, effectively
agree to become a party hereto and a "Lender" hereunder and be
bound by the terms hereof.
(iv) In the event of a default of any Lender under the terms of
this Agreement, the Company's election to terminate the
Commitment of such Lender shall not act as a waiver of any
other remedies which the Company may have for such default.
(v) The termination of the Commitment of any Lender pursuant to
Section 2.5(ii) shall not affect the Commitments or the
obligations of all remaining Lenders under this Agreement.
(vi) After any termination or reduction of the Commitments as
described in this Section 2.5, the Facility Fees payable
hereunder shall be calculated upon the Commitments of the
Lenders as so reduced.
16
<PAGE> 17
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS AND
FIXED RATE LOANS
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time after the
Effective Date any Regulatory Change shall impose, modify or deem
applicable any reserve and/or special deposit requirement (other than
reserves: (a) included in the Reserve Percentage, the effect of which
is reflected in the interest rate(s) of the LIBOR Loan(s) or
Competitive Libor Loan(s) in question or (b) attributable to
requirements imposed by the Board of Governors of the Federal Reserve
System on any Lender as a result of the failure of any such Lender to
maintain necessary current capitalization or financial conditions
imposed thereby) against assets held by, or deposits in or for the
account of any Loans by any Lender, and the result of the foregoing is
to increase the cost to such Lender of making or maintaining LIBOR
Loans or Competitive Libor Loans, as the case may be, or reduce the
amount of principal or interest received by such Lender with respect to
LIBOR Loans or Competitive Libor Loans, then upon demand by such Lender
the Company shall pay to such Lender from time to time on Interest
Adjustment Dates with respect to such Loans, as additional
consideration hereunder, additional amounts sufficient to fully
compensate and indemnify such Lender for such increased cost or reduced
amount, provided that such additional cost or reduced amount were
allocable to such LIBOR Loans or Competitive Libor Loans.
A certificate as to the increased cost or reduced amount
(hereinafter in this Section 3.1 collectively called "Increased Costs")
as a result of any event mentioned in this Section 3.1, setting forth
the calculations therefor, shall be promptly submitted by such Lender
to the Company for its review. The Company shall pay such Increased
Costs for such period of time prior to the date such certificate is
received by the Company during which such Regulatory Change, by its
terms, applies retroactively to any period of time prior to the date
such Regulatory Change became effective. In addition, the Company shall
pay such Increased Costs incurred by a Lender on and after the date
such certificate is received by the Company unless, and until, the
Company, notwithstanding any other provision of this Agreement,
(i) upon at least three (3) Banking Days' prior written notice to
such Lender, prepays the affected LIBOR Loans in full or
converts all LIBOR Loans to Alternate Base Rate Loans
regardless of the LIBOR Interest Period thereof, or
(ii) terminates the Commitment of such Lender pursuant to Section
2.5 (provided that the Company shall pay such Increased Costs
on any LIBOR Loans from such Lender which remain outstanding).
Each Lender will notify the Company as promptly as practicable of the
existence of any event which will likely require the payment by the
Company of any such additional amount under this Section.
SECTION 3.2. CHANGES IN TAX LAWS. In the event that by reason of any Regulatory
Change of the jurisdiction where the office of the Lender making a Loan
is located, (i) any Lender shall, with respect to this Agreement or any
transaction under this Agreement, be subject to any tax, levy, impost,
charge, fee, duty, deduction or withholding of any kind whatsoever
(other than any tax imposed upon the total net income of such Lender or
imposed on or calculated with respect to the value of the assets of
such Lender) or (ii) any change shall occur in the taxation of any
Lender with respect to any Loan and the interest payable thereon (other
than any change which affects, and to the extent that it affects, the
taxation of the total net income of such Lender or imposed on or
calculated with respect to the value of the assets of such Lender), and
if any such measures or any other similar measure shall result in an
increase in the cost to such Lender of making or maintaining any Loan
or
17
<PAGE> 18
in a reduction in the amount of principal, interest or Facility Fee receivable
by such Lender in respect thereof, then such Lender shall promptly notify the
Company stating the reasons therefor.
A certificate as to any such increased cost or reduced amount
(hereinafter in this Section 3.2 collectively called "Increased Taxes") as a
result of any event mentioned in this Section 3.2, setting forth the
calculations therefor, shall be submitted by such Lender to the Company for its
review. The Company shall pay such Increased Taxes for such period of time prior
to the date such certificate is received by the Company during which such
Regulatory Change, by its terms, applies retroactively to any period of time
prior to the date such Regulatory Change became effective. In addition, the
Company shall pay such Increased Taxes incurred by such Lender on and after the
date such certificate is received by the Company unless and until the Company,
notwithstanding any other provision of this Agreement,
(i) upon at least three (3) Banking Days' prior written notice to
such Lender and the Administrative Agent, prepays the affected
Loans in full, or
(ii) terminates the Commitment of such Lender pursuant to Section
2.5 hereof (provided that the Company shall pay such Increased
Costs on any Loans from such Lender which remain outstanding).
If any Lender receives such additional consideration from the Company
pursuant to this Section 3.2 and thereafter obtains the benefits of any refund,
deduction or credit for any taxes or other amounts on account of which such
additional consideration has been paid, such Lender shall pay to the Company its
allocable share thereof and shall reimburse the Company to the extent, but only
to the extent, that such Lender shall have actually received a refund of such
taxes or other amounts together with any interest thereon or an effective net
reduction in taxes or other governmental charges (including any taxes imposed on
or measured by the total net income of such Lender) of the United States or any
state or subdivision thereof by virtue of any such deduction or credit, after
first giving effect to all other deductions and credits otherwise available to
such Lender. If, at the time any audit of such Lender's income tax return by any
taxing agency is completed, such Lender determines, based on such audit, that it
was not entitled to the full amount of any refund reimbursed to the Company as
aforesaid or that its net income taxes are not reduced by a credit or deduction
for the full amount of taxes reimbursed to the Company as aforesaid, the
Company, upon demand of such Lender, will promptly pay to such Lender the amount
so refunded to which such Lender was not so entitled, or the amount by which the
net income taxes of such Lender were not so reduced, as the case may be. The
provisions of this Section 3.2 and Section 3.1 shall survive the termination of
this Agreement.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE.
In the event the Majority Lenders shall have determined, in good faith
and reasonably, that Dollar deposits of the relevant amount for the
relevant LIBOR Interest Period for LIBOR Loans are not available to the
Lenders 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 then (i) any notice of new LIBOR Loans
(or conversion of Revolving Credit Loans to LIBOR Loans) previously
given by the Company and not yet borrowed (or converted, as the case
may be) shall be deemed a notice to make Alternate Base Rate Loans
unless the Company notifies the Administrative Agent to the contrary,
and (ii) the Company shall be obligated either to prepay or to convert
any outstanding LIBOR Loans on the last day of the then current LIBOR
Interest Period or Periods with respect thereto.
18
<PAGE> 19
SECTION 3.4. INDEMNITY. Without limitation of any other provisions of this
Article III, the Company hereby agrees to indemnify and hold harmless
each of CBT, Chase and each Lender from and against all costs, expenses
(including fees, charges and disbursements of counsel) and liabilities
resulting from any litigation or other proceedings (regardless of
whether CBT, Chase or any Lender is a party thereto), related to or
arising out of the Transactions contemplated hereby, except to the
extent such costs, expenses and liabilities result from the wilful
misconduct or gross negligence of the party seeking indemnification as
determined by a court of competent jurisdiction, excluding
consequential, incidental or special damages. A certificate as to any
such loss or expense shall be promptly submitted by CBT, Chase and any
such Lender to the Company for its review and shall be paid by the
Company in the absence of manifest error.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any time any
Regulatory Change shall make it unlawful for any Lender to fund,
refinance, continue or convert into any LIBOR Loans which it is
committed to make hereunder with moneys obtained in the London
Interbank Eurodollar market, the Commitment of such Lender to fund,
refinance, continue or convert into LIBOR Loans shall, upon the
happening of such event, be suspended for the duration of such
illegality and such Lender shall by written notice to the Company and
the Administrative Agent declare that its Commitment with respect to
such Loans has been so suspended and, if and when such illegality
ceases to exist, such suspension shall cease and such Lender shall
similarly notify the Company and the Administrative Agent. If any such
change shall make it unlawful for any Lender to continue in effect the
funding in the London Interbank Eurodollar market of any LIBOR Loan
previously made by it hereunder, such Lender shall, upon the happening
of such event, notify the Company and the other Lenders thereof in
writing stating the reasons therefor and the Company shall, on the
earlier of (i) the last day of the then current LIBOR Interest Period
or (ii) if required by such law, regulation or interpretation, on such
date as shall be specified in such notice, either convert all LIBOR
Loans to Alternate Base Rate Loans or prepay all LIBOR Loans to the
Lenders in full. Any such prepayment or conversion shall not be subject
to the prepayment premiums prescribed in Section 2.1A(x) hereof. Any
requests for a LIBOR Loan not funded pursuant to this Section shall be
deemed to have been a request for an Alternate Base Rate Loan.
SECTION 3.6. FUNDING. Each Lender may, but shall not be required to, make LIBOR
Loans and Competitive Libor Loans with funds obtained outside the
United States.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders that:
SECTION 4.1. CORPORATE EXISTENCE. The Company is a corporation duly organized
and in good standing under the laws of the State of Ohio.
SECTION 4.2. AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance by the Company of this Agreement, the Notes and Related
Writings are within the Company'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 or any
applicable final judgement in effect or of the Amended Articles of
Incorporation or Regulations of the Company or of any agreement for
borrowed money or other material agreement binding upon the Company.
The Company has duly executed and delivered this Agreement.
SECTION 4.3. VALIDITY AND BINDING NATURE. This Agreement is, and the Notes when
duly executed and delivered will be, legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms.
19
<PAGE> 20
SECTION 4.4. LITIGATION AND LIENS. To the best of the Company's knowledge, no
litigation or proceeding is pending which would, if successful, have a
Material adverse impact on the financial condition of the Company and
the Consolidated Subsidiaries taken as a whole, which is not already
reflected in the Company's Financial Reports delivered to the Lenders
prior to the date of this Agreement. The Internal Revenue Service has
not alleged any Material default by the Company 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 the Company and the Consolidated
Subsidiaries, taken as a whole.
SECTION 4.5. ERISA COMPLIANCE. Neither the Company 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 the Company or any of its
Consolidated Subsidiaries, taken as a whole. The Pension Benefit
Guaranty Corporation, established under ERISA, has not asserted that
the Company 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 the Company and any Consolidated Subsidiary as a result of
the Company's or any Consolidated Subsidiary's failure to comply with
ERISA.
SECTION 4.6. ENVIRONMENTAL MATTERS. To the best of the Company's knowledge, the
Company 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 the Company or a Subsidiary, as the case may be, in good faith by
appropriate proceedings diligently prosecuted) relating to
environmental control in all jurisdictions where the Company or any
Subsidiary is presently doing business and the Company 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 the Company or a Subsidiary, as the case
may be, in good faith by appropriate proceedings diligently
prosecuted).
SECTION 4.7. FINANCIAL REPORTS. The Financial Reports of the Company and the
Consolidated Subsidiaries, furnished to each Lender 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 the
Company's and its Consolidated Subsidiaries' financial condition and
the results of their operations, as of the date, and for the period
encompassed by such Financial Reports. Since the dates of the Company's
most recent Financial Reports until the date of this Agreement there
has been no material adverse change in the consolidated financial
condition of the Company and the Consolidated Subsidiaries taken as a
whole.
SECTION 4.8. REGULATION U. Neither the Company 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). Each of the
Lenders represents and warrants to the Company that it is not relying
on and will not rely on any margin stock (as described above) in
determining whether to extend or maintain credit under this Agreement.
SECTION 4.9. GOVERNMENT REGULATION. Neither the Company 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.
20
<PAGE> 21
SECTION 4.10. TAXES. The Company 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 the Company or a
Subsidiary, as the case may be, in good faith by appropriate
proceedings diligently prosecuted (the Company having made adequate and
reasonable provision for all material taxes not yet due and payable),
if any, and all material assessments, if any.
SECTION 4.11. DEFAULTS. No Possible Default or Event of Default exists which
would have or reasonably could have a Material adverse impact on the
financial condition of the Company and the Consolidated Subsidiaries,
taken as a whole.
ARTICLE V. OPENING COVENANTS
Prior to or concurrently with the execution and delivery of this
Agreement, the Company shall furnish to each Lender, and with regard to
Section 5.6, the Administrative Agent, copies of the following:
SECTION 5.1. RESOLUTIONS. Certified copies of the resolutions of the Board of
Directors of the Company evidencing approval of the execution of this
Agreement.
SECTION 5.2. LEGAL OPINION. A favorable opinion of counsel for the Company as to
the matters referred to in Sections 4.1, 4.2, 4.3, 4.4, 4.6, 4.8 and
4.9 of this Agreement and such other matters as the Lenders may
reasonably request.
SECTION 5.3. CERTIFICATE OF INCUMBENCY. A certificate of the secretary or
assistant secretary of the Company certifying the names of the officers
of the Company authorized to sign this Agreement, and the Notes,
together with the true signatures of such officers.
SECTION 5.4. FINANCIAL REPORTS. The Financial Reports of the Company and the
Consolidated Subsidiaries, dated December 31, 1995, previously
furnished to each Lender, are true and complete, have been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with those used by the Company and the Consolidated
Subsidiaries during the Company's 1995 fiscal year, except as stated
therein, and fairly present the Company's and the Consolidated
Subsidiaries' financial condition as of that date and the results of
their operations for the period then ended. Since that date there has
been no material adverse change in the Company's and the Consolidated
Subsidiaries' financial condition, properties or business taken as a
whole.
SECTION 5.5. GOOD STANDING. Such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of the Company and any
other legal matters relating to the Company and this Agreement, all in
form and substance satisfactory to the Administrative Agent and its
counsel.
ARTICLE VI. COVENANTS
Until the later of (i) the expiration of the Commitments or
(ii) all obligations of the Company hereunder and under the Notes are
satisfied and paid in full, the Company agrees that, unless at any
time the Majority Lenders shall otherwise expressly agree in writing:
SECTION 6.1. INSURANCE. The Company will (a) maintain insurance to such extent
and against such hazards and liabilities as is commonly maintained by
companies similarly situated, and (b) upon
21
<PAGE> 22
any Lender's written request, furnish to such Lender such information
about the Company's and its Consolidated Subsidiaries' insurance as
such Lender may from time to time reasonably request, which information
shall be prepared in form and detail reasonably satisfactory to such
Lender.
SECTION 6.2. FINANCIAL REPORTS. The Company will furnish to the Administrative
Agent and each Lender:
(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 the Company 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 the Company 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 the Company 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
the Company (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 the
Company's senior unsecured long-term debt by Moodys or S&P
within thirty (30) days of such change; and
(vi) such other financial information regarding the Company as any
Lender may reasonably request.
SECTION 6.3. NET WORTH. The Company will not permit Consolidated Net Worth at
any time to fall below Eight Hundred Million Dollars ($800,000,000).
SECTION 6.4. REGULATIONS U AND X. The Company will not nor will it permit any
Subsidiary to take any action that would result in any non-compliance
of the Loans with Regulations U and X of the Board of Governors of the
Federal Reserve System. The Company's use of proceeds of any borrowings
under this Agreement will not cause a violation of Regulations U or X.
22
<PAGE> 23
SECTION 6.5. MERGER AND SALE OF ASSETS. The Company 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,
Event of Default or Change of Control (as such term is defined in
Section 6.6) shall then exist or immediately thereafter will begin to
exist:
(i) Any Consolidated Subsidiary may merge with (a) the Company
(provided that the Company 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), the Company 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 the Company 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) the Company, (b)
any Wholly-Owned Consolidated Subsidiary or (c) any
Consolidated Subsidiary of which the Company and/or one or
more Wholly-Owned Consolidated Subsidiaries shall own not less
than the same percentage of Voting Stock as the Company and/or
one or more Wholly-Owned Consolidated Subsidiaries then own of
the Consolidated Subsidiary making such sale, lease, transfer
or other disposition,
(iii) The Company may sell the stock or assets of any Consolidated
Subsidiary if such sale or other disposition is determined by
the board of directors of the Company to be in the best
interests of the Company and such sale is for a consideration
which represents the fair value (as determined in good faith
by the board of directors of the Company) thereof at the time
of such sale of such stock or assets,
(iv) The Company may merge with any other corporation, provided
that the Company shall be the surviving corporation,
(v) The Company or any Consolidated Subsidiary may sell all or any
part of the assets of any of its divisions or operations if
such sale or other disposition is determined by the board of
directors of the Company and/or such Consolidated Subsidiary,
as the case may be, to be in the best interests of the Company
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 the Company) thereof at the time of such sale or other
disposition of such assets, and
(vi) The Company or any Subsidiary may sell or transfer all or any
part of the assets of any of its divisions or operations to
any Subsidiary.
SECTION 6.6. CHANGE OF CONTROL. In the event there occurs a Change of Control of
the Company, the Commitments of the Lenders will immediately terminate
and the outstanding Loans will become due and payable.
A. For purposes of this Section 6.6, a "Change of Control" shall be
deemed to have occurred if:
23
<PAGE> 24
(i) Any Person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
who or that, together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2, as in effect on April
23, 1997, of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended) of such Person,
is the Beneficial Owner (as defined below) of ten percent
(10%) or more of the shares of Common Stock (as defined below)
of the Company then outstanding, except:
(a) the Company;
(b) any Subsidiary of the Company;
(c) any employee benefit or stock ownership plan of the
Company or any trustee or fiduciary with respect to
such a plan acting in such capacity; or
(d) any such Person who has reported or may, pursuant to
Rule 13d-1(b)(1) of the General Rules and Regulations
under the Securities Exchange Act of 1934, as
amended, report such ownership (but only as long as
such Person is the Beneficial Owner of less than
fifteen percent (15%) of the shares of Common Stock
then outstanding) on Schedule 13G (or any comparable
or successor report) under the Securities Exchange
Act of 1934, as amended.
Notwithstanding the foregoing, (1) no Person shall become the
Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any Person identified in clause
(d) above) solely as the result of an acquisition of Common
Stock by the Company that, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such Person to ten percent (10%) or more
(fifteen percent (15%) or more in the case of any Person
identified in clause (d) above) of the shares of Common Stock
then outstanding; provided, however, that if a Person becomes
the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any Person identified in
clause (d) above) of the shares of Common Stock solely by
reason of purchases of Common Stock by the Company and shall,
after such purchases by the Company, become the Beneficial
Owner of any additional shares of Common Stock which has the
effect of increasing such Person's percentage ownership of the
then-outstanding shares of Common Stock by any means
whatsoever, then such Person shall be deemed to have triggered
a Change of Control, and (2) if the Board of Directors
determines that a Person who would otherwise be the Beneficial
Owner of ten percent (10%) or more (fifteen percent (15%) or
more in the case of any Person identified in clause (d) above)
of the shares of Common Stock has become such inadvertently
(including, without limitation, because (A) such Person was
unaware that it beneficially owned ten percent (10%) or more
(fifteen percent (15%) or more in the case of any Person
identified in clause (d) above) of the shares of Common Stock
or (B) such Person was aware of the extent of such beneficial
ownership but such person acquired beneficial ownership of
such shares of Common Stock without the intention to change or
influence the control of the Company) and such Person divests
itself as promptly as practicable of a sufficient number of
shares of Common Stock so that such Person would no longer be
the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any Person identified in
clause (d) above), then such Person shall not be deemed to be,
or have been, the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of any Person
24
<PAGE> 25
identified clause (d) above) of the shares of Common Stock,
and no Change of Control shall be deemed to have occurred.
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of
Directors of the Company and any new director (other than a
director initially elected or nominated as a director as a
result of an actual or threatened election contest with
respect to directors or any other actual or threatened
solicitation of proxies by or on behalf of such director)
whose election by the Board of Directors 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, cease for any reason to constitute a
majority thereof.
(iii) There shall be consummated any consolidation, merger or other
combination of the Company with any other Person or entity
other than:
(a) a consolidation, merger or other combination which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than fifty-one percent (51%)
of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such consolidation, merger or other
combination; or
(b) a consolidation, merger or other combination effected
to implement a recapitalization and/or reorganization
of the Company (or similar transaction), or any other
consolidation, merger or other combination of the
Company, which results in no Person, together with
all Affiliates and Associates of such Person,
becoming the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of
any Person identified in clause A(i)(d)) of the
combined voting power of the Company's then
outstanding securities.
(iv) There shall be consummated any sale, lease, assignment,
exchange, transfer or other disposition (in one transaction or
a series of related transactions) of fifty percent (50%) or
more of the assets or earning power of the Company (including,
without limitation, any such sale, lease, assignment,
exchange, transfer or other disposition effected to implement
a recapitalization and/or reorganization of the Company (or
similar transaction)) which results in any Person, together
with all Affiliates and Associates of such Person, owning a
proportionate share of such assets or earning power greater
than the proportionate share of the voting power of the
Company that such Person, together with all Affiliates and
Associates of such Person, owned immediately prior to any such
sale, lease, assignment, exchange, transfer or other
disposition.
(v) The shareholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding any subparagraphs of this Section 6.6A above, with
respect to any of the events described in subparagraphs (i), (iii),
(iv) and (v), a Change of Control shall not be
25
<PAGE> 26
deemed to have occurred if any such event is approved by a vote of at
least two-thirds of the directors.
B. A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule
13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, as in effect on
April 23, 1997;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has or shares the right to
acquire, hold, vote (except pursuant to a revocable proxy as
described in the proviso to this Section 6.6B) or dispose of
such securities (whether any such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed to be the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such other
Person) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), with respect to
acquiring, holding, voting (except as described in the proviso
to this Section 6.6B) or disposing of any securities of the
Company;
provided; however, that a Person shall not be deemed the Beneficial
Owner of, nor to beneficially own, any security if such Person has the
right to vote such security pursuant to an agreement, arrangement or
understanding which (a) arises solely from a revocable proxy given to
such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Securities Exchange Act of 1934, as amended, and
(b) is not also then reportable on Schedule 13D (or any comparable or
successor report) under the Securities Exchange Act of 1934, as
amended; and provided, further, that nothing in this Section 6.6B shall
cause a Person engaged in business as an underwriter of securities to
be the Beneficial Owner of, or to beneficially own, any securities
acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of forty (40) days after
the date of such acquisition or such later date as the Board of
Directors may determine in any specific case.
C. "Common Stock" shall mean, unless specifically referenced otherwise,
the shares of common stock $1.00 par value, of the Company; provided,
however, that, if the Company is the continuing or surviving
corporation in a transaction described in subsections A (iii) or A(iv)
of this Section 6.6, "Common Stock" shall mean the capital stock with
the greatest aggregate voting power of the Company, or, if the Company
is a subsidiary of another corporation or business trust, the
corporation or business trust which ultimately controls the Company.
"Common Stock" when used with reference to any corporation or business
trust, other than the Company, shall mean the capital stock with the
greatest aggregate voting power of such corporation or business trust,
or, if such corporation or business trust is a subsidiary of
26
<PAGE> 27
another corporation or business trust, the corporation or business
trust which ultimately controls such first-mentioned corporation or
business trust.
SECTION 6.7. NOTICE. Until the Termination Date, the Company will cause its
treasurer, or in his absence another representative of the Company
designated by the treasurer, to promptly notify the Lenders and the
Administrative Agent whenever any Material Possible Default may occur
or any warranty made in Article IV hereof or elsewhere in this
Agreement or in any Related Writing may for any reason cease in any
Material respect to be true and complete.
SECTION 6.8. LIENS. The Company 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 diligently
prosecuted,
(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 the Company or
another Consolidated Subsidiary,
(iv) liens on Properties of the Company 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 the
Company or any Consolidated Subsidiary through purchase,
merger, consolidation or otherwise, whether or not assumed by
the Company 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 the Company or any Consolidated Subsidiary to
secure all or a portion of or to secure indebtedness 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 the
Company or such Consolidated Subsidiary,
(vii) any lien placed upon any real property now owned or hereafter
acquired by the Company 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
27
<PAGE> 28
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 such 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 6.9. ERISA COMPLIANCE. Neither the Company nor any Consolidated
Subsidiary will incur any Material accumulated funding deficiency
within the meaning of ERISA and the regulations thereunder, or any
Material liability to the Pension Benefit Guaranty Corporation or any
successor thereto in connection with any Plan. The Company will furnish
to the Lenders as soon as possible and in any event within thirty (30)
days after the Company 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 the
Company or such Consolidated Subsidiary setting forth details as to
such Reportable Event and the action which the Company 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 (or any successor thereto) if a copy of
such notice is available to the Company or such Consolidated
Subsidiary.
SECTION 6.10. NOTICE OF DEFAULT. The Company will, and will cause each
Consolidated Subsidiary to, give prompt notice in writing to each
Lender, the Administrative Agent and the Competitive Advance Facility
Agent of the occurrence of any Possible Default, Event of Default or
Change of Control 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 the Company's ability to
repay the Notes.
SECTION 6.11. CONDUCT OF BUSINESS. The Company 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 6.12. TAXES. The Company 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 6.13. COMPLIANCE WITH LAWS. The Company 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 the Company 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 the Company or any Subsidiary may then
be doing business.
28
<PAGE> 29
ARTICLE VII. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default":
SECTION 7.1. NON-PAYMENT OF NOTES, INTEREST, FACILITY FEE OR OTHER FEES. If the
principal on any Note shall not be paid in full when due and payable
and shall remain unpaid for a period of three (3) consecutive Banking
Days, or London Banking Days, as the case may be and/or any interest
due on any Note or any Facility Fee or Other Fee shall not be paid
within five (5) Banking Days after written notice thereof to the
Company from the Lender (or the Administrative Agent or Competitive
Advance Facility Agent, as the case may be) to whom such amount(s) are
owed.
SECTION 7.2. COVENANTS. If the Company 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 the Company's part to be complied with,
and such failure or omission, is not fully corrected within thirty (30)
days after the giving of written notice thereof to the Company by no
less than fifty-one percent (51%) of the Lenders acting as a whole.
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 the Company to the Lenders or any other holder
of any 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 the Company and the Consolidated Subsidiaries,
taken as a whole.
SECTION 7.4. CROSS DEFAULT. If the Company or any of its Consolidated
Subsidiaries (i) defaults 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) defaults 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 Company
and the Consolidated Subsidiaries, taken as a whole.
SECTION 7.5. TERMINATION OF OPERATIONS, BANKRUPTCY OR INSOLVENCY. If the Company
or a Consolidated Subsidiary representing in excess of ten percent
(10%) of total consolidated assets of the Company 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.
29
<PAGE> 30
ARTICLE VIII. EFFECT OF DEFAULT
SECTION 8. EFFECT OF EVENT OF DEFAULT. If any Event of Default described in
Section 7.5 hereof shall occur, the Commitments (if they have not
already been terminated) shall immediately terminate and all Notes
shall automatically become immediately due and payable, without notice.
If any other Event of Default shall occur and shall not have been
remedied within an allowable time period referred to in this Agreement,
then the Majority Lenders may terminate the Commitments (if they have
not already been terminated) and the Outstanding Majority Lenders may
declare that all Notes shall become immediately due and payable. The
Majority Lenders and the Outstanding Majority Lenders shall promptly
notify the Company in writing of any such declaration. The effect as an
Event of Default of any event described in Section 7.1 or 7.5 hereof
may be waived only by the written concurrence of the holders of one
hundred percent (100%) of the Commitments, or in the event there are no
Commitments, by one hundred percent (100%) of the holders of
outstanding Notes. The effect as an Event of Default of any other event
described in Sections 7.2, 7.3 or 7.4 may be waived by the holders of
fifty-one percent (51%) by amount of the Commitments.
ARTICLE IX. THE ADMINISTRATIVE AGENT AND COMPETITIVE ADVANCE
FACILITY AGENT
The Lenders hereby authorize (a) CBT and CBT hereby agrees to
act as Administrative Agent, and (b) The Chase Manhattan Bank and
Chase hereby agrees to act as the Competitive Advance Facility Agent,
for the Lenders in respect of this Agreement upon the terms and
conditions set forth elsewhere in this Agreement, and upon the
following terms and conditions:
SECTION 9.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
appoints and authorizes the Administrative Agent and the Competitive
Advance Facility Agent to exercise such powers hereunder as are
delegated to the Administrative Agent and the Competitive Advance
Facility Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. Notwithstanding anything in this
Agreement to the contrary, or in a Related Writing, neither the
Administrative Agent nor the Competitive Advance Facility Agent shall
have any duties or responsibilities, except those expressly set forth
herein, nor shall the Administrative Agent or the Competitive Advance
Facility Agent have or be deemed to have any fiduciary relationship
with any Lender. Neither the Administrative Agent, the Competitive
Advance Facility Agent nor any of its or their directors, officers,
attorneys or employees shall be liable for any action taken or omitted
to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
SECTION 9.2. NOTE HOLDERS. The Administrative Agent and the Competitive Advance
Facility Agent, as the case may be, may treat the payee of any Note as
the holder thereof until written notice of transfer shall have been
filed with it signed by such payee and in form satisfactory to the
Administrative Agent or the Competitive Advance Facility Agent, as the
case may be.
SECTION 9.3. CONSULTATION WITH COUNSEL. Each of the Competitive Advance Facility
Agent and the Administrative Agent may consult with legal counsel
selected by it (including in-house counsel) and shall not be liable for
any reasonable action taken or suffered in good faith by it in
accordance with the written opinion of external counsel, issued before
such action is taken or suffered.
SECTION 9.4. DOCUMENTS. Neither the Competitive Advance Facility Agent nor the
Administrative Agent shall be under a duty to examine into or pass upon
the validity, effectiveness, genuineness or value of this Agreement,
the Notes, any Related Writing furnished pursuant hereto or in
connection herewith or the value of any collateral obtained hereunder,
and each of the
30
<PAGE> 31
Competitive Advance Facility Agent and the Administrative Agent shall
be entitled to assume that the same are valid, effective and genuine
and what they purport to be.
SECTION 9.5. ADMINISTRATIVE AGENT, COMPETITIVE ADVANCE FACILITY AGENT AND THEIR
AFFILIATES. With respect to the Loans made hereunder, each of the
Competitive Advance Facility Agent and the Administrative Agent shall
have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not the Administrative Agent or the
Competitive Advance Facility Agent, and the Administrative Agent and
the Competitive Advance Facility Agent and their affiliates may accept
deposits from, lend money to and generally engage in any kind of
business with the Company or any Subsidiary or affiliate of the
Company.
SECTION 9.6. KNOWLEDGE OF DEFAULT. It is expressly understood and agreed that
each of the Administrative Agent and the Competitive Advance Facility
Agent shall be entitled to assume that no Possible Default or Event of
Default has occurred and is continuing, unless the Administrative Agent
or the Competitive Advance Facility Agent, as the case may be, has
actual knowledge of such fact or has been notified by a Lender that
such Lender considers that a Possible Default or Event of Default has
occurred and is continuing and specifying the nature thereof.
SECTION 9.7. ACTION BY ADMINISTRATIVE AGENT, COMPETITIVE ADVANCE FACILITY AGENT.
So long as the Administrative Agent or the Competitive Advance Facility
Agent, as the case may be, shall be entitled, pursuant to Section 9.6
hereof, to assume that no Possible Default or Event of Default shall
have occurred and be continuing, each of the Competitive Advance
Facility Agent and the Administrative Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising
any rights which may be vested in it by, or with respect to taking or
refraining from taking any action or actions which it may be able to
take under or in respect of, this Agreement. Neither the Competitive
Advance Facility Agent nor the Administrative Agent shall incur any
liability under or in respect of this Agreement by action upon any
notice, certificate, warranty or other paper or instrument reasonably
believed by it to be genuine or authentic or to be signed by the proper
party or parties, or with respect to anything which it may do or
refrain from doing in the reasonable exercise of its judgment, or which
the Administrative Agent or the Competitive Advance Facility Agent
reasonably believes to be necessary or desirable in the premises.
SECTION 9.8. INDEMNIFICATION. The Lenders agree to indemnify each of the
Competitive Advance Facility Agent and the Administrative Agent (to the
extent not reimbursed by the Company), ratably according to the
respective principal amounts of their Commitments from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, reasonable out of pocket costs and expenses
(including reasonable external counsel costs), expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against either the Competitive Advance Facility
Agent or the Administrative Agent in any action taken or omitted by the
Administrative Agent or the Competitive Advance Facility Agent with
respect to this Agreement, provided that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's or the Competitive Advance
Facility Agent's gross negligence or willful misconduct or from any
action taken or omitted by the Administrative Agent or the Competitive
Advance Facility Agent in any capacity other than as agent under this
Agreement.
SECTION 9.9. SUCCESSOR. The Company may select a successor or alternate
Administrative Agent and/or Competitive Advance Facility Agent with the
approval of the holders of fifty-one percent (51%) by amount of the
Commitments or Loans, as the case may be.
31
<PAGE> 32
ARTICLE X. MISCELLANEOUS
SECTION 10.1. LENDERS' INDEPENDENT INVESTIGATION. Each Lender, by its signature
to this Agreement, acknowledges and agrees that it has made and shall
continue to make its own independent investigation of the
creditworthiness, financial condition and affairs of the Company and
any Subsidiary in connection with the extension of credit hereunder,
and agrees that no other Lender, the Administrative Agent or the
Competitive Advance Facility Agent has any duty or responsibility,
either initially or on a continuing basis, to provide any Lender with
any credit or other information with respect thereto whether coming
into its possession before the making of the first Loans or at any time
or times thereafter.
SECTION 10.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing
on the part of any Lender or the holder of any 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 10.3. AMENDMENTS. Except as otherwise specifically provided herein, no
amendment, modification, termination, or waiver of any provision of
this Agreement or of the Notes (except in the event of a Money Market
Note and/or Competitive Note), nor consent to any variance therefrom,
shall be effective unless the same shall be in writing and signed by
the Company and the Majority Lenders and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
The unanimous consent of the Lenders, shall be required with
respect to (i) the change of maturity of the Notes under Section 2.1A
hereto, or the payment date of interest on Notes pursuant to Section
2.1A, (ii) any change in the rate of interest on such Notes, or in the
rate at which the Facility Fee referred to in Section 2.3 hereof shall
be calculated or in any amount of principal or interest due on any such
Note, or in the manner of pro-rata application of any payments made by
the Company to the Lenders hereunder, (iii) any change in any
percentage voting requirement in this Agreement, (iv) any change in any
date specified in this Agreement for the payment of principal or
interest on any Note under Section 2.1A hereto or for the payment of
any Facility Fee hereunder, (v) any increase in any Lender's Commitment
or Percentage, except pursuant to Section 2.5(iii) hereof, or any
increase in the aggregate of all of the Lenders' Commitments hereunder
or (vi) any change to this Section 10.3. No amendments to the duties or
responsibilities of the Administrative Agent or Competitive Advance
Facility Agent may be made without the prior written consent of the
Administrative Agent or the Competitive Advance Facility Agent, as the
case may be, except as provided in Section 9.9 hereof.
Notice of amendments or consents ratified by the Lenders
hereunder shall immediately be forwarded by the Company to all Lenders.
Each Lender or other holder of a Note shall be bound by any amendment,
waiver or consent obtained as authorized by this Section, regardless of
its failure to agree thereto.
SECTION 10.4. CONFIDENTIALITY. Unless the Company otherwise agrees in writing,
each Lender 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 such
Lender's directors, officers, employees, affiliates, and agents, and
then only on a confidential need-to-know basis; provided, however that
a Lender 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
32
<PAGE> 33
potential assignees or participants as permitted by Section 10.9 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 the Company, any Subsidiary, or any of their
respective affiliates which has been furnished by the Company, 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 a Lender not permitted
by this Agreement, (y) was available to a Lender on a nonconfidential
basis prior to its disclosure to such Lender by the Company, any
Subsidiary, or any of their respective affiliates, or (z) becomes
available to a Lender on a nonconfidential basis from a person and/or
entity other than the Company, any Subsidiary, or any of their
respective affiliates who, to the best knowledge of such Lender, is not
otherwise bound by a confidentiality agreement with the Company, any
Subsidiary, or any of their respective affiliates, or, to the best
knowledge of such Lender, is not otherwise prohibited from transmitting
the information to such Lender.
SECTION 10.5. NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing and, if to the Company or a
Subsidiary, mailed or delivered to it, addressed to it at the address
of the Company herein or hereinafter specified, and if to a Lender,
mailed or delivered to it, addressed to the address (as may be amended
from time to time) of such Lender specified on its signature page to
this Agreement. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or
made when received.
SECTION 10.6. COSTS AND EXPENSES. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses (including reasonable legal
fees for outside counsel) of the Lenders incurred directly as a result
of the enforcement of this Agreement, the Notes and the other
instruments and documents in connection herewith.
SECTION 10.7. OBLIGATIONS SEVERAL. The obligations of the Lenders hereunder are
several and not joint. Nothing contained in this Agreement and no
action taken by the Lenders pursuant hereto shall be deemed to
constitute the Lenders as a partnership, association, joint venture or
other entity. No default by any Lender hereunder shall excuse the other
Lenders from any obligation under this Agreement; but no Lender shall
have or acquire any additional obligation of any kind by reason of such
default.
SECTION 10.8. EXECUTION IN COUNTERPARTS. This Agreement 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 10.9. ASSIGNMENTS AND PARTICIPATIONS.
A. ASSIGNMENTS. Unless the Company otherwise consents in writing,
which consent shall not be unreasonably withheld, no payee or
other party in possession of any Note (including any Lender)
shall assign or transfer any Note or any interest therein to
any other person or entity, except as otherwise permitted
under this Section, or negotiate any Note, as such term is
defined in Ohio Revised Code Chapter 1303; provided, however,
no consent from the Company shall be required in the event a
Lender makes any such assignment to an affiliate of such
Lender or to another Lender. Except as otherwise expressly
agreed in writing by the Company, no Lender shall, by reason
of the assignment or transfer of any Note or otherwise, be
relieved of any of its obligations hereunder. Each transferee
of any Note shall take such Note subject to the provisions of
this Agreement and to any request made, waiver or consent
33
<PAGE> 34
given, or other action taken hereunder, prior to such
transfer, by each previous holder of such Note; and the
Company shall be entitled to conclusively assume that the
transferee shall thereafter be vested with all rights and
powers under this Agreement of the Lender named as the payee
of the Note which is the subject of such transfer. Nothing
herein shall prohibit any Lender from pledging or assigning
any Note to any Federal Reserve Bank of the United States
pursuant to applicable law. No party in possession of a Note
shall be a "Holder" as such term is defined in Ohio Revised
Code Chapter 1303. Notwithstanding any provision of this
Section 10.9 to the contrary, the Company may not assign or
transfer any of its rights or obligations hereunder without
the consent of the holders of one hundred percent (100%) by
amount of the Commitments or Loans, as the case may be.
B. PARTICIPATIONS. Any Lender may grant participations in or to
all or any part of any Loan or Loans held by such Lender and
Commitment of such Lender and the Notes held by such Lender
without the consent of the Company. Except as otherwise
expressly agreed in writing by the Company, no grant of a
participation shall relieve any Lender of its obligations
hereunder. The Company shall be entitled to deal solely with
the Lenders (and their respective assignees) for all purposes
of this Agreement and the Notes, and no holder of a
participation in all or any part of the Loans, Notes or
Commitments shall have any rights under this Agreement and
shall not be a Holder of any Note, as such term is defined in
Ohio Revised Code Chapter 1303.
C. DISCLOSURE OF INFORMATION. The Company hereby consents to the
disclosure of any information obtained in connection herewith
by any Lender to any entity which is an assignee or potential
assignee or a participant or potential participant pursuant to
Section 10.9A or 10.9B hereof, it being understood that such
Lender shall advise any such actual or potential assignee or
participant of its obligation to keep confidential any
nonpublic information disclosed to it pursuant to this Section
10.9 and, prior to the disclosure of such information, shall
cause each such actual or potential assignee or participant to
execute a confidentiality agreement containing the
confidentiality provisions set forth in Section 10.4 hereof.
D. SECURITIES LAWS. Each Lender represents that it is the present
intention of such Lender to acquire each Note drawn to its
order for its own account and not with a view to the
distribution or sale thereof.
SECTION 10.10. TAX FORMS. With respect to each Lender which is organized under
the laws of a jurisdiction outside the United States (which claims,
exemption from, or reduction of, United States withholding tax under
Sections 1441 or 1442 of the Internal Revenue Code of 1986, as
amended), on the date of any borrowing, and from time to time
thereafter if requested by the Company or the Administrative Agent,
each such Lender shall provide the Administrative Agent and the Company
with the forms prescribed by the Internal Revenue Service of the United
States certifying as to such Lender's status for purposes of
determining exemption from United States withholding taxes with respect
to all payments to be made to such Lender hereunder or other documents
satisfactory to the Company and the Administrative Agent indicating
that all payments to be made to such Lender hereunder are subject to
such tax at a rate reduced by an applicable tax treaty. Unless the
Company and the Administrative Agent have received such forms and such
other documents reasonably requested by the Administrative Agent or the
Company indicating that payments hereunder are not subject to United
States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, the Company or the Administrative Agent shall
withhold taxes from such payments at the applicable statutory rate in
the case of payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
34
<PAGE> 35
SECTION 10.11. 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; provided that the indemnification and expense reimbursement
provisions of the Commitment Letter dated November 12, 1996 by and
among the Company, TCB, Chase and Chase Securities, Inc. and the
provisions relating to the administration fees and the auction
administration fees in the Fee Letter referred to therein shall
continue in effect notwithstanding the execution and delivery of this
Agreement.
SECTION 10.12. GOVERNING LAW. This Agreement, each of the Notes and any Related
Writing shall be governed by and construed in accordance with the laws
of the State of Ohio and the respective rights and obligations of the
Company and the Lenders shall be governed by Ohio law.
SECTION 10.13. 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.
SECTION 10.14. PRESS RELEASES. Neither the Administrative Agent nor the
Competitive Advance Facility Agent or any Lender shall issue any press
release regarding this Agreement without the prior written consent of
the Company.
SECTION 10.15. CONSENT TO JURISDICTION. The Company hereby irrevocably and
unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted
by law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent, the Competitive Advance
Facility Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Company or its
properties in the courts of any jurisdiction.
The Company hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in
any court referred to in this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 10.5. Nothing
in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date indicated above.
THE SHERWIN-WILLIAMS COMPANY
35
<PAGE> 36
By: /s/
--------------------------------------
LARRY J. PITORAK
Title: SENIOR VICE PRESIDENT-
FINANCE, TREASURER AND
CHIEF FINANCIAL OFFICER
By: /s/
--------------------------------------
CYNTHIA D. BROGAN
Title: VICE PRESIDENT AND ASSISTANT
TREASURER
36
<PAGE> 37
Amount of Percentage of
Commitment Commitments ABN AMRO Bank N.V.
- ---------- -----------
$10,000,000 7.44% by: ABN AMRO North America, Inc.
as agent
By: /s/
-----------------------------
Name:
Title:
ABN AMRO Bank N.V.
by: ABN AMRO North America, Inc.
as agent
One PPG Place, Suite 2950
Pittsburgh, PA l5222-5400
Telephone:
-----------------------
Facsimile:
-----------------------
<PAGE> 38
Amount of Percentage of
Commitment Commitments BankBoston, N.A.
- ---------- -----------
$4,800,000 3.57%
By: /s/
------------------------------
Name:
Title:
BankBoston, N.A.
100 Federal Street, 01-09-05
Boston, MA 02110
Telephone:
-----------------------
Facsimile:
-----------------------
<PAGE> 39
Amount of Percentage of
Commitment Commitments National City Bank
- ---------- -----------
$10,000,000 7.44%
By: /s/
------------------------------
Name:
Title:
National City Bank
1900 East Ninth Street (LOC 2077)
Cleveland, Ohio 44114
Telephone:
-----------------------
Facsimile:
-----------------------
<PAGE> 40
Amount of Percentage of
Commitment Commitments Wells Fargo Bank, N.A.
- ---------- -----------
$10,000,000 7.44%
By: /s/
------------------------------
Name:
Title:
Wells Fargo Bank, N.A.
707 Wilshire Boulevard - MAC
2818-165
Los Angeles, CA 90017
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 41
Amount of Percentage of
Commitment Commitments Wachovia Bank of Georgia, N.A.
- ---------- -----------
$7,600,000 5.65%
By: /s/
-----------------------------
Name:
Title:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 42
Amount of Percentage of
Commitment Commitments SunTrust Bank, Atlanta
- ---------- -----------
$10,000,000 7.44%
By: /s/
-----------------------------
Name:
Title:
SunTrust Bank, Atlanta
25 Park Place, 26th Floor
Atlanta, GA 30303
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 43
Amount of Percentage of
Commitment Commitments Banca Commerciale Italiana
- ---------- ----------- Chicago Branch
$4,800,000 3.57%
By: /s/
-----------------------------
Name:
Title:
Banca Commerciale Italiana
Chicago Branch
150 North Michigan Avenue,
Suite 1500
Chicago, Ill. 60601
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 44
Amount of Percentage of
Commitment Commitments The Bank of New York
- ---------- -----------
$10,000,000 7.44%
By: /s/
----------------------------
Name:
Title:
The Bank of New York
One Wall Street
New York, New York 10286
Telephone:
---------------------
Facsimile:
---------------------
<PAGE> 45
Amount of Percentage of
Commitment Commitments Bank One, NA (Illinois)
- ---------- -----------
$10,000,000 7.44%
By: /s/
----------------------------
Name:
Title:
Bank One, NA (Illinois)
611 Woodward Avenue, Mail Suite
8074
Detroit, MI 48226
Telephone:
---------------------
Facsimile:
---------------------
<PAGE> 46
Amount of Percentage of
Commitment Commitments The Bank of Nova Scotia
- ---------- ----------- Atlanta Agency
$4,800,000 3.57%
By: /s/
--------------------------
Name:
Title:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 47
Amount of Percentage of
Commitment Commitments Bank of America, N.A.
- ---------- -----------
$10,000,000 7.44%
By: /s/
-----------------------------
Name:
Title:
Bank of America, N.A.
335 Madison Avenue, 5th Floor
New York, NY 10017
Telephone:
-----------------------
Facsimile:
-----------------------
<PAGE> 48
Amount of Percentage of
Commitment Commitments KeyBank National Association
- ---------- -----------
$10,000,000 7.44%
By: /s/
-----------------------------
Name:
Title:
KeyBank National Association
127 Public Square/Mail Code:OH
01-27-0606
Cleveland, Ohio 44114-1306
Telephone:
-----------------------
Facsimile:
-----------------------
<PAGE> 49
Amount of Percentage of
Commitment Commitments First Union National Bank of
- ---------- ----------- North Carolina
$10,000,000 7.44%
By: /s/
------------------------------
Name:
Title:
First Union National Bank of
North Carolina
301 South College Street, TW-5
Charlotte, NC 28288-0745
Telephone:
-----------------------
Facsimile:
-----------------------
<PAGE> 50
Amount of Percentage of
Commitment Commitments Mellon Bank, N.A.
- ---------- -----------
$7,600,000 5.65%
By: /s/
-----------------------------
Name:
Title:
Mellon Bank, N.A.
One Mellon Bank Center, Room 4320
Pittsburgh, PA 15258-0001
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 51
Amount of Percentage of
Commitment Commitments
$10,000,000 7.44% Chase Bank of Texas, National
Association
By: /s/
-----------------------------
Name:
Title:
Chase Bank of Texas, National
Association
712 Main Street (4TCBN59)
Houston, TX 77002-8059
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 52
Amount of Percentage of
Commitment Commitments
$4,800,000 3.57% Fifth Third Bank
By: /s/
-----------------------------
Name:
Title:
Fifth Third Bank
1404 East Ninth Street
Cleveland, Ohio 44114
Telephone:
---------------------
Facsimile:
---------------------
<PAGE> 53
The Chase Manhattan Bank,
as the Competitive Advance
Facility Agent
By: /s/
---------------------------
Name:
Title:
The Chase Manhattan Bank
270 Park Avenue, 4th Floor
New York, NY 10017
Telephone:
---------------------
Facsimile:
---------------------
<PAGE> 54
<TABLE>
<CAPTION>
Schedule A
<S> <C>
ABN AMRO Bank N.V. Bank One, NA (Illinois)
One PPG Place, Suite 2950 611 Woodward Avenue, Mail Suite 8074
Pittsburgh, PA 15222-5400 Detroit, MI 48226
Banca Commerciale Italiana First Union National Bank of North Carolina
150 North Michigan Avenue, Suite 1500 301 South College Street, TW-5
Chicago, IL 60601 Charlotte, NC 28288-0745
BankBoston, N.A. KeyBank National Association
100 Federal Street, 01-09-05 127 Public Square
Boston, MA 02110 Mail Code: OH-01-27-0606
Cleveland, OH 44114-1306
Bank of America, N.A.
335 Madison Avenue Mellon Bank, N.A.
5th Floor One Mellon Bank Center, Rm. 4320
New York, NY 10017 Pittsburgh, PA 15258-0001
The Bank of New York National City Bank
One Wall Street 1900 East Ninth Street (LOC 2077)
New York, NY 10286 Cleveland, OH 44114
The Bank of Nova Scotia SunTrust Bank, Atlanta
Atlanta Agency 25 Park Place, 26th Floor
600 Peachtree Street, N.E. Atlanta GA 30303
Suite 2700
Atlanta, GA 30308 Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Chase Bank of Texas, National Association Atlanta, GA 30303
712 Main Street (4TCBN59)
Houston, TX 77002-8059 Wells Fargo Bank, N.A.
707 Wilshire Boulevard - MAC 2818-165
Fifth Third Bank Los Angeles, CA 90017
1404 East Ninth Street
Cleveland, OH 44114
</TABLE>
<PAGE> 55
Schedule B
NON-NEGOTIABLE REVOLVING CREDIT NOTE
$________________________ Cleveland, Ohio
Due Date: _______________, 19__
FOR VALUE RECEIVED, the undersigned, THE SHERWIN-WILLIAMS COMPANY
("Borrower") promises to pay to the order of _____________________________
("Lender"), the principal sum of _______________________________ Dollars
($__________) or the aggregate unpaid principal amount of all Loans evidenced by
this Note made by Lender to Borrower pursuant to Paragraph A of Section 2.1 of
the Amended and Restated 364-Day Revolving Credit Agreement, whichever is less,
in legal tender of the United States of America on the Due Date indicated above
pursuant to that certain Amended and Restated 364-Day Revolving Credit Agreement
(as may be amended from time to time, "Credit Agreement") dated December 31,
1999 by and among Borrower, Chase Bank of Texas, National Association, as
Administrative Agent, The Chase Manhattan Bank and the Lenders identified on the
signature pages to such Agreement. Capitalized terms used, but not otherwise
defined herein, shall have the meanings ascribed to them in said Credit
Agreement.
Borrower promises to pay interest on the unpaid principal amount from
time to time outstanding from the date of such Loan until the payment in full
thereof at the rates per annum which shall be determined in accordance with the
provisions of Paragraph A of Section 2.1 of the Credit Agreement. Said interest
shall be payable on each date provided for in Paragraph A of said Section 2.1;
provided, however, that interest on any principal portion which is not paid when
due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Alternate Base Rate Loans and LIBOR Loans, and payments of principal of any
thereof, will be recorded on the grid(s) attached hereto and made a part hereof
or by appropriate book entry. All Revolving Credit Loans to Borrower pursuant to
the Credit Agreement and all payments on account of principal hereof shall be
recorded by Lender prior to transfer hereof on such grid(s) or by appropriate
book entries, it being understood, however, that Lender's failure to record
appropriate information in the grid(s) attached to this Note shall in no way
affect the obligation of Borrower under the Credit Agreement or this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement , or any Event of
Default under the Credit Agreement the principal hereof and the unpaid interest
thereon shall bear interest, until paid, at a rate per annum which shall be 1.1
times the Alternate Base Rate. All payments of principal of and interest on this
Note shall be made in immediately available funds.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement. Reference is made to such Credit Agreement for a description
of other terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By:____________________________________
Title:_________________________________
<PAGE> 56
<TABLE>
<CAPTION>
REVOLVING CREDIT NOTE
LOANS AND PRINCIPAL PAYMENTS
----------------------------
===================================================================================================================================
Amount of Alternate Amount of Amount of Unpaid Principal Balance Name of Person
Date Base Rate Loan LIBOR Loan Principal Prepaid of Revolving Credit Note Making Notification
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
<PAGE> 57
Schedule C
NON-NEGOTIABLE MONEY MARKET NOTE
$________________________ Cleveland, Ohio
______________________, 19__
Due Date:
___________________
FOR VALUE RECEIVED, the undersigned, THE SHERWIN-WILLIAMS
COMPANY ("Borrower") promises to pay to the order of ___________________
("Lender") , the principal sum of __________________________ Dollars
($__________) pursuant to Paragraph B of Section 2.1 of the Amended and Restated
364-Day Revolving Credit Agreement, in legal tender of the United States of
America on the Due Date indicated above pursuant to that certain Amended and
Restated 364-Day Revolving Credit Agreement (as may be amended from time to
time, "Credit Agreement") dated December 31, 1999 by and among Borrower, Chase
Bank of Texas, National Association, as Administrative Agent, The Chase
Manhattan Bank and the Lenders identified on the signature pages to such
Agreement in lawful money of the United States of America. Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the credit agreement referred to herein.
Borrower promises to pay interest on the unpaid principal amount from
time to time outstanding from the date of such Loan until the payment in full
thereof at the rate of __________ percent (____%) per annum. Said interest shall
be payable on each date provided for in Paragraph B of Section 2.1 of the Credit
Agreement; provided, however, that interest on any principal portion which is
not paid when due shall be payable on demand.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the credit agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be 1.1 times the Alternate Base Rate from time to time in
effect. All payments of principal of and interest on this Note shall be made in
immediately available funds.
This Note is one of the Money Market Notes referred to in the Credit
Agreement Reference is made to such Credit Agreement for a description of other
terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By: ___________________________
<PAGE> 58
<TABLE>
<CAPTION>
MONEY MARKET NOTE
LOANS AND PRINCIPAL PAYMENTS
----------------------------
============================================================================================================
Amount of Loan Amount of Principal Unpaid Principal Name of Person Making
Prepaid Balance Notation
Date of Money Market Loan
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
============================================================================================================
</TABLE>
<PAGE> 59
Schedule D
NON-NEGOTIABLE COMPETITIVE BID NOTE
$___________________ Cleveland, Ohio
Due Date: _______________, 19__
FOR VALUE RECEIVED, the undersigned, THE SHERWIN-WILLIAMS COMPANY
("Borrower") promises to pay on the last day of the relevant interest period as
referred to in that certain Amended and Restated 364-Day Revolving Credit
Agreement (as may be amended from time to time, "Credit Agreement") dated
December 31, 1999 by and among Borrower, Chase Bank of Texas, National
Association, The Chase Manhattan Bank and the Lenders identified on the
signature pages to such Agreement, to the order of _____________________________
("Lender"), the principal sum of _______________________________ Dollars
($__________) or the aggregate unpaid principal amount of all Loans evidenced by
this note made by Lender to Borrower pursuant to Paragraph D of Section 2.1 of
the Credit Agreement, whichever is less, in legal tender of the United States of
America pursuant to the Credit Agreement. Capitalized terms used, but not
otherwise defined herein, shall have the meanings ascribed to them in said
Credit Agreement.
Borrower promises to pay interest on the unpaid principal amount from
time to time outstanding from the date of such Loan until the payment in full
thereof at the rates per annum which shall be determined in accordance with the
provisions of Paragraph C of Section 2.1 of the Credit Agreement. Said interest
shall be payable as provided in the Competitive Bid accepted by the Company
provided, however, that interest on any principal portion which is not paid when
due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Fixed Rate Loans and Competitive Libor Loans, and payments of principal of any
thereof, will be recorded on the grid(s) attached hereto and made a part hereof
or by appropriate book entry. All Competitive Loans to Borrower pursuant to the
Credit Agreement and all payments on account of principal hereof shall be
recorded by Lender prior to transfer hereof on such grid(s) or by appropriate
book entries, it being understood, however, that Lender's failure to record
appropriate information in the grid(s) attached to this Note shall in no way
affect the obligation of Borrower under the Credit Agreement or this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement hereinafter referred
to, or in any Event of Default under the Credit Agreement the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be _________________
This Note is one of the Competitive Notes referred to in the Credit
Agreement. Reference is made to such Credit Agreement for a description of other
terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By:____________________________________
Title:_________________________________
<PAGE> 60
<TABLE>
<CAPTION>
COMPETITIVE NOTE
LOANS AND PRINCIPAL PAYMENTS
=================================================================================================================================
Amount of Fixed Amount of Amount of Unpaid Principal Balance Name of Person
Rate Loan Competitive Principal Prepaid (if of Competitive Note Making Notification
Date Libor Loan consent obtained)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
LOANS AND PRINCIPAL PAYMENTS
----------------------------
============================================================================================================
Amount of Loan Amount of Principal Unpaid Principal Name of Person Making
Prepaid Balance Notation
Date of Money Market Loan
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
============================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 4(c)
AMENDED AND RESTATED
FIVE YEAR REVOLVING CREDIT AGREEMENT
This Amended and Restated Five Year Revolving Credit Agreement is made
and entered into this 3rd day of January, 2000 by and among The Sherwin-Williams
Company ("Company"), whose principal place of business is located at 101
Prospect Avenue, N.W., Cleveland, Ohio 44115, Chase Bank of Texas, National
Association, formerly known as Texas Commerce Bank National Association ("CBT"),
as Administrative Agent, The Chase Manhattan Bank ("Chase"), as the Competitive
Advance Facility Agent, and the financial institutions listed on Schedule A
hereto together with each of their successors and assigns (collectively referred
to as the "Lenders" and individually a "Lender").
W I T N E S S E T H:
-------------------
WHEREAS, the Company, CBT, Chase and certain of the Lenders previously
entered into that certain Five Year Revolving Credit Agreement, dated January 3,
1997, which agreement was subsequently amended effective March 31, 1997 and
January 3, 1999, pursuant to which the Lenders agreed to make available to the
Company a certain principal amount of money to be used by the Company for
general corporate purposes including, but not limited to, commercial paper
backup, general working capital, acquisitions of assets, stock or other
ownership interests and repurchases or redemptions of securities; and
WHEREAS, the Company, CBT, Chase and the Lenders desire to amend and
restate such Five Year Revolving Credit Agreement, as amended, on the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein the parties agree as follows:
ARTICLE I: DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"ADMINISTRATIVE AGENT" shall mean Chase Bank of Texas, National Association, or
any successor Lender appointed by the Company and approved by the
holders of fifty-one percent (51%) by amount of the Commitments.
"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 the
Administrative Agent as its "prime rate" and (ii) the Federal Funds
Rate plus 50 basis points. Any change by the Administrative Agent of
its "prime 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 a Loan bearing interest at the Alternate
Base Rate.
"BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which New
York banks are open for the transaction of business.
<PAGE> 2
"COMMITMENT" shall mean the obligation of each Lender to make Loans under
Sections 2.1A or 2.1C, up to the amount set opposite the name of such
Lender as set forth on such Lender's signature page hereto (or such
lesser amount as shall be determined pursuant to Section 2.5 hereof).
"COMMITMENT PERIOD" shall mean the period which commences on the Effective Date
and terminates on the Termination Date.
"COMPETITIVE ADVANCE FACILITY AGENT" shall mean The Chase Manhattan Bank.
"COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive Loan in
accordance with Section 2.1D.
"COMPETITIVE BID RATE" shall mean, with respect to any Competitive Bid, the
Competitive Libor Rate or the Fixed Rate, as applicable, offered by the
Lender making such Competitive Bid.
"COMPETITIVE BID REQUEST" shall mean a request by the Company for Competitive
Bids in accordance with Section 2.1D.
"COMPETITIVE BORROWING" shall mean a borrowing by the Company in response to a
Competitive Bid Request.
"COMPETITIVE LIBOR INTEREST PERIOD" shall mean a period of one, two, three, six
or, if available to all of the Lenders, twelve months (as selected by
the Company) commencing on the applicable borrowing date of each
Competitive Libor Loan hereunder; provided, however, that no
Competitive Libor Interest Period shall end after the Termination Date.
"COMPETITIVE LIBOR LOAN" shall mean a Competitive Loan bearing interest at a
rate based on LIBOR.
"COMPETITIVE LIBOR RATE" shall mean, with respect to a Competitive LIBOR Loan,
LIBOR plus the applicable margin specified by the Lender making such
Competitive Loan in its Competitive Bid.
"COMPETITIVE LOAN" shall mean a Loan made pursuant to Section 2.1D.
"COMPETITIVE NOTE" shall mean a Note or Notes executed and delivered pursuant to
Section 2.1D.
"CONSOLIDATED NET WORTH" shall mean the excess of the net book value of the
assets of the Company 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 the Company in the calculation of
such amount in the Company's then most recent financial statements
furnished to its stockholders, plus the aggregate value of all treasury
stock purchased after January 3, 1997 (at cost) by the Company (to the
extent that the aggregate value of such treasury stock for purposes of
this calculation does not exceed Two Hundred Fifty Million Dollars
($250,000,000)). The calculation of Consolidated Net Worth shall
exclude any amounts which would otherwise be required to be included
therein as a result of the future adoption by the Financial Accounting
Standards Board of any policy, statement, rule or regulation requiring
the Company to record an accumulative liability on its Financial
Report(s).
"CONSOLIDATED SUBSIDIARY" shall mean, at any particular time, every Subsidiary
which is consolidated in the Company's financial statements contained
in its then most recent Financial Report.
<PAGE> 3
"DEBT" shall mean, collectively, all indebtedness at any one time outstanding
hereunder and owed by the Company to the Lenders pursuant to this
Agreement and includes the principal of and interest on all Notes and
each conversion, extension, renewal or refinancing thereof in whole or
in part, the Facility Fees and any prepayment premium due under Section
2.1A(x).
"DOLLARS" or "$" shall mean any lawful currency of the United States of America.
"EFFECTIVE DATE" shall mean January 3, 2000.
"EUROCURRENCY" shall mean any freely transferable and convertible currency on
deposit outside the country of issuance.
"EVENT OF DEFAULT" shall mean any of the events referred to in Article VII
hereof.
"FACILITY FEE" shall mean the sum to be paid by the Company to the
Administrative Agent on behalf of each Lender on the last Banking Day
of each calendar quarter prior to the termination of the Commitments
and the repayment of the outstanding Loans, calculated, for each day,
as the product of each Lender's Commitment (or, after the termination
of such Commitments, each Lender's outstanding Loans), on such day, and
the number of basis points set forth in the following table for the
highest of the then current ratings assigned to the Company's senior
unsecured non-credit enhanced long-term debt by Moodys Investors
Service, Inc. ("Moodys") or Standard & Poor's Ratings Group ("S&P") on
such day:
- ----------------------------------------------------------------------------
MOODYS OR S&P BASIS POINTS
- ----------------------------------------------------------------------------
AA-/Aa3 or above 6.0
- ----------------------------------------------------------------------------
A-/A3 or above but below AA-/Aa3 7.0
- ----------------------------------------------------------------------------
BBB/Baa2 or above but below A-/A3 10.0
- ----------------------------------------------------------------------------
BBB-/Baa3 or below 15.0
- ----------------------------------------------------------------------------
"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 the Administrative Agent, 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 the Administrative
Agent.
"FINANCIAL REPORT" shall mean the annual or periodic report prepared in
accordance with generally accepted accounting principles, except as
otherwise indicated therein, filed by the Company 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
3
<PAGE> 4
furnished by the Company to its stockholders (which annual financial
statements shall be certified by the Company's independent certified
public accountants).
"FIXED RATE LOAN" shall mean a Competitive Loan bearing interest at a Fixed
Rate.
"FIXED RATE" shall mean, with respect to any Competitive Loan (other than a
Competitive Libor Loan), the fixed rate of interest per annum specified
by the Lender making such Competitive Loan in its related Competitive
Bid.
"INTEREST ADJUSTMENT DATE" shall mean the last day of each LIBOR Interest
Period.
"LIBOR" shall mean the average (rounded upward to the nearest 1/16 of 1%) of
the per annum rates at which deposits in immediately available funds in
Dollars for the number of months in the relevant LIBOR Interest Period
and in the amount of the LIBOR Loan or Competitive Libor Loan to be
disbursed or to remain outstanding during such LIBOR Interest Period,
as the case may be, are offered to the Administrative Agent or the
Competitive Advance Facility Agent, as the case may be, by the
Reference Lender in the London Interbank Eurodollar market, determined
as of 11:00 a.m. London time, two (2) London Banking Days prior to the
beginning of the relevant LIBOR Interest Period pertaining to a LIBOR
Loan or Competitive Libor Loan hereunder, as appropriately adjusted by
dividing such average rate by 1.00 minus the applicable Reserve
Percentage then in effect.
"LIBOR INTEREST PERIOD" shall mean a period of one, two, three, six or, if
available to the Lenders, twelve months (as selected by the Company)
commencing on the applicable borrowing date of each LIBOR Loan or
Competitive Libor Loan hereunder; provided, however, that if any such
period would be affected by a reduction in Commitments as provided in
Section 2.5 , prepayment as provided in Section 3.5 or maturity of a
LIBOR Loan or Competitive Libor Loan as provided in Sections 2.1A or
2.1D , such period shall end on such date; and provided further that no
LIBOR Interest Period shall end after the Termination Date. With
respect only to that portion of LIBOR Loans (as described in Section
2.1C ) during the two (2) year Term Loan period which represents a
mandatory semi-annual installment of principal, the Company may not
select a LIBOR Interest Period the maturity of which would extend
beyond the due date of such installment payment without becoming
subject to the provisions of Section 2.1A(x).
"LIBOR LOAN" shall mean a Loan bearing interest at a rate based on LIBOR.
"LOAN" shall mean the indebtedness of the Company with respect to each advance
of funds by a Lender hereunder.
"LONDON BANKING DAY" shall mean a day, other than a Saturday or Sunday, on
which banks are open for business in London, England and New York, New
York, quoting deposit rates for Dollar deposits.
"MAJORITY LENDERS" shall mean Lenders with an aggregate of sixty-six and
two-thirds percent (66 2/3%) or more of the Commitments (or, if the
Commitments have been terminated, outstanding Loans) on the relevant
date.
"MARGIN" shall mean the number of basis points set forth in the following table
for the highest of the then current ratings assigned to the Company's
senior unsecured non-credit-enhanced long-term debt by Moodys or S&P:
4
<PAGE> 5
- --------------------------------------------------------------------------
MOODY'S OR S&P BASIS POINTS
- --------------------------------------------------------------------------
AA-/Aa3 or above 12.75
- --------------------------------------------------------------------------
A-/A3 or above but below AA-/Aa3 15.5
- --------------------------------------------------------------------------
BBB/Baa2 or above but below A-/A3 20.0
- --------------------------------------------------------------------------
BBB-/Baa3 or below 25.0
- --------------------------------------------------------------------------
"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
Consolidated Net Worth.
"MONEY MARKET NOTE" shall mean a Note or Notes executed and delivered pursuant
to Section 2.1B.
"MONEY MARKET RATE" shall mean, with respect to any period of days selected by
the Company, commencing on the applicable borrowing date for a Money
Market Rate Loan, the rate of interest per annum quoted by any Lender
to the Company for such Money Market Rate Loan.
"MONEY MARKET RATE LOAN" shall mean a Loan with an interest rate equal to the
Money Market Rate and as otherwise defined in Section 2.1B.
"NOTE" or "NOTES" shall mean a note or notes executed and delivered pursuant to
Sections 2.1A, 2.1B, 2.1C or 2.1D.
"NOTICE" shall mean a notice given pursuant to Section 10.5.
"OTHER FEES" shall mean the annual administration fee to be paid by the
Company to CBT and the auction administration fee to be paid by the
Company to Chase pursuant to the Fee Letter ("Fee Letter") dated
November 12, 1996 by and among the Company, CBT, Chase and Chase
Securities, Inc.
"OUTSTANDING MAJORITY LENDERS" shall mean Lenders with an aggregate of sixty-six
and two-thirds percent (66 2/3%) or more of the principal amount of
Loans on the relevant date.
"PERCENTAGE" shall mean, as to any Lender (as set forth on such Lender's
signature page hereof), the percentage of such Lender's share of the
total Commitments of all Lenders; provided that if the Commitments are
terminated or reduced pursuant to this Agreement, then "Percentage"
shall mean the percentage of such Lender's share of the total
Commitments of all Lenders immediately prior to the termination or
after the reduction of Commitments (giving effect to any subsequent
assignments pursuant to Section 10.9).
"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 the
Company, any Consolidated Subsidiary, or 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 the Company or any Consolidated Subsidiary is a part,
for employees thereof.
"POSSIBLE DEFAULT" shall mean an event, condition or thing known to the Company
which constitutes, or which with the lapse of any applicable grace
period or the giving of notice or both would
5
<PAGE> 6
constitute, any Event of Default and which has not been appropriately
waived by the Lenders in writing or fully corrected prior to becoming
an Event of Default.
"REFERENCE LENDER" shall mean Chase or any successor Lender appointed by the
Company, and satisfactory to the holders of fifty-one percent (51%) by
amount of the Commitments or Loans, as the case may be, at any time,
upon thirty (30) days prior written notice to the Lenders, to act as
the Reference Lender pursuant to the terms of this Agreement.
"REGULATORY CHANGE" shall mean, as to any Lender, any change in United States
federal, state or foreign laws or regulations or the adoption or making
of any interpretations, directives, guidelines or requests of or under
any United States federal, state or foreign laws, treaties or
regulations, in each case, enacted after the Effective Date (whether or
not having the force of law) by any court or governmental authority
charged with the interpretation or administration thereof.
"RELATED WRITING" shall mean any assignment, mortgage, security agreement,
subordination agreement, financial statement, audit report or other
writing furnished by the Company or any of its officers to the Lenders
pursuant to or otherwise in connection with this Agreement.
"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, that percentage (expressed as a
decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the reserve requirement (including, but not limited to, any
margin reserve requirement and taking into account any transitional
adjustments or other scheduled changes in reserve requirements) which
is imposed on (a) commercial time deposits having an original maturity
of one (1) year or less and which is applicable to the class of Lenders
of which the Administrative Agent is a member; or (b) a Lender with
respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits, as the case may be.
"REVOLVING CREDIT LOAN" shall mean a Loan evidenced by a Revolving Credit Note.
"REVOLVING CREDIT NOTE" shall mean a Note evidencing a Loan described in Section
2.1A.
"SUBORDINATED INDEBTEDNESS" shall mean indebtedness which has been subordinated
(by written terms or agreement being in form and substance reasonably
satisfactory to the holders of fifty-one percent (51%) by amount of the
Commitments) in favor of the prior payment in full of the Company's
Debt to the Lenders.
"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 the Company or by another
such corporation(s) or by any combination of the Company and such
corporation(s).
"TERM LOAN" shall mean a Loan evidenced by a Term Note.
"TERM NOTE" shall mean a Note executed and delivered pursuant to Section 2.1C.
"TERMINATION DATE" shall mean 12:01 a.m. New York time on the fifth (5th)
anniversary of the Effective Date (except in the case of a Term Loan in
which case the Termination Date shall
6
<PAGE> 7
mean 12:01a.m. New York time on the seventh (7th) anniversary of the
Effective Date); provided, however, that commencing with the first
(1st) anniversary of the Effective Date, and each successive
anniversary thereafter, the Termination Date shall be extended
automatically by one (1) year periods with respect to any Lender which
fails to respond to the Company's notice notifying the Lenders, in
writing, of the Company's request for renewal not less than forty-five
(45) days prior to such anniversary date that it wishes to terminate
its Commitment four (4) years from the first anniversary date next
following the date written notice of termination was received. Any
provisions of the foregoing definition to the contrary withstanding,
the "Termination Date" shall mean the foregoing definition unless
otherwise set forth on such Lender's signature page.
"TRANSACTIONS" shall mean the execution, delivery and performance by the Company
of this Agreement and the borrowings contemplated hereunder.
"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 the Company and/or by one or more
Wholly-Owned Consolidated Subsidiaries.
"364 - DAY FACILITY" shall mean the Amended and Restated 364-Day Revolving
Credit Agreement, dated December 31, 1999, by and among the Company as
borrower, CBT as Administrative Agent, Chase as the Competitive Advance
Facility Agent and certain or all of the Lenders.
Any accounting term not specifically defined in this Article shall have
the meaning ascribed thereto by generally accepted accounting principles in
effect as of the date of the Company's then most recent Financial Reports unless
otherwise indicated.
The foregoing definitions shall be applicable to the singular and
plural of such defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and conditions of
this Agreement each Lender will participate to the extent hereinafter
provided in making Loans to the Company in such aggregate amounts as
the Company shall 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 the Commitments
which, on the date hereof, total Five Hundred Ninety-Eight Million Four
Hundred Thousand Dollars ($598,400,000).
7
<PAGE> 8
A. REVOLVING CREDIT LOANS
(i) BORROWING RIGHTS AND RESTRICTIONS: Subject to the terms and
conditions of this Agreement, during the Commitment Period
each Lender will make a Loan or Loans to the Company, pursuant
to this Section 2.1A, in such amount or amounts as the Company
may request from time to time but not exceeding in aggregate
principal amount, at any one time outstanding hereunder, the
Commitment of such Lender. Subject to the provisions of this
Agreement, the Company shall be entitled under this Paragraph
A to borrow funds, repay the same in whole or in part, and
reborrow hereunder at any time and from time to time during
the Commitment Period. Each Loan made under this Paragraph A
shall be made pro-rata according to the Lenders' respective
Commitments.
(ii) LOAN AMOUNTS: The Company shall have the option, subject to
the terms and conditions set forth herein, to borrow under
this Section 2.1A up to the total of all the Commitments by
means of any combination of:
(a) Alternate Base Rate Loans which shall be payable on
their respective due dates and shall be drawn down in
aggregate amounts of not less than Five Million
Dollars ($5,000,000) or any greater amount evenly
divisible by One Million Dollars ($1,000,000); and
(b) LIBOR Loans which shall be payable on the last day of
the relevant LIBOR Interest Period and shall be drawn
down in aggregate amounts of not less than Five
Million Dollars ($5,000,000) or any greater amount
evenly divisible by One Million Dollars ($1,000,000).
(iii) PROCEDURE FOR BORROWING: The procedure for borrowing under
this Section 2.1A shall be as follows:
(a) Each such borrowing shall be made upon the Company's
written notice ("Notice") to the Administrative Agent
(which Notice must be received by the Administrative
Agent prior to 11:00 a.m. New York time three (3)
London Banking Days prior to the requested borrowing
date in the event of a LIBOR Loan and by 11:00 a.m.
New York time on the same Banking Day of the proposed
date of such borrowing in the event of an Alternate
Base Rate Loan). The Notice shall specify:
(1) the amount of such borrowing;
(2) the requested borrowing date which shall be
a Banking Day or a London Banking Day, as
the case may be;
(3) the type of Loan(s) comprising such
borrowing; and
(4) the duration of the LIBOR Interest Period
for any LIBOR Loan(s) and the maturity date
of any Alternate Base Rate Loan(s) (which in
either case shall not be later than the
Termination Date).
(b) The Administrative Agent shall promptly notify each
Lender of (i) its receipt of a Notice of borrowing,
(ii) the amount of each Lender's pro-rata share of
such borrowing; and (iii) the name of the Company's
bank, the Company's
8
<PAGE> 9
account number and American Banking Association
routing number of the bank at which the Company's
account is maintained and to which such pro-rata
shares shall be routed.
(c) Each Lender's pro-rata share of each Revolving Credit
Loan shall be delivered by each such Lender to the
Company not later than 3:00 p.m. New York time on the
requested borrowing date, time being of the essence,
in immediately available Dollars by wire transfer to
an account of the Company designated by the Company,
from time to time in writing to the Administrative
Agent, with the account number and American Banking
Association routing number of the bank at which such
account is maintained.
(iv) INTEREST RATES: The Company shall pay interest on Revolving
Credit Loans:
(a) at the Alternate Base Rate on the unpaid principal
amount of Alternate Base Rate Loans outstanding from
time to time from the date of receipt of funds by the
Company until paid, payable on the last Banking Day
of each calendar quarter and on the maturity date,
computed on the basis of a 365 or 366 day year as the
case may be; and
(b) at LIBOR plus the applicable Margin (converted to
percentage points) on the unpaid principal amount of
LIBOR Loans outstanding from time to time from the
date on which funds are received by the Company until
paid (computed on the basis of a year having 360 days
calculated on the basis of the actual number of days
elapsed), payable (a) on the last day of the LIBOR
Interest Period or (b) every three (3) months in the
event any such LIBOR Interest Period exceeds three
(3) months.
(v) PAYMENTS ON REVOLVING CREDIT NOTES, ETC.: All payments of
principal and interest shall be made to the Administrative
Agent in immediately available funds for the account of the
Lenders by no later than 3:00 p.m. (New York time) on the
applicable payment date. The Administrative Agent shall
promptly distribute to each Lender its ratable share of the
principal and interest received by it for the account of such
Lender. Each Lender shall endorse each Revolving Credit Note
held by it or otherwise make appropriate book entries
evidencing each payment of principal made thereon, it being
understood, however, that any Lender's failure to record
appropriate information on the grid(s) attached to any such
Note shall in no way affect the obligation of the Company
under this Agreement or under any such Note. Whenever any
payment to be made hereunder, including without limitation,
any payment to be made on any Note, shall be stated to be due
on a day which is not a Banking Day, such payment may be made
on the next Banking Day (but in any event not later than its
maturity date) and such extension of time shall in each case
be included in the computation of the interest payable on such
Note. Notwithstanding the previous sentence, in the case of
any LIBOR Loan, if the next Banking Day is in a month other
than the month the payment was originally due, such payment
may be made on the immediately preceding Banking Day and such
reduction of time shall in each case be considered in the
computation of the interest payable on such Note.
(vi) REVOLVING CREDIT NOTES: The obligation of the Company to repay
the Alternate Base Rate Loans and the LIBOR Loans made by each
Lender and to pay interest thereon shall be evidenced by
non-negotiable Revolving Credit Notes of the Company
substantially in the form of Schedule B hereto, with
appropriate insertions,
9
<PAGE> 10
dated the date of execution thereof by the Company and payable
to the order of such Lender on the maturity date of such Loan,
in the principal amount indicated thereon. The principal
amount of the Alternate Base Rate Loans and the LIBOR Loans
made by each Lender under this Section 2.1A and all
prepayments thereof and the applicable dates with respect
thereto shall be recorded by such Lender from time to time on
the grid(s) attached to such Note or by appropriate book
entry. The aggregate unpaid amount of Alternate Base Rate
Loans and LIBOR Loans set forth on the grid(s) attached to
each Revolving Credit Note shall be rebuttable presumptive
evidence of the principal amount owing and unpaid on such
Note, it being understood, however, that any Lender's failure
to so record appropriate information on the grid(s) attached
to its respective Revolving Credit Note shall in no way affect
the obligations of the Company under this Agreement or such
Note.
(vii) INTEREST ON LATE PAYMENTS: If any Revolving Credit Note shall
not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision or
acceleration of maturity therein or herein contained, the
principal thereof and the accrued and unpaid interest thereon
shall bear interest, until paid, at a rate per annum which
shall be 1.1 times the Alternate Base Rate from time to time
in effect.
(viii) LOAN REFINANCINGS: If any Revolving Credit Loan is not repaid
when due, unless otherwise directed by the Company, and
provided no Event of Default exists, (and the Commitment
Period has not terminated), the Lenders shall refinance such
Loans with Alternate Base Rate Loans unless otherwise provided
in this Agreement. Such automatic Loans shall be deemed to
have repaid the principal in full of each prior Loan such that
no Event of Default would exist.
(ix) CONVERSION: At the Company's option, the Company may at any
time or from time to time, except if an Event of Default
exists, convert a LIBOR Loan or an Alternate Base Rate Loan to
any one of the other types of Loans; provided, however, in the
case of LIBOR Loans any such conversion may only be made on
the Interest Adjustment Date applicable thereto. Such
conversion shall not be deemed to be a prepayment. The
provisions of this subsection shall apply with respect to
voluntary conversions or conversions required hereunder. The
Company, through the Administrative Agent, shall give written
or telephonic notice to the Lenders of each conversion by
11:00 a.m., New York time (a) on the date of such conversion
if such conversion is to Alternate Base Rate Loans, and (b) at
least two (2) London Banking Days prior to the date of such
conversion if such conversion is to LIBOR Loans. Each such
notice shall be effective upon receipt by the relevant Lender
and shall specify the date and amount of such conversion, the
type of Loans to be converted and the type of Loans to be
converted into. Each conversion shall be in an aggregate
amount of not less than Five Million Dollars ($5,000,000) or
any greater amount evenly divisible by One Million Dollars
($1,000,000).
10
<PAGE> 11
(x) PREPAYMENT.
(a) As to Alternate Base Rate Loans, the Company shall
have the right at any time or from time to time, upon
one (1) Banking Day's prior written notice to the
Administrative Agent, without the payment of any
premium or penalty to prepay on a pro-rata basis, all
or any part of the principal amount of the Revolving
Credit Notes then outstanding as designated by the
Company plus interest accrued on the amount so
prepaid to the date of such prepayment.
(b) As to LIBOR Loans, the Company shall have the right
at any time or from time to time, upon four (4)
London Banking Days' prior written notice to the
Administrative Agent, to prepay on a pro-rata basis,
all or any part of the principal amount of the
Revolving Credit Notes then outstanding as designated
by the Company, plus interest accrued on the amount
so prepaid to the date of such prepayment. If LIBOR,
as determined as of 11:00 a.m. London time three (3)
London Banking Days prior to the date of prepayment
(hereinafter "Prepayment LIBOR"), shall be lower than
the last LIBOR previously determined for the LIBOR
Loan(s), with respect to which prepayment is intended
to be made (hereinafter "Last LIBOR"), then the
Company shall promptly pay each of the Lenders, in
immediately available funds, a prepayment premium
measured by a rate (the "Prepayment Premium Rate")
which shall be equal to the difference between the
Last LIBOR and the Prepayment LIBOR. In determining
the Prepayment LIBOR, the Company shall apply a rate
equal to LIBOR (for a deposit approximately equal to
the amount of such prepayment) which would be
applicable to a LIBOR Interest Period commencing on
the date of such prepayment and having a duration
equal to the LIBOR Interest Period described in
Article I hereof with a length closest to the
remaining duration of the actual LIBOR Interest
Period during which such prepayment is to be made.
The Prepayment Premium Rate shall be applied to all
or such part of the principal amount of the Revolving
Credit Notes as related to the LIBOR Loans to be
prepaid, and the prepayment premium shall be computed
for the period commencing with the date on which said
prepayment is to be made to that date which coincides
with the last day of the LIBOR Interest Period
previously established when the LIBOR Loans, which
are to be prepaid, were made. Each prepayment of a
LIBOR Loan shall be in the aggregate principal sum of
not less than One Million Dollars ($1,000,000).
Notwithstanding the above, no prepayment premium
shall be due and owing by the Company if the Company
makes such payment on the Interest Adjustment Date
applicable to the Loan being paid. In the event the
Company fails to borrow or convert into a proposed
LIBOR Loan subsequent to the delivery to the Lenders
of the notice of the proposed date, aggregate amount
and initial LIBOR Interest Period of such Loan, but
prior to the draw down of funds thereunder, such
failure to borrow or convert shall be treated as a
prepayment subject to such prepayment premium.
B. MONEY MARKET RATE LOANS
(i) BORROWING RESTRICTIONS: Subject to the terms and conditions of
this Agreement, during the Commitment Period each Lender may
make (but is not obligated to make) a Money Market Rate Loan
to the Company in such amount or amounts as the Company may
from time to time request, provided that the sum of the total
Loans outstanding under Sections 2.1A, 2.1B and 2.1C plus the
aggregate
11
<PAGE> 12
principal amount of outstanding Competitive Loans at any time
shall not exceed the Commitments which, on the date hereof,
total Five Hundred Ninety-Eight Million Four Hundred Thousand
Dollars ($598,400,000). Subject to the provisions of this
Agreement, the Company shall be entitled under this Paragraph
B to borrow funds, repay the same in whole or in part and
reborrow hereunder at any time and from time to time from any
Lender making Money Market Rate Loans to the Company. The
Administrative Agent shall not be involved, in its capacity as
such agent, in any borrowing(s) by the Company under this
Section 2.1B; provided, however, the Administrative Agent
shall be advised by the Company of each such borrowing
hereunder. The procedures for any such Loan shall be as agreed
upon by the Company and each Lender making a Loan under
Paragraph B.
(ii) LOAN AMOUNTS: The Company shall have the option, subject to
the terms and conditions set forth herein, to borrow under
this Section 2.1B from any Lender, that agrees to make such
Loan, an amount not to exceed the total of all Commitments in
amounts of not less than Five Million Dollars ($5,000,000) or
any greater amount evenly divisible by One Million Dollars
($1,000,000).
(iii) INTEREST RATES: The Company shall pay interest on the unpaid
principal amount of any Money Market Rate Loan outstanding
from time to time from the date on which funds are received by
the Company until paid, at the Money Market Rate. Except as
may be otherwise agreed by the Company and the Lender making a
Money Market Rate Loan, interest shall be payable at the
maturity of such Loan and shall be computed on the basis of a
365 or 366 day year, as the case may be.
(iv) MONEY MARKET NOTES: The obligation of the Company to repay
Money Market Rate Loans and to pay interest thereon shall be
evidenced by a Money Market Note substantially in the form of
Schedule C hereto, dated the date of execution thereof by the
Company and payable to the order of the applicable Lender in
accordance with the terms and conditions of such Money Market
Note.
(v) PAYMENT: All payments of principal and interest due on Money
Market Rate Loans shall be paid by the Company directly to any
Lender making a Money Market Rate Loan to the Company. Any
such Loans hereunder shall be paid on the date specified in
the applicable Money Market Note.
(vi) INTEREST ON LATE PAYMENTS: If any Money Market Note shall not
be paid at maturity, whether such maturity occurs by reason of
lapse of time or by operation of any provision of acceleration
of maturity therein or herein contained, the principal thereof
and the unpaid interest thereon shall bear interest, until
paid, at a rate per annum which shall be 1.1 times the
Alternate Base Rate from time to time in effect.
C. TERM LOAN
(i) BORROWING RIGHTS AND RESTRICTIONS: Subject to the terms and
conditions of this Agreement, at any time prior to the end of
the Commitment Period, each Lender will make a two (2) year
Term Loan to the Company in such amount, if any, as the
Company may request, but not exceeding the Commitment of such
Lender then in effect. In the event the Company makes
borrowings under this Section 2.1C, no further borrowing shall
be made under Section 2.1A, notwithstanding anything in this
Agreement to the contrary. Any prepayment of the Notes
outstanding under this
12
<PAGE> 13
Section 2.1C shall be subject to Section 2.1A(x) hereof. The
proceeds of each Term Loan shall be delivered to the Company
not later than 3:00 p.m. New York time on the last day of the
notice period set forth in Section 2.1C(iii), time being of
the essence, in immediately available Dollars by wire transfer
to an account of the Company designated by the Company, from
time to time in writing to the Administrative Agent (who shall
notify each Lender), with the account number and American
Banking Association routing number of the bank at which such
account is maintained.
(ii) LOAN AMOUNTS: Alternate Base Rate Loans and LIBOR Loans shall
be in aggregate amounts of not less than Five Million Dollars
($5,000,000) or any greater amount evenly divisible by One
Million Dollars ($1,000,000), but either may be in lesser
amounts with respect to mandatory semi-annual installments of
principal or as a result of such semi-annual installments of
principal having been made.
(iii) PROCEDURES FOR BORROWING: The procedures for borrowing under
this Section 2.1C shall be as follows:
(a) Any such borrowing prior to the scheduled Termination
Date shall be made pro-rata among the Lenders and
shall be made upon the Company's written notice to
the Administrative Agent (which notice must be
received by the Administrative Agent prior to 11:00
a.m. New York time three (3) London Banking Days
prior to the requested borrowing date in the event of
a LIBOR Loan and by 11:00 a.m. New York time on the
same Banking Day of the proposed date of such
borrowing in the event of an Alternate Base Rate
Loan). Such notice shall specify:
(1) the amount of such borrowing;
(2) the requested borrowing date which shall be
a Banking Day or a London Banking Day, as
the case may be;
(3) the type of Loan(s) comprising such
borrowing; and
(4) the duration of the LIBOR Interest Period
for any LIBOR Loan(s) and the maturity date
of any Alternate Base Rate Loan(s).
(b) The Administrative Agent shall promptly notify each
Lender of (i) its receipt of the Company's Notice of
borrowing, (ii) the amount of each Lender's pro-rata
share of such borrowing, and (iii) the name of the
Company's bank, the Company's account number and
American Banking Association routing number of the
bank at which the Company's account is maintained and
to which such pro-rata shares shall be routed.
(c) Each Lender's pro-rata share of each Term Loan shall
be delivered by each such Lender to the Company not
later than 3:00 p.m. New York time on the last day of
the notice period set forth herein, time being of the
essence, in immediately available Dollars by wire
transfer to an account of the Company designated by
the Company, from time to time in writing to the
Administrative Agent, with the account number and
American Banking Association routing number of the
bank at which such account is maintained.
13
<PAGE> 14
(iv) INTEREST RATES:
(a) If the Term Loans are Alternate Base Rate Loans, the
Company shall pay interest (computed on the basis of
a year having 365 or 366 days, as the case may be) on
the unpaid principal amount thereof outstanding from
time to time from the date of such Loan until paid,
payable quarterly in arrears, during the term of such
Loan and upon prepayment and if not paid at maturity
thereof at the Alternate Base Rate plus one-quarter
of one percent (1/4%) per annum. Any change in such
rate resulting from a change in the Alternate Base
Rate shall be effective immediately from and after
such change in the Alternate Base Rate.
(b) If the Term Loans are LIBOR Loans, the Company shall
pay interest (computed on the basis of a year having
360 days and calculated on the basis of the number of
days elapsed) at a fixed rate for each LIBOR Interest
Period on the unpaid principal amount of LIBOR Loans
outstanding from time to time from the date of such
Loan until paid, payable on each Interest Adjustment
Date with respect to a LIBOR Interest Period
(provided that if a LIBOR Interest Period exceeds
three (3) months, the interest must be paid every
three (3) months, commencing three (3) months from
the beginning of such LIBOR Interest Period), at
LIBOR plus one-quarter of one percent (1/4%) per
annum, fixed in advance of each LIBOR Interest
Period as herein provided for each LIBOR Interest
Period.
(v) LOAN CONVERSIONS: All of the Term Loans outstanding at any
time must be either Alternate Base Rate Loans or LIBOR Loans,
but the Lenders, at the request of the Company, shall convert
Alternate Base Rate Loans to LIBOR Loans at any time, except
if an Event of Default exists, and shall convert LIBOR Loans
to Alternate Base Rate Loans permitted by this Paragraph C on
any Interest Adjustment Date, provided the conditions of
Section 2.2 are adhered to by the Company,, applicable to such
LIBOR Loan but each request for Loans under this Section 2.1C
must either be for Alternate Base Rate Loans or LIBOR Loans.
In the event of any conversion under this Section 2.1C, the
procedures set forth in Section 2.1A(ix) shall be followed by
the Company.
(vi) TERM LOAN NOTE: The obligation of the Company to repay the
Alternate Base Rate Loans and the LIBOR Loans made by each
Lender under this Section 2.1C and to pay interest thereon
shall be evidenced by a Term Note of the Company substantially
in the form of Schedule D, with appropriate insertions, dated
the date of execution thereof by the Company and payable to
the order of such Lender in the principal amount of its
Commitment, or if less, the aggregate unpaid principal amount
of Term Loans made hereunder by such Lender, in four (4)
semi-annual substantially equal installments, commencing six
(6) months from the date thereof. The principal amount of the
Alternate Base Rate Loans and LIBOR Loans made by each Lender
and all prepayments thereof and the applicable dates with
respect thereto shall be recorded by such Lender from time to
time on the grid(s) attached to such Note or by appropriate
book entry. The aggregate unpaid amount of Alternate Base Rate
Loans and LIBOR Loans set forth on the grid(s) attached to
each Term Note shall be rebuttable presumptive evidence of the
principal amount owing and unpaid on such Note, it being
understood, however, that any Lender's failure to so record
appropriate information on the grid(s) attached to its
respective Note shall in no way affect the obligations of the
Company under this Agreement or such Note.
14
<PAGE> 15
(vii) INTEREST ON LATE PAYMENTS: If any Term Note shall not be paid
at maturity, whether such maturity occurs by reason of lapse
of time or by operation of any provision of acceleration of
maturity therein contained, the principal thereof and the
unpaid interest thereon shall bear interest, until paid, at a
rate per annum which shall be 1.1 times the Alternate Base
Rate from time to time in effect.
D. COMPETITIVE BID LOANS
(i) BORROWING RIGHTS AND RESTRICTIONS: Subject to the terms and
conditions of this Agreement, during the Commitment Period the
Company may request Competitive Bids and may (but shall not
have any obligation to) accept Competitive Bids and borrow
Competitive Loans provided that the sum of the total Loans
outstanding under Sections 2.1A, 2.1B and 2.1C plus the
aggregate principal amount of outstanding Competitive Loans at
any time shall not exceed the Commitments which, on the date
hereof, total Five Hundred Ninety-Eight Million Four Hundred
Thousand Dollars ($598,400,000). Subject to the provisions of
this Agreement, the Company may, if a Competitive Bid is
submitted by a Lender, borrow funds under this Paragraph D,
repay the same in whole or in part, and reborrow hereunder at
any time and from time to time during the Commitment Period.
(ii) LOAN AMOUNTS: The Company shall have the option, subject to
the terms and conditions set forth herein, to borrow under
this Section 2.1D up to the principal amount of the
Commitments which, on the date hereof, total Five Hundred
Ninety-Eight Million Four Hundred Thousand Dollars
($598,400,000) by means of any combination of:
(a) Fixed Rate Loans which shall be payable on their
respective due dates and shall be drawn down in
aggregate amounts of not less than Five Million
Dollars ($5,000,000) or any greater amount evenly
divisible by One Million Dollars ($1,000,000); and
(b) Competitive Libor Loans which shall be payable on the
last date of their Competitive Libor Interest Period
and shall be drawn down in aggregate amounts of not
less than Five Million Dollars ($5,000,000) or any
greater amount evenly divisible by One Million
Dollars ($1,000,000).
(iii) PROCEDURE FOR BORROWING: The procedure for borrowing under
this Section 2.1D shall be as follows:
(a) Each such borrowing shall be made by Notice to the
Competitive Advance Facility Agent (which Notice must
be received by the Competitive Advance Facility Agent
prior to 11:00 a.m. New York time four (4) London
Banking Days prior to the requested borrowing date in
the event of a Competitive Libor Loan and by 11:00
a.m. New York time one Banking Day prior to the
proposed date of such borrowing in the event of a
Fixed Rate Loan). Such Notice shall specify:
(1) the amount of such borrowing;
(2) the requested borrowing date which shall be
a Banking Day or a London Banking Day, as
the case may be;
15
<PAGE> 16
(3) the type of Loan(s) comprising such
borrowing; and
(4) the duration of the Competitive Libor
Interest Period for any Competitive Libor
Loan and the maturity date of any Fixed Rate
Loan(s).
(b) The Competitive Advance Facility Agent shall promptly
notify each Lender of its receipt of a request for a
Competitive Loan thereby inviting the Lenders to
submit Competitive Bids. Any such notice shall
identify the name of the Company's bank, the
Company's account number and American Banking
Association routing number of the bank at which the
Company's account is maintained and to which the
proceeds from any Competitive Loan shall be routed.
(c) Each Lender may (but shall not have any obligation
to) make one or more Competitive Bids to the Company
in response to a Competitive Bid Request. Each
Competitive Bid by a Lender must be in a form
approved by the Competitive Advance Facility Agent
and must be received by the Competitive Advance
Facility Agent by telecopy, in the case of a
Competitive Libor Loan, not later than 10:00 a.m.,
New York time, three (3) London Banking Days before
the proposed date of such Competitive Borrowing, and
in the case of a Fixed Rate Loan, not later than
10:00 a.m., New York time, on the proposed date of
such Competitive Borrowing. Competitive Bids that do
not conform substantially to the form approved by the
Competitive Advance Facility Agent may be rejected by
the Competitive Advance Facility Agent, and the
Competitive Advance Facility Agent shall notify the
applicable Lender as promptly as practicable. Each
Competitive Bid shall be in aggregate amounts of not
less than Five Million Dollars ($5,000,000) or any
greater amount evenly divisible by One Million
Dollars ($1,000,000) and may equal the entire
principal amount of the Competitive Borrowing
requested by the Company. Each Competitive Bid shall
specify (i) the Competitive Bid Rate(s) at which the
applicable Lender is prepared to make such Loan or
Loans (expressed as a percentage rate per annum in
the form of a decimal to no more than four decimal
places) as well as the basis of calculation and (ii)
in the case of a Competitive Libor Loan, the
Competitive Libor Interest Period applicable to each
such Loan and the last day thereof.
(d) The Competitive Advance Facility Agent shall promptly
notify the Company by telecopy of the Competitive Bid
Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that
made such Competitive Bid.
(e) Subject only to the provisions of this paragraph, the
Company may accept or reject any Competitive Bid. The
Company shall notify the Competitive Advance Facility
Agent by telephone, confirmed by telecopy in a form
approved by the Competitive Advance Facility Agent,
whether and to what extent it has decided to accept
or reject each Competitive Bid, in the case of a
Competitive Libor Loan, not later than 11:00 a.m.,
New York time, three (3) London Banking Days before
the date of the proposed Competitive Borrowing, and
in the case of a Fixed Rate Loan, not later than
11:00 a.m., New York time, on the proposed date of
the Competitive Borrowing;
16
<PAGE> 17
provided that (i) the failure of the Company to give
such notice shall be deemed to be a rejection of each
Competitive Bid, (ii) the Company shall not accept a
Competitive Bid made at a particular Competitive Bid
Rate if the Company rejects a Competitive Bid made at
a lower Competitive Bid Rate, (iii) the aggregate
amount of the Competitive Bids accepted by the
Company shall not exceed the aggregate amount of the
requested Competitive Borrowing specified in the
related Competitive Bid Request, (iv) to the extent
necessary to comply with clause (iii) above, the
Company may accept Competitive Bids at the same
Competitive Bid Rate in part, which acceptance, in
the case of multiple Competitive Bids at such
Competitive Bid Rate, shall be made pro-rata in
accordance with the amount of each such Competitive
Bid, and (v) except as otherwise provided in clause
(iv) above, no Competitive Bid shall be accepted for
a Competitive Loan unless such Competitive Loan is in
a minimum principal amount of Five Million Dollars
($5,000,000) or any greater amount evenly divisible
by One Million Dollars ($1,000,000); provided further
that if a Competitive Loan must be in an amount less
than Five Million Dollars ($5,000,000) because of the
provisions of clause (iv) above, such Competitive
Loan may be for a minimum of One Million Dollars
($1,000,000) or any integral multiple thereof, and in
calculating the pro-rata allocation of acceptances of
portions of multiple Competitive Bids at a particular
Competitive Bid Rate pursuant to clause (iv) the
amounts shall be rounded to integral multiples of One
Million Dollars ($1,000,000) in a manner determined
by the Company.
(f) The Competitive Advance Facility Agent shall promptly
notify each bidding Lender by telecopy whether or not
its Competitive Bid has been accepted (and, if so,
the amount and Competitive Bid Rate so accepted), and
each successful bidder will thereupon become bound,
subject to the terms and conditions hereof, to make
the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(g) If the Competitive Advance Facility Agent shall elect
to submit a Competitive Bid in its capacity as a
Lender, it shall submit such Competitive Bid directly
to the Company at least one quarter of an hour
earlier than the time by which the other Lenders are
required to submit their Competitive Bids to the
Competitive Advance Facility Agent pursuant to
paragraph (b) of this Section.
(iv) INTEREST RATES: Interest shall accrue at the Competitive Bid
Rate specified in the applicable Competitive Bid, unless
otherwise agreed by the Lender submitting such Competitive Bid
and the Company.
(v) PAYMENTS ON COMPETITIVE NOTES: All payments of principal and
interest shall be made to the Competitive Advance Facility
Agent in immediately available funds for the account of the
Lenders by no later than 3:00 p.m. (New York time) on the
applicable payment date which date shall be specified on the
applicable Competitive Note. The Competitive Advance Facility
Agent shall promptly distribute to each Lender the principal
and interest received by it for the account of such Lender.
Each Lender having made a Competitive Loan hereunder shall
endorse each Competitive Note held by it or otherwise make
appropriate book entries evidencing each payment of principal
made thereon, it being understood, however, that any Lender's
failure to record appropriate information on the grid(s)
attached to any such Note shall in no way affect the
obligation of the Company under this Agreement or
17
<PAGE> 18
under any such Note. Whenever any payment to be made
hereunder, including without limitation, any payment to be
made on any Note, shall be stated to be due on a day which is
not a Banking Day, or a London Banking day as the case may be,
such payment shall be made on the next Banking Day (but in any
event not later than its maturity date) and such extension of
time shall in each case be included in the computation of the
interest payable on such Note. Notwithstanding the previous
sentence, in the case of any Competitive Libor Loan, if the
next London Banking Day is in a month other than the month the
payment was originally due, such payment may be made on the
immediately preceding London Banking Day and such reduction of
time shall in each case be considered in the computation of
the interest payable on such Note.
(vi) COMPETITIVE NOTES: The obligation of the Company to repay the
Fixed Rate Loans and the Competitive Libor Loans made by any
Lender and to pay interest thereon shall be evidenced by
non-negotiable Competitive Notes of the Company substantially
in the form of Schedule E hereto, with appropriate insertions,
dated the date of execution thereof by the Company and payable
to the order of such Lender on the maturity date of such Loan,
in the principal amount indicated thereon. The principal
amount of the Fixed Rate Loans and the Competitive Libor Loans
made by each Lender under this Section 2.1D and all
prepayments thereof and the applicable dates with respect
thereto shall be recorded by such Lender from time to time on
the grid(s) attached to such Note or by appropriate book
entry. The aggregate unpaid amount of Fixed Rate Loans and
Competitive Libor Loans set forth on the grid(s) attached to
each Competitive Note shall be rebuttable presumptive evidence
of the principal amount owing and unpaid on such Note, it
being understood, however, that any Lender's failure to so
record appropriate information on the grid(s) attached to its
respective Competitive Note shall in no way affect the
obligations of the Company under this Agreement or such Note.
(vii) PREPAYMENT. The Company shall not have any right to prepay any
Competitive Loan without the prior consent of the Lender
having made such Loan.
SECTION 2.2. CONDITIONS TO CERTAIN LOANS OR CONVERSIONS. The obligation or right
of each Lender to make any of the Loans or to convert any of the Loans
described in Sections 2.1A, 2.1B, 2.1C or 2.1D hereunder is
conditioned, in the case of each borrowing or conversion hereunder,
upon:
(i) the fact that no Possible Default or Event of Default shall
then exist or immediately after such Loan would exist; and
(ii) the fact that the representations and warranties contained in
Article IV hereof shall be true and correct in all material
respects with the same force and effect as if made on and as
of the date of such borrowing or conversion.
Each borrowing or conversion by the Company hereunder shall be deemed
to be a representation and warranty by the Company as of the date of such
borrowing or conversion as to the facts specified in Sections 2.2 (i) and (ii)
above.
SECTION 2.3. FACILITY FEE. The Company agrees to pay to each Lender a Facility
Fee, for the period from and including the date of this Agreement until
the Commitments have terminated and the outstanding Loans have been
repaid. The first payment of the Facility Fee shall be made no later
than March 31, 1997 for the period January 3, 1997 to March 31, 1997.
All payments of the Facility Fee
18
<PAGE> 19
shall be made to the Administrative Agent in immediately available
funds for the account of the Lenders by no later than 3:00 p.m. (New
York time) on the applicable payment date. The Administrative Agent
shall promptly distribute to each Lender its ratable share of the
Facility Fee received by it for the account of such Lender.
SECTION 2.4. COMPUTATION OF FACILITY FEES. Facility Fees shall be computed for
the actual number of days elapsed on the basis of a 360-day year.
SECTION 2.5. TERMINATION OF COMMITMENTS AND RIGHT OF SUBSTITUTION.
(i) The Company may at any time or from time to time terminate in
whole or ratably in part the Commitments of all of the Lenders
to an amount not less than the aggregate principal amount of
the Loans then outstanding under this Agreement, by giving the
Lenders and the Administrative Agent not less than two (2)
Banking Days' notice of the aggregate amount of such
termination (which shall not be less than Five Million Dollars
($5,000,000) or any greater amount evenly divisible by One
Million Dollars ($1,000,000)) and such Lender's proportionate
amount of such termination. If the Company terminates in whole
the Commitments of the Lenders, on the effective date of such
termination (provided the Company has prepaid in full the
unpaid principal balance, if any, of the Notes outstanding
together with all accrued and unpaid interest, if any,
Facility Fees accrued and unpaid, and any applicable
prepayment premiums) all of the Notes outstanding shall be
delivered to the Company marked "Cancelled". Any termination
of the Commitments shall be irrevocable during the remainder
of the Commitment Period.
(ii) The Company may at any time or from time to time terminate or
reduce the Commitment of any Lender hereunder to an amount not
less than the aggregate principal amount of the Loans then
outstanding held by such Lender under this Agreement:
(a) immediately if such Lender satisfies any of the
criteria for insolvency described in Section 7.5
hereof; or
(b) upon not less than two (2) Banking Days' notice to
such Lender and the Administrative Agent if the
Company, in its sole discretion, elects to terminate
the Commitment of such Lender for any reason
including, but not limited to, the default of such
Lender under the terms of this Agreement.
(iii) In the event the Commitment of any Lender is terminated by the
Company, the Company shall replace such Lender with a
successor Lender or Lenders (including any Lender or Lenders
which are a party to this Agreement with the consent of such
Lender or Lenders) with a Commitment not to exceed the
Commitment of the terminated Lender(s); provided that such
successor Lender shall, pursuant to a written instrument in
form and substance satisfactory to the Company, effectively
agree to become a party hereto and a "Lender" hereunder and be
bound by the terms hereof.
(iv) In the event of a default of any Lender under the terms of
this Agreement, the Company's election to terminate the
Commitment of such Lender shall not act as a waiver of any
other remedies which the Company may have for such default.
19
<PAGE> 20
(v) The termination of the Commitment of any Lender pursuant to
Section 2.5(ii) shall not affect the Commitments or the
obligations of all remaining Lenders under this Agreement.
(vi) After any termination or reduction of the Commitments as
described in this Section 2.5, the Facility Fees payable
hereunder shall be calculated upon the Commitments of the
Lenders as so reduced.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
AND FIXED RATE LOANS
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time after the
Effective Date any Regulatory Change shall impose, modify or deem
applicable any reserve and/or special deposit requirement (other than
reserves: (a) included in the Reserve Percentage, the effect of which
is reflected in the interest rate(s) of the LIBOR Loan(s) or
Competitive Libor Loan(s) in question or (b) attributable to
requirements imposed by the Board of Governors of the Federal Reserve
System on any Lender as a result of the failure of any such Lender to
maintain necessary current capitalization or financial conditions
imposed thereby) against assets held by, or deposits in or for the
account of any Loans, by any Lender, and the result of the foregoing is
to increase the cost to such Lender of making or maintaining LIBOR
Loans or Competitive Libor Loans, as the case may be, or reduce the
amount of principal or interest received by such Lender with respect to
LIBOR Loans or Competitive Libor Loans, then upon demand by such Lender
the Company shall pay to such Lender from time to time on Interest
Adjustment Dates with respect to such Loans, as additional
consideration hereunder, additional amounts sufficient to fully
compensate and indemnify such Lender for such increased cost or reduced
amount, provided that such additional cost or reduced amount were
allocable to such LIBOR Loans or Competitive Libor Loans.
A certificate as to the increased cost or reduced amount
(hereinafter in this Section 3.1 collectively called "Increased Costs")
as a result of any event mentioned in this Section 3.1, setting forth
the calculations therefor, shall be promptly submitted by such Lender
to the Company for its review. The Company shall pay such Increased
Costs for such period of time prior to the date such certificate is
received by the Company during which such Regulatory Change, by its
terms, applies retroactively to any period of time prior to the date
such Regulatory Change became effective. In addition, the Company shall
pay such Increased Costs incurred by a Lender on and after the date
such certificate is received by the Company unless, and until, the
Company, notwithstanding any other provision of this Agreement,
(i) upon at least three (3) Banking Days' prior written notice to
such Lender, prepays the affected LIBOR Loans in full or
converts all LIBOR Loans to Alternate Base Rate Loans
regardless of the LIBOR Interest Period thereof, or
(ii) terminates the Commitment of such Lender pursuant to Section
2.5 (provided that the Company shall pay such Increased Costs
on any LIBOR Loans from such Lender which remain outstanding).
Each Lender will notify the Company as promptly as practicable
of the existence of any event which will likely require the payment by
the Company of any such additional amount under this Section.
SECTION 3.2. CHANGES IN TAX LAWS. In the event that by reason of any Regulatory
Change of the jurisdiction where the office of the Lender making a Loan
is located, (i) any Lender shall, with
20
<PAGE> 21
respect to this Agreement or any transaction under this Agreement, be subject to
any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind
whatsoever (other than any tax imposed upon the total net income of such Lender
or imposed on or calculated with respect to the value of the assets of such
Lender) or (ii) any change shall occur in the taxation of any Lender with
respect to any Loan and the interest payable thereon (other than any change
which affects, and to the extent that it affects, the taxation of the total net
income of such Lender or imposed on or calculated with respect to the value of
the assets of such Lender), and if any such measures or any other similar
measure shall result in an increase in the cost to such Lender of making or
maintaining any Loan or in a reduction in the amount of principal, interest or
Facility Fee receivable by such Lender in respect thereof, then such Lender
shall promptly notify the Company stating the reasons therefor.
A certificate as to any such increased cost or reduced amount
(hereinafter in this Section 3.2 collectively called "Increased Taxes") as a
result of any event mentioned in this Section 3.2, setting forth the
calculations therefor, shall be submitted by such Lender to the Company for its
review. The Company shall pay such Increased Taxes for such period of time prior
to the date such certificate is received by the Company during which such
Regulatory Change, by its terms, applies retroactively to any period of time
prior to the date such Regulatory Change became effective. In addition, the
Company shall pay such Increased Taxes incurred by such Lender on and after the
date such certificate is received by the Company unless, and until, the Company,
notwithstanding any other provision of this Agreement,
(i) upon at least three (3) Banking Days' prior written notice to
such Lender and the Administrative Agent, prepays the affected
Loans in full, or
(ii) terminates the Commitment of such Lender pursuant to Section
2.5 hereof (provided that the Company shall pay such Increased
Costs on any Loans from such Lender which remain outstanding).
If any Lender receives such additional consideration from the Company
pursuant to this Section 3.2 and thereafter obtains the benefits of any refund,
deduction or credit for any taxes or other amounts on account of which such
additional consideration has been paid, such Lender shall pay to the Company its
allocable share thereof and shall reimburse the Company to the extent, but only
to the extent, that such Lender shall have actually received a refund of such
taxes or other amounts together with any interest thereon or an effective net
reduction in taxes or other governmental charges (including any taxes imposed on
or measured by the total net income of such Lender) of the United States or any
state or subdivision thereof by virtue of any such deduction or credit, after
first giving effect to all other deductions and credits otherwise available to
such Lender. If, at the time any audit of such Lender's income tax return by any
taxing agency is completed, such Lender determines, based on such audit, that it
was not entitled to the full amount of any refund reimbursed to the Company as
aforesaid or that its net income taxes are not reduced by a credit or deduction
for the full amount of taxes reimbursed to the Company as aforesaid, the
Company, upon demand of such Lender, will promptly pay to such Lender the amount
so refunded to which such Lender was not so entitled, or the amount by which the
net income taxes of such Lender were not so reduced, as the case may be. The
provisions of this Section 3.2 and Section 3.1 shall survive the termination of
this Agreement.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE.
In the event the Majority Lenders shall have determined, in good faith
and reasonably, that Dollar deposits of the relevant amount for the
relevant LIBOR Interest Period for LIBOR Loans are not available to the
Lenders 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 then (i) any notice of new LIBOR Loans
(or conversion of Revolving Credit
21
<PAGE> 22
Loans to LIBOR Loans) previously given by the Company and not yet
borrowed (or converted, as the case may be) shall be deemed a notice to
make Alternate Base Rate Loans unless the Company notifies the
Administrative Agent to the contrary, and (ii) the Company shall be
obligated either to prepay or to convert any outstanding LIBOR Loans on
the last day of the then current LIBOR Interest Period or Periods with
respect thereto.
SECTION 3.4. INDEMNITY. Without limitation of any other provisions of this
Article III, the Company hereby agrees to indemnify and hold harmless
each of CBT, Chase and each Lender from and against all costs, expenses
(including fees, charges and disbursements of counsel) and liabilities
resulting from any litigation or other proceedings (regardless of
whether CBT, Chase or any Lender is a party thereto), related to or
arising out of the Transactions contemplated hereby, except to the
extent such costs, expenses and liabilities result from the willful
misconduct or gross negligence of the party seeking indemnification as
determined by a court of competent jurisdiction, excluding
consequential, incidental or special damages. A certificate as to any
such loss or expense shall be promptly submitted by CBT, Chase and any
such Lender to the Company for its review and shall be paid by the
Company in the absence of manifest error.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any time any
Regulatory Change shall make it unlawful for any Lender to fund,
refinance, continue or convert into any LIBOR Loans which it is
committed to make hereunder with moneys obtained in the London
Interbank Eurodollar market, the Commitment of such Lender to fund,
refinance, continue or convert into LIBOR Loans shall, upon the
happening of such event, be suspended for the duration of such
illegality and such Lender shall by written notice to the Company and
the Administrative Agent declare that its Commitment with respect to
such Loans has been so suspended and, if and when such illegality
ceases to exist, such suspension shall cease and such Lender shall
similarly notify the Company and the Administrative Agent. If any such
change shall make it unlawful for any Lender to continue in effect the
funding in the London Interbank Eurodollar market of any LIBOR Loan
previously made by it hereunder, such Lender shall, upon the happening
of such event, notify the Company and the other Lenders thereof in
writing stating the reasons therefor and the Company shall, on the
earlier of (i) the last day of the then current LIBOR Interest Period
or (ii) if required by such law, regulation or interpretation, on such
date as shall be specified in such notice, either convert all LIBOR
Loans to Alternate Base Rate Loans or prepay all LIBOR Loans to the
Lenders in full. Any such prepayment or conversion shall not be subject
to the prepayment premiums prescribed in Section 2.1A(x) hereof. Any
requests for a LIBOR Loan not funded pursuant to this Section shall be
deemed to have been a request for an Alternate Base Rate Loan.
SECTION 3.6. FUNDING. Each Lender may, but shall not be required to, make LIBOR
Loans and Competitive Libor Loans with funds obtained outside the
United States.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders that:
SECTION 4.1. CORPORATE EXISTENCE. The Company is a corporation duly
organized and in good standing under the laws of the State of Ohio.
SECTION 4.2. AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance by the Company of this Agreement, the Notes and Related
Writings are within the Company'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 or any
applicable final judgement in effect or of the Amended Articles of
Incorporation or Regulations of the Company or of any
22
<PAGE> 23
agreement for borrowed money or other material agreement binding upon
the Company. The Company has duly executed and delivered this
Agreement.
SECTION 4.3. VALIDITY AND BINDING NATURE. This Agreement is, and the Notes when
duly executed and delivered will be, legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms.
SECTION 4.4. LITIGATION AND LIENS. To the best of the Company's knowledge, no
litigation or proceeding is pending which would, if successful, have a
Material adverse impact on the financial condition of the Company and
the Consolidated Subsidiaries taken as a whole, which is not already
reflected in the Company's Financial Reports delivered to the Lenders
prior to the date of this Agreement. The Internal Revenue Service has
not alleged any Material default by the Company 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 the Company and the Consolidated
Subsidiaries, taken as a whole.
SECTION 4.5. ERISA COMPLIANCE. Neither the Company 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 the Company or any of its
Consolidated Subsidiaries, taken as a whole. The Pension Benefit
Guaranty Corporation, established under ERISA, has not asserted that
the Company 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 the Company and any Consolidated Subsidiary as a result of
the Company's or any Consolidated Subsidiary's failure to comply with
ERISA.
SECTION 4.6. ENVIRONMENTAL MATTERS. To the best of the Company's knowledge, the
Company 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 the Company or a Subsidiary, as the case may be, in good faith by
appropriate proceedings diligently prosecuted) relating to
environmental control in all jurisdictions where the Company or any
Subsidiary is presently doing business and the Company 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 the Company or a Subsidiary, as the case
may be, in good faith by appropriate proceedings diligently
prosecuted).
SECTION 4.7. FINANCIAL REPORTS. The Financial Reports of the Company and the
Consolidated Subsidiaries, furnished to each Lender 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 the
Company's and its Consolidated Subsidiaries' financial condition and
the results of their operations, as of the date, and for the period
encompassed by such Financial Reports. Since the dates of the Company's
most recent Financial Reports until the date of this Agreement there
has been no material adverse change in the consolidated financial
condition of the Company and the Consolidated Subsidiaries taken as a
whole.
SECTION 4.8. REGULATION U. Neither the Company 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). Each of the
Lenders represents and warrants to the Company that it is not relying
on and will not rely on any margin stock (as described above) in
determining whether to extend or maintain credit under this Agreement.
23
<PAGE> 24
SECTION 4.9. GOVERNMENT REGULATION. Neither the Company 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 4.10. TAXES. The Company 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 the Company or a
Subsidiary, as the case may be, in good faith by appropriate
proceedings diligently prosecuted (the Company having made adequate and
reasonable provision for all material taxes not yet due and payable),
if any, and all material assessments, if any.
SECTION 4.11. DEFAULTS. No Possible Default or Event of Default exists which
would have or reasonably could have a Material adverse impact on the
financial condition of the Company and the Consolidated Subsidiaries,
taken as a whole.
ARTICLE V. OPENING COVENANTS
Prior to or concurrently with the execution and delivery of this
Agreement, the Company shall furnish to each Lender, and, with regard
to Section 5.6, the Administrative Agent, copies of the following:
SECTION 5.1. RESOLUTIONS. Certified copies of the resolutions of the Board of
Directors of the Company evidencing approval of the execution of this
Agreement.
SECTION 5.2. LEGAL OPINION. A favorable opinion of counsel for the Company as to
the matters referred to in Sections 4.1, 4.2, 4.3, 4.4, 4.6, 4.8 and
4.9 of this Agreement and such other matters as the Lenders may
reasonably request.
SECTION 5.3. CERTIFICATE OF INCUMBENCY. A certificate of the secretary or
assistant secretary of the Company certifying the names of the officers
of the Company authorized to sign this Agreement, and the Notes,
together with the true signatures of such officers.
SECTION 5.4. FINANCIAL REPORTS. The Financial Reports of the Company and the
Consolidated Subsidiaries, dated December 31, 1995, previously
furnished to each Lender, are true and complete, have been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with those used by the Company and the Consolidated
Subsidiaries during the Company's 1995 fiscal year, except as stated
therein, and fairly present the Company's and the Consolidated
Subsidiaries' financial condition as of that date and the results of
their operations for the period then ended. Since that date there has
been no material adverse change in the Company's and the Consolidated
Subsidiaries' financial condition, properties or business taken as a
whole.
SECTION 5.5. GOOD STANDING. Such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of the Company, and any
other legal matters relating to the Company and this Agreement, all in
form and substance satisfactory to the Administrative Agent and its
counsel.
ARTICLE VI. COVENANTS
24
<PAGE> 25
Until the later of (i) the expiration of the Commitments or
(ii) all obligations of the Company hereunder and under the Notes are
satisfied and paid in full, the Company agrees that, unless at any
time the Majority Lenders shall otherwise expressly agree in writing:
SECTION 6.1. INSURANCE. The Company will (a) maintain insurance to such extent
and against such hazards and liabilities as is commonly maintained by
companies similarly situated, and (b) upon any Lender's written
request, furnish to such Lender such information about the Company's
and its Consolidated Subsidiaries' insurance as such Lender may from
time to time reasonably request, which information shall be prepared in
form and detail reasonably satisfactory to such Lender.
SECTION 6.2. FINANCIAL REPORTS. The Company will furnish to the Administrative
Agent and each Lender:
(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 the Company 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 the Company 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 the Company 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
the Company (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 the
Company's senior unsecured long-term debt by Moodys or S&P
within thirty (30) days of such change; and
(vi) such other financial information regarding the Company as any
Lender may reasonably request.
SECTION 6.3. NET WORTH. The Company will not permit Consolidated Net Worth at
any time to fall below Eight Hundred Million Dollars ($800,000,000).
SECTION 6.4. REGULATIONS U AND X. The Company will not nor will it permit any
Subsidiary to take any action that would result in any non-compliance
of the Loans with Regulations U and X of the Board of Governors of the
Federal Reserve System. The Company's use of proceeds of any borrowings
under this Agreement will not cause a violation of Regulations U or X.
SECTION 6.5. MERGER AND SALE OF ASSETS. The Company will not merge or
consolidate with or 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
25
<PAGE> 26
part of its assets to any person or entity (except as otherwise
provided herein); provided, however, if no Possible Default, Event of
Default or Change of Control (as such term is defined in Section 6.6)
shall then exist or immediately thereafter will begin to exist:
(i) Any Consolidated Subsidiary may merge with (a) the Company
(provided that the Company 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), the Company 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 the Company 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) the Company, (b)
any Wholly-Owned Consolidated Subsidiary or (c) any
Consolidated Subsidiary of which the Company and/or one or
more Wholly-Owned Consolidated Subsidiaries shall own not less
than the same percentage of Voting Stock as the Company and/or
one or more Wholly-Owned Consolidated Subsidiaries then own of
the Consolidated Subsidiary making such sale, lease, transfer
or other disposition,
(iii) The Company may sell the stock or assets of any Consolidated
Subsidiary if such sale or other disposition is determined by
the board of directors of the Company to be in the best
interests of the Company and such sale is for a consideration
which represents the fair value (as determined in good faith
by the board of directors of the Company) thereof at the time
of such sale of such stock or assets,
(iv) The Company may merge with any other corporation, provided
that the Company shall be the surviving corporation,
(v) The Company or any Consolidated Subsidiary may sell all or any
part of the assets of any of its divisions or operations if
such sale or other disposition is determined by the board of
directors of the Company and/or such Consolidated Subsidiary,
as the case may be, to be in the best interests of the Company
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 the Company) thereof at the time of such sale or other
disposition of such assets, and
(vi) The Company or any Subsidiary may sell or transfer all or any
part of the assets of any of its divisions or operations to
any Subsidiary.
SECTION 6.6. CHANGE OF CONTROL. In the event there occurs a Change of Control of
the Company, the Commitments of the Lenders will immediately terminate
and the outstanding Loans will become due and payable.
A. For purposes of this Section 6.6, a "Change of Control" shall be deemed
to have occurred if:
(i) Any Person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
who or that, together with all Affiliates and Associates (as
such terms are defined in Rule 12b-2, as in effect on April
23, 1997, of the General Rules and Regulations under the
Securities Exchange Act of 1934, as
26
<PAGE> 27
amended) of such Person, is the Beneficial Owner (as defined
below) of ten percent (10%) or more of the shares of Common
Stock (as defined below) of the Company then outstanding,
except:
(a) the Company;
(b) any Subsidiary of the Company;
(c) any employee benefit or stock ownership plan of the
Company or any trustee or fiduciary with respect to
such a plan acting in such capacity; or
(d) any such Person who has reported or may, pursuant to
Rule 13d-1(b)(1) of the General Rules and Regulations
under the Securities Exchange Act of 1934, as
amended, report such ownership (but only as long as
such Person is the Beneficial Owner of less than
fifteen percent (15%) of the shares of Common Stock
then outstanding) on Schedule 13G (or any comparable
or successor report) under the Securities Exchange
Act of 1934, as amended.
Notwithstanding the foregoing, (1) no Person shall become the
Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any Person identified in clause
(d) above) solely as the result of an acquisition of Common
Stock by the Company that, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such Person to ten percent (10%) or more
(fifteen percent (15%) or more in the case of any Person
identified in clause (d) above) of the shares of Common Stock
then outstanding; provided, however, that if a Person becomes
the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any Person identified in
clause (d) above) of the shares of Common Stock solely by
reason of purchases of Common Stock by the Company and shall,
after such purchases by the Company, become the Beneficial
Owner of any additional shares of Common Stock which has the
effect of increasing such Person's percentage ownership of the
then-outstanding shares of Common Stock by any means
whatsoever, then such Person shall be deemed to have triggered
a Change of Control, and (2) if the Board of Directors
determines that a Person who would otherwise be the Beneficial
Owner of ten percent (10%) or more (fifteen percent (15%) or
more in the case of any Person identified in clause (d) above)
of the shares of Common Stock has become such inadvertently
(including, without limitation, because (A) such Person was
unaware that it beneficially owned ten percent (10%) or more
(fifteen percent (15%) or more in the case of any Person
identified in clause (d) above) of the shares of Common Stock
or (B) such Person was aware of the extent of such beneficial
ownership but such person acquired beneficial ownership of
such shares of Common Stock without the intention to change or
influence the control of the Company) and such Person divests
itself as promptly as practicable of a sufficient number of
shares of Common Stock so that such Person would no longer be
the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any Person identified in
clause (d) above), then such Person shall not be deemed to be,
or have been, the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of any Person
identified clause (d) above) of the shares of Common Stock,
and no Change of Control shall be deemed to have occurred.
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of
Directors of the Company and any new director
27
<PAGE> 28
(other than a director initially elected or nominated as a
director as a result of an actual or threatened election
contest with respect to directors or any other actual or
threatened solicitation of proxies by or on behalf of such
director) whose election by the Board of Directors 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, cease for any reason
to constitute a majority thereof.
(iii) There shall be consummated any consolidation, merger or other
combination of the Company with any other Person or entity
other than:
(a) a consolidation, merger or other combination which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than fifty-one percent (51%)
of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such consolidation, merger or other
combination; or
(b) a consolidation, merger or other combination effected
to implement a recapitalization and/or reorganization
of the Company (or similar transaction), or any other
consolidation, merger or other combination of the
Company, which results in no Person, together with
all Affiliates and Associates of such Person,
becoming the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of
any Person identified in clause A(i)(d)) of the
combined voting power of the Company's then
outstanding securities.
(iv) There shall be consummated any sale, lease, assignment,
exchange, transfer or other disposition (in one transaction or
a series of related transactions) of fifty percent (50%) or
more of the assets or earning power of the Company (including,
without limitation, any such sale, lease, assignment,
exchange, transfer or other disposition effected to implement
a recapitalization and/or reorganization of the Company (or
similar transaction)) which results in any Person, together
with all Affiliates and Associates of such Person, owning a
proportionate share of such assets or earning power greater
than the proportionate share of the voting power of the
Company that such Person, together with all Affiliates and
Associates of such Person, owned immediately prior to any such
sale, lease, assignment, exchange, transfer or other
disposition.
(v) The shareholders of the Company approve a plan of complete
liquidation of the Company.
Notwithstanding any subparagraphs of this Section 6.6A above, with
respect to any of the events described in subparagraphs (i), (iii),
(iv) and (v), a Change of Control shall not be deemed to have occurred
if any such event is approved by a vote of at least two-thirds of the
directors.
B. A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
28
<PAGE> 29
(i) which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule
13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, as in effect on
April 23, 1997;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has or shares the right to
acquire, hold, vote (except pursuant to a revocable proxy as
described in the proviso to this Section 6.6B) or dispose of
such securities (whether any such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed to be the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such other
Person) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), with respect to
acquiring, holding, voting (except as described in the proviso
to this Section 6.6B) or disposing of any securities of the
Company;
provided; however, that a Person shall not be deemed the Beneficial
Owner of, nor to beneficially own, any security if such Person has the
right to vote such security pursuant to an agreement, arrangement or
understanding which (a) arises solely from a revocable proxy given to
such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Securities Exchange Act of 1934, as amended, and
(b) is not also then reportable on Schedule 13D (or any comparable or
successor report) under the Securities Exchange Act of 1934, as
amended; and provided, further, that nothing in this Section 6.6B shall
cause a Person engaged in business as an underwriter of securities to
be the Beneficial Owner of, or to beneficially own, any securities
acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of forty (40) days after
the date of such acquisition or such later date as the Board of
Directors may determine in any specific case.
C. "Common Stock" shall mean, unless specifically referenced otherwise,
the shares of common stock $1.00 par value, of the Company; provided,
however, that, if the Company is the continuing or surviving
corporation in a transaction described in subsections A (iii) or A(iv)
of this Section 6.6, "Common Stock" shall mean the capital stock with
the greatest aggregate voting power of the Company, or, if the Company
is a subsidiary of another corporation or business trust, the
corporation or business trust which ultimately controls the Company.
"Common Stock" when used with reference to any corporation or business
trust, other than the Company, shall mean the capital stock with the
greatest aggregate voting power of such corporation or business trust,
or, if such corporation or business trust is a subsidiary of another
corporation or business trust, the corporation or business trust which
ultimately controls such first-mentioned corporation or business trust.
SECTION 6.7. NOTICE. Until the Termination Date, the Company will cause its
treasurer, or in his absence another representative of the Company
designated by the treasurer, to promptly notify the Lenders and the
Administrative Agent whenever any Material Possible Default may occur
or any
29
<PAGE> 30
warranty made in Article IV hereof or elsewhere in this Agreement or in
any Related Writing may for any reason cease in any Material respect to
be true and complete.
SECTION 6.8. LIENS. The Company 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 diligently
prosecuted,
(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 the Company or
another Consolidated Subsidiary,
(iv) liens on Properties of the Company 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 the
Company or any Consolidated Subsidiary through purchase,
merger, consolidation or otherwise, whether or not assumed by
the Company 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 the Company or any Consolidated Subsidiary to
secure all or a portion of or to secure indebtedness 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 the
Company or such Consolidated Subsidiary,
(vii) any lien placed upon any real property now owned or hereafter
acquired by the Company 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,
30
<PAGE> 31
(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 such 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 6.9. ERISA COMPLIANCE. Neither the Company 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. The Company will furnish
to the Lenders as soon as possible and in any event within thirty (30)
days after the Company 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 the
Company or such Consolidated Subsidiary setting forth details as to
such Reportable Event and the action which the Company 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 (or any successor thereto) if a copy of
such notice is available to the Company or such Consolidated
Subsidiary.
SECTION 6.10. NOTICE OF DEFAULT. The Company will, and will cause each
Consolidated Subsidiary to, give prompt notice in writing to each
Lender, the Administrative Agent and the Competitive Advance Facility
Agent of the occurrence of any Possible Default, Event of Default or
Change of Control 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 the Company's ability to
repay the Notes.
SECTION 6.11. CONDUCT OF BUSINESS. The Company 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 6.12. TAXES. The Company 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 6.13. COMPLIANCE WITH LAWS. The Company 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 the Company 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 the Company 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 NOTES, INTEREST, FACILITY FEE OR OTHER FEES. If the
principal on any Note shall not be paid in full when due and payable
and shall remain unpaid for a period of three (3) consecutive Banking
Days, or London Banking Days, as the case may
31
<PAGE> 32
be and/or any interest due on any Note or any Facility Fee or Other Fee
shall not be paid within five (5) Banking Days after written notice
thereof to the Company from the Lender (or the Administrative Agent or
the Competitive Advance Facility Agent, as the case may be) to whom
such amount(s) are owed.
SECTION 7.2. COVENANTS. If the Company 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 the Company's part to be complied with,
and such failure or omission, is not fully corrected within thirty (30)
days after the giving of written notice thereof to the Company by no
less than fifty-one percent (51%) of the Lenders acting as a whole.
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 the Company to the Lenders or any other holder
of any 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 the Company and the Consolidated Subsidiaries,
taken as a whole.
SECTION 7.4. CROSS DEFAULT. If the Company or any of its Consolidated
Subsidiaries (i) defaults 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) defaults 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 Company
and the Consolidated Subsidiaries, taken as a whole.
SECTION 7.5. TERMINATION OF OPERATIONS, BANKRUPTCY OR INSOLVENCY. If the Company
or a Consolidated Subsidiary representing in excess of ten percent
(10%) of total consolidated assets of the Company 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. If any Event of Default described in
Section 7.5 hereof shall occur, the Commitments (if they have not
already been terminated) shall immediately terminate and all Notes
shall automatically become immediately due and payable, without notice.
If any other Event of Default shall occur and shall not have been
remedied within an allowable time period referred to in this Agreement,
then the Majority Lenders may terminate the Commitments (if
32
<PAGE> 33
they have not already been terminated) and the Outstanding Majority
Lenders may declare that all Notes shall become immediately due and
payable. The Majority Lenders and the Outstanding Majority Lenders
shall promptly notify the Company in writing of any such declaration.
The effect as an Event of Default of any event described in Section 7.1
or 7.5 hereof may be waived only by the written concurrence of the
holders of one hundred percent (100%) of the aggregate unpaid principal
amount of the Notes. The effect as an Event of Default of any other
event described in Sections 7.2, 7.3 or 7.4 may be waived by the
holders of fifty-one percent (51%) by amount of the Commitments.
ARTICLE IX. THE ADMINISTRATIVE AGENT AND COMPETITIVE ADVANCE
FACILITY AGENT
The Lenders hereby authorize (a) CBT and CBT hereby agrees to
act as Administrative Agent, and (b) The Chase Manhattan Bank and
Chase hereby agrees to act as the Competitive Advance Facility Agent,
for the Lenders in respect of this Agreement upon the terms and
conditions set forth elsewhere in this Agreement, and upon the
following terms and conditions:
SECTION 9.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
appoints and authorizes the Administrative Agent and the Competitive
Advance Facility Agent to exercise such powers hereunder as are
delegated to the Administrative Agent and the Competitive Advance
Facility Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. Notwithstanding anything in this
Agreement to the contrary, or in a Related Writing, neither the
Administrative Agent nor the Competitive Advance Facility Agent shall
have any duties or responsibilities, except those expressly set forth
herein, nor shall the Administrative Agent or the Competitive Advance
Facility Agent have or be deemed to have any fiduciary relationship
with any Lender. Neither the Administrative Agent, the Competitive
Advance Facility Agent nor any of its or their directors, officers,
attorneys or employees shall be liable for any action taken or omitted
to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
SECTION 9.2. NOTE HOLDERS. The Administrative Agent and the Competitive Advance
Facility Agent, as the case may be, may treat the payee of any Note as
the holder thereof until written notice of transfer shall have been
filed with it signed by such payee and in form satisfactory to the
Administrative Agent or the Competitive Advance Facility Agent, as the
case may be.
SECTION 9.3. CONSULTATION WITH COUNSEL. Each of the Competitive Advance Facility
Agent and the Administrative Agent may consult with legal counsel
selected by it (including in-house counsel) and shall not be liable for
any reasonable action taken or suffered in good faith by it in
accordance with the written opinion of external counsel, issued before
such action is taken or suffered.
SECTION 9.4. DOCUMENTS. Neither the Competitive Advance Facility Agent nor the
Administrative Agent shall be under a duty to examine into or pass upon
the validity, effectiveness, genuineness or value of this Agreement,
the Notes, any Related Writing furnished pursuant hereto or in
connection herewith or the value of any collateral obtained hereunder,
and each of the Competitive Advance Facility Agent and the
Administrative Agent shall be entitled to assume that the same are
valid, effective and genuine and what they purport to be.
SECTION 9.5. ADMINISTRATIVE AGENT, COMPETITIVE ADVANCE FACILITY AGENT AND THEIR
AFFILIATES. With respect to the Loans made hereunder, each of the
Competitive Advance Facility Agent and the Administrative Agent shall
have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not the
33
<PAGE> 34
Administrative Agent or the Competitive Advance Facility Agent, and the
Administrative Agent and the Competitive Advance Facility Agent and
their affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Company or any Subsidiary or
affiliate of the Company.
SECTION 9.6. KNOWLEDGE OF DEFAULT. It is expressly understood and agreed that
each of the Administrative Agent and the Competitive Advance Facility
Agent shall be entitled to assume that no Possible Default or Event of
Default has occurred and is continuing, unless the Administrative Agent
or the Competitive Advance Facility Agent, as the case may be, has
actual knowledge of such fact or has been notified by a Lender that
such Lender considers that a Possible Default or Event of Default has
occurred and is continuing and specifying the nature thereof.
SECTION 9.7. ACTION BY ADMINISTRATIVE AGENT, COMPETITIVE ADVANCE FACILITY AGENT.
So long as the Administrative Agent or the Competitive Advance Facility
Agent, as the case may be, shall be entitled, pursuant to Section 9.6
hereof, to assume that no Possible Default or Event of Default shall
have occurred and be continuing, each of the Competitive Advance
Facility Agent and the Administrative Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising
any rights which may be vested in it by, or with respect to taking or
refraining from taking any action or actions which it may be able to
take under or in respect of, this Agreement. Neither the Competitive
Advance Facility Agent nor the Administrative Agent shall incur any
liability under or in respect of this Agreement by action upon any
notice, certificate, warranty or other paper or instrument reasonably
believed by it to be genuine or authentic or to be signed by the proper
party or parties, or with respect to anything which it may do or
refrain from doing in the reasonable exercise of its judgment, or which
the Administrative Agent or the Competitive Advance Facility Agent
reasonably believes to be necessary or desirable in the premises.
SECTION 9.8. INDEMNIFICATION. The Lenders agree to indemnify each of the
Competitive Advance Facility Agent and the Administrative Agent (to the
extent not reimbursed by the Company), ratably according to the
respective principal amounts of their Commitments from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, reasonable out of pocket costs and expenses
(including reasonable external counsel costs), expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against either the Competitive Advance Facility
Agent or the Administrative Agent in any action taken or omitted by the
Administrative Agent or the Competitive Advance Facility Agent with
respect to this Agreement, provided that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's or the Competitive Advance
Facility Agent's gross negligence or willful misconduct or from any
action taken or omitted by the Administrative Agent or the Competitive
Advance Facility Agent in any capacity other than as agent under this
Agreement.
SECTION 9.9. SUCCESSOR. The Company may select a successor or alternate
Administrative Agent and/or Competitive Advance Facility Agent with the
approval of the holders of fifty-one percent (51%) by amount of the
Commitments or Loans, as the case may be.
ARTICLE X. MISCELLANEOUS
SECTION 10.1. LENDERS' INDEPENDENT INVESTIGATION. Each Lender, by its signature
to this Agreement, acknowledges and agrees that it has made and shall
continue to make its own independent investigation of the
creditworthiness, financial condition and affairs of the Company and
any Subsidiary in connection with the extension of credit hereunder,
and agrees that no other Lender, the Administrative Agent or the
Competitive Advance Facility Agent has any duty or responsibility,
34
<PAGE> 35
either initially or on a continuing basis, to provide any Lender with
any credit or other information with respect thereto whether coming
into its possession before the making of the first Loans or at any time
or times thereafter.
SECTION 10.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing
on the part of any Lender or the holder of any 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 10.3. AMENDMENTS. Except as otherwise specifically provided herein no
amendment, modification, termination, or waiver of any provision of
this Agreement or of the Notes (except in the event of a Money Market
Note and/or Competitive Note), nor consent to any variance therefrom,
shall be effective unless the same shall be in writing and signed by
the Company and the Majority Lenders and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
The unanimous consent of the Lenders shall be required with
respect to (i) the change of maturity of any Term Note or
Revolving Credit Note, or the payment date of interest thereunder,
(ii) any change in the rate of interest on such Notes, or in the rate
at which the Facility Fee referred to in Section 2.3 hereof shall be
calculated or in any amount of principal or interest due on any Term
Note or Revolving Credit Note, or in the manner of pro-rata
application of any payments made by the Company to the Lenders
hereunder, (iii) any change in any percentage voting requirement in
this Agreement, (iv) any change in any date specified in this
Agreement for the payment of principal or interest on any Term Note or
Revolving Credit Note or for the payment of any Facility Fee
hereunder, (v) any increase in any Lender's Commitment or Percentage,
except pursuant to Section 2.5(iii) hereof, or any increase in the
aggregate of all of the Lenders' Commitments hereunder or (vi) any
change to this Section 10.3. No amendments to the duties or
responsibilities of the Administrative Agent or Competitive Advance
Facility Agent may be made without the prior written consent of the
Administrative Agent or the Competitive Advance Facility Agent, as the
case may be, except as provided in Section 9.9 hereof.
Notice of amendments or consents ratified by the Lenders
hereunder shall immediately be forwarded by the Company to all
Lenders. Each Lender or other holder of a Note shall be bound by any
amendment, waiver or consent obtained as authorized by this Section,
regardless of its failure to agree thereto.
SECTION 10.4. CONFIDENTIALITY. Unless the Company otherwise agrees in writing,
each Lender 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 such
Lender's directors, officers, employees, affiliates, and agents, and
then only on a confidential need-to-know basis; provided, however that
a Lender 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 Lenders or banking, or (d) to
actual or potential assignees or participants as permitted by Section
10.9 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 the Company, any Subsidiary, or any
of their respective affiliates which has been furnished by the Company,
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 a Lender not permitted
by this
35
<PAGE> 36
Agreement, (y) was available to a Lender on a nonconfidential basis
prior to its disclosure to such Lender by the Company, any Subsidiary,
or any of their respective affiliates, or (z) becomes available to a
Lender on a nonconfidential basis from a person and/or entity other
than the Company, any Subsidiary, or any of their respective affiliates
who, to the best knowledge of such Lender, is not otherwise bound by a
confidentiality agreement with the Company, any Subsidiary, or any of
their respective affiliates, or, to the best knowledge of such Lender,
is not otherwise prohibited from transmitting the information to such
Lender.
SECTION 10.5. NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing and, if to the Company or a
Subsidiary, mailed or delivered to it, addressed to it at the address
of the Company herein or hereinafter specified, and if to a Lender,
mailed or delivered to it, addressed to the address (as may be amended
from time to time) of such Lender specified on its signature page to
this Agreement. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or
made when received.
SECTION 10.6. COSTS AND EXPENSES. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses (including reasonable legal
fees for outside counsel) of the Lenders incurred directly as a result
of the enforcement of this Agreement, the Notes and the other
instruments and documents in connection herewith.
SECTION 10.7. OBLIGATIONS SEVERAL. The obligations of the Lenders hereunder are
several and not joint. Nothing contained in this Agreement and no
action taken by the Lenders pursuant hereto shall be deemed to
constitute the Lenders as a partnership, association, joint venture or
other entity. No default by any Lender hereunder shall excuse the other
Lenders from any obligation under this Agreement; but no Lender shall
have or acquire any additional obligation of any kind by reason of such
default.
SECTION 10.8. EXECUTION IN COUNTERPARTS. This Agreement 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 10.9. ASSIGNMENTS AND PARTICIPATIONS.
A. ASSIGNMENTS. Unless the Company otherwise consents in writing, which
consent shall not be unreasonably withheld, no payee or other party in
possession of any Note (including any Lender) shall assign or transfer
any Note or any interest therein to any other person or entity, except
as otherwise permitted under this Section, or negotiate any Note, as
such term is defined in Ohio Revised Code Chapter 1303; provided,
however, no consent from the Company shall be required in the event a
Lender makes any such assignment to an affiliate of such Lender or to
another Lender. Except as otherwise expressly agreed in writing by the
Company, no Lender shall, by reason of the assignment or transfer of
any Note or otherwise, be relieved of any of its obligations hereunder.
Each transferee of any Note shall take such Note subject to the
provisions of this Agreement and to any request made, waiver or consent
given, or other action taken hereunder, prior to such transfer, by each
previous holder of such Note; and the Company shall be entitled to
conclusively assume that the transferee shall thereafter be vested with
all rights and powers under this Agreement of the Lender named as the
payee of the Note which is the subject of such transfer. Nothing herein
shall prohibit any Lender from pledging or assigning any Note to any
Federal Reserve Bank of the United States pursuant to applicable law.
No party in possession of a Note shall be a "Holder" as such term is
defined in Ohio Revised Code Chapter 1303. Notwithstanding any
provision of this Section
36
<PAGE> 37
10.9 to the contrary, the Company may not assign or transfer any of its
rights or obligations hereunder without the consent of the holders of
one hundred percent (100%) by amount of the Commitments or Loans, as
the case may be.
B. PARTICIPATIONS. Any Lender may grant participations in or to all or any
part of any Loan or Loans held by such Lender and Commitment of such
Lender and the Notes held by such Lender without the consent of the
Company. Except as otherwise expressly agreed in writing by the
Company, no grant of a participation shall relieve any Lender of its
obligations hereunder. The Company shall be entitled to deal solely
with the Lenders (and their respective assignees) for all purposes of
this Agreement and the Notes, and no holder of a participation in all
or any part of the Loans, Notes or Commitments shall have any rights
under this Agreement and shall not be a Holder of any Note, as such
term is defined in Ohio Revised Code Chapter 1303.
C. DISCLOSURE OF INFORMATION. The Company hereby consents to the
disclosure of any information obtained in connection herewith by any
Lender to any entity which is an assignee or potential assignee or a
participant or potential participant pursuant to Section 10.9A or 10.9B
hereof, it being understood that such Lender shall advise any such
actual or potential assignee or participant of its obligation to keep
confidential any nonpublic information disclosed to it pursuant to this
Section 10.9 and, prior to the disclosure of such information, shall
cause each such actual or potential assignee or participant to execute
a confidentiality agreement containing the confidentiality provisions
set forth in Section 10.4 hereof.
D. SECURITIES LAWS. Each Lender represents that it is the present
intention of such Lender to acquire each Note drawn to its order for
its own account and not with a view to the distribution or sale
thereof.
SECTION 10.10. TAX FORMS. With respect to each Lender which is organized under
the laws of a jurisdiction outside the United States (which claims
exemption from, or reduction of, United States withholding tax under
Sections 1441 or 1442 of the Internal Revenue Code of 1986, as
amended), on the date of any borrowing, and from time to time
thereafter if requested by the Company or the Administrative Agent,
each such Lender shall provide the Administrative Agent and the Company
with the forms prescribed by the Internal Revenue Service of the United
States certifying as to such Lender's status for purposes of
determining exemption from United States withholding taxes with respect
to all payments to be made to such Lender hereunder or other documents
satisfactory to the Company and the Administrative Agent indicating
that all payments to be made to such Lender hereunder are subject to
such tax at a rate reduced by an applicable tax treaty. Unless the
Company and the Administrative Agent have received such forms and such
other documents reasonably requested by the Administrative Agent or the
Company indicating that payments hereunder are not subject to United
States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty, the Company or the Administrative Agent shall
withhold taxes from such payments at the applicable statutory rate in
the case of payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
SECTION 10.11. 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; provided that the indemnification and expense reimbursement
provisions of the Commitment Letter dated November 12, 1996 by and
among the Company, CBT, Chase and Chase Securities, Inc. and the
provisions relating to the administration fees and the auction
administration fees in the Fee Letter referred to therein shall
continue in effect notwithstanding the execution and delivery of this
Agreement.
37
<PAGE> 38
SECTION 10.12. GOVERNING LAW. This Agreement, each of the Notes and any Related
Writing shall be governed by and construed in accordance with the laws
of the State of Ohio and the respective rights and obligations of the
Company and the Lenders shall be governed by Ohio law.
SECTION 10.13. 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.
SECTION 10.14. PRESS RELEASES. Neither the Administrative Agent nor any Lender
or the Competitive Advance Facility Agent shall issue any press release
regarding this Agreement without the prior written consent of the
Company.
SECTION 10.15. CONSENT TO JURISDICTION. The Company hereby irrevocably and
unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted
by law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent, the Competitive Advance
Facility Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Company or its
properties in the courts of any jurisdiction.
The Company hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this
Agreement in any court referred to in this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 10.5.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date indicated above.
THE SHERWIN-WILLIAMS COMPANY
By: /s/
-----------------------------------
LARRY J. PITORAK
Title: SENIOR VICE PRESIDENT-
FINANCE, TREASURER AND
CHIEF FINANCIAL OFFICER
38
<PAGE> 39
By: /s/
---------------------------------
CYNTHIA D. BROGAN
Title: VICE PRESIDENT AND ASSISTANT
TREASURER
<PAGE> 40
Amount of Percentage of
Commitment Commitments ABN AMRO Bank N.V.
- ---------- -----------
$40,000,000 6.68% by: ABN AMRO North America,
Inc. as agent
By: /s/
---------------------------------
Name:
Title:
ABN AMRO Bank N.V.
by: ABN AMRO North America, Inc.
as agent
One PPG Place, Suite 2950
Pittsburgh, PA l5222-5400
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 41
Amount of Percentage of
Commitment Commitments BankBoston, N.A.
- ---------- -----------
$19,200,000 3.21%
By: /s/
---------------------------------
Name:
Title:
BankBoston, N.A.
100 Federal Street, 01-09-05
Boston, MA 02110
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 42
Amount of Percentage of
Commitment Commitments National City Bank
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
National City Bank
1900 East Ninth Street (LOC 2077)
Cleveland, Ohio 44114
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 43
Amount of Percentage of
Commitment Commitments Wells Fargo Bank, N.A.
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
Wells Fargo Bank, N.A.
707 Wilshire Boulevard - MAC 2818-165
Los Angeles, CA 90017
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 44
Amount of Percentage of
Commitment Commitments PNC Bank, National Association
- ---------- -----------
$30,400,000 5.08%
By: /s/
---------------------------------
Expiration Date: January 3, 2003
Name:
Title:
PNC Bank, National Association
249 Fifth Ave., 2nd Floor
Pittsburgh, PA 15222-2702
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 45
Amount of Percentage of
Commitment Commitments Wachovia Bank of Georgia, N.A.
- ---------- -----------
$30,400,000 5.08%
By: /s/
---------------------------------
Name:
Title:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, GA 30303
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 46
Amount of Percentage of
Commitment Commitments SunTrust Bank, Atlanta
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
SunTrust Bank, Atlanta
25 Park Place, 26th Floor
Atlanta, GA 30303
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 47
Amount of Percentage of
Commitment Commitments Banca Commerciale Italiana
- ---------- ----------- Chicago Branch
$19,200,000 3.21%
By: /s/
---------------------------------
Name:
Title:
Banca Commerciale Italiana
Chicago Branch
150 North Michigan Avenue, Suite 1500
Chicago, Ill. 60601
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 48
Amount of Percentage of
Commitment Commitments The Bank of New York
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
The Bank of New York
One Wall Street
New York, New York 10286
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 49
Amount of Percentage of
Commitment Commitments Bank One, NA (Illinois)
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
Bank One, NA (Illinois)
611 Woodward Avenue, Mail Suite 8074
Detroit, MI 48226
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 50
Amount of Percentage of
Commitment Commitments The Bank of Nova Scotia
- ---------- ----------- Atlanta Agency
$19,200,000 3.21%
By: /s/
---------------------------------
Name:
Title:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 51
Amount of Percentage of
Commitment Commitments Bank of America, N.A.
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
Bank of America, N.A.
335 Madison Avenue, 5th Floor
New York, NY 10017
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 52
Amount of Percentage of
Commitment Commitments KeyBank National Association
- ---------- -----------
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
KeyBank National Association
127 Public Square/Mail Code:OH
01-27-0606
Cleveland, Ohio 44114-1306
Telephone:
----------------------
Facsimile:
----------------------
<PAGE> 53
Amount of Percentage of
Commitment Commitments First Union National Bank
- ---------- ----------- of North Carolina
$40,000,000 6.68%
By: /s/
---------------------------------
Name:
Title:
First Union National Bank of North
Carolina
301 South College Street, TW-5
Charlotte, NC 28288-0745
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 54
Amount of Percentage of
Commitment Commitments Mellon Bank, N.A.
- ---------- -----------
$30,400,000 5.08%
By: /s/
---------------------------------
Name:
Title:
Mellon Bank, N.A.
One Mellon Bank Center, Room 4320
Pittsburgh, PA 15258-0001
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 55
Amount of Percentage of
Commitment Commitments Royal Bank of Canada
- ---------- -----------
$30,400,000 5.08%
By: /s/
---------------------------------
Name:
Title:
Royal Bank of Canada
One Liberty Plaza, 5th Floor
165 Broadway
New York, New York 10006-1404
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 56
Amount of Percentage of
Commitment Commitments
$40,000,000 6.68% Chase Bank of Texas,
National Association
By: /s/
---------------------------------
Name:
Title:
Chase Bank of Texas, National
Association
712 Main Street (4TCBN59)
Houston, TX 77002-8059
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 57
Amount of Percentage of
Commitment Commitments
- ----------- -------------
$19,200,000 3.21% Fifth Third Bank
By: /s/
---------------------------------
Name:
Title:
Fifth Third Bank
1404 East Ninth Street
Cleveland, Ohio 44114
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 58
The Chase Manhattan Bank,
as the Competitive Advance Facility
Agent
By: /s/
---------------------------------
Name:
Title:
The Chase Manhattan Bank
270 Park Avenue, 4th Floor
New York, NY 10017
Telephone:
---------------------------
Facsimile:
---------------------------
<PAGE> 59
<TABLE>
<CAPTION>
Schedule A
<S> <C>
ABN AMRO Bank N.V. First Union National Bank of North Carolina
One PPG Place, Suite 2950 301 South College Street, TW-5
Pittsburgh, PA 15222-5400 Charlotte, NC 28288-0745
Banca Commerciale Italiana KeyBank National Association
150 North Michigan Avenue, Suite 1500 127 Public Square
Chicago, IL 60601 Mail Code: OH-01-27-0606
Cleveland, OH 44114-1306
BankBoston, N.A.
100 Federal Street, 01-09-05 Mellon Bank, N.A.
Boston, MA 02110 One Mellon Bank Center, Rm. 4320
Pittsburgh, PA 15258-0001
Bank of America, N.A.
335 Madison Avenue National City Bank
5th Floor 1900 East Ninth Street (LOC 2077)
New York, NY 10017 Cleveland, OH 44114
The Bank of New York PNC Bank, National Association
One Wall Street 249 Fifth Avenue, 2nd Floor
New York, NY 10286 Pittsburgh, PA 15222-2707
The Bank of Nova Scotia Royal Bank of Canada
Atlanta Agency One Liberty Plaza, 5th Floor
600 Peachtree Street, N.E. 165 Broadway
Suite 2700 New York, NY 10006-1404
Atlanta, GA 30308
SunTrust Bank, Atlanta
Chase Bank of Texas, National Association 25 Park Place, 26th Floor
712 Main Street (4TCBN59) Atlanta GA 30303
Houston, TX 77002-8059
Wachovia Bank of Georgia, N.A.
Fifth Third Bank 191 Peachtree Street, N.E.
1404 East Ninth Street Atlanta, GA 30303
Cleveland, OH 44114
Wells Fargo Bank, N.A.
Bank One, NA (Illinois) 707 Wilshire Boulevard - MAC 2818-165
611 Woodward Avenue, Mail Suite 8074 Los Angeles, CA 90017
Detroit, MI 48226
</TABLE>
<PAGE> 60
Schedule B
NON-NEGOTIABLE REVOLVING CREDIT NOTE
$________________________ Cleveland, Ohio
Due Date: _______________, 19__
FOR VALUE RECEIVED, the undersigned, THE SHERWIN-WILLIAMS COMPANY
("Borrower") promises to pay to the order of _____________________________
("Lender"), the principal sum of _______________________________ Dollars
($__________) or the aggregate unpaid principal amount of all Loans evidenced by
this Note made by Lender to Borrower pursuant to Paragraph A of Section 2.1 of
the Amended and Restated Five Year Revolving Credit Agreement, whichever is
less, in legal tender of the United States of America on the Due Date indicated
above pursuant to that certain Amended and Restated Five Year Revolving Credit
Agreement (as may be amended from time to time, "Credit Agreement") dated
January 3, 2000 by and among Borrower, Chase Bank of Texas, National
Association, as Administrative Agent, , The Chase Manhattan Bank and the Lenders
identified on the signature pages to such Agreement. Capitalized terms used, but
not otherwise defined, herein shall have the meanings ascribed to them in said
Credit Agreement.
Borrower promises to pay interest on the unpaid principal amount from
time to time outstanding from the date of such Loan until the payment in full
thereof at the rates per annum which shall be determined in accordance with the
provisions of Paragraph A of Section 2.1 of the Credit Agreement. Said interest
shall be payable on each date provided for in Paragraph A of said Section 2.1;
provided, however, that interest on any principal portion which is not paid when
due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Alternate Base Rate Loans and LIBOR Loans, and payments of principal of any
thereof, will be recorded on the grid(s) attached hereto and made a part hereof
or by appropriate book entry. All Revolving Credit Loans to Borrower pursuant to
the Credit Agreement and all payments on account of principal hereof shall be
recorded by Lender prior to transfer hereof on such grid(s) or by appropriate
book entries, it being understood, however, that Lender's failure to record
appropriate information in the grid(s) attached to this Note shall in no way
affect the obligation of Borrower under the Credit Agreement or this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement , or any Event of
Default under the Credit Agreement the principal hereof and the unpaid interest
thereon shall bear interest, until paid, at a rate per annum which shall be 1.1
times the Alternate Base Rate. All payments of principal of and interest on this
Note shall be made in immediately available funds.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement. Reference is made to such Credit Agreement for a description
of other terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By:_____________________________________
Title:__________________________________
<PAGE> 61
<TABLE>
<CAPTION>
REVOLVING CREDIT NOTE
LOANS AND PRINCIPAL PAYMENTS
----------------------------
=================================================================================================================================
Amount of Alternate Amount of Amount of Unpaid Principal Balance Name of Person
Base Rate Loan LIBOR Principal Prepaid of Revolving Credit Note Making Notification
Date Loan
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
</TABLE>
<PAGE> 62
Schedule C
NON-NEGOTIABLE MONEY MARKET NOTE
$________________________ Cleveland, Ohio
_________________________, 19__
Due Date: _____________________
FOR VALUE RECEIVED, the undersigned, THE SHERWIN-WILLIAMS COMPANY
("Borrower") promises to pay to the order of ___________________ ("Lender") ,
the principal sum of __________________________ Dollars ($__________) pursuant
to Paragraph B of Section 2.1 of the Amended and Restated Five Year Revolving
Credit Agreement, in legal tender of the United States of America on the Due
Date indicated above pursuant to that certain Amended and Restated Five Year
Revolving Credit Agreement (as may be amended from time to time, "Credit
Agreement") dated January 3, 2000 by and among Borrower, Chase Bank of Texas,
National Association, as Administrative Agent, The Chase Manhattan Bank and the
Lenders identified on the signature pages to such Agreement in lawful money of
the United States of America. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the credit agreement referred
to herein.
Borrower promises to pay interest on the unpaid principal amount from
time to time outstanding from the date of such Loan until the payment in full
thereof at the rate of __________ percent (____%) per annum. Said interest shall
be payable on each date provided for in Paragraph B of Section 2.1 of the Credit
Agreement ; provided, however, that interest on any principal portion which is
not paid when due shall be payable on demand.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the credit agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be 1.1 times the Alternate Base Rate from time to time in
effect. All payments of principal of and interest on this Note shall be made in
immediately available funds.
This Note is one of the Money Market Notes referred to in the Credit
Agreement Reference is made to such Credit Agreement for a description of other
terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By:_________________________________
Title
<PAGE> 63
<TABLE>
<CAPTION>
MONEY MARKET NOTE
LOANS AND PRINCIPAL PAYMENTS
----------------------------
================================================================================================================
Amount of Loan Amount of Principal Unpaid Principal Balance Name of Person Making
Date Prepaid of Money Market Loan Notation
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
================================================================================================================
</TABLE>
<PAGE> 64
Schedule D
TERM LOAN NOTE
$_____________________________ Cleveland, Ohio
___________________, 19__
FOR VALUE RECEIVED, the undersigned THE SHERWIN-WILLIAMS COMPANY
("Borrower") promises to pay to the order of __________________________________
("Lender"), the principal sum of ______________________________________ Dollars
($_____________) or the aggregate unpaid principal amount of all loans
evidenced by this Note made by the Lender to the Borrower pursuant to Paragraph
C of Section 2.1 of the Credit Agreement hereinafter referred to, whichever is
less, in lawful money of the United States of America in four (4) equal
consecutive semi-annual installments commencing six (6) months from the date
hereof Capitalized terms used herein shall have the meanings ascribed to them
in said Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount of each Term Loan from time to time outstanding from the date of such
Loan until the payment in full thereof at the rates per annum which shall be
determined in accordance with the provisions of Paragraph C of Section 2.1 of
the Credit Agreement. Said interest shall be payable on each date provided for
in Paragraph C of said Section 2.1; provided, however, that interest on any
principal portion which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Alternate Base Rate Loans and LIBOR Loans, and payments of principal of either
thereof, will be recorded on the grid(s) attached hereto and made a part hereof
or by appropriate book entries and all payments on account of principal hereof
shall be recorded by the Lender prior to then transfer hereof on such grid(s) or
by appropriate book entries, it being understood, however, that Lender's failure
to record appropriate information on the grid(s) attached to this Note shall in
no way affect the obligation of the Borrower under the Credit Agreement or this
Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement hereinafter referred
to, the principal hereof and the unpaid interest thereon shall bear interest,
until paid, at a rate per annum which shall be 1.1 times the Alternate Base Rate
from time to time in effect. All payments of principal of and interest on this
Note shall be made in immediately available funds.
This Note is one of the Term Loan Notes referred to in the Amended and
Restated Five Year Revolving Credit Agreement (as may be amended from time to
time, "Credit Agreement") dated January 3, 2000 among the Borrower, Chase Bank
of Texas, National Association, as Administrative Agent, The Chase Manhattan
Bank and the Lenders named therein. Reference is made to such Credit Agreement
for description of other terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By: ________________________________
<PAGE> 65
<TABLE>
<CAPTION>
TERM LOAN NOTE
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
===============================================================================================================================
Amount of Alternate Amount of LIBOR Loan Amount of Principal Unpaid Principal Balance Name of Person Making
Date Base Rate Loan Prepaid of Term Loan Note Notation
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
</TABLE>
<PAGE> 66
Schedule E
NON-NEGOTIABLE COMPETITIVE BID NOTE
$___________________ Cleveland, Ohio
Due Date: _______________, 19__
FOR VALUE RECEIVED, the undersigned, THE SHERWIN-WILLIAMS COMPANY
("Borrower") promises to pay on the last day of the relevant interest period as
referred to in that certain Amended and Restated Five Year Revolving Credit
Agreement (as may be amended from time to time, "Credit Agreement") dated
January 3, 2000 by and among Borrower, Chase Bank of Texas, National
Association, The Chase Manhattan Bank and the Lenders identified on the
signature pages to such Agreement, to the order of _____________________________
("Lender"), the principal sum of _______________________________ Dollars
($__________) or the aggregate unpaid principal amount of all Loans evidenced by
this note made by Lender to Borrower pursuant to Paragraph D of Section 2.1 of
the Credit Agreement, whichever is less, in legal tender of the United States of
America pursuant to the Credit Agreement. Capitalized terms used, but not
otherwise defined herein, shall have the meanings ascribed to them in said
Credit Agreement.
Borrower promises to pay interest on the unpaid principal amount from
time to time outstanding from the date of such Loan until the payment in full
thereof at the rates per annum which shall be determined in accordance with the
provisions of Paragraph D of Section 2.1 of the Credit Agreement. Said interest
shall be payable as provided in the relevant Competitive Bid accepted by the
Company provided, however, that interest on any principal portion which is not
paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Fixed Rate Loans and Competitive Libor Loans, and payments of principal of any
thereof, will be recorded on the grid(s) attached hereto and made a part hereof
or by appropriate book entry. All Competitive Loans to Borrower pursuant to the
Credit Agreement and all payments on account of principal hereof shall be
recorded by Lender prior to transfer hereof on such grid(s) or by appropriate
book entries, it being understood, however, that Lender's failure to record
appropriate information in the grid(s) attached to this Note shall in no way
affect the obligation of Borrower under the Credit Agreement or this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement hereinafter referred
to, or in any Event of Default under the Credit Agreement the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be _________________
This Note is one of the Competitive Notes referred to in the Credit
Agreement. Reference is made to such Credit Agreement for a description of other
terms and conditions upon which this Note is issued.
THE SHERWIN-WILLIAMS COMPANY
("Borrower")
By:________________________________________
Title:_____________________________________
<PAGE> 67
<TABLE>
<CAPTION>
COMPETITIVE NOTE
LOANS AND PRINCIPAL PAYMENTS
----------------------------
================================================================================================================================
Amount of Amount of
Amount of Fixed Competitive Principal Prepaid (if Unpaid Principal Balance Name of Person
Date Rate Loan Libor Loan consent obtained) of Competitive Note Making Notification
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
================================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10(e)
Schedule of Certain Executive Officers who are Parties
to the Severance Pay Agreements in the Forms Attached
as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q
For the Period Ended June 30, 1997
----------------------------------
Form A of Severance Pay Agreement
- ---------------------------------
John G. Breen
Christopher M. Connor
Joseph M. Scaminace
Form B of Severance Pay Agreement
- ---------------------------------
John L. Ault
Michael A. Galasso
Thomas E. Hopkins
Conway G. Ivy
John G. Morikis
Larry J. Pitorak
Thomas W. Seitz
Louis E. Stellato
<PAGE> 1
EXHIBIT 10(f)
THE SHERWIN-WILLIAMS COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
(1997/1999 AMENDMENT AND RESTATEMENT)
The Sherwin-Williams Company, an Ohio corporation, hereby amends and
restates in its entirety, effective as of April 1, 1997 except as otherwise
specifically provided herein, The Sherwin-Williams Company Deferred Compensation
Savings Plan ("Plan") which was originally established January 1, 1991 and
amended pursuant to Amendment No. 1 effective January 1, 1993. The purpose of
the Plan is to offer certain highly compensated employees a supplement to
participation in The Sherwin-Williams Company Employee Stock Purchase and
Savings Plan without the various limitations and restrictions imposed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
Internal Revenue Code of 1986, as amended ("Code"), including the limitations
and restrictions applicable to cash or deferred arrangements maintained under
Section 401(k) of the Code.
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:
1.1 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 provided in Section
4.1.
1.2 ACCRUED BENEFIT. The balance of a Participant's or Beneficiary's
Accounts, including contributions, income, gains and losses (whether or
not realized) allocated or attributable thereto.
1.3 BENEFICIARY(IES). Any person or persons so designated in accordance
with the provisions of Article VII.
1.4 BOARD. The Board of Directors of the Company.
1.5 COMMITTEE. The committee which administers the Plan as provided for
in Article IX.
1.6 COMMON STOCK. The common stock of the Company or any security into
which such Common Stock may be changed by reason of: (a) any stock
dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company; (b) any merger,
consolidation, separation, reorganization or partial or complete
liquidation; or (c) any other corporate transaction or event having an
effect similar to the foregoing.
<PAGE> 2
1.7 COMPANY. The Sherwin-Williams Company, a corporation duly organized and
existing under the laws of the State of Ohio, and its corporate
successors and assigns.
1.8 COMPANY BORROWING RATE. The Company Borrowing Rate shall be the then
current borrowing rate of the Company, as determined by the Committee
(or the person, group or entity designated by the Committee) in
consultation with representatives of the Company.
1.9 COMPANY CONTRIBUTIONS. Contributions and/or allocations made in
accordance with Section 4.3.
1.10 COMPANY CONTRIBUTIONS ACCOUNT. The account established and maintained
pursuant to Section 4.1(a).
1.11 COMPANY STOCK FUND. The Company Stock Fund shall mean the Company Stock
Fund established and maintained pursuant to The Sherwin-Williams
Company Employee Stock Purchase and Savings Plan which consists
primarily of Company Stock and such short-term investments as may be
deemed appropriate by the Trustee to provide liquidity for the Company
Stock Fund.
1.12 COMPENSATION. Compensation shall mean:
(a) (i) compensation paid by the Company to an Eligible
Employee during the taxable year ending with or
within the Plan Year which is required to be reported
as wages on the Eligible Employee's Form W-2; or
(ii) at the election of the Company, such other amounts
paid to the Eligible Employee as determined in
accordance with the regulations issued by the
Secretary of the Treasury which do not discriminate
in favor of Highly Compensated Employees (as such
term is defined in the Stock Purchase Plan); and
(b) compensation paid by the Company during the taxable year
ending with or within the Plan Year which is not currently
includible in the Eligible Employee's gross income by reason
of the application of Sections 125, 402(a)(8), 402(h) or
403(b) of the Code.
1.13 DISTRIBUTION ACCOUNT. The Account established and maintained for a
Participant pursuant to Section 4.1(c) with respect to the
Participant's vested Accrued Benefit as of his Distribution Date.
1.14 DISTRIBUTION DATE. The date on which a Participant: (1) dies while in
the active employ of the Company or (2) otherwise terminates his
employment with the Company. Notwithstanding the foregoing, the
Distribution Date of a Participant subject to Rule 16b-3 issued under
the Securities Exchange Act of 1934 (or any successor rule to the same
effect), if such transaction would not otherwise be exempt under such
Rule 16b-3, shall be the date not less than six (6) months and one (1)
day from the date on which Shadow Units
2
<PAGE> 3
or fractions thereof were credited to or transferred from such
Participant's Shadow Company Stock Fund Account.
1.15 EARNINGS. All cash Compensation payable by the Company to an Eligible
Employee (before payroll deductions, salary reduction contributions or
any other pre-tax deductions) during the Plan Year, for the period the
Eligible Employee was a Participant, for services rendered after the
Effective Date, but excluding any Compensation which might otherwise
constitute Earnings, which Compensation is designated by the Company at
the time of its authorization, or in the contract for its payment, as
not constituting Earnings for purposes of the Plan; for example,
severance pay and tuition aid.
1.16 EFFECTIVE DATE. The effective date of the Plan is January 1, 1991.
1.17 ELIGIBLE EMPLOYEE. Any person employed by the Company, its affiliates
or subsidiaries who is selected by the Committee, in its sole
discretion, to participate in the Plan.
1.18 EMPLOYEE DEFERRALS. Contributions and/or allocations made in accordance
with Section 4.2.
1.19 EMPLOYEE DEFERRALS ACCOUNT. The account established and maintained
pursuant to Section 4.1(b).
1.20 ENROLLMENT DATE. The first day of January, April, July and October.
1.21 KEY MANAGEMENT PLAN. The Sherwin-Williams Company Key Management
Deferred Compensation Plan, as amended from time-to-time.
1.22 LONG TERM DISABILITY. An absence from work for a period in excess of
two (2) years because of the inability of the Participant to perform
the duties of the Participant's occupation or any substantial gainful
occupation for which the Participant is qualified by reason of
training, education and experience, as determined by the Committee on a
uniform and consistent basis.
1.23 PARTICIPANT. Any person so designated in accordance with the provisions
of Article II.
1.24 PLAN YEAR. The twelve (12) month period commencing January 1 of any
year and ending on December 31 of the same year.
1.25 PRIME RATE. The prime rate as determined using the Federal Reserve
Statistical daily subscription (FRRB - Select Interest Rate,
Subscription - H15) is the primary source to calculate and attribute
earnings to the Prime Rate Fund. On the first business day of each
calendar month, the Prime Rate shall be calculated on the monthly
average of the prime rate for the prior month, and the value divided by
365 days to arrive at the daily mil rate
3
<PAGE> 4
value for purposes of attributing earnings to the Prime Rate Fund for
the preceding calendar month. The daily mil rate shall be calculated to
the one-millionth position.
1.26 PRIME RATE FUND. The investment fund established and maintained for a
Participant with respect to any amounts of Accrued Benefit which are to
be so invested pursuant to Section 4.4(a).
1.27 SHADOW COMPANY STOCK FUND. The investment fund established and
maintained for a Participant with respect to any amounts of Accrued
Benefit which are to be invested pursuant to Section 4.4(b).
1.28 SHADOW UNITS. A unit of measure equivalent to one (1) unit of the
Company Stock Fund.
1.29 STOCK PURCHASE PLAN. The Sherwin-Williams Company Employee Stock
Purchase and Savings Plan, as amended from time-to-time.
1.30 TRUST. A trust fund established pursuant to Section 8.1.
1.31 VALUATION DATE. If a business day, the date on which a transaction is
requested, provided such request is received and confirmed prior to
4:00 p.m. EST; or if a request is received after 4:00 p.m. EST or on a
non-business day, the next succeeding business day.
1.32 VESTING SERVICE. Any period of service for which an individual receives
credit for vesting in accordance with the Stock Purchase Plan.
4
<PAGE> 5
ARTICLE II
ELIGIBILITY AND PARTICIPATION
-----------------------------
Participation in the Plan is voluntary. An Eligible Employee shall
become a Participant in the Plan as of the first Enrollment Date occurring on or
after the date which such Eligible Employee (1) is so designated by the
Committee, in its sole discretion; and (2) elects to participate, in the manner
designated by the Committee, but in no event later than the date participation
hereunder is to commence. Once an Eligible Employee becomes a Participant, he
shall remain a Participant (regardless of whether further Employee Deferrals or
Company Contributions are made) until the later of: (i) his Distribution Date or
(ii) the date of his final payment if the Participant elects payments over a
period of years pursuant to Article VI.
5
<PAGE> 6
ARTICLE III
VESTING SERVICE
3.1 VESTING UPON DEATH OR LONG TERM DISABILITY. If a Participant dies while
in the employ of the Company or in the event of Long Term Disability,
the Participant shall be deemed to be one hundred percent (100%) vested
in his Accrued Benefit regardless of the Participant's Vesting Service
at his date of death or at the time of Long Term Disability.
3.2 VESTING UPON TERMINATION. If a Participant terminates employment for
any reason other than death or Long Term Disability, the Participant
shall be vested in his Accrued Benefit as follows:
(a) Each Participant shall at all times be one hundred percent
(100%) vested in all amounts credited to his Employee
Deferrals Account.
(b) Each Participant shall acquire a vested interest in amounts
credited to his Company Contributions Account, determined on
the basis of the number of years of Vesting Service, according
to the following schedule:
Years of
Vesting Service Percentage Vested
--------------- -----------------
Less than 3 0%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
(c) All interest and earnings credited to a Participant's Company
Contributions Account shall at all times be one hundred
percent (100%) vested.
(d) Notwithstanding anything in Article X to the contrary, no Plan
amendment changing the Plan's vesting schedule may reduce the
vested percentage of a Participant's Accrued Benefit
determined as of the later of the date the amendment is
adopted or the date the amendment becomes effective.
3.3 FORFEITURES. As soon as practicable after the end of the calendar month
in which the Participant's Distribution Date occurs, the Company shall
distribute, in accordance with Article VI and subject to the remaining
provisions of this Section 3.3, the value of all vested amounts
credited to such Participant's Accounts. The Participant will forfeit
the non-vested portion of his Accrued Benefit as of his Distribution
Date. The aggregate of any forfeitures occurring in a Plan Year shall
be used to reduce any Company Contributions to the Trust attributable
to the Plan Year in which the forfeitures occurred. Any excess of
forfeitures over the Company Contributions shall be applied as soon as
practicable to reduce Company Contributions attributable to subsequent
Plan Years.
6
<PAGE> 7
ARTICLE IV
CONTRIBUTIONS
-------------
4.1 ESTABLISHMENT OF ACCOUNTS. The Committee shall establish and maintain
the following Accounts, which shall reflect the interest, and any
increases or decreases thereto, of each Participant in the Plan:
(a) COMPANY CONTRIBUTIONS ACCOUNT. The Company Contributions Account
maintained for each Participant shall be credited with all
Company Contributions made on behalf of the Participant
pursuant to Section 4.3.
(b) EMPLOYEE DEFERRALS ACCOUNT. The Employee Deferrals Account
maintained for each Participant shall be credited with all
Employee Deferrals made on behalf of the Participant pursuant
to Section 4.2.
(c) DISTRIBUTION ACCOUNT. The Distribution Account shall, upon a
Participant's Distribution Date, be credited with the
vested portion of Participant's Accrued Benefit and his other
Accounts charged accordingly. For all periods after the
Distribution Date, with respect to any Company Contributions or
Employee Deferrals contributed: (1) prior to January 1, 2000,
the crediting rate for the Distribution Account shall be the
Prime Rate; or (2) on or after January 1, 2000, the crediting
rate for the Distribution Account shall be the Company
Borrowing Rate.
4.2 EMPLOYEE DEFERRALS. A Participant may elect each calendar year to
reduce his Compensation, and to receive instead a corresponding credit
under the Plan as of each Valuation Date of not less than one percent
(1%) and not more than seven percent (7%) of his estimated Earnings for
the Plan Year plus any amounts in excess of seven percent (7%) which
arise pursuant to Section 15.09(B) of the Stock Purchase Plan;
provided, however that the sum of (i) a Participant's "Salary Reduction
Contributions" made pursuant to Section 4.01 of the Stock Purchase Plan
and (ii) a Participant's Employee Deferrals made pursuant to this
Section, shall not exceed seven percent (7%) of the Participant's
Earnings for the Plan Year except to the extent that any amounts in
excess of seven percent (7%) arise pursuant to Section 15.09(B) of the
Stock Purchase Plan. Except for a new Participant, a Participant's
deferral election for a calendar year must be made before the calendar
year begins and cannot be amended or revoked during the year. A new
Participant's deferral election for the portion of the year following
his Enrollment Date shall be made prior to the applicable Enrollment
Date. Notwithstanding anything herein to the contrary, a Participant
shall not be eligible to elect for any Plan Year to have Employee
Deferrals made on his behalf unless such Participant first elects to
have the maximum amount of "Salary Reduction Contributions" (as such
maximum may be determined by the "Administration Committee" (as such
term is defined in the Stock Purchase Plan) in accordance with terms of
the Stock Purchase Plan) contributed to the Stock Purchase Plan
pursuant to Section 4.01 of the Stock Purchase Plan, except to the
extent such Employee Deferrals arise pursuant to Section 15.09(B) of
the Stock Purchase Plan.
7
<PAGE> 8
4.3 FAILURE TO ELECT EMPLOYEE DEFERRALS. An Eligible Employee who fails to
return a completed election form on or before the specified due date
for the Plan Year in which he is eligible to become a Participant,
shall be deemed to have elected not to participate in the Plan. A
Participant who fails to return a completed election form on or before
the specified due date for any subsequent Plan Year shall be deemed to
have made the same election as was in effect just prior to the end of
the preceding Plan year. The Participant shall also be deemed to have
agreed to a reduction in his Compensation for the subsequent Plan Year
equal to the amount of the Employee Deferrals deemed elected.
4.4 COMPANY CONTRIBUTIONS.
(a) As of each Valuation Date, the Company shall credit the
Company Contributions Account of each eligible Participant
with an amount equal to fifty percent (50%) of the amount
deferred by the Participant to his Employee Deferrals Account
during the month ending on the applicable Valuation Date;
provided, however, that the amount credited to a Participant's
Company Contributions Account under this Section shall not
exceed (i) three and one-half percent (3.5%) of the
Participant's Earnings for such month ending on the applicable
Valuation Date, less (ii) the Participant's "Company
Contribution" for such month made pursuant to Section 6.01(b)
of the Stock Purchase Plan; and that no Company Contributions
shall be credited with respect to any amount deferred by the
Participant to his Employee Deferrals Account pursuant to
Section 15.09(B) of the Stock Purchase Plan.
(b) As of each Valuation Date, the Company shall credit the
Company Contributions Account of each eligible Participant
with an amount equal to the excess, if any, of:
(i) the amount which would have been allocated to the
Company Contributions Account of an eligible
Participant pursuant to the terms of the Stock
Purchase Plan, including Section 6.01(c) of the Stock
Purchase Plan, as of the end of such Valuation Date,
if the provisions of the Stock Purchase Plan were
administered without regard to the limitations and
restrictions of the Code and without regard to any
other limiting provisions under the Stock Purchase
Plan, over
(ii) the amounts that were, in fact, allocated as of such
Valuation Date to the account of such Participant
pursuant to the terms of the Stock Purchase Plan.
Notwithstanding anything in Section 4.3(b) to the contrary, if the
"Administration Committee" of the Stock Purchase Plan determines that a
portion of the bonus contribution made pursuant to Section 6.01(c) of
the Stock Purchase Plan may be paid in cash to certain "Members" of the
Stock Purchase Plan who are also Participants, then such amounts may be
distributed in cash to each such Participant; provided, that the
Participant elected to receive such portion of the bonus contribution
in cash prior to the calendar year in which the distribution is made.
Amounts credited under this Section to any Participant shall be
computed in accordance with the foregoing and with the objective that
such Participant should receive, in aggregate, under this Section 4.4
and the Stock Purchase Plan, the total
8
<PAGE> 9
amount which would have been payable to that Participant solely
pursuant to the terms of the Stock Purchase Plan had the limitations
and restrictions of the Code not been applicable thereto and without
regard to any other limiting provisions under the Stock Purchase Plan.
4.5 INVESTMENT FUNDS. The Committee shall establish the following
investment funds under the Plan:
(a) PRIME RATE FUND. The Prime Rate Fund shall accrue interest
based on Prime Rate.
(b) SHADOW COMPANY STOCK FUND. The Shadow Company Stock Fund shall
be credited with a quantity of Shadow Units and fractions
thereof (to the nearest thousandths) equal to the amount of
units in the Company Stock Fund that could have been purchased
with the amount of the Participant's Accrued Benefit credited
to the Shadow Company Stock Fund on the Valuation Date.
4.6 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 4.7 hereof, may
direct the Company as to how his Accrued Benefit should be allocated
between the Prime Rate Fund and the Shadow Company Stock Fund. A
Participant's investment direction shall specify the percentage of his
Accrued Benefit which is to be invested in each of the Prime Rate Fund
and the Shadow Company Stock Fund. If a Participant fails to direct the
investment of any of his Accrued Benefit, all such undirected amounts
will be credited to the Shadow Company Stock Fund.
4.7 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 Purchase 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 Section 8.05(a) of the Stock Purchase
Plan, to invest his Accrued Benefit allocated to the Shadow Company
Stock Fund to the same extent and subject to the same limitations as
set forth in such Section 8.05(a), in the investment funds made
available for diversification pursuant to the Stock Purchase Plan,
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 funds. If a
Participant fails to direct the investment of any of his Accrued
Benefit, all such undirected amounts will be credited to the Shadow
Company Stock Fund.
9
<PAGE> 10
ARTICLE V
ENTITLEMENT TO BENEFITS
-----------------------
5.1 DEATH. If a Participant dies while in the employ of the Company, the
full value of his Accrued Benefit, valued in accordance with Article
VI, shall become payable to the Participant's designated Beneficiary as
of his Distribution Date.
5.2 OTHER TERMINATIONS. If a Participant terminates employment for any
reason other than death, the Participant shall become entitled to the
vested portion of his Accrued Benefit, determined in accordance with
the provisions of Section 3.2, and valued and payable according to the
provisions of Article VI.
5.3 HARDSHIP DISTRIBUTIONS. After a Participant has five (5) years of
Vesting Service and upon thirty (30) days prior written application
effective as of the applicable Valuation Date but not more than once in
any five (5) year period, a Participant may be permitted to make a
withdrawal in cash from his Accounts on account of hardship in
accordance with the following rules:
(a) An application for an approval 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 a Participant resulting from a sudden and
unexpected illness or accident of the Participant or a
dependent (as defined in Section 152(a) of the Code) 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 an 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;
(ii) By liquidation of the Participant's assets to the extent
such liquidation would not itself cause severe financial
hardship; or
(iii) By cessation of deferrals under the Plan.
(e) If a hardship distribution is approved, the withdrawal shall
be deemed to be made pro rata from the various investment
funds held in his Accounts in the following order:
(i) from his Company Contributions Account; and
(ii) from his Employee Deferrals Account.
5.4 DEATH PRIOR TO COMPLETE DISTRIBUTION. If a Participant or Beneficiary
dies before receiving a complete distribution of his vested Accrued
Benefit under the Plan under any of the following circumstances:
10
<PAGE> 11
(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 vested Accrued Benefit 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 6.2 as the Committee, in
its sole discretion, shall determine.
5.5 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.
5.6 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.
5.7 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 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 5.7, 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
11
<PAGE> 12
of such Accrued Benefits 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 5.7 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 5.7 is
known to the Committee, then the Committee will notify such person of
any action contemplated by it pursuant to this Section 5.7, by letter
addressed to him at such last known address.
12
<PAGE> 13
ARTICLE VI
DISTRIBUTION OF BENEFITS
------------------------
6.1 DETERMINING AMOUNT. Upon his Distribution Date, a Participant (or his
Beneficiary) shall become entitled to receive his Accrued Benefit, to
the extent then vested, in accordance with this Article VI.
Determination of the amount to be distributed shall be based upon the
valuation of the Participant's Accrued Benefit made as of the Valuation
Date coincident with the Participant's Distribution Date.
6.2 FORM OF PAYMENT. The amount to which a Participant (or his Beneficiary)
is entitled shall be distributed in cash. A Participant's vested
Accrued Benefit will be paid by the Company to him or, in the event of
his death, to the Participant's Beneficiary, in one of the following
forms, as elected by the Participant:
(a) in a cash lump sum;
(b) solely with respect to a Participant whose Accrued Benefit
exceeds Ten Thousand and 00/100 Dollars ($10,000.00) as of his
Distribution Date, in substantially equal monthly installments
over a five (5) year period (sixty (60) monthly installments);
or
(c) solely with respect to a Participant whose Accrued Benefit
exceeds Twenty-five Thousand and 00/100 Dollars ($25,000.00)
as of his Distribution Date, in substantially equal monthly
installments over either: (i) a ten (10) year period (one
hundred twenty (120) monthly installments); or (ii) a fifteen
(15) year period (one hundred eighty (180) monthly
installments);
provided, however, the Committee shall have, in its sole discretion,
the right to change the method of distribution selected by the
Participant in the event the Committee determines it is in the best
interest of the Company to do so. A Participant may elect the form of
distribution in which the Participant's Accrued Benefit 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
Distribution Date. If a Participant fails to elect a manner of payment,
the Participant shall receive a cash lump sum. Upon the Distribution
Date, an amount equal to the aggregate value (as determined in
accordance with Section 6.1) of the Participant's Shadow Company Stock
Fund, his Prime Rate Fund and any other investment funds made available
for diversification, shall be credited to his Distribution Account and
the Participant's Shadow Company Stock Fund, Prime Rate Fund and any
other investment funds shall be eliminated. Amounts held pending
distribution pursuant to this Section 6.2 shall continue to be credited
with interest in accordance with the provisions of Section 4.1(c).
6.3 BENEFIT COMMENCEMENT DEADLINE. The payment of benefits under the Plan
to each Participant will commence as soon as practicable after the
Valuation Date on which such Participant's Distribution Date occurs.
13
<PAGE> 14
ARTICLE VII
BENEFICIARIES; PARTICIPANT DATA
-------------------------------
7.1 DESIGNATION OF BENEFICIARIES. A Participant may, by instrument in
writing in the form prescribed by the Committee executed and delivered
to the Committee designate a Beneficiary or Beneficiaries (who may be
named contingently or successively) to whom his vested Accrued Benefit
under the Plan shall be distributed in the event of his death prior to
the full receipt of his interest under the Plan, and he may designate
the 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 written instrument delivered in accordance with this Section
7.1. Each designation will revoke all prior designations by the same
Participant
7.2 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.
14
<PAGE> 15
ARTICLE VIII
THE TRUST
---------
8.1 ESTABLISHMENT OF TRUST. The Company has established a 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. Company Contributions and Employee
Deferrals 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 Units 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.
8.3 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, execution, 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.
15
<PAGE> 16
ARTICLE IX
COMMITTEE
9.1 COMPOSITION OF COMMITTEE. The 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 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.
9.2 POWERS AND DUTIES OF COMMITTEE. Except as otherwise expressly provided
in the Plan, the Committee shall have the full power and authority,
within the limits provided by the Plan, to:
(a) 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, Participants and
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 good faith
decisions and actions shall be final and binding upon all
persons hereunder;
(b) 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) Enforce the Plan, in accordance with its terms and the rules
and regulations adopted by the Committee;
(d) Delegate such of its authority as the Committee deems
appropriate to Company representatives and third party service
providers to facilitate the day-to-day administration of the
Plan; and
(e) Do all other acts which in its judgment are necessary or
desirable for the proper and advantageous administration of
the Plan.
9.3 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.
16
<PAGE> 17
9.4 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
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.
17
<PAGE> 18
ARTICLE X
CHANGE OF CONTROL
In the event of a Change of Control, the amounts to which Participants
are entitled under Section 6.1 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:
(i) Any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) who or that, together with all
Affiliates and Associates of such person, is the Beneficial
Owner of ten percent (10%) or more of the shares of Common
Stock of the Company then outstanding, except:
(A) the Company;
(B) any of the Company's subsidiaries in which a majority
of the voting power of the equity securities or
equity interests of such subsidiary is owned,
directly or indirectly, by the Company;
(C) any employee benefit or stock ownership plan of the
Company or any trustee or fiduciary with respect to
such a plan acting in such capacity; or
(D) any such person who has reported or may, pursuant to
Rule 13d-1(b)(1) of the General Rules and Regulations
under the Exchange Act, report such ownership (but
only as long as such person is the Beneficial Owner
of less than fifteen percent (15%) of the shares of
Common Stock then outstanding) on Schedule 13G (or
any comparable or successor report) under the
Exchange Act.
Notwithstanding the foregoing: (A) no person shall become the
Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any person identified in clause
(D) above) solely as the result of an acquisition of Common
Stock by the Company that, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such person to ten percent (10%) or more
(fifteen percent (15%) or more in the case of any person
identified in clause (D) above) of the shares of Common Stock
then outstanding; provided, however, that if a person becomes
the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any person identified in
clause (D) above) of the shares of Common Stock solely by
reason of purchases of Common Stock by the Company and shall,
after such purchases by the Company, become the Beneficial
Owner of any additional shares of Common Stock which has the
effect of increasing such person's percentage ownership of the
then-outstanding shares of Common Stock by any means
whatsoever, then such person shall be deemed to have triggered
a Change of Control; and (B) if the Board of Directors
determines that a person who would otherwise be the Beneficial
Owner of ten percent (10%) or more (fifteen percent (15%) or
more in the case of any person identified in clause (D) above)
of the shares of Common Stock has become such inadvertently
(including, without limitation, because (1) such person was
unaware that it Beneficially Owned ten
18
<PAGE> 19
percent (10%) or more (fifteen percent (15%) or more in the
case of any person identified in clause (D) above) of the
shares of Common Stock or (2) such person was aware of the
extent of such beneficial ownership but such person acquired
beneficial ownership of such shares of Common Stock without
the intention to change or influence the control of the
Company) and such person divests itself as promptly as
practicable of a sufficient number of shares of Common Stock
so that such person would no longer be the Beneficial Owner of
ten percent (10%) or more (fifteen percent (15%) or more in
the case of any person identified in clause (D) above), then
such person shall not be deemed to be, or have been, the
Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any person identified in clause
(D) above) of the shares of Common Stock, and no Change of
Control shall be deemed to have occurred.
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of
Directors of the Company and any new director (other than a
director initially elected or nominated as a director as a
result of an actual or threatened election contest with
respect to directors or any other actual or threatened
solicitation of proxies by or on behalf of such director)
whose election by the Board of Directors 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, cease for any reason to constitute a
majority thereof.
(iii) There shall be consummated any consolidation, merger or other
combination of the Company with any other person or entity
other than:
(A) a consolidation, merger or other combination which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than fifty-one percent (51%)
of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such consolidation, merger or other
combination; or
(B) a consolidation, merger or other combination effected
to implement a recapitalization and/or reorganization
of the Company (or similar transaction), or any other
consolidation, merger or other combination of the
Company, which results in no person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange
Act), together with all Affiliates and Associates of
such person, becoming the Beneficial Owner of ten
percent (10%) or more (fifteen percent (15%) or more
in the case of any person identified in Section
1(c)(i)(D)) of the combined voting power of the
Company's then outstanding securities.
(iv) There shall be consummated any sale, lease, assignment,
exchange, transfer or other disposition (in one transaction or
a series of related transactions) of fifty percent (50%) or
more of the assets or earning power of the Company (including,
19
<PAGE> 20
without limitation, any such sale, lease, assignment,
exchange, transfer or other disposition effected to implement
a recapitalization and/or reorganization of the Company (or
similar transaction)) which results in any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act), together with all Affiliates and Associates of such
person, owning a proportionate share of such assets or earning
power greater than the proportionate share of the voting power
of the Company that such person, together with all Affiliates
and Associates of such person, owned immediately prior to any
such sale, lease, assignment, exchange, transfer or other
disposition.
(v) The shareholders of the Company approve a plan of complete
liquidation of the Company.
For purposes of this Article X, a person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended, hereinafter "Exchange Act") shall be deemed the "BENEFICIAL
OWNER" of and shall be deemed to "beneficially own" any securities:
(i) which such person or any of such person's "Affiliates" or
"Associates" (as such terms are defined in Rule 12b-2, as in
effect on April 23, 1997, of the General Rules and under the
Exchange Act) is considered to be a "beneficial owner" under
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on April 23, 1997;
(ii) which such person or any of such person's Affiliates or
Associates, directly or indirectly, has or shares the right to
acquire, hold, vote (except pursuant to a revocable proxy as
described in the proviso to this Section 1(b)) or dispose of
such securities (whether any such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed to be the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or
(iii) which are beneficially owned, directly or indirectly, by any
other person (or any Affiliate or Associate of such other
person) with which such person (or any of such person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), with respect to
acquiring, holding, voting (except as described in the proviso
to this Section 1(b)) or disposing of any securities of the
Company;
provided, however, that a person shall not be deemed the Beneficial
Owner of, nor to beneficially own, any security if such person has the
right to vote such security pursuant to an agreement, arrangement or
understanding which (A) arises solely from a revocable proxy given to
such person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act, and (B) is not also then reportable
on Schedule 13D (or any comparable or
20
<PAGE> 21
successor report) under the Exchange Act; and provided, further, that
nothing in this Section 1(b) shall cause a person engaged in business
as an underwriter of securities to be the Beneficial Owner of, or to
beneficially own, any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of such acquisition or
such later date as the Board of Directors may determine in any specific
case.
21
<PAGE> 22
ARTICLE XI
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 signed 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 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 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.
22
<PAGE> 23
ARTICLE XII
AMENDMENT
---------
The Company, by written instrument executed by the Company, shall have
the right to amend the Plan, at any time, including retroactively, and all
parties claiming any interest thereunder shall be bound thereby.
23
<PAGE> 24
ARTICLE XIII
TERMINATION
-----------
13.1 RIGHT TO TERMINATE. The Company reserves the right, at any time, to
terminate its obligation to make contributions to the Trust or to
further credit Accounts. The Company also reserves the right, at any
time, to suspend crediting Accounts for a fixed or indefinite period of
time. The Company shall have the right to terminate or amend the Plan
at any time in such manner and to such extent as the Company may in its
sole discretion deem advisable and in the best interest of the Company.
13.2 AUTOMATIC TERMINATION OF CONTRIBUTIONS. The liability of the Company to
make future contributions to the Trust or credit Accounts shall
automatically terminate upon dissolution of the Company, upon its
adjudication as bankrupt, or upon the making of a general assignment
for the benefit of creditors.
13.3 ALLOCATION AND DISTRIBUTION. This Section shall become operative upon
termination of the Plan. Upon the effective date of termination,
notwithstanding any other provisions of the Plan, no persons who were
not theretofore Participants shall be eligible to become Participants,
and all interests of Participants not theretofore vested shall become
immediately fully (100%) vested. The value of the Accrued Benefit of
all Participants and Beneficiaries shall be determined and distributed
to them as soon as practicable after the end of the quarter in which
such termination occurs. All Participants shall receive distributions
in a uniform manner in a cash lump sum. The provisions set forth in
this Section shall be subject to such modification, including
retroactively, without necessity of formal amendment to the Plan, as
may be necessary, in the opinion of the Company, to cause the
termination of the Plan and/or Trust, or to conform to any requirements
of law.
24
<PAGE> 25
ARTICLE XIV
MISCELLANEOUS
-------------
14.1 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 Plan 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 Plan Year.
14.2 LIMITATIONS ON LIABILITY OF COMPANY. Neither the establishment of the
Plan or Trust 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 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 their personal
representative. The Company does not in any way guarantee the Trust or
any Participant's Accrued Benefit 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 for the failure of any
Participant, Beneficiary or other person to be entitled to any
particular tax consequences with respect to the Plan, the Trust or any
contribution thereto or distribution therefrom.
14.3 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.
14.4 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 purposes of ERISA.
14.5 PAYMENT OF ADMINISTRATIVE EXPENSES. Expenses incurred in the
administration and operation of the Plan shall be paid by the Company.
14.6 GOVERNING LAW. The laws of the State of Ohio shall govern, control and
determine all questions arising with respect to the Plan and the
interpretation and validity of its
25
<PAGE> 26
respective provisions, except where those laws are preempted by the
laws of the United States.
14.7 NO RIGHT TO EMPLOYMENT. Participation under the Plan will not give any
Participant the right to be retained in the service of the Company nor
any right or claim to any benefit under the Plan unless such right or
claim has specifically accrued hereunder.
14.8 PARTICIPANTS ARE GENERAL CREDITORS. All payments to be made hereunder
shall be made in cash from 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 this Plan, such right shall
be no greater than the right of an unsecured general creditor of the
Company.
14.9 DECISIONS INVOLVING OWN BENEFITS. Notwithstanding any other provisions
in Article IX, 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.
14.10 CONSTRUCTION. Where headings have been supplied for portions of the
Plan, they have been supplied for convenience only and are not to be
taken as limiting or excluding the meaning of any portion of the Plan.
Whenever the word "person" appears in the Plan, it shall refer to both
natural and legal persons. The singular or plural number or masculine,
feminine and neuter gender shall each be deemed to include the other.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed and
its seal to be affixed hereto, effective as of the 1st day of April, 1997,
except as otherwise specifically provided herein.
ATTEST: THE SHERWIN-WILLIAMS COMPANY
/s/ By: /s/
- ---------------------------------- ------------------------------
Title:
------------------------------
26
<PAGE> 1
EXHIBIT 10(g)
THE SHERWIN-WILLIAMS COMPANY
----------------------------
KEY MANAGEMENT DEFERRED COMPENSATION PLAN
-----------------------------------------
(1997/1999 AMENDMENT AND RESTATEMENT)
The Sherwin-Williams Company, an Ohio corporation, hereby amends and
restates in its entirety, effective as of April 1, 1997, The Sherwin-Williams
Company Key Management Deferred Compensation Plan (the "Plan"), which was
originally established effective January 1, 1980 and subsequently amended and
restated. 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:
1.01 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.
1.02 AWARD DATE. The date on which a Participant would have otherwise
received a Salary payment, Incentive Award or Eligible Special
Compensation, but for an election to defer such Salary, Incentive Award
or Eligible Special Compensation made pursuant to Article III of the
Plan.
1.03 BENEFICIARY(IES). Any person or persons so designated in accordance
with the provisions of Article VI.
1.04 BOARD. The Board of Directors of the Company.
1.05 COMMITTEE. The committee which administers the Plan as provided for in
Article IX.
1.06 COMMON STOCK. The common stock of the Company or any security into
which such Common Stock may be changed by reason of: (a) any stock
dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company; (b) any merger,
consolidation, separation, reorganization or partial or complete
liquidation; or (c) any other corporate transaction or event having an
effect similar to the forgoing.
1.07 COMPANY. The Sherwin-Williams Company, a corporation duly organized
and existing under the laws of the State of Ohio, and its corporate
successors and assigns.
<PAGE> 2
1.08 COMPANY BORROWING RATE. The Company Borrowing Rate shall be the then
current borrowing rate of the Company, as determined by the Committee
(or the person, group or entity designated by the Committee) in
consultation with representatives of the Company.
1.09 COMPANY STOCK FUND. The Company Stock Fund shall mean the Company Stock
Fund established and maintained pursuant to The Sherwin-Williams
Company Employee Stock Purchase and Savings Plan which consists
primarily of Company Stock and such short-term investments as may be
deemed appropriate by the Trustee to provide liquidity for the Company
Stock Fund.
1.10 DEFERRED COMPENSATION. The amount of a Participant's (i) Salary; (ii)
Incentive Award; and/or (iii) Eligible Special Compensation, which such
Participant elects to defer pursuant to Article III of the Plan.
1.11 DISTRIBUTABLE INTEREST. The balance in a Participant's Accounts on
his Settlement Date determined in accordance with Section 5.01.
1.12 DISTRIBUTION ACCOUNT. The Account established and maintained for a
Participant with respect to the Participant's Distributable Interest
as of his Settlement Date.
1.13 EFFECTIVE DATE. The effective date of the Plan is January 1, 1980.
1.14 ELIGIBLE EMPLOYEE(S). Eligible Employees shall mean the select group of
management and highly compensated employees determined by the
Committee, including but not limited to: (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, provided such Subsidiary, with the consent of the Board of
Directors of the Company, adopts this Plan by resolution of its Board
of Directors.
1.15 ELIGIBLE SPECIAL COMPENSATION. Eligible Special Compensation shall mean
any special compensation payable to a Participant that is designated by
the Committee as eligible for deferral pursuant to this Plan.
1.16 EMPLOYMENT PERIOD. The period commencing on the later of: (i) the
Effective Date of this Plan or (ii) the Participant's employment
commencement date; and ending on the Participant's Settlement Date.
1.17 INCENTIVE AWARD. A bonus award granted under 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.
1.18 PARTICIPANT. Any person so designated in accordance with the provisions
of Article II.
2
<PAGE> 3
1.19 PLAN. The Sherwin-Williams Company Key Management Deferred Compensation
Plan, as amended from time-to-time.
1.20 PLAN YEAR. The twelve (12) consecutive month period commencing January
1 of any year and ending December 31 of the same year.
1.21 PRIME RATE. The prime rate as determined using the Federal Reserve
Statistical daily subscription (FRRB - Select Interest Rate,
Subscription - H15) is the primary source to calculate and attribute
earnings to the Prime Rate Fund. On the first business day of each
calendar month, the Prime Rate shall be calculated on the monthly
average of the prime rate for the prior month, and the value divided by
365 days to arrive at the daily mil rate value for purposes of
attributing earnings to the Prime Rate Fund for the preceding calendar
month. The daily mil rate shall be calculated to the one-millionth
position.
1.22 PRIME RATE FUND 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.
1.23 SALARY. The amount of a Participant's base salary before any deduction
from or reduction of such salary by reason of Sections 125, 402(a)(8),
402(h) or 403(b) of the Internal Revenue Code of 1986, as amended, but
not including any other amounts which may be considered compensation
attributable to the Participant as a consequence of his employment.
1.24 SETTLEMENT DATE. The later of: (i) the date on which a Participant
ceases to receive salary payments from the Company and every Subsidiary
by reason of permanent termination of employment; or (ii) if such
Participant is part of the group of Eligible Employees subject to Rule
16b-3 issued under the Securities Exchange Act of 1934 (or any
successor rule to the same effect) and such transaction would not
otherwise be exempt under such Rule 16b-3, six (6) months and one (1)
day from the last date on which Shadow Units or fractions thereof were
credited to or transferred from the Participant's Shadow Company Stock
Fund Account.
1.25 SHADOW COMPANY STOCK FUND 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.
1.26 SHADOW UNITS. A unit of measure equivalent to one (1) unit of the
Company Stock Fund.
1.27 SUBSIDIARY. Any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of
3
<PAGE> 4
the total combined voting power of all classes of stock in one of the
other corporations in such chain.
1.28 TRUST. The trust fund established pursuant to Section 8.01.
1.29 VALUATION DATE. If a business day, the date on which a transaction is
requested, provided such request is received and confirmed prior to
4:00 p.m. EST; or if a request is received after 4:00 p.m. EST or on a
non-business day, the next succeeding business day.
4
<PAGE> 5
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,
an Incentive Award and/or Eligible Special Compensation to the Plan. Once an
Eligible Employee becomes a Participant, he shall remain a Participant
(regardless of whether he elects to defer further Salary, Incentive Awards or
Eligible Special Compensation 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.
5
<PAGE> 6
ARTICLE III
ELECTION TO DEFER SALARY, INCENTIVE AWARDS
AND/OR ELIGIBLE SPECIAL COMPENSATION
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
twenty-five percent (25%) per Plan Year; (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; and/or (iii)
all or a portion of any Eligible Special Compensation 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, Incentive Award and/or Eligible
Special Compensation 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,
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) and/or Eligible Special Compensation by making such election
within thirty (30) days of such qualification.
6
<PAGE> 7
ARTICLE IV
ACCOUNTS
----------
4.01 ESTABLISHMENT OF ACCOUNTS. The Committee shall establish and
maintain the following Accounts which shall reflect the interest, and
any increases or decreases thereto, of each Participant in the Plan:
(a) PRIME RATE FUND ACCOUNT. The Prime Rate Fund Account shall
accrue interest based on Prime Rate.
(b) SHADOW COMPANY STOCK FUND ACCOUNT. The Shadow Company Stock
Fund Account shall be credited with a quantity of Shadow Units
and fractions thereof (to the nearest thousandths) equal to
the amount of units in the Company Stock Fund that could have
been purchased with the amount of the Participant's Deferred
Compensation credited to the Shadow Company Stock Account on
the Valuation Date.
(c) DISTRIBUTION ACCOUNT. The Distribution Account shall, upon a
Participant's Settlement Date, be credited with the
Participant's Distributable Interest as determined pursuant to
Section 5.01 and his other Accounts charged accordingly. For
all periods after the Settlement Date, with respect to any
amounts deferred: (1) prior to January 1, 2000, the crediting
rate for the Distribution Account shall be the Prime Rate; or
(2) on or after January 1, 2000, the crediting rate for the
Distribution Account shall be the Company Borrowing Rate.
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 as to how his Deferred
Compensation should be allocated between the Shadow Company Stock Fund
Account and the Prime Rate Fund Account. A Participant's investment
direction shall designate the percentage of his Deferred Compensation
that is to be invested in each Account. A Participant's investment
direction 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 Prime
Rate Fund 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,
Incentive Award and/or Eligible Special Compensation, if any, in
accordance with his investment directions pursuant to Section 4.02.
7
<PAGE> 8
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 value of the Shadow Units
allocated to his Shadow Company Stock Fund Account as of the
Participant's Settlement Date;
and
(b) the total amount of Deferred Compensation allocated to his
Prime Rate Fund 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 Company Stock Fund Account and his Prime
Rate Fund Account shall be credited to his Distribution Account, and
his Shadow Company Stock Fund Account and his Prime Rate Fund 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. The amount to which a Participant (or his
Beneficiary) is entitled shall be distributed in cash. A Participant's
Distributable Interest shall be distributed to the Participant, or in
the event of his death, his Beneficiary, in one of the following forms,
as elected by the Participant:
(a) a cash lump sum;
(b) solely with respect to a Participant whose Distributable
Interest exceeds Ten Thousand and 00/100 Dollars ($10,000.00)
as of his Settlement Date, in substantially equal monthly
installments over a five (5) year period (sixty (60) monthly
installments); or
(c) solely with respect to a Participant whose Distributable
Interest exceeds Twenty-five Thousand and 00/100 Dollars
($25,000.00) as of his Settlement Date, in substantially equal
monthly installments over either: (1) a ten (10) year period
(one hundred twenty (120) monthly installments); or (2) a
fifteen (15) year period (one hundred eighty (180) monthly
installments);
provided, however, the Committee shall have, in its sole discretion,
the right to change the method of distribution selected by the
Participant in the event the Committee determines it is in the best
interest of the Company to do so. 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. If the Participant fails to elect the
manner of
8
<PAGE> 9
payment, the Participant shall receive a cash lump sum. 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
effective as of the applicable Valuation Date, a Participant may be
permitted to make a withdrawal in cash from his Accounts on account of
hardship 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;
(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 on account of disability in one
of the forms permitted by Section 5.04 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(b), "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 employment 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.
9
<PAGE> 10
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.
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
10
<PAGE> 11
such Participant, former Participant or Beneficiary is then unknown to
the Committee 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.
11
<PAGE> 12
ARTICLE VI
BENEFICIARIES; PARTICIPANT DATA
-------------------------------
6.01 DESIGNATION OF BENEFICIARIES. A Participant may, by instrument in
writing in the form prescribed by the Committee executed and delivered
to the Committee designate a Beneficiary or Beneficiaries (who may be
named contingently or successively) 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 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 in accordance with this Section
6.01. Each designation will revoke all prior designations by the same
Participant.
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.
12
<PAGE> 13
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. In the event that neither a Participant nor
Beneficiary survives to receive distribution of amounts in the Accounts, such
amounts shall forfeited and the Company shall have no further obligations or
liability with respect thereto.
13
<PAGE> 14
ARTICLE VIII
THE TRUST
---------
8.01 ESTABLISHMENT OF TRUST. The Company has established a 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.
8.02 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 Units 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.
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; not
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.
14
<PAGE> 15
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.
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;
(d) to delegate such of its authority as the Committee deems
appropriate to Company representatives and third party service
providers to facilitate the day-to-day administration of the
Plan; and
(e) 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.
15
<PAGE> 16
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
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.
16
<PAGE> 17
ARTICLE X
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:
(i) Any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) who or that, together with all
Affiliates and Associates of such person, is the Beneficial
Owner of ten percent (10%) or more of the shares of Common
Stock of the Company then outstanding, except:
(A) the Company;
(B) any of the Company's subsidiaries in which a majority
of the voting power of the equity securities or
equity interests of such subsidiary is owned,
directly or indirectly, by the Company;
(C) any employee benefit or stock ownership plan of the
Company or any trustee or fiduciary with respect to
such a plan acting in such capacity; or
(D) any such person who has reported or may, pursuant to
Rule 13d-1(b)(1) of the General Rules and Regulations
under the Exchange Act, report such ownership (but
only as long as such person is the Beneficial Owner
of less than fifteen percent (15%) of the shares of
Common Stock then outstanding) on Schedule 13G (or
any comparable or successor report) under the
Exchange Act.
Notwithstanding the foregoing: (1) no person shall become the
Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any person identified in clause
(D) above) solely as the result of an acquisition of Common
Stock by the Company that, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such person to ten percent (10%) or more
(fifteen percent (15%) or more in the case of any person
identified in clause (D) above) of the shares of Common Stock
then outstanding; provided, however, that if a person becomes
the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any person identified in
clause (D) above) of the shares of Common Stock solely by
reason of purchases of Common Stock by the Company and shall,
after such purchases by the Company, become the Beneficial
Owner of any additional shares of Common Stock which has the
effect of increasing such person's percentage ownership of the
then-outstanding shares of Common Stock by any means
whatsoever, then such person shall be deemed to have triggered
a Change of Control; and (2) if the Board of Directors
determines that a person who would otherwise be the Beneficial
Owner of ten percent (10%) or more (fifteen percent (15%) or
more in the case of any person identified in clause (D) above)
of the shares of Common Stock has become such inadvertently
(including, without limitation, because (i) such person was
unaware that it Beneficially Owned ten
17
<PAGE> 18
percent (10%) or more (fifteen percent (15%) or more in the
case of any person identified in clause (D) above) of the
shares of Common Stock or (ii) such person was aware of the
extent of such beneficial ownership but such person acquired
beneficial ownership of such shares of Common Stock without
the intention to change or influence the control of the
Company) and such person divests itself as promptly as
practicable of a sufficient number of shares of Common Stock
so that such person would no longer be the Beneficial Owner of
ten percent (10%) or more (fifteen percent (15%) or more in
the case of any person identified in clause (D) above), then
such person shall not be deemed to be, or have been, the
Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any person identified in clause
(D) above) of the shares of Common Stock, and no Change of
Control shall be deemed to have occurred.
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of
Directors of the Company and any new director (other than a
director initially elected or nominated as a director as a
result of an actual or threatened election contest with
respect to directors or any other actual or threatened
solicitation of proxies by or on behalf of such director)
whose election by the Board of Directors 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, cease for any reason to constitute a
majority thereof.
(iii) There shall be consummated any consolidation, merger or other
combination of the Company with any other person or entity
other than:
(A) a consolidation, merger or other combination which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) more than fifty-one percent (51%)
of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such consolidation, merger or other
combination; or
(B) a consolidation, merger or other combination effected
to implement a recapitalization and/or reorganization
of the Company (or similar transaction), or any other
consolidation, merger or other combination of the
Company, which results in no person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange
Act), together with all Affiliates and Associates of
such person, becoming the Beneficial Owner of ten
percent (10%) or more (fifteen percent (15%) or more
in the case of any person identified in Section
1(c)(i)(D)) of the combined voting power of the
Company's then outstanding securities.
(iv) There shall be consummated any sale, lease, assignment,
exchange, transfer or other disposition (in one transaction or
a series of related transactions) of fifty percent (50%) or
more of the assets or earning power of the Company (including,
18
<PAGE> 19
without limitation, any such sale, lease, assignment,
exchange, transfer or other disposition effected to implement
a recapitalization and/or reorganization of the Company (or
similar transaction)) which results in any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act), together with all Affiliates and Associates of such
person, owning a proportionate share of such assets or earning
power greater than the proportionate share of the voting power
of the Company that such person, together with all Affiliates
and Associates of such person, owned immediately prior to any
such sale, lease, assignment, exchange, transfer or other
disposition.
(v) The shareholders of the Company approve a plan of complete
liquidation of the Company.
For purposes of this Article X, a person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended, hereinafter "Exchange Act") shall be deemed the "BENEFICIAL
OWNER" of and shall be deemed to "beneficially own" any securities:
(i) which such person or any of such person's "Affiliates" or
"Associates" (as such terms are defined in Rule 12b-2, as in
effect on April 23, 1997, of the General Rules and under the
Exchange Act) is considered to be a "beneficial owner" under
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on April 23, 1997;
(ii) which such person or any of such person's Affiliates or
Associates, directly or indirectly, has or shares the right to
acquire, hold, vote (except pursuant to a revocable proxy as
described in the proviso to this Section 1(b)) or dispose of
such securities (whether any such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed to be the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or
(iii) which are beneficially owned, directly or indirectly, by any
other person (or any Affiliate or Associate of such other
person) with which such person (or any of such person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), with respect to
acquiring, holding, voting (except as described in the proviso
to this Section 1(b)) or disposing of any securities of the
Company;
provided, however, that a person shall not be deemed the Beneficial
Owner of, nor to beneficially own, any security if such person has the
right to vote such security pursuant to an agreement, arrangement or
understanding which (I) arises solely from a revocable proxy given to
such person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act, and (II) is not also then
reportable on Schedule 13D (or any comparable or
19
<PAGE> 20
successor report) under the Exchange Act; and provided, further, that
nothing in this Section 1(b) shall cause a person engaged in business
as an underwriter of securities to be the Beneficial Owner of, or to
beneficially own, any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of such acquisition or
such later date as the Board of Directors may determine in any specific
case.
20
<PAGE> 21
ARTICLE XI
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 signed 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 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 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.
21
<PAGE> 22
ARTICLE XII
AMENDMENT
---------
The Company, by written instrument executed by the Company, shall have
the right to amend the Plan, at any time, including retroactively, and all
parties claiming any interest thereunder shall be bound thereby.
22
<PAGE> 23
ARTICLE XIII
TERMINATION
13.01 RIGHT TO TERMINATE. The Company reserves the right, at any time, to
terminate its obligation to make contributions to the Trust or to
further credit Accounts. The Company also reserves the right, at any
time, to suspend crediting Accounts for a fixed or indefinite period of
time. The Company shall have the right to terminate or amend the Plan
at any time in such manner and to such extent as the Company may in its
sole discretion deem advisable and in the best interest of the Company.
13.02 AUTOMATIC TERMINATION OF CONTRIBUTIONS. The liability of the Company to
make future contributions to the Trust or credit Accounts shall
automatically terminate upon dissolution of the Company, upon its
adjudication as bankrupt, or upon the making of a general assignment
for the benefit of creditors.
13.03 ALLOCATION AND DISTRIBUTION. This Section shall become operative upon
termination of the Plan. Upon the effective date of termination,
notwithstanding any other provisions of the Plan, no persons who were
not theretofore Participants shall be eligible to become Participants,
and all interests of Participants not theretofore vested shall become
immediately fully (100%) vested. The value of the Accrued Benefit of
all Participants and Beneficiaries shall be determined and distributed
to them as soon as practicable after the end of the quarter in which
such termination occurs. All Participants shall receive distributions
in a uniform manner in a cash lump sum. The provisions set forth in
this Section shall be subject to such modification, including
retroactively, without necessity of formal amendment to the Plan, as
may be necessary, in the opinion of the Company, to cause the
termination of the Plan and/or Trust, or to conform to any requirements
of law.
23
<PAGE> 24
ARTICLE XIV
MISCELLANEOUS
-------------
14.01 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 Plan 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 Plan Year.
14.02 LIMITATIONS ON LIABILITY OF COMPANY. Neither the establishment of the
Plan or Trust 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 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 their personal
representative. The Company does not in any way guarantee the Trust or
any Participant's Accrued Benefit 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 for the failure of any
Participant, Beneficiary or other person to be entitled to any
particular tax consequences with respect to the Plan, the Trust or any
contribution thereto or distribution therefrom.
14.03 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.
14.04 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 purposes of ERISA.
14.05 PAYMENT OF ADMINISTRATIVE EXPENSES. Expenses incurred in the
administration and operation of the Plan shall be paid by the Company.
14.06 GOVERNING LAW. The laws of the State of Ohio shall govern, control and
determine all questions arising with respect to the Plan and the
interpretation and validity of its respective provisions, except where
those laws are preempted by the laws of the United States.
24
<PAGE> 25
14.07 NO RIGHT TO EMPLOYMENT. Participation under the Plan will not give any
Participant the right to be retained in the service of the Company nor
any right or claim to any benefit under the Plan unless such right or
claim has specifically accrued hereunder.
14.08 PARTICIPANTS ARE GENERAL CREDITORS. All payments to be made hereunder
shall be made in cash from 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 this Plan, such right shall
be no greater than the right of an unsecured general creditor of the
Company.
14.09 DECISIONS INVOLVING OWN BENEFITS. Notwithstanding any other provisions
in Article IX, 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.
14.10 CONSTRUCTION. Where headings have been supplied for portions of the
Plan, they have been supplied for convenience only and are not to be
taken as limiting or excluding the meaning of any portion of the Plan.
Whenever the word "person" appears in the Plan, it shall refer to both
natural and legal persons. The singular or plural number or masculine,
feminine and neuter gender shall each be deemed to include the other.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed
effective as of the 1st day of April, 1997, except as otherwise specifically
provided herein.
ATTEST: THE SHERWIN-WILLIAMS COMPANY
/s/ By:/s/
- -------------------------------- ---------------------------------
Title:
------------------------------
25
<PAGE> 1
Exhibit 10(j)
SHERWIN-WILLIAMS MANAGEMENT COMPENSATION PROGRAM
------------------------------------------------
PURPOSE
- -------
The purpose of the Sherwin-Williams Management Compensation Program is to
establish and maintain a performance and achievement oriented management
environment throughout the Company that results in improved profits and/or
creativity. The primary emphasis is to develop Sherwin-Williams as a superior
company that can achieve and sustain above average earnings growth and a company
dedicated to excellence in management, products, services and product
development.
With this in mind, the Program is designed so that participating managers will
earn higher than average total compensation for doing an above average job and
have the opportunity to accumulate a significant estate if the Company's
long-range earnings goals are achieved.
TOTAL COMPENSATION
- ------------------
Sherwin-Williams' base salary structure is so designed that a participant may
receive a level of salary compensation which approximates the average of that
paid an equivalent position in the same or similar industries, as reported by
several outside executive compensation services. Those who participate in the
Incentive Plan may be awarded additional compensation in the form of cash and
deferred compensation for performance results that meet or exceed specified
pre-determined goals. Total compensation, therefore, may exceed that of
comparable executive positions in the outside marketplace.
I. BASE SALARY
-----------
Sherwin-Williams' overall salary structure is reviewed
annually to insure that it remains competitive. Positions are
classified within the salary structure on the basis of
assigned responsibilities.
The mid-point salary of a grade assigned to a position is the
salary level which approximates the average salary paid an
equivalent position in the same or similar industries. Data
are obtained from the latest survey information available from
various executive compensation data sources. Where salary
information is not available for a particular position, the
salary grade assigned is consistent with other positions
having similar responsibilities in the Company and in similar
industries.
Individual salaries are reviewed at least annually, but it
must be understood that salaries may not increase each year.
Decisions relating to salary increases are based on guidelines
provided by management.
1
<PAGE> 2
II. S-W MANAGEMENT INCENTIVE PLAN
-----------------------------
The second element of the compensation program is the
Sherwin-Williams Management Incentive Plan ("Plan"). This
incentive Plan is designed to permit the total compensation of
a key manager to reflect:
A. The performance of a particular unit (profit center
or department), and
B. The results of individual efforts as related to
established goals. Goals must require well above
average performance and results should be difficult
to attain and have a significant impact on the
improvement of the organizational unit and/or the
Company.
ELIGIBILITY TO PARTICIPATE IN SWMIP
-----------------------------------
Eligibility to participate in the Plan is limited to
Corporate, Group and Division key managers who are responsible
for profit decisions and major policy direction. To remain a
participant, one must remain an active employee in a
participating job through the end of the Plan year (December
31). Individuals employed in a participating job by October 1
of the Plan year may become eligible to participate in that
Plan year upon approval of the Chief Executive Officer and/or
the Compensation Committee of the Board of Directors.
Division participants are selected and recommended by the
Division President, Group President and Chief Operating
Officer on an individual basis after careful consideration and
evaluation and must be approved by the Chief Executive
Officer. The potential of the position to contribute to the
achievement of overall company goals is the major criterion
for being approved as a Plan participant.
Participation at the Corporate level is limited to Officers
and Major Department Heads.
Certain limits are placed on the number of managers from any
one Division that may be included in the Plan as shown below.
The numbers shown in parentheses represent additional
participants who may be included in the Plan if warranted by
the responsibilities of the position.
Division Sales Number Eligible Rec. Positions
-------------- --------------- --------------
Below $25MM 1 + (1) General Manager
$25MM to $50MM 3 + (1) General Manager
Marketing Manager
Manufacturing Manager
2
<PAGE> 3
$50MM to $150MM 4 + (2) General Manager
Marketing Manager
Manufacturing Manager
Controller
Technical Director
$150MM to $300MM 5 + (2) General Manager
Marketing Manager
Manufacturing Manager
Controller
$300MM to $600MM 6 + (3) Technical Director
Product Manager
Human Resources Director
Merchandise Manager
$600MM & over 7 + (4) Region Director
INCENTIVE AWARDS
----------------
The Plan is designed to provide an award for improvement over
prior year results. To be eligible for any award under the
Plan, a participant, Division or Department must attain at
least 75% of the improvement portion of the major profit or
program goal.
For example:
Prior Year Actual PBT: $13.0MM
Plan Year PBT: $14.0MM
Planned Improvement: $ 1.0MM
The threshold for earning an award is an
improvement of $0.750MM (75% of $1MM) or an
actual PBT for the Plan Year of $13.75MM.
WHERE AN APPROVED PROFIT GOAL SHOWS NO IMPROVEMENT, OR IS
CONSIDERED TO SHOW INSUFFICIENT IMPROVEMENT, THE PARTICIPANT,
DIVISION OR DEPARTMENT MUST ATTAIN THE GOAL TO EARN ANY AWARD.
THE ACHIEVEMENT OF THIS GOAL MAY RESULT IN AN INCENTIVE AWARD
AT THE MINIMUM PAYOUT LEVEL FOR THE APPROPRIATE INCENTIVE
GROUP (AS HEREAFTER DESCRIBED), PROVIDED THAT THE COMPANY
ACHIEVES ITS OVERALL GOALS. GENERALLY, NO ADDITIONAL INCENTIVE
WILL BE AWARDED UNLESS THE RESULTS EXCEED THE PRIOR YEAR'S
ACTUAL RESULTS.
3
<PAGE> 4
As an example:
Prior Year Actual PBT: $13.0MM
Plan Year Goal PBT: $12.7MM
Incentive payouts MAY be as follows, assuming the
Company achieves its overall goals:
Plan Year Actual PBT Incentive Award
-------------------- ---------------
< $12.7MM 0
$12.7MM Minimum Payout Per Incentive Group
$12.8MM "
$12.9MM "
$13.0MM "
> $13.0MM Management Discretion
Participants are assigned to an Incentive Group (Exhibit A)
which determines the potential percentage of base salary that
may be awarded. Assignment to an Incentive Group is made by
the Chief Executive Officer. Individual awards are based on
the overall percentage of goal achievement as described in the
Performance Results Evaluation section which follows and as
approved by the Chief Executive Officer and/or the
Compensation Committee of the Board of Directors.
PERFORMANCE RESULTS EVALUATION
------------------------------
Assuming the overall Company earnings performance is at least
75% of the Planned improvement goal, individual performance is
evaluated at the end of the year in terms of achievement of
goals set by the participant and approved by management at the
beginning of the year. If the Company does not meet the
minimum earnings improvement, funds may not be available for
awards, although special awards may be made under exceptional
circumstances.
The process for individual goal achievement evaluation is
outlined in the following steps. In all cases, recommended
awards must be approved by the Chief Executive Officer and/or
the Compensation Committee of the Board of Directors.
PROCEDURES FOR EVALUATING GOAL ACHIEVEMENT
------------------------------------------
1. The goals are pre-determined and agreed upon by the
participant and immediate supervisor, reviewed by the Division
President, Group President and/or Chief Operating Officer or
Corporate Department Head and submitted to the Chief Executive
Officer for approval. Strong emphasis is placed on IMPROVEMENT
over the previous fiscal year; particularly where the goals
relate to profits, profit margins and return on assets
employed.
4
<PAGE> 5
2. At the close of each fiscal year, participants review their
own performance by recording achievements as related to
pre-determined goals.
3. The supervisor then determines a performance rating percentage
for each quantitative goal by comparing the goal against
supervisory appraisal of the achievement of that goal. For all
Division participants, a performance rating percentage for
each special goal and each strategic goal will be determined
by the Division President, Group President and Chief Operating
Officer. For Corporate participants, these performance rating
percentages will be determined by the Chief Executive Officer.
A percentage achievement rating is scaled as follows:
--- 125% --- Outstanding Performance ---
--- ---
--- ---
--- ---
--- ---
--- 100% --- Planned Results ---
--- ---
--- ---
--- ---
--- ---
--- 75% --- Minimum Acceptable ---
--- Performance ---
--- ---
--- ---
--- 0% --------------------------------------
a. A "100% Objective Achieved" rating for any particular goal
indicates that the participant met that goal right on
target.
b. A rating of 125% is the maximum rating for any particular
goal, indicating outstanding achievement of that goal.
c. A rating below 75% indicates less than acceptable
performance, and since no credit is given for that
particular goal, the performance rating is 0%.
d. Because certain factors cannot be accurately measured in
terms of a percentage, a direct arithmetic relationship
may not necessarily exist between the established goal,
the appraisal of results and the
5
<PAGE> 6
performance rating percentage of that goal.
e. Incumbents in covered positions for less than the Plan
year being measured may be awarded incentive compensation
on a pro-rata basis (i.e., participant for 6 months out of
12 months would result in 50% of the normal award.)
4. The participant's appraisal and the supervisor's rating of
each goal, together with any additional comments by the
supervisor, form the basis for overall performance. The
overall performance rating is then reviewed for approval by
subsequent levels of management. The overall evaluation may
not exceed 125%.
5. The Chief Executive Officer reviews the recommended incentive
awards in terms of individual performance, the performance of
the Division or Department and the overall performance of the
Company, and, as appropriate, reviews his recommendations with
the Compensation Committee of the Board of Directors.
6. After the recommendations and approvals are final, a review
session is held with each participant, at which time the
supervisor is to review the incentive award with the
participant.
7. Fair, impartial judgement is in reality the major factor in
the final determination, and not arithmetic results.
8. The incentive award is determined as follows:
a. The overall performance percentage is related to the
applicable Incentive Group to determine the incentive
award percentage.
b. The participant's salary base is multiplied by the
incentive award percentage to determine the total
dollar incentive award. Incentive Plan award
computations are based upon the total salary of the
individual for the previous twelve months or for the
time in the approved position if less than a full
year.
For example: 100% Performance of Goals
Group II = 45%
Salary = $140,000
Incentive Award = $140,000 X 0.45
= $63,000
6
<PAGE> 7
SPECIAL INCENTIVE AWARDS
------------------------
In addition to the previously described incentive awards, the
Compensation Committee of the Board of Directors may, from
time to time, declare a special incentive award ("Special
Incentive Award") with respect to a particular Plan year. The
performance objectives and any other criteria, restrictions or
procedures associated with eligibility to receive any such
Special Incentive Award shall be determined by the
Compensation Committee, in its sole discretion, and the
material terms thereof shall be attached hereto and
incorporated herein as an exhibit to the Plan. All applicable
information regarding eligibility for or other aspects of any
Special Incentive Award shall also be communicated in writing
to all Plan participants on a timely basis.
GENERAL
Each employee should understand that the employment relationship with
Sherwin-Williams, or any of its subsidiaries or affiliates, is an at-will
relationship and, as such, may be terminated at any time by either party.
Nothing in any application form, employee handbook, summary, booklet, policy
manual or other communication is intended to be an express or implied contract
of employment, or guarantee of employment for a specific period of time between
an employee and the Company, a subsidiary or affiliate, unless clearly so stated
and signed by both parties.
INCOME DEFERRAL
- ---------------
The Company has a deferred compensation Plan to provide greater flexibility in
the method of payment of incentive awards. The payment of an incentive award may
be deferred, in whole or in part, under the Company's Key Management Deferred
Compensation Plan if that is an employee's election prior to the start of the
Plan year. Otherwise, payment will be made in cash.
February, 2000
7
<PAGE> 8
EXHIBIT A
INCENTIVE AWARDS AS A PERCENTAGE OF BASE SALARY
-----------------------------------------------
OVERALL GROUP GROUP GROUP GROUP
EVAL. I II III IV
------- ----- ------ ------- ----
125% (Max) 60 70 95 110
120% 55 65 88 103
115% 50 60 81 96
110% 45 55 74 89
105% 40 50 67 82
100% (Target) 35 45 60 75
95% 32 40 54 68
90% 29 35 48 61
85% 26 30 42 54
80% 23 25 36 47
75% (Min) 20 20 30 40
8
<PAGE> 9
EXHIBIT B
2000 SPECIAL INCENTIVE AWARD
----------------------------
The 2000 Special Incentive Award ("2000 Award") is designed to provide a
supplemental incentive award solely for the 2000 Plan year. Pursuant to the 2000
Award, Plan participants are eligible to receive up to an additional twenty
percent (20%) of their base salary if certain 2000 net external sales increases
established by the Compensation Committee of the Board of Directors are
achieved.
9
<PAGE> 1
Exhibit 13
PORTIONS OF 1999 ANNUAL REPORT TO SHAREHOLDERS
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
BASIS FOR REPORTABLE SEGMENTS
During the fourth quarter of 1999, following the appointment of a new chief
operating decision maker, the Company adopted revised segment reporting
guidelines that changed the number and composition of its reportable segments
and changed the value of goods that are transferred domestically between
segments. Effective for the fourth quarter and year 1999, the Company will
report financial information for five reportable segments - the Paint Stores,
Consumer, Automotive Finishes, International Coatings (collectively, the
"Operating Segments") and Administrative Segments. The value assigned to goods
that are transferred domestically between segments represents the
approximate fully absorbed manufactured cost plus distribution costs. Previously
reported annual Reportable Segment Information for years 1995 through 1998 was
restated to conform to the Company's 1999 presentation which is shown on page 13
of this report. Unaudited quarterly Reportable Segment Information for 1999 and
1998, which was reported in the Company's 1999 quarterly reports filed with the
Securities and Exchange Commission on Form 10-Q, has also been restated as
described in Note 14 on pages 36 and 37 of this report.
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information," requires an enterprise to
report segment information in the same way that management internally organizes
its business for assessing performance and making decisions regarding allocation
of resources. One of the characteristics identified by SFAS No. 131 that must be
considered in the determination of reportable segments is the regular review of
performance by the enterprise's chief operating decision maker. The Company's
chief operating decision maker has been identified as the Chief Executive
Officer because he has final authority over performance assessment and resource
allocation decisions. Each reportable segment identified by the Company meets
the SFAS No. 131 criteria for external reporting in the same way that current
management internally has organized the Company. The new segment reporting meets
other SFAS No. 131 characteristics of earning revenue and incurring expenses in
carrying out a business activity and making discrete financial information about
the business component available to the chief operating decision maker.
Because of the global, diverse operations of the Company, the chief operating
decision maker regularly receives discrete financial information about each
operating segment as well as a significant amount of additional financial
information about certain aggregated divisions, operating units and subsidiaries
of the Company. The chief operating decision maker uses all such financial
information for performance assessment and resource allocation decisions.
Factors considered in determining the five reportable segments of the Company
include the nature of the business activities, existence of managers responsible
for the operating and administrative activities and information presented to the
Board of Directors. Information about net sales, operating profits and assets
attributable to the United States and to all foreign consolidated subsidiaries
can be found on pages 12 and 13 of this report. Revenues and operating profits
attributable to any individual country outside the United States are not
material.
The Company evaluates the performance of each operating segment and allocates
resources based on profit or loss and cash generated from operations before
income taxes, excluding corporate expenses and financing gains and losses. The
accounting policies of the reportable segments are the same as those described
in Note 1 - Significant Accounting Policies on pages 28 and 29 of this report.
PAINT STORES SEGMENT
The Paint Stores Segment consists of four geographically divided domestic
domiciled divisions - Eastern, Southeastern, Mid Western and South Western -
which include all paint stores in the United States, Canada, the Virgin Islands
and Puerto Rico. The domestic divisions have the same business activity of
selling identical national and similar regional products through
company-operated specialty paint stores to the same types of customers. The
Paint Stores Segment now includes
Committed to being America's Paint Company
6
<PAGE> 2
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
[Picture of two Duration(TM) paint cans]
New in 1999, Duration(TM) exterior latex house paint delivered superior product
performance, exceeding first year sales forecasts.
the manufacturing and technical operations of the Product Finishes Business Unit
that produces original equipment manufacturer (OEM) product finishes sold
through the paint stores and by direct outside sales representatives. These
operations were previously reported in the Coatings Segment. The Paint Stores
Segment also consists of certain operations in Mexico that include a
manufacturing facility, distribution activities, specialty paint stores and
outside selling functions to dealers and other distributors. The Mexico
operations were also previously reported as part of the Coatings Segment. The
Paint Stores Segment consisted of 2,396 company-operated paint stores in the
United States, Canada, the Virgin Islands, Puerto Rico and Mexico on December
31, 1999. A map on the inside back cover of this report shows the approximate
geographical separation of each domestic division and the number of paint stores
in each state or province and in the Virgin Islands, Puerto Rico and Mexico. The
Paint Stores Segment is the exclusive North American marketer and seller of
Sherwin-Williams(R) branded architectural coatings, industrial maintenance and
marine products, and related items produced by the Consumer Segment and the
Paint Stores Segment's Mexican manufacturing operations. This Segment is also
the exclusive North American marketer and seller of Sherwin-Williams(R) branded
industrial OEM product finishes produced by its manufacturing facilities. In
addition, this Segment markets and sells Con-Lux(R), Old Quaker(TM),
Mercury(TM), Brod Dugan(TM), Pro-Line(R), SeaGuard(R), JetGlo(R), AcryGlo(R),
other control-branded coatings, and related products also manufactured by the
Consumer Segment. Complementary coatings and associated products manufactured by
third parties are sold through the Paint Stores Segment to complete its product
offering.
Paint, applicators, wallcoverings, floorcoverings, spray equipment and
associated products are marketed and sold by store personnel and direct sales
representatives to the do-it-yourself customer, professional painting
contractor, home builder, property manager, industrial maintenance and marine
customer, aviation market, OEM customer, and product finishing job shop
customer. The loss of any single customer would not have a material adverse
effect on the business of this Segment.
During 1999, the Segment opened 73 net new stores, remodeled 81 and relocated
41. Included in the 73 net new stores were 66 stores in the United States, one
each in Canada, the Virgin Islands and Puerto Rico, and four in Mexico. There
were 64 net new stores opened in 1998 (55 in the United States) and 47 net new
stores in 1997 (36 in the United States). This Segment introduced many new
national and regional architectural products, industrial maintenance and marine
products, and industrial OEM product finishes in 1999. The exterior paint
"Duration(TM)" was launched in March 1999 and exceeded its first year sales
forecasts. This product was well accepted by the painting contractor looking for
long-lasting durability, ease of application and excellent appearance. It was
also well accepted by the do-it-yourself customer looking for superior
performance and a one-coat application. Growth in the faux finishing area, which
is used to achieve unique finishes for home remodeling projects and new home
7
<PAGE> 3
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
construction, has continued.In addition to introducing new products in this
area, this Segment added several well-received customer services such as an
in-store merchandiser, application tools, in-store clinics and "how to"
brochures and videos.
In 2000, the Paint Stores Segment plans to open approximately 80 net new stores
while investing in new sales territories and field technical personnel. Service
levels will continue to improve through added investments in staffing, color
matching equipment and other productivity improving equipment. This Segment will
also invest in a key project designed to dramatically enhance color offering and
product consistency. This multi-year project will launch in 2000 with the
introduction of an "Extra White" base, a brighter and cleaner white base, which
will allow Sherwin-Williams(R) products to be tinted to a wider range of colors
than ever before. Projects to enhance existing product lines while introducing
new technology will continue, as product quality remains a key issue to both new
and existing customers.
The Company launched its extremely successful web site,
"www.sherwin-williams.com" in January 1999. It has received favorable reviews
from a number of internet trade publications and won the Dow Jones Directory's
site of the month award in August 1999. Customer and employee feedback included
high marks for ease of navigation, logical organization structure, and breadth
and depth of content. By the end of 1999, the site consisted of more than 12,000
pages of information and received 5.5 million hits per month with 165,000 user
sessions. This site will be expanded to further leverage the existing store
distribution platform by enabling customers and vendors to conduct business
electronically.
The successful advertising campaign theme, "Ask How, Ask Now, Ask
Sherwin-Williams" will continue in 2000. The campaign capitalizes on the strong
brand name recognition and quality perception inherent in the
Sherwin-Williams name.
CONSUMER SEGMENT
The Consumer Segment develops, manufactures and distributes architectural
paints, stains, varnishes, industrial maintenance products, wood finishing
products, paint applicators, corrosion inhibitors, and paint-related products in
the United States and Canada. In addition, a wide variety of cleaning products
and custom, industrial and automotive aerosols are filled, packaged, distributed
and sold by this Segment. The Consumer Segment employs a wide variety of trade
names and trademarks in pursuit of its business. Sherwin-Williams(R), Dutch
Boy(R), Krylon(R), Minwax(R), Cuprinol(R), Thompson's(R), Formby's(R), Red
Devil(R), Kem-Tone(R), Martin Senour(R), Pratt & Lambert(R), H&C(R), White
Lightning(R), DupliColor(R), Rust Tough(R), Rubberset(R), Sprayon(R),
Moly-White(R), Cello(R) and Tri-Flow(TM) are some of the trade names and
trademarks that have high national customer recognition and collectively
contribute significantly to the external sales of the Consumer Segment.
Domestically, Sherwin-Williams(R) branded architectural coatings, stains,
varnishes, industrial maintenance products, wood finishing products, paint
applicators, aerosols, adhesives and related products are manufactured solely
for the Paint Stores Segment. Approximately 40 percent of the total sales,
including intersegment transfers, of the Consumer Segment in 1999 represented
products sold through the Paint Stores Segment.
Certain control-branded, other branded and private label coatings, stains,
varnishes, wood finishing products, paint applicators, aerosols and related
products are manufactured for and distributed through many of the leading mass
merchandisers, home centers, independent dealers and industrial maintenance
distributors. Sales and marketing of these branded and private label products is
performed by a direct sales staff. The products distributed through these
third-party customers are intended for resale to the ultimate end-user of the
product. Cleaning products and custom, industrial and automotive aerosols
produced by this Segment are distributed through various mass merchandisers and
the homecare products, institutional, insecticide and industrial markets.
The Consumer Segment has sales to certain customers that,
Committed to being America's Paint Company
8
<PAGE> 4
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
individually, may be a significant portion of the sales of the Segment. However,
the loss of any single customer would not have a material adverse effect on the
overall profitability of the Segment. This Segment incurs most of the Company's
capital expenditures related to ongoing environmental compliance measures.
During 1999, the Consumer Segment's sales and marketing organizations began to
benefit from the consolidation of the former Consumer Brands, Coatings,
Transportation Services and Diversified Brands Divisions that started in 1998.
The consolidation was precipitated by customer expectations for improved
service, the necessity to lower operating costs, and the need for additional
field service personnel to support the customers' businesses. In 1999, a new
sales and marketing organization was put in place to provide proper focus to the
key brands as well as this Segment's large, diverse customer base. Technology
changes throughout the Consumer Segment allowed for the complete integration of
marketing and sales information into a data warehouse for acquired brands as
well as core business brands. This Segment also installed supply chain software
into many of its manufacturing and distribution sites to speed up the supply
chain process and increase responsiveness to customer demand.
In 1999, the Consumer Segment's Chicago Emulsion Plant was accepted into the
Occupational Safety and Health Administration's Voluntary Protection Program as
a "Star" site. This program recognizes U.S. facilities that have designed and
implemented outstanding health and safety practices. This acceptance marks the
first time that a U.S. coatings manufacturer has achieved this status. The
Consumer Segment continued its promotion of the unique Dutch Boy(R)
ClimateGUARD(TM) exterior house paint product line. Climatological research
identifies five U.S. regions with distinctively different climates. Five unique
ClimateGUARD(TM) formulas were developed for each different weather condition it
guards against and are all backed by the Company's 20-year limited warranty.
In 2000, several new marketing and sales programs will be initiated. The Segment
has launched a new Thompson's(R) exterior architectural paint program. This
program is a premium branded program that leverages the well-known Thompson's(R)
brand name at a leading mass merchandiser. The product is being supported with a
lifetime warranty for moisture resistance. This program provides a branded paint
program along side the customer's private label paint program. Additionally, the
Consumer Segment will introduce an extension pole program for the professional
contractor. This program will involve separate sizes of extension poles for
paint rollers with a lifetime warranty on the patent-pending pin lock mechanism
on the extension poles.
AUTOMOTIVE FINISHES SEGMENT
The Automotive Finishes Segment develops, manufactures and distributes motor
vehicle finish, refinish and touch-up products primarily throughout North and
South America and the Caribbean Islands. This Segment also licenses certain
technology and trade names worldwide. This Segment employs a variety of trade
names and trademarks
[Picture of three ClimateGUARD(TM) Paint Cans]
Dutch Boy(R) ClimateGUARD(TM) is available in formulas for the Northwest,
Sunbelt, Heartland, Southeast and Northeast regions.
9
<PAGE> 5
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
[Picture of Color Eye(TM) spectrophotometer]
Automotive Finishes Color Eye(TM) spectrophotometer can help achieve one-step
simplicity and exacting results first time, every time using the power of this
advanced four-angle instrument.
worldwide in pursuit of its business. Sherwin-Williams(R), Martin Senour(R),
Western(R), Lazzuril(TM), Excelo(TM) and Marson(TM) are some of the trade names
and trademarks that have high national and international customer recognition
and collectively contribute significantly to the sales of the Automotive
Finishes Segment. Sherwin-Williams(R) branded automotive finish and refinish
products are distributed throughout North America solely through this Segment's
network of company-operated automotive branches. At December 31, 1999, the
Segment consisted of a network of 172 company-operated automotive branches
worldwide. In the United States there were 121 branches open at that date and 51
foreign branches in Canada (21), Jamaica (12) and Chile (18). A map on the
inside back cover of this report shows the geographical demographics and the
number of branches in each state, province or country. Some control-branded,
other branded and private label refinish and touch-up products are manufactured
for and distributed through many of the leading independent dealers, automotive
program distributors, automotive jobbers, independent jobbers, wholesale
distributors, automotive body shops, automotive dealerships, fleet owners and
refinishers, production shops, body builders and manufacturers requiring a
factory-applied finished product. At December 31, 1999, the Automotive Finishes
Segment included nine foreign wholly-owned subsidiaries in five foreign
countries and 12 foreign licensing agreements in 29 countries outside the United
States.
During 1999, the Automotive Finishes Segment opened five new branches - one in
the United States and two each in Chile and Jamaica. This Segment also acquired
thirteen branches in 1999 - ten in Canada, two in Chile and one in the United
States. The branch network continued to increase sales and gain market share in
the collision shop sector. Unique sales programs, national account management
and the high performing Ultra 7000(TM) system were key factors contributing to
sales increases in the branch network. Sales and profits increased significantly
in product lines sold to suppliers to the automotive and truck OEM businesses.
Genesis(TM) high solids urethane systems for OEM heavy truck and bus application
was launched during 1999, adding to the growth in that business.
Increased unit builds and new product approvals by automobile parts suppliers
and truck manufacturers were key to the growth in the OEM business.
In 2000, the Automotive Finishes Segment will continue to focus on sales growth
in the OEM business and expansion of its branch network. The development of
additional, improved color technology in international markets will aid in sales
growth as well. This Segment will continue to pursue growing market
opportunities including international business to better compete on a global
basis.
INTERNATIONAL COATINGS SEGMENT
The International Coatings Segment develops, licenses, manufactures and
distributes architectural paints, stains, varnishes, industrial maintenance
products, product finishes, wood finishing products and paint-related
Committed to being America's Paint Company
10
<PAGE> 6
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
products worldwide. In addition, custom, industrial and automotive aerosols are
filled, packaged, distributed and sold by this Segment. The International
Coatings Segment employs a wide variety of trade names and trademarks worldwide
in pursuit of its business. Sherwin-Williams(R), Dutch Boy(R), Krylon(R),
Kem-Tone(R), Pratt & Lambert(R), Minwax(R), Ronseal(TM), Colorgin(TM),
Globo(TM), Sumare(R), Andina(TM) and Marson(TM) are some of the trade names and
trademarks that have high customer recognition and collectively contribute
significantly to the sales of the International Coatings Segment. Some other
branded and private label coatings, stains, varnishes, wood finishing products,
paint applicators, aerosols, adhesives and related products are manufactured for
and distributed through various marketing channels. The International Coatings
Segment manufactures, distributes and sells its products primarily through
wholly-owned subsidiaries, joint ventures and licensees of technology,
trademarks and trade names. At December 31, 1999, this Segment included ten
foreign wholly-owned subsidiaries in seven foreign countries, four foreign joint
ventures and 32 licensing agreements in 24 foreign countries. This Segment also
sells its products through 33 company-operated specialty paint stores in Chile
and ten in Brazil. The majority of the sales from licensees and subsidiaries
occur in South America, the Segment's most important international market.
The economic climate throughout South America was difficult in 1999. Despite
Brazil's maxi-devaluation of its currency in January, and the resultant impact
on the economy, improved sales and operating profits were achieved in local
currency. In spite of the harsh economic climate and recessions in Argentina and
Chile, the operations in these countries managed to increase market share. S-W
Argentina achieved record sales and profits. In the United Kingdom, Ronseal
achieved record sales and profits with continued growth in its do-it-yourself
and home improvement market.
In 2000, the less-than-favorable economic conditions in South America are
expected to continue although some improvement may be realized in Brazil and
Chile. Nonetheless, cost containment remains a focal point of the businesses in
South America, especially in Argentina where a continuation of the recession is
possible. Additionally, proper servicing of key accounts, new product
introductions, entry into new market segments and a broadening of distribution
will be necessary to achieve planned goals.
ADMINISTRATIVE SEGMENT
The Company and certain consolidated subsidiaries have corporate headquarters
expenses that are considered part of the Administrative Segment and not a part
of an Operating Segment. The Administrative Segment includes the expenses of
headquarter sites, interest expense which is unrelated to certain financing
activities of the Operating Segments, investment income, certain foreign
currency transaction losses related to dollar-denominated debt and other
financing activities, certain provisions for disposition and
environmental-related matters, and other expenses which are not directly
associated with any Operating Segment.
[Picture of factory]
Taboao da Serra, Sao Paulo, Brazil
11
<PAGE> 7
REPORTABLE SEGMENT INFORMATION
The Administrative Segment expenses and assets reconcile Operating Segment data
to total consolidated income before income taxes, identifiable assets, capital
expenditures and depreciation.
Also included in the Administrative Segment is a real estate management unit
that is responsible for the ownership, management, leasing of non-retail
properties held primarily for use by the Company, including the Company's
headquarters site, and disposal of idle facilities. Sales of the Administrative
Segment represent external leasing revenue of excess headquarters space or
leasing of facilities no longer used by the Company in its operations. Gains and
losses from the sale of property are not a significant factor in determining the
performance of this Segment. At the end of 1999, this Segment owned 22 and
leased two properties consisting of office buildings, distribution service
centers, idle manufacturing facilities and vacant land. Occasionally, such
properties are acquired or developed to provide the lowest cost alternative for
expansion of distribution operations by the Consumer or Automotive Finishes
Segments. Locations that have been utilized profitably in the past that can no
longer contribute to the Company's future plans are offered for sale or lease.
If a location is no longer in usable condition, all buildings on the property
are razed and the vacant land is then offered for sale or lease. During 1999,
two owned properties were sold and early termination of a lease was successfully
negotiated at a third site. Sales agreements are currently being pursued for
three other facilities with anticipated sale dates in 2000. The second phase of
a demolition plan was completed at a former manufacturing facility in 1999. The
occupancy rate for external non-retail office space was 95 percent at December
31, 1999. For 2000, the lease expiration of a large tenant in the Company's
headquarters building and the reduction in leased space of another tenant will
result in decreased revenue for the near term.
NOTES TO FINANCIAL TABLE
Operating profit is total revenue, including intersegment transfers, less
operating costs and expenses. Administrative expenses include interest which is
unrelated to certain financing activities of the Operating Segments, certain
foreign currency transaction losses related to dollar-denominated debt and other
financing activities, certain provisions for disposition and termination of
operations and environmental remediation which are not directly associated with
any Operating Segment, and other adjustments.
Identifiable assets are those directly identified with each reportable segment.
Administrative Segment assets consist primarily of cash, investments, deferred
pension assets, headquarters property, plant and equipment, and other real
estate.
The operating margin for each Operating Segment is based upon total external
sales and intersegment transfers. Domestic intersegment transfers are accounted
for at the approximate fully absorbed manufactured cost plus distribution costs.
International intersegment transfers are accounted for at values comparable to
normal unaffiliated customer sales.
Net external sales of all consolidated foreign subsidiaries were $497 million,
$521 million and $523 million for 1999, 1998 and 1997, respectively. Operating
profits of all consolidated foreign subsidiaries were $70 million, $47 million
and $55 million for 1999, 1998 and 1997, respectively. Domestic operations
account for the remaining net sales and operating profits. Long-lived assets
consist of net property, plant and equipment, goodwill, and intangibles.
Long-lived assets of consolidated foreign subsidiaries totaled $242 million,
$312 million and $320 million at December 31, 1999, 1998 and 1997,
respectively. The consolidated total of long-lived assets for the Company was
$2,026 million, $2,134 million and $2,164 million at December 31, 1999, 1998 and
1997, respectively. Administrative expenses do not include any significant
foreign operations. No single geographic area outside the United States was
significant relative to consolidated net external sales or operating profits.
Consolidated foreign operations were not material for any year prior to 1997.
Export sales and sales to any individual customer were each less than 10 percent
of consolidated sales to unaffiliated customers during all years presented.
Committed to being America's Paint Company
12
<PAGE> 8
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
- --------------------------------------------------------------------------------
REPORTABLE SEGMENT INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
1999 1998(*) 1997(*) 1996(*) 1995(*)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET EXTERNAL SALES
PAINT STORES ........................................ $ 3,002 $ 2,822 $ 2,639 $ 2,414 $ 2,143
CONSUMER ............................................ 1,224 1,282 1,409 1,162 729
AUTOMOTIVE FINISHES ................................. 471 474 476 434 385
INTERNATIONAL COATINGS .............................. 299 348 350 114 8
ADMINISTRATIVE ...................................... 8 8 7 9 9
------- ------- ------- ------- -------
CONSOLIDATED TOTALS ................................. $ 5,004 $ 4,934 $ 4,881 $ 4,133 $ 3,274
OPERATING PROFITS
PAINT STORES ........................................ $ 377 $ 347 $ 315 $ 277 $ 239
CONSUMER ............................................ 155 125 167 126 88
AUTOMOTIVE FINISHES ................................. 67 65 64 52 39
INTERNATIONAL COATINGS .............................. 34 24 36 20 2
ADMINISTRATIVE:
INTEREST EXPENSE .................................. (59) (70) (79) (22) (1)
CORPORATE EXPENSES AND OTHER ...................... (84) (51) (76) (78) (49)
------- ------- ------- ------- -------
INCOME BEFORE INCOME TAXES .......................... $ 490 $ 440 $ 427 $ 375 $ 318
IDENTIFIABLE ASSETS
PAINT STORES ........................................ $ 930 $ 881 $ 832 $ 757 $ 674
CONSUMER ............................................ 1,804 1,850 1,938 1,122 431
AUTOMOTIVE FINISHES ................................. 279 275 274 274 157
INTERNATIONAL COATINGS .............................. 294 356 312 194 86
ADMINISTRATIVE ...................................... 745 703 680 648 793
------- ------- ------- ------- -------
CONSOLIDATED TOTALS ................................. $ 4,052 $ 4,065 $ 4,036 $ 2,995 $ 2,141
CAPITAL EXPENDITURES
PAINT STORES ........................................ $ 49 $ 57 $ 56 $ 49 $ 31
CONSUMER ............................................ 40 37 57 44 53
AUTOMOTIVE FINISHES ................................. 10 8 14 10 13
INTERNATIONAL COATINGS .............................. 11 15 13 12 2
ADMINISTRATIVE ...................................... 24 29 24 8 9
------- ------- ------- ------- -------
CONSOLIDATED TOTALS ................................. $ 134 $ 146 $ 164 $ 123 $ 108
DEPRECIATION
PAINT STORES ........................................ $ 42 $ 38 $ 40 $ 35 $ 27
CONSUMER ............................................ 29 30 24 21 18
AUTOMOTIVE FINISHES ................................. 8 8 7 7 7
INTERNATIONAL COATINGS .............................. 6 6 6 1 1
ADMINISTRATIVE ...................................... 20 16 13 12 10
------- ------- ------- ------- -------
CONSOLIDATED TOTALS ................................. $ 105 $ 98 $ 90 $ 76 $ 63
OPERATING MARGINS
PAINT STORES ........................................ 12.5% 12.3% 11.9% 11.5% 11.2%
CONSUMER ............................................ 7.6% 6.1% 8.0% 7.0% 6.6%
AUTOMOTIVE FINISHES ................................. 13.3% 12.8% 12.5% 11.1% 9.4%
INTERNATIONAL COATINGS .............................. 11.4% 6.9% 10.2% 17.5% 18.2%
------- ------- ------- ------- -------
OPERATING SEGMENT TOTALS ............................ 10.8% 9.8% 10.4% 9.9% 9.4%
INTERSEGMENT TRANSFERS
PAINT STORES ........................................ $ 8 $ 5
CONSUMER ............................................ 817 771 $ 666 $ 645 $ 608
AUTOMOTIVE FINISHES ................................. 31 34 37 33 28
INTERNATIONAL COATINGS .............................. 2 3
ADMINISTRATIVE ...................................... 12 11 9 9 7
------- ------- ------- ------- -------
SEGMENT TOTALS ...................................... $ 868 $ 821 $ 714 $ 687 $ 646
</TABLE>
(*) Amounts have been restated to conform to the Company's 1999 Reportable
Segment Information presentation.
13
<PAGE> 9
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION - 1999
Net operating cash flow for 1999, as shown in the Statements of Consolidated
Cash Flows, is calculated in accordance with SFAS No. 95, "Statement of Cash
Flows." SFAS No. 95 requires that material effects of exchange rate changes on
cash held in foreign currencies be reported on a separate line of the Statements
of Consolidated Cash Flows. Effective January 1, 1999, the Company began
reporting the effects of exchange rate changes on cash in accordance with SFAS
No. 95 for its Brazilian operations due to the January 1999 devaluation of the
Brazilian real. The effects of exchange rate changes on cash were not material
for 1998 or 1997. Net operating cash flow generated by the Company during 1999
was $485.1 million. This cash flow provided the funds to invest in property,
plant and equipment, reduce total debt, acquire treasury stock and increase the
annual dividend. The Company's current ratio declined to 1.34 at December 31,
1999 from 1.39 at the end of 1998. The Company's Consolidated Balance Sheets and
Statements of Consolidated Cash Flows, on pages 25 and 26 of this report,
provide more detailed information on the Company's financial position and cash
flows.
There were no short-term borrowings outstanding at December 31, 1999 under the
Company's commercial paper program. The commercial paper program had unused
borrowing availability of $747.2 million at December 31, 1999. Borrowings under
the commercial paper program are fully backed by and limited to the borrowing
availability under the Company's revolving credit agreements which aggregated
$732.8 million effective January 3, 2000.
The Current portion of long-term debt increased $4.1 million to $122.3 million
at December 31, 1999. This increase was primarily due to the reclassification of
6.25% Notes due February 1, 2000 of $100.0 million. Substantially offsetting
this reclassification was the repayment of Floating Rate Notes of $50.0 million
and a portion of 5.5% Notes, due October 15, 2027. The 5.5% Notes permit holders
to exercise put options beginning on October 15, 1999 and annually on each
October 15 thereafter. Put options were exercised by holders that required the
Company to repay $38.9 million of these debt securities in October 1999. The
remaining $11.1 million of these debt securities is included in Current portion
of long-term debt at December 31, 1999. Inventories increased $20.9 million at
December 31, 1999 due primarily to planned inventory builds to support new
product introductions planned for early 2000. Some of these new products are
expected to dramatically enhance color and product consistency. Increases and
decreases in other components of net working capital were primarily due to
timing during 1999.
Deferred pension assets of $334.1 million at December 31, 1999 represent the
excess of the fair market value of the assets in the Company's defined benefit
pension plans over the actuarially-determined projected benefit obligations.
The 1999 increase in Deferred pension assets of $30.1 million represents
primarily the recognition of the current year net pension credit, described in
Note 6 on pages 30 to 32 of this report. The assumed discount rate used to
compute the actuarial present value of projected benefit obligations was
increased from 6.75 percent to 7.25 percent at December 31, 1999 due to
increased rates of high-quality, long-term investments. The slight increase in
the actual return on plan assets during 1999 over the assumed return of 8.5
percent was primarily the result of favorable returns on equity investments.
Goodwill, which represents the excess of cost over the fair value of net assets
acquired in purchase business combinations, decreased $83.6 million in 1999.
Intangible assets, which represent items such as trademarks and patents,
decreased $16.8 million in 1999. These decreases were due primarily to
amortization expense of $48.3 million and foreign currency translation
adjustments, related primarily to the devaluation of the Brazilian real, of
$63.7 million. These decreases were
Committed to being America's Paint Company
14
<PAGE> 10
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
partially offset by increases resulting from 1999 acquisitions. The increase in
other assets of $14.0 million was primarily due to the capitalization of costs
incurred related to designing, developing, obtaining and implementing internal
use software in accordance with Statement of Position 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use," net of
amortization expense of $2.1 million.
Net property, plant and equipment decreased $7.2 million to $711.7 million at
December 31, 1999. The decrease relates primarily to depreciation expense of
$105.4 million, provisions for disposition or retirement of certain assets and
foreign currency translation adjustments, primarily related to the devaluation
of the Brazilian real, partially offset by capital expenditures of $134.2
million. Capital expenditures in 1999 represented primarily the costs of
upgrading and installing information systems equipment, the capacity expansion
or upgrade of manufacturing and distribution centers, and costs related to new
paint stores. Capital expenditures during 1999 in the Paint Stores Segment were
primarily attributable to new stores and store relocations along with normal
replacement and upgrading of store equipment. Capital expenditures in the
Consumer Segment during 1999 were primarily related to capacity expansions and
efficiency improvements in production facilities, technical center expansion,
and hardware associated with the implementation of a supply chain management
system to increase responsiveness to customer demand. Capital expenditures
during 1999 in the Automotive Finishes and International Coatings Segments
primarily related to capacity expansions and equipment upgrades in two
production facilities. The Automotive Finishes Segment also had capital
expenditures related to a new state-of-the-art color lab. In 2000, the Company
expects that its most significant capital expenditures will relate to the
construction or acquisition of a new technical lab facility which was originally
planned for 1999, various capacity and productivity improvement projects at
manufacturing facilities, continued new store openings, and new or upgraded
information systems equipment. The Company does not anticipate the need for any
specific long-term external financing to support these capital programs.
Long-term debt decreased $105.9 million during the year to $624.4 million at
December 31, 1999, resulting primarily from principal payments and current
maturities as previously discussed. The Company expects to remain in a borrowing
position throughout 2000.
The increase in the Company's long-term postretirement benefit liability
occurred due to the excess of the net postretirement benefit expense over the
costs for benefit claims incurred. The current portion of the accrued
postretirement liability, amounting to $11.6 million at December 31, 1999, is
included in Other accruals. The assumed discount rate used to calculate the
actuarial present value of the postretirement benefit obligations was increased
from 6.75 percent to 7.25 percent at December 31, 1999 due to increased rates of
high-quality long-term investments. The effect of this change on the net post-
retirement benefit expense for 2000 will be minimal as the cumulative
unrecognized net loss is below the threshold for required amortization. See Note
6, on pages 30 to 32 of this report, for further information on the Company's
postretirement benefit obligations.
Other long-term liabilities include accruals for environmental-related
liabilities and other non-current items. The increase of $30.2 million in other
long-term liabilities during 1999 primarily related to additional tax
liabilities resulting from timing items partially offset by a decrease in the
accrual for environmental-related liabilities. See Note 9, on page 33 of this
report, for additional information concerning the Company's Other long-term
liabilities.
The Company and certain other companies are defendants in a number of lawsuits,
including two purported class actions and an
15
<PAGE> 11
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
action brought by the State of Rhode Island, arising from the manufacture and
sale of lead pigments and lead paints. The plaintiffs are seeking recovery based
upon various legal theories, including negligence, strict liability, breach of
warranty, negligent misrepresentations and omissions, fraudulent
misrepresentations and omissions, concert of action, civil conspiracy,
violations of unfair trade practices and consumer protection laws, enterprise
liability, market share liability, nuisance, unjust enrichment and other
theories. The lawsuits seek various damages and relief, including personal
injury and property damage, costs involving the detection and abatement of lead
paint from buildings, costs associated with a public education campaign, medical
monitoring costs and others. The Company believes that such lawsuits are without
merit and is vigorously defending them. It is also possible that additional
lawsuits may be filed against the Company based upon similar or different legal
theories and seeking similar or different types of damages and relief.
Litigation is inherently subject to many uncertainties. Adverse rulings or
determinations of liability, as well as changes in laws, could affect the lead
pigment and lead paint lawsuits against the Company and encourage an increase in
the number and nature of future claims and proceedings. Due to the uncertainties
involved, management is unable to predict the outcome of such lawsuits or the
number or nature of possible future claims and proceedings. In addition,
management cannot determine the scope or amount of the potential costs and
liabilities related to such lawsuits, claims or proceedings. However, based upon
the outcome of previous similar lawsuits, management does not currently believe
that the costs or 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 results of operations, liquidity 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 potential liability on the Company for past
operations which were conducted utilizing practices and procedures that were
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 promote continued compliance.
Capital expenditures and other expenses related to ongoing environmental
compliance measures are included in the normal operating expenses of conducting
business. The Company's capital expenditures and other expenses related to
ongoing environmental compliance measures were not material to the Company's
financial condition, results of operations or liquidity during 1999, and the
Company does not expect such capital expenditures and other expenses to be
material to the Company's financial condition, results of operations or
liquidity in the future.
The Company is involved with environmental compliance, investigation and
remediation activities at some of its current and former sites (including former
sites which were previously owned and/or operated by businesses acquired by the
Company). The Company, together with other parties, has also been designated a
potentially responsible party under federal and state environmental protection
laws for the investigation and remediation of environmental contamination and
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.
Committed to being America's Paint Company
16
<PAGE> 12
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company accrues for environmental-related activities relating to its past
operations and third-party sites, including Superfund sites, for which costs or
minimum costs can be reasonably estimated. These estimated costs are determined
based on currently available facts regarding each site. The Company continuously
assesses its potential liability for investigation and remediation-related
activities and adjusts its environmental-related accruals as information becomes
available upon which more accurate costs can be reasonably estimated and as
additional accounting guidelines are issued which require changing the estimated
costs or the procedure utilized in estimating such costs. Actual costs incurred
may vary from these estimates due to the inherent uncertainties involved
including, among others, the number and financial condition of parties involved
with respect to any given site, the volumetric contribution which may be
attributed to the Company relative to that attributed to other parties, the
nature and magnitude of the wastes involved, the various technologies that can
be used for remediation and the determination of acceptable remediation with
respect to a particular site.
Pursuant to a Consent Decree entered into with the United States of America, on
behalf of the Environmental Protection Agency, filed in the United States
District Court for the Northern District of Illinois, the Company has agreed, in
part, to (i) conduct an investigation at its southeast Chicago, Illinois
facility to determine the nature, extent and potential impact, if any, of
environmental contamination at the facility and (ii) implement remedial action
measures, if required, to address any environmental contamination identified
pursuant to the investigation. The Company is currently conducting its
investigation of the site.
The Company entered into a settlement agreement with PMC, Inc. settling a
lawsuit brought by PMC regarding the Company's former manufacturing facility in
Chicago, Illinois which was sold to PMC in 1985. Pursuant to the terms of the
settlement agreement, the Company agreed, in part, to investigate and remediate,
as necessary, certain soil and/or groundwater contamination caused by historical
disposal, discharges, releases or events occurring at the facility. In February,
1999, the People of the State of Illinois filed an amended complaint in a state
court action against PMC joining the Company and alleging, in part, that the
Company has caused certain soil and underground contamination at the facility
and seeking, in part, that the Company investigate and remediate, as necessary,
any such soil and groundwater contamination. The Company has entered into
discussions with the State of Illinois to address these allegations.
With respect to the Company's southeast Chicago, Illinois facility and the PMC
facility, the Company has evaluated its potential liability and, based upon its
preliminary evaluation, has accrued appropriate amounts. 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 material impact on net
income for the annual or interim period during which the additional costs are
accrued.
The Company does not believe that any potential liability ultimately attributed
to the Company for its environmental-related matters will 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 9, on page
33 of this report, for discussion of the environmental-related accruals included
in the Company's consolidated balance sheets.
Shareholders' equity decreased $17.4 million during 1999. The decrease was due
primarily to the purchase of 5,925,000 shares of Company stock for treasury at a
cost of $145.8 million. The Company acquires its own stock for general corporate
purposes and, depending on its future cash position and market conditions, it
may acquire additional shares in the future. On February 2, 2000,
17
<PAGE> 13
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
the Board of Directors authorized the Company to purchase, in the aggregate,
20,000,000 shares of common stock and rescinded the prior share purchase
authorization. Also contributing to the decrease in Shareholders' equity are
other comprehensive losses related to foreign currency translations of $100.7
million and cash dividends paid of $81.0 million. These decreases were partially
offset by current year net income of $303.9 million.
Comprehensive income is comprised of net income and the components of other
comprehensive income or loss, which for the Company include foreign currency
translation and minimum pension liability adjustments. The 1999 increase of
$100.7 million in Cumulative other comprehensive loss occurred primarily due to
the devaluation of the Brazilian real. In January 1999, the Brazilian Central
Bank eliminated its governmental policy of supporting and tightly managing the
trading band of the real and allowed it to trade freely in the open market
against other currencies. Shortly after this announcement, the Brazilian real
weakened significantly in trading with the U.S. dollar and other foreign
currencies and only partially recovered by the end of 1999. As a result of the
floating exchange rate of the Brazilian real, the Company may experience
increased losses in other comprehensive losses from foreign currency translation
of its Brazilian operations in addition to the weakening of any other foreign
currencies in countries where we have operations. Based upon the estimated
economic outlook and relative stability of currencies in countries where we have
operations, the Company does not expect any devaluation or other currency
translation losses to have a material adverse effect on operating results,
financial condition or cash flows for the Company as a whole. See Note 16, on
page 37 of this report.
The Company is exposed to market risk through various financial instruments,
including fixed rate debt instruments. The Company does not believe that any
potential loss related to these financial instruments will have a material
adverse effect on the Company's financial condition or results of operations.
Beginning in the fourth quarter of 1997, the Company commenced multi-year
information technology projects to enhance portions of the Company's computer
systems. The projects will provide efficiencies and further integration of
operations primarily within the Consumer Segment. The Company expects that full
implementation of the projects will involve significant capital expenditures
over the next several years. Costs and expenses related to these projects,
including amortization costs, charged to operations in 1999 were not material.
Costs and expenses to be charged to operations in the future are not expected to
have a material adverse effect on the Company's annual results of operations.
Expenditures associated with these projects slightly impacted cash flows from
operations in 1998 and 1999.
At a meeting held on February 2, 2000, the Board of Directors increased the
quarterly dividend to $.135 per share. This represents the twenty-first
consecutive increase and a compounded annual rate of increase of 25.4 percent
since the dividend was reinstated in the fourth quarter of 1979. The 1999 annual
dividend of $.48 per share marked the twentieth consecutive year that the
dividend approximated our payout ratio target of 30.0 percent of the prior
year's earnings.
YEAR 2000 READINESS
The Company completed its company-wide project to prepare its business for the
change in date from the year 1999 to 2000. The Company has not experienced any
business interruptions related to the Year 2000 issue. In addition, the Company
is not aware of any significant Year 2000 business interruptions experienced by
any of its key customers, suppliers, service providers or financial
institutions. The total cost of the project was approximately $28.1 million.
This cost included costs of internal employees and third-party consultants
involved in the project and the costs of software
Committed to being America's Paint Company
18
<PAGE> 14
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
and hardware. All costs and expenses incurred to address the Year 2000 issue
were charged against income on a current basis. These costs and expenses did not
have a material adverse effect on the Company's operating results, financial
condition or cash flows.
RESULTS OF OPERATIONS - 1999 VS 1998
Consolidated net sales increased 1.4 percent to $5.00 billion in 1999, primarily
due to increased sales in the Paint Stores Segment which were partially offset
by decreased sales in each of the other reportable segments.
Net external sales in the Paint Stores Segment during 1999 increased 6.3 percent
primarily due to higher volume sales of paint products, combined with sales
gains in each of the remaining major product lines (wallcoverings,
floorcoverings, spray equipment and associated products). Comparable-store sales
increased 4.0 percent in 1999. The Company launched its web site, "www.sherwin-
williams.com" in 1999. The web site currently provides Paint Stores Segment
do-it-yourself customers, painting contractors, and others with product
information and store locations along with do-it-yourself instruction. The
Company expects the web site's increasing customer exposure to accelerate the
Paint Stores Segment's sales growth. This Segment plans to increase the number
of paint store openings and begin conducting business transactions on the
Internet in 2000. Increasing customer exposure through the web site and the
number of store locations through which to purchase Sherwin-Williams(R) paint is
expected to help continue the Paint Stores Segment's sales growth.
External sales in the Consumer Segment decreased 4.5 percent during 1999
primarily due to the bankruptcy and subsequent liquidation of a large retail
customer, the anticipated sales losses due to the closing of a Cleaning
Solutions plant in the fourth quarter of 1998, and slow do-it-yourself coatings
sales at certain customers. The Company expects that sales from new product
introductions, expansion of its presence at certain retailers, and new customer
accounts will result in sales growth for this Segment in 2000.
External sales in the Automotive Finishes Segment declined 0.6 percent. The
sales decrease in this Segment was primarily due to the effects of foreign
currency translation losses and, to a lesser extent, a soft domestic automotive
refinish market. The Company expects that sales from new product and color
introductions and an increase in the number of automotive branches will result
in a sales increase for this Segment in 2000.
External sales in the International Coatings Segment declined 14.0 percent.
Sales declines in the International Coatings Segment resulted primarily from the
first quarter 1999 devaluation of the Brazilian real and continuing poor market
conditions in South America. Gallons sold and sales in local currencies were up
in most market areas. The Company expects to realize sales improvements in the
International Coatings Segment in 2000 as economic conditions improve in the
South American countries in which we operate.
Consolidated gross profit as a percent of sales increased to 44.9 percent from
43.2 percent in 1998. The Paint Stores Segment's 1999 gross profit margin was
slightly higher than last year primarily due to a favorable product sales mix.
Gross profit margin in the Consumer Segment was higher than last year as
increased factory efficiencies and cost reductions associated with closing four
manufacturing plants early in 1999 took effect. Gross profit margin in the
Automotive Finishes Segment increased slightly due to product sales mix. Gross
profit margin in the International Coatings Segment increased primarily due to
increased factory efficiencies and cost reduction efforts.
Consolidated selling, general and administrative (SG&A) expenses as a percent of
sales increased to 33.4 percent from 32.4 percent in 1998 resulting primarily
from increased expenses related to new store openings, bad debts, certain
employee benefits, and information systems, partially offset by decreased SG&A
expenses in the Consumer
19
<PAGE> 15
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Segment primarily resulting from the consolidation of sales and marketing
functions of four separate operating divisions into one. The Paint Stores
Segment's SG&A ratio was slightly unfavorable compared to last year primarily
due to increased expenses related to new store openings. A slightly unfavorable
SG&A ratio in the Consumer Segment for 1999 as compared to last year was
primarily a result of decreased sales and increased bad debt expense, partially
offset by the consolidation of administrative functions. Automotive Finishes
Segment's SG&A ratio was slightly unfavorable compared to last year primarily
due to increases in bad debt expense and reduced sales volume. International
Coatings Segment's SG&A ratio was unfavorable compared to last year primarily
due to reduced sales.
Consolidated operating profits increased 11.4 percent in 1999. Operating profits
of the Paint Stores Segment increased 8.6 percent, primarily due to increased
sales volume and gross profit margins. The Consumer Segment's operating profits
were 23.7 percent higher than last year primarily due to decreased SG&A expenses
and increased gross profit margins, partially offset by lower sales volume.
Operating profits of the Automotive Finishes Segment increased 2.0 percent
primarily due to increased gross profit margins, partially offset by slightly
lower sales and increased SG&A expenses. Operating profits of the International
Coatings Segment increased 40.3 percent primarily due to decreased foreign
currency transaction losses associated with lower U.S. dollar denominated debt
and improved gross profit margins, partially offset by decreased sales and
increased SG&A expenses. There are certain risks in transacting business
internationally, such as changes in applicable laws and regulatory requirements,
political instability, general economic and labor conditions, fluctuations in
currency exchange rates and expatriation restrictions, which could adversely
affect the financial condition or results of operation of the Company's
consolidated foreign subsidiaries. Corporate expenses increased in 1999
primarily due to the increase in certain unallocated employee benefit and
information systems expenses, partially offset by decreased interest expense.
Additionally, the 1998 Corporate expenses included a net gain related to the
sale of the Company's joint venture interest in American Standox, Inc. Refer to
pages 6 through 13 of this report for additional reportable segment information.
Interest expense decreased in 1999 primarily due to lower average outstanding
debt balances. As a result, interest coverage increased to 9.0 times from 7.1
times in 1998. Fixed charge coverage, which is calculated using interest and
rent expense, increased to 3.7 times from 3.3 times in 1998.
Interest and net investment income decreased in 1999 primarily due to lower
average yields, partially off-set by slightly higher average cash and short-term
investment balances. See Note 4, on page 30 of this report, for further detail
on Other expense - net. As shown in Note 13, on page 36 of this report, the
effective income tax rate in 1999 remained unchanged from 1998 at 38 percent.
Net income increased 11.4 percent in 1999 to $303.9 million from $272.9 million
in 1998. Net income per share - diluted increased 14.6 percent to $1.80 from
$1.57. See Note 15, on page 37 of this report for detailed computations.
RESULTS OF OPERATIONS - 1998 VS 1997
Consolidated net sales increased 1.1 percent over 1997 to $4.93 billion in 1998,
primarily due to increased Paint Stores Segment sales, partially offset by
decreased sales in the Consumer, Automotive Finishes and International Coatings
Segments.
The Paint Stores Segment's sales during 1998 increased 7.0 percent primarily due
to increased paint gallons sold to both retail and wholesale customers, combined
with sales gains in each of the remaining major product lines. Comparable-store
sales were up 4.9 percent in 1998.
Committed to being America's Paint Company
20
<PAGE> 16
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
External sales in the Consumer Segment decreased 9.0 percent during 1998
primarily due to weak do-it-yourself coatings sales and the continuing effects
of the 1997 loss of certain coatings, aerosol and detergent business. Reduced
gallons sold to national accounts and home center customers, due to the weak
do-it-yourself sales, accounted for a significant portion of the sales decline
in this Segment. Reduced sales to some customers in the cleaning solutions
business affected Consumer Segment sales of related products. External sales in
the Automotive Finishes and International Coatings Segments declined 0.5 and 0.6
percent, respectively. Sales declines in the Automotive Finishes Segment were
the result of strong competitive pressures. Weak sales in the International
Coatings Segment resulted from poor market conditions in South America.
Consolidated gross profit as a percent of sales increased to 43.2 percent in
1998 from 43.0 percent in 1997. The Paint Stores Segment's 1998 gross profit
margin was higher than 1997 primarily due to a favorable product mix. Gross
profit margin in the Consumer Segment was lower than 1997 due to lower fixed and
overhead cost absorption resulting from decreased sales volume and provisions
for plant closings, as described in Note 5 on page 30 of this report, partially
offset by the favorable effects of replacing lower margin business with more
profitable sales. Gross profit margin in the Automotive Finishes Segment
increased due to product sales mix. Gross profit margin in the International
Coatings Segment was essentially flat versus 1997.
Consolidated SG&A expenses as a percent of sales increased to 32.4 percent in
1998 from 32.2 percent in 1997 primarily as a result of increased expenses
related to Year 2000 compliance efforts. SG&A expenses as a percent of sales for
the Paint Stores and Automotive Finishes Segments were slightly unfavorable
versus last year primarily due to Year 2000 compliance efforts. A slightly
favorable SG&A ratio in the Consumer and International Coatings Segments for
1998 compared to 1997 was primarily a result of reduced promotional expenses.
Consolidated operating profits increased 3.0 percent in 1998. Operating profits
of the Paint Stores Segment increased 10.2 percent, primarily due to increased
sales volume and gross profit, partially offset by higher SG&A expenses. The
Consumer Segment's operating profits were 24.9 percent lower in 1998 versus 1997
primarily due to decreased sales volume and gross profit margins, partially
offset by lower SG&A expenses. Operating profits of the Automotive Finishes
Segment increased 1.5 percent primarily due to increased gross profit margins,
partially offset by slightly lower sales and increased SG&A expenses. Operating
profits of the International Coatings Segment decreased 32.0 percent primarily
due to increased foreign currency transaction losses, decreased sales and
increased SG&A expenses. Corporate and other expenses decreased in 1998 compared
to 1997 primarily due to decreased interest expense and net losses relating to
translation of certain foreign investments which are not directly associated
with any individual operating segment and the leasing of office space which was
vacant in 1997.
Interest expense decreased in 1998 primarily due to lower average outstanding
debt balances. As a result, interest coverage increased to 7.1 times from 6.3
times in 1997. Fixed charge coverage, which is calculated using interest and
rent expense, increased to 3.3 times from 3.2 times in 1997.
Interest and net investment income decreased in 1998 from 1997 primarily due to
lower average cash and short-term investment balances and lower average yields.
See Note 4, on page 30 of this report, for further detail on Other expense -
net. As shown in Note 13, on page 36 of this report, the effective income tax
rate in 1998 decreased to 38 percent, from 39 percent in 1997, due to the
effects of changes in tax credits from investment vehicles and other - net
items.
Net income increased 4.7 percent in 1998 to $272.9 million from $260.6 million
in 1997. Net income per share - diluted increased 4.7 percent to $1.57 from
$1.50. See Note 15, on page 37 of this report for detailed computations.
21
<PAGE> 17
- --------------------------------------------------------------------------------
STATEMENTS OF CONSOLIDATED INCOME
- --------------------------------------------------------------------------------
STATEMENTS OF CONSOLIDATED INCOME
(Thousands of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES ............................................ $5,003,837 $4,934,430 $4,881,103
COST OF GOODS SOLD ................................... 2,755,323 2,804,459 2,784,392
GROSS PROFIT ......................................... 2,248,514 2,129,971 2,096,711
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ......... 1,673,449 1,598,333 1,573,510
OPERATING INCOME ..................................... 575,065 531,638 523,201
INTEREST EXPENSE ..................................... 61,168 71,971 80,837
INTEREST AND NET INVESTMENT INCOME ................... (5,761) (6,482) (8,278)
OTHER EXPENSE - NET .................................. 29,540 26,046 23,365
---------- ---------- ----------
INCOME BEFORE INCOME TAXES ........................... 490,118 440,103 427,277
INCOME TAXES ......................................... 186,258 167,239 166,663
---------- ---------- ----------
NET INCOME ........................................... $ 303,860 $ 272,864 $ 260,614
========== ========== ==========
NET INCOME PER SHARE:
BASIC .............................................. $ 1.81 $ 1.58 $ 1.51
========== ========== ==========
DILUTED ............................................ $ 1.80 $ 1.57 $ 1.50
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
Committed to being America's Paint Company
24
<PAGE> 18
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS ......................................... $ 18,623 $ 19,133 $ 3,530
ACCOUNTS RECEIVABLE, LESS ALLOWANCE ............................... 606,046 604,516 546,314
INVENTORIES:
FINISHED GOODS .................................................. 591,912 568,328 587,680
WORK IN PROCESS AND RAW MATERIALS ............................... 111,476 114,195 133,988
----------- ----------- -----------
703,388 682,523 721,668
DEFERRED INCOME TAXES ............................................. 128,177 117,720 124,669
OTHER CURRENT ASSETS .............................................. 141,143 123,398 136,072
----------- ----------- -----------
TOTAL CURRENT ASSETS ............................................ 1,597,377 1,547,290 1,532,253
GOODWILL ............................................................ 1,039,555 1,123,128 1,161,129
INTANGIBLE ASSETS ................................................... 274,924 291,715 310,221
DEFERRED PENSION ASSETS ............................................. 334,094 304,006 276,086
OTHER ASSETS ........................................................ 94,464 80,466 63,854
PROPERTY, PLANT AND EQUIPMENT:
LAND .............................................................. 62,517 67,567 64,367
BUILDINGS ......................................................... 431,802 422,902 383,485
MACHINERY AND EQUIPMENT ........................................... 913,346 906,501 841,343
CONSTRUCTION IN PROGRESS .......................................... 40,262 43,274 68,649
----------- ----------- -----------
1,447,927 1,440,244 1,357,844
LESS ALLOWANCES FOR DEPRECIATION .................................. 736,251 721,387 665,586
----------- ----------- -----------
711,676 718,857 692,258
----------- ----------- -----------
TOTAL ASSETS ........................................................ $ 4,052,090 $ 4,065,462 $ 4,035,801
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS ............................................. $ 106,913
ACCOUNTS PAYABLE .................................................. $ 458,919 $ 408,144 424,184
COMPENSATION AND TAXES WITHHELD ................................... 140,934 125,698 118,709
CURRENT PORTION OF LONG-TERM DEBT ................................. 122,270 118,178 53,926
OTHER ACCRUALS .................................................... 382,343 383,149 367,392
ACCRUED TAXES ..................................................... 85,396 76,804 44,539
----------- ----------- -----------
TOTAL CURRENT LIABILITIES ....................................... 1,189,862 1,111,973 1,115,663
LONG-TERM DEBT ...................................................... 624,365 730,283 843,919
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS ......................... 206,591 204,763 199,839
OTHER LONG-TERM LIABILITIES ......................................... 332,740 302,503 284,200
SHAREHOLDERS' EQUITY:
COMMON STOCK - $1.00 PAR VALUE: 165,663,601, 171,033,231,
AND 172,907,418 SHARES OUTSTANDING AT DECEMBER 31, 1999,
1998 AND 1997, RESPECTIVELY ..................................... 206,309 205,701 204,538
OTHER CAPITAL ..................................................... 150,887 143,686 119,695
RETAINED EARNINGS ................................................. 2,020,851 1,797,945 1,602,882
TREASURY STOCK, AT COST ........................................... (533,891) (386,465) (301,418)
CUMULATIVE OTHER COMPREHENSIVE LOSS ............................... (145,624) (44,927) (33,517)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY ...................................... 1,698,532 1,715,940 1,592,180
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......................... $ 4,052,090 $ 4,065,462 $ 4,035,801
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 19
- --------------------------------------------------------------------------------
STATEMENTS OF CONSOLIDATED CASH FLOWS
- --------------------------------------------------------------------------------
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
NET INCOME ............................................... $ 303,860 $ 272,864 $ 260,614
ADJUSTMENTS TO RECONCILE NET INCOME TO NET OPERATING CASH:
DEPRECIATION ........................................... 105,350 97,821 90,202
DEFERRED INCOME TAXES .................................. 21,170 30,557 59,247
PROVISIONS FOR DISPOSITION OF OPERATIONS ............... 7,640 23,557 4,152
PROVISIONS FOR ENVIRONMENTAL-RELATED MATTERS ........... 16,334 4,295 7,607
AMORTIZATION OF INTANGIBLE ASSETS ...................... 50,394 50,067 49,044
DEFINED BENEFIT PENSION PLANS NET CREDIT ............... (28,083) (30,851) (20,173)
NET INCREASE IN POSTRETIREMENT LIABILITY ............... 3,428 5,424 5,452
FOREIGN CURRENCY TRANSACTION LOSSES .................... 3,333 11,773 15,580
OTHER .................................................. 13,594 554 397
NET CHANGE IN WORKING CAPITAL ACCOUNTS:
INCREASE IN ACCOUNTS RECEIVABLE ........................ (28,212) (65,679) (30,405)
(INCREASE) DECREASE IN INVENTORIES ..................... (24,420) 35,130 (34,745)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE ................ 60,487 (12,272) 11,611
INCREASE (DECREASE) IN ACCRUED TAXES ................... 6,019 32,449 (24,016)
OTHER .................................................. 3,650 35,175 6,493
PROCEEDS OF INSURANCE SETTLEMENT ......................... 53,900
INCREASE IN LONG-TERM ACCRUED TAXES ...................... 15,715 8,211 12,174
COSTS INCURRED FOR ENVIRONMENTAL-RELATED MATTERS ......... (15,808) (14,275) (18,052)
COSTS INCURRED FOR DISPOSITION OF OPERATIONS ............. (15,529) (5,322) (12,422)
OTHER .................................................... (13,808) (10,721) (4,354)
----------- ----------- -----------
NET OPERATING CASH ..................................... 485,114 468,757 432,306
INVESTING ACTIVITIES
CAPITAL EXPENDITURES ..................................... (134,171) (146,129) (163,955)
ACQUISITIONS OF BUSINESSES ............................... (15,427) (884,525)
INCREASE IN OTHER INVESTMENTS ............................ (23,435) (19,281) (5,633)
OTHER .................................................... 9,111 (6,478) 849
----------- ----------- -----------
NET INVESTING CASH ..................................... (163,922) (158,932) (1,053,264)
FINANCING ACTIVITIES
NET DECREASE IN SHORT-TERM BORROWINGS .................... (106,913) (61,692)
INCREASE IN LONG-TERM DEBT ............................... 4,559 750,653
PAYMENTS OF LONG-TERM DEBT ............................... (102,046) (54,673) (2,194)
PAYMENTS OF CASH DIVIDENDS ............................... (80,954) (77,801) (69,027)
PROCEEDS FROM STOCK OPTIONS EXERCISED .................... 7,107 16,818 14,760
TREASURY STOCK ACQUIRED .................................. (147,426) (85,047) (5,464)
OTHER .................................................... 4,411 8,835 (4,428)
----------- ----------- -----------
NET FINANCING CASH ..................................... (318,908) (294,222) 622,608
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................. (2,794)
-----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ..... (510) 15,603 1,650
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ........... 19,133 3,530 1,880
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................. $ 18,623 $ 19,133 $ 3,530
=========== =========== ===========
TAXES PAID ON INCOME ..................................... $ 153,890 $ 85,746 $ 115,801
INTEREST PAID ON DEBT .................................... 61,868 71,970 59,572
</TABLE>
See notes to consolidated financial statements.
Committed to being America's Paint Company
26
<PAGE> 20
- --------------------------------------------------------------------------------
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Thousands of Dollars Except Per Share Data) CUMULATIVE
OTHER
COMMON OTHER RETAINED TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS STOCK LOSS TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 ................. $ 101,650 $ 203,223 $ 1,411,295 $ (295,954) $ (18,982) $ 1,401,232
COMPREHENSIVE INCOME:
NET INCOME ................................ 260,614 260,614
OTHER COMPREHENSIVE LOSS .................. (14,535) (14,535)
-----------
COMPREHENSIVE INCOME ..................... 246,079
TWO-FOR-ONE STOCK SPLIT .................... 101,876 (101,876)
STOCK ISSUED (TENDERED)
FOR EXERCISE OF OPTIONS .................. 1,012 20,793 (5,464) 16,341
RESTRICTED STOCK GRANTS
(NET ACTIVITY) ........................... 528 528
STOCK ACQUIRED FOR TRUST ................... (2,973) (2,973)
CASH DIVIDENDS -- $.40 PER SHARE ........... (69,027) (69,027)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997 ............... 204,538 119,695 1,602,882 (301,418) (33,517) 1,592,180
COMPREHENSIVE INCOME:
NET INCOME ................................ 272,864 272,864
OTHER COMPREHENSIVE LOSS .................. (11,410) (11,410)
-----------
COMPREHENSIVE INCOME ..................... 261,454
TREASURY STOCK ACQUIRED .................... (83,791) (83,791)
STOCK ISSUED (TENDERED)
FOR EXERCISE OF OPTIONS ................... 1,201 23,103 (1,256) 23,048
RESTRICTED STOCK GRANTS
(NET ACTIVITY) ........................... (38) 2,128 2,090
STOCK ACQUIRED FOR TRUST ................... (1,240) (1,240)
CASH DIVIDENDS -- $.45 PER SHARE ........... (77,801) (77,801)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998 ............... 205,701 143,686 1,797,945 (386,465) (44,927) 1,715,940
COMPREHENSIVE INCOME:
NET INCOME ................................ 303,860 303,860
OTHER COMPREHENSIVE LOSS .................. (100,697) (100,697)
-----------
COMPREHENSIVE INCOME ..................... 203,163
TREASURY STOCK ACQUIRED .................... (145,806) (145,806)
STOCK ISSUED (TENDERED)
FOR EXERCISE OF OPTIONS ................... 463 8,597 (252) 8,808
STOCK TENDERED IN CONNECTION
WITH RESTRICTED STOCK GRANTS .............. (1,368) (1,368)
RESTRICTED STOCK GRANTS
(NET ACTIVITY) ........................... 145 (69) 76
STOCK ACQUIRED FOR TRUST ................... (1,327) (1,327)
CASH DIVIDENDS -- $.48 PER SHARE ........... (80,954) (80,954)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1999 ............... $ 206,309 $ 150,887 $ 2,020,851 $ (533,891) $ (145,624) $ 1,698,532
=========== =========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 21
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
CONSOLIDATION. The consolidated financial statements include all controlled
subsidiaries. Inter-company accounts and transactions have been eliminated.
REPORTABLE SEGMENTS. Reportable segment information appears on pages 6 through
13 of this report.
FOREIGN CURRENCY TRANSLATION. All consolidated non-highly inflationary 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 included in
Cumulative other comprehensive loss, a component of Shareholders' equity. All
consolidated highly inflationary foreign operations use the Company's currency
as the functional currency.
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 and South America.
USE OF ESTIMATES. The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated 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-related activities for
which commitments or clean-up plans have been developed and for which costs can
be reasonably estimated. All accrued amounts are recorded on an undiscounted
basis. Accrued environmental remediation-related expenses include direct costs
of remediation and indirect costs related to the remediation effort, such as
compensation and benefits for employees directly involved in the remediation
activities and fees paid to outside engineering, consulting and law firms. See
Notes 4 and 9 for discussions of the environmental remediation-related expense
and accruals included in the consolidated financial statements.
STOCK-BASED COMPENSATION. The Company uses the intrinsic value method of
accounting for stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25. See Note 12 for pro forma disclosure of net income and
earnings per share under the fair value method of accounting for stock-based
compensation as prescribed by SFAS No. 123, "Accounting for Stock-Based
Compensation."
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:
Buildings .......................... 2% - 6-2/3%
Machinery and equipment ............ 4% - 20%
Furniture and fixtures ............. 5% - 33-1/3%
Automobiles and trucks ............. 10% - 33-1/3%
INVESTMENT IN LIFE INSURANCE. The Company invests in broad-based corporate owned
life insurance. The cash surrender values of the policies, net of policy loans,
are included in Other assets. The net expense associated with such investment is
included in Other expense-net. Such expense is immaterial to Income before
income taxes.
GOODWILL. Goodwill represents the cost in excess of fair value of net assets
acquired in business combinations accounted for by the purchase method and is
amortized on a straight-line basis over the expected period of benefit ranging
from 10 to 40 years. The Company evaluates the recoverability of goodwill and
related estimated remaining lives at each balance sheet date and would record an
impairment or change in useful life whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable or the useful life has
changed in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of." Accumulated
amortization of goodwill was $107,365, $78,983 and $48,596 at December 31, 1999,
1998 and 1997, respectively.
INTANGIBLES. Intangible assets include non-compete covenants, operating rights,
patents and trademarks. These assets are amortized on a straight-line basis over
the expected period of benefit ranging from 1 to 40 years. Accumulated
amortization of intangible assets was $119,125, $102,359 and $85,242 at December
31, 1999, 1998 and 1997, respectively. The Company reviews intangible assets and
related estimated remaining lives at each balance sheet date and would record an
impairment or change in useful life whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable or the useful life has
changed in accordance with SFAS No. 121.
TECHNICAL EXPENDITURES. Total technical expenditures include research and
development costs, quality control, product formulation expenditures and other
similar items. Research and development costs included in technical expenditures
were $27,200, $23,955 and $24,748 for 1999, 1998 and l997, respectively.
Committed to being America's Paint Company
28
<PAGE> 22
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ADVERTISING EXPENSES. The cost of advertising is expensed as incurred. The
Company incurred $265,411, $282,817 and $295,942 in advertising costs during
1999, 1998 and 1997, respectively.
EARNINGS PER SHARE. The Company adopted SFAS No. 128, "Earnings Per Share,"
during the quarter ended December 31, 1997. Accordingly, basic net income per
share is computed based on the weighted-average number of shares outstanding
during the year. Diluted net income per share is computed based on the
weighted-average number of shares outstanding plus all potentially dilutive
securities outstanding during the year. See Note 15 for computation.
LETTERS OF CREDIT. The Company occasionally enters into standby letter of credit
agreements to guarantee various operating activities. These agreements, which
expire in 2000, provide credit availability to the various beneficiaries if
certain contractual events occur. Amounts outstanding under these agreements
totaled $14,177, $15,042 and $18,844 at December 31, 1999, 1998 and 1997,
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, classified as available for sale securities, in a fund to provide
for payment of health care benefits of certain qualified employees. The
estimated fair values of these securities, included in Other assets, of
$21,093, $25,523 and $28,751 at December 31, 1999, 1998 and 1997,
respectively, are based on quoted market prices.
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,
---------------------------------------------------------------
1999 1998 1997
------------------- ------------------------------------------
CARRYING FAIR Carrying Fair Carrying Fair
AMOUNT VALUE Amount Value Amount Value
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PUBLICLY TRADED
DEBT ............. $726,017 $698,031 $764,806 $825,989 $764,725 $826,400
NON-TRADED
DEBT ............. 20,536 18,969 83,559 80,929 133,012 122,354
</TABLE>
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 interest rate swap agreements are based on
pricing models or formulas using current assumptions for comparable instruments.
The interest rate swap agreements, shown below, did not have carrying values for
either period presented. There were no interest rate swaps outstanding at
December 31, 1999.
December 31,
---------------------
1998 1997
-------- --------
Fair value ..................... $ 17 $ 443
Notional amount ................ 50,000 100,000
Number of agreements outstanding 1 2
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
$15,860, $20,034 and $17,587 at December 31, 1999, 1998 and 1997,
respectively, represent the Company's best estimate of current economic values
of these investments.
RECLASSIFICATION. Certain amounts in the 1998 and 1997 financial statements have
been reclassified to conform with the 1999 presentation.
NOTE 2 -- ACQUISITION AND MERGER
- --------------------------------------------------------------------------------
Effective January 7, 1997, the Company, through a wholly-owned subsidiary,
acquired all shares outstanding of Thompson Minwax Holding Corp. (Thompson
Minwax). The total amount of funds required to acquire the shares and pay off
certain indebtedness of Thompson Minwax was approximately $830,000. The excess
purchase price over the fair value of the net assets acquired is being amortized
over 40 years using the straight-line method. For financial statement purposes,
the acquisition was accounted for under the purchase method of accounting.
Accordingly, the results of operations of Thompson Minwax since the date of
acquisition are included in the Company's statements of consolidated income.
In addition, during the three-year period ended December 31, 1999, the Company
purchased various automotive and retail paint distributors, coatings
manufacturers, and aerosol and liquid filling businesses.
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 in periods of inflation. The following
presents the effect on inventories, net income and net income per basic share
had the Company used the first-in, first-out (FIFO) and
29
<PAGE> 23
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
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>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
PERCENTAGE OF TOTAL INVENTORIES ON LIFO ... 90% 91% 93%
EXCESS OF FIFO AND AVERAGE COST
OVER LIFO ................................ $ 97,953 $ 96,235 $ 104,637
INCREASE (DECREASE) IN NET INCOME
DUE TO LIFO .............................. (894) 4,685 (3,604)
INCREASE (DECREASE) IN NET INCOME PER BASIC
SHARE DUE TO LIFO ........................ (.01) .03 (.02)
</TABLE>
NOTE 4 -- OTHER EXPENSE - NET
- --------------------------------------------------------------------------------
A summary of significant items included in Other expense - net is as follows:
1999 1998 1997
-------- -------- --------
DIVIDEND AND ROYALTY INCOME ....... $ (4,692) $ (3,069) $ (3,361)
NET EXPENSE OF FINANCING AND
INVESTING ACTIVITIES ............. 7,084 2,542 3,688
PROVISIONS FOR ENVIRONMENTAL
MATTERS - NET (SEE NOTE 9) ....... 15,402 695 107
PROVISIONS FOR DISPOSITION AND
TERMINATION OF OPERATIONS
(SEE NOTE 5) ..................... 3,830 12,290 4,152
FOREIGN CURRENCY TRANSACTION LOSSES 3,333 11,773 15,580
MISCELLANEOUS ..................... 4,583 1,815 3,199
-------- -------- --------
$ 29,540 $ 26,046 $ 23,365
======== ======== ========
The net expense of financing and investing activities represents the net
realized gains from disposing of fixed assets, the net gain or loss associated
with the investment of certain long-term asset funds, the net pre-tax expense
associated with the Company's investment in broad-based corporate owned life
insurance and, in 1998, the net gain related to the sale of the Company's joint
venture interest in American Standox, Inc.
The provisions for environmental matters represent the charge to income
necessary to record the most current estimates of potential costs of
environmental remediation at current, former and third-party sites. The
provisions for 1998 and 1997 were partially offset by settlements with certain
insurance carriers totaling $3,600 and $7,500, respectively.
The provisions for disposition and termination of operations reduce property,
plant and equipment at closed facilities to estimated net realizable value and
adjust previous provisions to current estimates as closure or disposition
occurs. The increase in 1998 is primarily due to provisions for closing four
manufacturing facilities as more fully described in Note 5.
NOTE 5 -- DISPOSITION AND TERMINATION OF OPERATIONS
- --------------------------------------------------------------------------------
The Company is continually re-evaluating its operating facilities with regard to
long-term strategic goals. Upon cessation of operations at facilities that are
not expected to contribute sufficiently to the Company's future plans, a
provision is made to reduce property, plant and equipment to its estimated net
realizable value. The expense is included in Other expense - net. Similarly,
provisions are made, and included in Cost of goods sold, to provide for all
qualified exit costs such as lease cancellation penalties, post-closure rent
expenses, incremental post-closure expenses and the estimated costs of employee
terminations.
The provisions made during 1999 reduced certain assets to their net realizable
value and accrued qualified exit costs for two idle manufacturing facilities and
a leased warehouse. The provisions made during 1998 reduced certain assets to
their net realizable value and accrued qualified exit costs related to four
redundant manufacturing facilities. There were no new provisions made in 1997.
Adjustments are made to prior accruals as information becomes available upon
which more accurate costs can be reasonably estimated.
The remaining accrual at December 31, 1999 primarily consisted of reductions in
property, plant and equipment to estimated net realizable values, post-closure
demolition expenses, and continued lease payments or cancellation penalties
relating to facilities whose operations ceased prior to 1997. The Company is
involved in ongoing environmental-related activities at certain owned facilities
that have been closed and cannot reasonably estimate when such matters will be
concluded to allow for disposition. As sale of the facilities occurs, following
the completion of the environmental-related activities, or at time of demolition
the realized loss from carrying value to net realizable value will be charged to
the accrual. Most demolition expenses and lease cancellation penalties are
expected to be incurred during 2000.
A summary of the financial data related to the closing or sale of the facilities
is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
BEGINNING ACCRUALS-- JANUARY 1 ............. $ 56,097 $ 47,111 $ 60,544
PROVISIONS INCLUDED IN COST OF GOODS SOLD .. 3,810 11,267
PROVISIONS INCLUDED IN OTHER EXPENSE - NET . 278 14,094
PRIOR ACCRUAL ADJUSTMENTS INCLUDED IN
OTHER EXPENSE - NET ....................... 3,552 (1,804) 4,152
-------- -------- --------
TOTAL CHARGES IN OTHER EXPENSE - NET ...... 3,830 12,290 4,152
ACTUAL EXPENDITURES CHARGED TO ACCRUAL ..... (15,529) (5,322) (12,422)
CARRYING VALUE REDUCTIONS CHARGED TO ACCRUAL (13,325) (9,249) (5,163)
-------- -------- --------
ENDING ACCRUALS-- DECEMBER 31 .............. $ 34,883 $ 56,097 $ 47,111
======== ======== ========
NET AFTER-TAX CHARGES TO CURRENT OPERATIONS $ 4,966 $ 15,312 $ 2,699
NET AFTER-TAX CHARGES PER BASIC SHARE ...... $ .03 $ .09 $ .02
</TABLE>
NOTE 6 -- PENSION AND OTHER BENEFITS
- --------------------------------------------------------------------------------
The Company provides pension benefits to substantially all employees through
noncontributory defined benefit or defined contribution plans. In addition,
certain health care and life insurance benefits are provided by company-
sponsored plans for certain active and retired employees. Effective December 31,
1998, the Company adopted SFAS No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits." The disclosures required by SFAS No. 132
supersede previous disclosure requirements without affecting measurement or
recognition criteria. Accordingly, all disclosures for prior periods shown below
have been restated to conform to the disclosure requirements of SFAS No. 132.
Committed to being America's Paint Company
30
<PAGE> 24
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DEFINED BENEFIT PENSION PLANS OTHER POSTRETIREMENT BENEFITS
----------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BENEFIT OBLIGATION:
Balance at beginning of year ................ $ 169,099 $ 175,204 $ 158,876 $ 217,627 $ 206,007 $ 183,179
Service cost ................................ 3,237 2,564 2,570 4,215 3,877 3,720
Interest cost ............................... 11,516 11,942 11,859 14,467 13,909 13,708
Actuarial (gain) loss ....................... (1,106) 1,702 402 966 3,184 15,366
Plan amendments ............................. 2,003 201
Acquisitions ................................ 19,644
Other - net ................................. 181
Benefits paid ............................... (12,295) (24,316) (18,348) (11,589) (9,350) (9,966)
--------- --------- --------- --------- --------- ---------
Balance at end of year ...................... 170,632 169,099 175,204 225,686 217,627 206,007
PLAN ASSETS:
Balance at beginning of year ................ 492,384 446,271 391,865
Actual return on plan assets ................ 44,859 71,188 60,143
Acquisitions ................................ 10,574
Other - net ................................. (1,495) (759) 2,037
Benefits paid ............................... (12,295) (24,316) (18,348)
--------- --------- ---------
Balance at end of year ...................... 523,453 492,384 446,271
EXCESS (DEFICIENT) PLAN ASSETS:
Balance at end of year ...................... 352,821 323,285 271,067 (225,686) (217,627) (206,007)
Unrecognized net asset ...................... (1,279) (2,792) (4,304)
Unrecognized actuarial (gain) loss .......... (20,262) (20,348) 3,195 21,993 20,171 16,784
Unrecognized prior service cost (credit) .... 2,404 2,330 808 (14,498) (17,307) (20,116)
--------- --------- --------- --------- --------- ---------
NET ASSET (LIABILITY) RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEETS ................. $ 333,684 $ 302,475 $ 270,766 $(218,191) $(214,763) $(209,339)
========= ========= ========= ========= ========= =========
NET ASSET (LIABILITY) RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEETS CONSISTS OF:
Prepaid benefit cost ...................... $ 334,094 $ 304,006 $ 276,086
Accrued benefit liability ................. (1,136) $(206,591) $(204,763) $(199,839)
Amount included in current liabilities .... (410) (1,531) (4,612) (11,600) (10,000) (9,500)
Cumulative other comprehensive
loss - net of tax ........................ 428
--------- --------- --------- --------- --------- ---------
$ 333,684 $ 302,475 $ 270,766 $(218,191) $(214,763) $(209,339)
========= ========= ========= ========= ========= =========
WEIGHTED-AVERAGE ASSUMPTIONS AS
OF DECEMBER 31:
Discount rate ............................. 7.25% 6.75% 7.00% 7.25% 6.75% 7.00%
Expected long-term rate of return on assets 8.50% 8.50% 8.50%
Rate of compensation increase ............. 5.00% 5.00% 5.00%
Health care cost trend rate ............... 6.40% 6.70% 7.20%
NET PERIODIC BENEFIT (CREDIT) COST:
Service and interest cost ................... $ 14,753 $ 14,506 $ 14,429 $ 18,682 $ 17,786 $ 17,428
Net amortization and deferral ............... (699) (2,524) (1,008) (2,768) (2,809) (2,689)
Expected return on assets ................... (42,137) (37,531) (33,594)
Settlement gain ............................. (5,302)
--------- --------- --------- --------- --------- ---------
Net periodic benefit (credit) cost .......... $ (28,083) $ (30,851) $ (20,173) $ 15,914 $ 14,977 $ 14,739
========= ========= ========= ========= ========= =========
</TABLE>
Plan assets include 1,938,800 shares of the Company's common stock at December
31, 1999. The ending market value and dividends received during the year for
those shares was $40,715 and $931, respectively.
There were no pension plans with accumulated benefit obligations in excess of
plan assets at December 31, 1999 or 1998. The projected benefit obligation,
accumulated benefit obligation, and fair value of plan assets for the pension
plans with accumulated benefit obligations in excess of plan assets at December
31, 1997 were $15,612, $15,573 and $11,541, respectively.
The Company's annual contribution for its defined contribution pension plans,
which is based on a level percentage of compensation for covered employees,
was $31,512, $27,004 and $28,255 in 1999, 1998 and 1997, respectively.
31
<PAGE> 25
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
The health care plans are contributory and contain cost-sharing features such
as deductibles and coinsurance. There were 16,081, 15,894 and 16,049 active
employees entitled to receive benefits under these plans as of December 31,
1999, 1998 and 1997, respectively. The cost of these benefits for active
employees is recognized as claims are incurred and amounted to $52,640, $47,563
and $47,484 for 1999, 1998 and 1997, 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 $6,421, $4,928 and $5,025 in 1999, 1998 and 1997, respectively.
Employees of the Company who were hired prior to January 1, 1993 and who are not
members of a collective bargaining unit, and certain groups of employees added
through acquisitions, are eligible for certain health care and life insurance
benefits upon retirement from active service, subject to the terms, conditions
and limitations of the applicable plans. There were 4,831, 4,800 and 4,229
retired employees entitled to receive benefits as of December 31, 1999, 1998 and
1997, respectively. The plans are unfunded.
The health care cost trend rate is assumed to decrease gradually to 5.5 percent
for 2003 and thereafter. Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plan. A one-percentage-point
change in assumed health care cost trend rates would have the following effects
as of December 31, 1999:
One-Percentage-Point
-----------------------
Increase Decrease
--------- ----------
Effect on total of service and interest
cost components ..................... $ 822 $ (781)
Effect on the postretirement benefit
obligation .......................... $ 11,380 $(10,800)
NOTE 7 -- LONG-TERM DEBT
- --------------------------------------------------------------------------------
AMOUNT OUTSTANDING
---------------------------------------------
Due Date 1999 1998 1997
------------- --------- --------- ---------
6.85% Notes ................. 2007 $ 199,775 $ 199,742 $ 199,710
7.375% Debentures ........... 2027 149,907 149,903 149,900
7.45% Debentures ............ 2097 149,402 149,396 149,390
6.5% Notes .................. 2002 99,978 99,966 99,955
6.25% Notes ................. 2000 99,974 99,948
Floating Rate Notes ......... 50,000
5.5% Notes .................. 2027 49,922
9.875% Debentures ........... 2007 to 2016 15,900 15,900 15,900
6% to 9% Promissory Notes ... Through 2004 5,752 10,623 23,791
8% to 12% Promissory Notes
partially secured by
certain land and buildings
and other .................. Through 2005 3,569 3,884 4,495
4.75% Promissory Note ....... 2000 800 800
Other Obligations ........... 82 95 108
--------- --------- ---------
$ 624,365 $ 730,283 $ 843,919
========= ========= =========
Maturities of long-term debt are as follows for the next five years: $122,270 in
2000; $4,141 in 2001; $102,971 in 2002; $1,542 in 2003; and $405 in 2004.
Interest expense on long-term debt was $55,415, $59,137 and $52,351 for 1999,
1998 and 1997, respectively.
Effective January 3, 1997, the Company entered into revolving credit agreements
aggregating a maximum borrowing of $1,450,000. Amendments in 1999, 1998 and 1997
reduced the aggregate maximum borrowing amount under these agreements to
$760,000, $1,064,000 and $1,080,000, respectively. The agreements were further
amended effective December 31, 1999 and January 3, 2000 to reflect the
following: 1) a 364-day agreement aggregating $134,400 expiring on December 29,
2000; and 2) a five-year agreement aggregating $598,400, with $30,400 expiring
January 3, 2003 and $568,000 expiring January 3, 2005. There were no borrowings
outstanding under any revolving credit agreement during all years presented.
The Company uses the revolving credit agreements to satisfy its commercial paper
program's dollar for dollar liquidity requirement. At December 31, 1997,
borrowings outstanding under the commercial paper program totaled $106,748 and
are included in Short-term borrowings on the balance sheet. The weighted-average
interest rate related to these borrowings was 5.89% at December 31, 1997. There
were no borrowings outstanding under this program at December 31, 1999 and 1998,
respectively. Effective January 3, 2000, this program is limited to $732,800,
which equals the new aggregate maximum borrowing capacity under the revolving
credit agreements.
On February 10, 1997, the Company issued $400,000 of debt securities under its
$450,000 shelf registration with the Securities and Exchange Commission
consisting of $100,000 of 6.25% notes due February 1, 2000, $100,000 of 6.5%
notes due February 1, 2002 and $200,000 of 6.85% notes due February 1, 2007. In
addition, on February 10, 1997, the Company issued $150,000 of 7.375% debentures
due February 1, 2027 and $150,000 of 7.45% debentures due February 1, 2097 in a
private offering not registered under the Securities Act of 1933, as amended
(Securities Act). In July 1997, the Company exchanged all of its 7.375% and
7.45% unregistered debentures outstanding for an equal principal amount of
newly-issued debentures containing identical terms except that the newly-issued
debentures were registered under the Securities Act. The net proceeds from these
borrowings were used to refinance a portion of the Company's commercial paper
debt.
On October 6, 1997, the Company issued the remaining $50,000 of debt securities
under this shelf registration consisting of 5.5% notes, due October 15, 2027,
with provisions that the holders, individually or in the aggregate, may exercise
a put option which would require the Company to repay the
Committed to being America's Paint Company
32
<PAGE> 26
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
securities at an earlier date. This option was first available to the holders on
October 15, 1999, and then annually on each October 15 thereafter. On October
15, 1999, individual debt security holders exercised put options requiring the
Company to repay $38,945 of these debt securities. The remaining $11,055 of
these debt securities is included in Current portion of long-term debt on the
December 31, 1999 consolidated balance sheet. The net proceeds from the initial
borrowing in 1997 were used to refinance short-term commercial paper debt.
On December 24, 1997, the Company filed a shelf registration with the Securities
and Exchange Commission covering $150,000 of unsecured debt securities with
maturities greater than nine months from the date of issue. The Company may
issue these securities from time to time in one or more series and will offer
the securities on terms determined at the time of sale. There were no borrowings
outstanding under this registration at December 31, 1999, 1998 and 1997.
On August 18, 1998, the Company filed a universal shelf registration statement
with the Securities and Exchange Commission to issue debt securities, common
stock and warrants up to $1,500,000. The registration was effective September 8,
1998. There were no borrowings outstanding under this registration at December
31, 1999 and 1998.
NOTE 8 -- LEASES
- --------------------------------------------------------------------------------
The Company leases certain stores, warehouses, manufacturing facilities, 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 $123,084, $117,762 and $113,339 for 1999, 1998
and 1997, 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 $11,530, $10,329 and $10,396 in 1999, 1998 and
1997, respectively. 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, 1999:
2000 .................................................... $ 91,672
2001 .................................................... 77,066
2002 .................................................... 60,427
2003 .................................................... 42,824
2004 .................................................... 28,196
LATER YEARS ............................................. 83,388
--------
TOTAL MINIMUM LEASE PAYMENTS ............................ $383,573
========
NOTE 9 -- OTHER LONG-TERM LIABILITIES
- --------------------------------------------------------------------------------
Other long-term liabilities consist of the following:
1999 1998 1997
---------- -------- ---------
ENVIRONMENTAL-RELATED ............. $124,096 $127,613 $143,276
OTHER ............................. 208,644 174,890 140,924
-------- -------- --------
$332,740 $302,503 $284,200
======== ======== ========
The accrual for environmental-related long-term liabilities represents the
Company's provisions for estimated costs associated with extended environmental
remediation-related 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, and includes in
long-term liabilities, its estimated potential long-term liability for
investigation and remediation costs with respect to such third-party sites.
The Company initially provides for the estimated cost of environmental-related
activities relating to its current, former and third-party sites when 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 as 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 such matters
will not have a material adverse effect on the financial condition, liquidity or
cash flow of the Company.
In addition to the environmental-related long-term liabilities shown above,
current environmental-related liabilities are included in Other accruals on the
consolidated balance sheets.
NOTE 10 -- STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
As of December 31, 1999, 13,908 employees participated through regular payroll
deductions in the Company's Employee Stock Purchase and Savings Plan. The
Company's contribution charged to operations was $36,535, $32,679 and $33,582
for 1999, 1998 and 1997, respectively. Additionally, the Company made
contributions on behalf of participating employees, which represent salary
reductions for income tax purposes, of $22,581, $20,250 and $18,905 in 1999,
1998 and 1997, respectively.
At December 31, 1999, there were 24,884,733 shares of the Company's stock being
held by this plan, representing 15.0
33
<PAGE> 27
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
percent of the total number of voting shares outstanding. Shares of company
stock credited to each member's account under the plan are voted by the trustee
under instructions from each individual plan member. Shares for which no
instructions are received, along with any unallocated shares held in the plan,
are voted by the trustee in the same proportion as those for which instructions
are received.
NOTE 11 -- CAPITAL STOCK
- --------------------------------------------------------------------------------
SHARES SHARES
IN TREASURY OUTSTANDING
---------- -----------
Balance at January 1, 1997 ....................... 31,469,516 171,831,178
Shares tendered as payment
for options exercised ......................... 160,739 (160,739)
Shares issued for exercise of stock options ..... 1,127,779
Net shares issued under restricted
stock grants .................................. 109,200
---------- -----------
Balance at December 31, 1997 ..................... 31,630,255 172,907,418
Shares tendered as payment
for options exercised ......................... 37,663 (37,663)
Shares issued for exercise of stock options ..... 1,201,476
Shares cancelled under previous
restricted stock grants ....................... (38,000)
Treasury stock acquired ......................... 3,000,000 (3,000,000)
---------- -----------
Balance at December 31, 1998 ..................... 34,667,918 171,033,231
SHARES TENDERED AS PAYMENT
FOR OPTIONS EXERCISED ......................... 8,392 (8,392)
SHARES ISSUED FOR EXERCISE OF STOCK OPTIONS ..... 462,598
SHARES TENDERED IN CONNECTION WITH RESTRICTED
STOCK GRANTS .................................. 44,236 (44,236)
NET SHARES ISSUED UNDER RESTRICTED
STOCK GRANTS .................................. 145,400
TREASURY STOCK ACQUIRED ......................... 5,925,000 (5,925,000)
---------- -----------
BALANCE AT DECEMBER 31, 1999 ..................... 40,645,546 165,663,601
========== ===========
An aggregate of 19,722,529, 20,389,127 and 21,594,603 shares of stock at
December 31, 1999, 1998 and 1997, respectively, were reserved for future grants
of restricted stock and the exercise and future grants of stock options. Shares
outstanding include 215,150, 159,800 and 115,000 shares of stock held in a
revocable trust at December 31, 1999, 1998 and 1997, respectively. At December
31, 1999, there were 300,000,000 shares of common stock and 30,000,000 shares of
serial preferred stock authorized for issuance (3,000,000 shares of the
authorized serial preferred stock have been designated as cumulative redeemable
serial preferred stock which may be issued pursuant to the Company's
shareholders' rights plan if the Company becomes the target of coercive and
unfair takeover tactics).
NOTE 12 -- STOCK PLAN
- --------------------------------------------------------------------------------
The Company's 1994 Stock Plan permits the granting of restricted stock, stock
appreciation rights and stock options 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 Company's 1997 Stock Plan for Nonemployee Directors
provides for the granting of restricted stock and stock options to members of
the Board of Directors who are not employees of the Company. There were 400,000
shares authorized as available for grant under the 1997 Stock Plan. Grants made
pursuant to the 1997 Stock Plan are authorized by the Board of Directors.
Restricted stock grants, which generally require four years of continuous
employment from the date of grant before vesting and receiving the shares
without restriction, have been awarded to certain officers and key employees
under the 1994 Stock Plan. The number of shares to be received without
restriction is based on the Company's performance relative to a peer group of
companies. Shares of restricted stock that vested and were delivered to officers
and employees amounted to 120,400 and 123,200 during 1999 and 1997,
respectively. No shares of restricted stock vested during 1998. At December 31,
1999, there were 348,000 shares of restricted stock outstanding. Unamortized
deferred compensation expense with respect to the restricted stock grants
amounted to $4,249, $2,781 and $5,401 at December 31, 1999, 1998 and 1997,
respectively, and is being amortized over the four-year vesting period. Deferred
compensation expense aggregated $77, $2,090 and $528 in 1999, 1998 and 1997,
respectively. No stock appreciation rights have been granted.
A summary of restricted stock granted during 1999, 1998 and 1997 is as follows:
1999 1998 1997
-------- ------- --------
SHARES GRANTED .................. 204,000 4,000 232,500
WEIGHTED-AVERAGE FAIR VALUE
OF RESTRICTED SHARES GRANTED
DURING YEAR .................... $ 23.77 $ 33.06 $ 27.91
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 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 following the date of grant and generally expire ten years after the
date of grant. The number of options and any period of service required before
the options may be exercised are determined by the Board of Directors at the
time of grant. No options may be exercised more than ten years from the date of
the grant.
The Company has elected to follow Accounting Principles Board Opinion (APBO) No.
25, "Accounting for Stock Issued to Employees," and related interpretations, in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123, "Accounting
for Stock-Based Compensation," requires use of highly subjective assumptions in
option valuation
Committed to being America's Paint Company
34
<PAGE> 28
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
models. Under APBO No. 25, because the exercise price of the Company's employee
stock options is not less than fair market price of the shares at the date of
grant, no compensation expense is recognized in the financial statements. Pro
forma information regarding net income and earnings per share, determined as if
the Company had accounted for its employee stock options under the fair value
method of SFAS No. 123, is required by that statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for all options granted:
1999 1998 1997
------- ------- -------
RISK-FREE INTEREST RATE ..................... 5.34% 5.14% 6.10%
EXPECTED LIFE OF OPTION ..................... 3 YEARS 3 years 3 years
EXPECTED DIVIDEND YIELD OF STOCK ............ 2.00% 2.00% 2.00%
EXPECTED VOLATILITY OF STOCK ................ 0.265 0.194 0.164
The Black-Scholes option pricing model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, it
is management's opinion that the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
The amounts below represent the pro forma information calculated through use of
the Black-Scholes model. For purposes of pro forma disclosures, the estimated
fair value of the options is amortized to expense over the options' vesting
period.
1999 1998 1997
--------- --------- ---------
PRO FORMA NET INCOME .......... $ 297,107 $ 269,838 $ 257,757
PRO FORMA NET INCOME PER SHARE:
BASIC ........................ $ 1.77 $ 1.57 $ 1.50
DILUTED ...................... $ 1.76 $ 1.56 $ 1.49
A summary of the Company's stock option activity, and related information for
the years ended December 31, 1999, 1998 and 1997 is shown in the following
table:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- -------------------------- ----------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
OPTIONED EXERCISE Optioned Exercise Optioned Exercise
SHARES PRICE Shares Price Shares Price
----------- -------- ---------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING BEGINNING OF YEAR ................... 6,259,702 $ 22.89 5,810,471 $ 18.47 5,434,596 $ 14.91
GRANTED ......................................... 5,292,350 22.33 1,867,500 29.10 1,746,500 27.93
EXERCISED ....................................... (462,598) 15.36 (1,201,476) 14.00 (1,127,779) 12.88
CANCELED ........................................ (364,801) 27.69 (216,793) 26.68 (242,846) 22.68
---------- ------- ---------- ------- ---------- -------
OUTSTANDING END OF YEAR ......................... 10,724,653 $ 22.78 6,259,702 $ 22.89 5,810,471 $ 18.47
========== ======= ========== ======= ========== =======
EXERCISABLE AT END OF YEAR ...................... 3,971,139 $ 21.09 3,019,873 $ 17.77 2,924,515 $ 13.96
WEIGHTED-AVERAGE FAIR VALUE OF
OPTIONS GRANTED DURING YEAR .................... $ 4.67 $ 5.12 $ 4.53
RESERVED FOR FUTURE GRANTS ...................... 8,997,876 14,129,425 15,784,132
</TABLE>
Exercise prices for optioned shares outstanding as of December 31, 1999 ranged
from $8.13 to $35.34. A summary of these options by range of exercise prices is
as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------------------- -----------------------------
WEIGHTED-
WEIGHTED- AVERAGE WEIGHTED-
RANGE AVERAGE REMAINING AVERAGE
OF EXERCISE OPTIONED EXERCISE CONTRACTUAL OPTIONED EXERCISE
PRICES SHARES PRICE LIFE (YEARS) SHARES PRICE
- ----------------------------- ---------- --------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Less than $12.00 504,997 $ 9.42 0.98 504,997 $ 9.42
$12.00 - $19.99 921,697 15.90 4.27 921,697 15.90
$20.00 - $26.00 6,300,212 22.00 8.68 1,103,412 21.03
Greater than $26.00 2,997,747 28.77 7.91 1,441,033 28.53
---------- ------- ---- --------- -------
10,724,653 $ 22.78 7.90 3,971,139 $ 21.09
========== ======= ==== ========= =======
</TABLE>
35
<PAGE> 29
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
NOTE 13 -- INCOME TAXES
- --------------------------------------------------------------------------------
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 using the enacted tax
rates and laws that are currently in effect. Significant components of the
Company's deferred tax assets and liabilities as of December 31, 1999, 1998 and
1997 are as follows:
1999 1998 1997
-------- -------- --------
DEFERRED TAX ASSETS:
DISPOSITIONS, ENVIRONMENTAL AND
OTHER SIMILAR ITEMS ............... $ 56,123 $ 61,857 $ 61,537
OTHER ITEMS
(EACH LESS THAN 5% OF TOTAL ASSETS) 94,196 88,432 99,120
-------- -------- --------
TOTAL DEFERRED TAX ASSETS ......... $150,319 $150,289 $160,657
======== ======== ========
DEFERRED TAX LIABILITIES:
DEPRECIATION ........................ $ 66,374 $ 51,997 $ 38,605
DEFERRED EMPLOYEE BENEFIT ITEMS ..... 42,785 35,163 26,128
-------- -------- --------
TOTAL DEFERRED TAX LIABILITIES .... $109,159 $ 87,160 $ 64,733
======== ======== ========
Significant components of the provisions for income taxes are as follows:
1999 1998 1997
-------- -------- --------
CURRENT:
FEDERAL ................................ $128,185 $106,538 $ 87,626
FOREIGN ................................ 11,787 6,982 3,472
STATE AND LOCAL ........................ 25,116 23,162 16,318
-------- -------- --------
TOTAL CURRENT ........................ 165,088 136,682 107,416
DEFERRED:
FEDERAL ................................ 14,388 20,946 46,890
FOREIGN ................................ 3,851 5,587 2,375
STATE AND LOCAL ........................ 2,931 4,024 9,982
-------- -------- --------
TOTAL DEFERRED ....................... 21,170 30,557 59,247
-------- -------- --------
TOTAL INCOME TAX EXPENSE ................ $186,258 $167,239 $166,663
======== ======== ========
Significant components of income before income taxes as used for income tax
purposes, are as follows:
1999 1998 1997
-------- -------- --------
DOMESTIC ................................ $411,626 $382,469 $382,325
FOREIGN ................................. 78,492 57,634 44,952
-------- -------- --------
$490,118 $440,103 $427,277
======== ======== ========
A reconciliation of the statutory federal income tax rate and the effective tax
rate follows:
1999 1998 1997
-------- -------- --------
STATUTORY TAX RATE ...................... 35.0% 35.0% 35.0%
EFFECT OF:
STATE AND LOCAL TAXES .................. 3.7 4.0 4.0
INVESTMENT VEHICLES .................... (1.5) (2.7) (3.3)
OTHER - NET ............................ 0.8 1.7 3.3
-------- -------- --------
EFFECTIVE TAX RATE ...................... 38.0% 38.0% 39.0%
======== ======== ========
As of December 31, 1999, estimated taxes payable have been provided on
substantially all unremitted retained earnings of the Company's foreign
consolidated subsidiaries.
Netted against the Company's other deferred tax assets are valuation reserves of
$16,211, $16,703 and $19,836 at December 31, 1999, 1998 and 1997, respectively,
resulting from the uncertainty as to the realization of the tax benefits from
certain foreign net operating losses and certain other foreign assets.
NOTE 14-- SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
1999
- --------------------------------------------------------------------------------
NET INCOME PER NET INCOME PER
QUARTER NET SALES GROSS PROFIT NET INCOME SHARE - BASIC SHARE - DILUTED
- ------- ----------- ------------- ------------ -------------- ----------------
1ST $1,127,867 $ 477,086 $ 28,797 $ .17 $ .17
2ND 1,384,070 610,390 107,594 .64 .63
3RD 1,345,483 609,834 111,482 .67 .66
4TH 1,146,416 551,204 55,987 .34 .34
Net income during the fourth quarter decreased by $1,751 ($.01 per share) due to
certain year-end adjustments. Cost of goods sold decreased by $23,006 ($14,953
after-tax, $.09 per share) as a result of physical inventory adjustments of
$32,659 ($21,228 after-tax, $.12 per share). These adjustments were partially
offset by other year-end adjustments of $5,843 ($3,798 after-tax, $.02 per
share) and by provisions for the closing costs associated with certain
operations of $3,810 ($2,477 after-tax, $.01 per share). Administrative expenses
decreased $703 ($457 after-tax, no per share effect) due to other year-end
adjustments. Other expense - net increased $26,403 ($17,162 after-tax, $.10 per
share) due to the net provisions for environmental-related matters at current,
former and third-party sites of $16,860 ($10,959 after-tax, $.07 per share), the
provision of $3,830 ($2,490 after-tax, $.01 per share) for the adjustment to net
realizable value of certain net fixed assets related to site closings, and due
to other year-end adjustments of $5,713 ($3,713 after-tax, $.02 per share).
1998
- --------------------------------------------------------------------------------
Net Income per Net Income per
Quarter Net Sales Gross Profit Net Income Share - Basic Share - Diluted
- ------- ----------- ------------- ------------ -------------- ----------------
1st $1,104,147 $ 454,939 $ 25,198 $ .15 $ .14
2nd 1,377,785 599,465 99,450 .58 .57
3rd 1,341,431 587,902 100,748 .59 .58
4th 1,111,067 487,665 47,468 .28 .28
Net income during the fourth quarter was increased by $883 (no per share effect)
due to certain year-end adjustments. Cost of goods sold decreased by $13,962
($9,075 after-tax, $.05 per share) as a result of physical inventory adjustments
of $17,411 ($11,317 after-tax, $.06 per share) and other year-end adjustments
of $7,818 ($5,082 after-tax, $.03 per share). These
Committed to being America's Paint Company
36
<PAGE> 30
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
adjustments were partially offset by provisions for the closing costs associated
with certain operations of $11,267 ($7,324 after-tax, $.04 per share).
Administrative expenses increased $295 ($192 after-tax, no per share effect) due
to other year-end adjustments. Other expense - net increased $12,785 ($8,310
after-tax, $.05 per share) due to the provision of $12,290 ($7,988 after-tax,
$.05 per share) for the adjustment to net realizable value of certain net fixed
assets and due to the net provisions for environmental-related matters at
current, former and third-party sites of $495 ($322 after-tax, no per share
effect).
During the fourth quarter of 1999, the Company adopted revised business segment
reporting guidelines which changed the number and composition of its Reportable
Segments and changed the value for goods that are transferred between segments.
See Reportable Segment Information on pages 6 through 13 of this report for a
description of the segments. The following table provides restated amounts of
Reportable Segment Information previously reported in the Company's 1999
Quarterly Reports filed with the Securities and Exchange Commission on Forms
10-Q.
<TABLE>
<CAPTION>
1999 1998
------------------------- ----------------------------
NET SEGMENT Net Segment
EXTERNAL OPERATING External Operating
SALES PROFIT Sales Profit
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31:
Paint Stores ........................................... $ 634,473 $ 32,887 $ 589,561 $ 28,605
Consumer ............................................... 302,689 35,431 306,391 19,336
Automotive Finishes .................................... 115,597 14,182 121,443 15,052
International Coatings ................................. 73,036 3,392 84,898 5,579
Administrative ......................................... 2,072 (39,446) 1,854 (27,930)
---------- --------- ----------- ---------
Consolidated totals $1,127,867 $ 46,446 $ 1,104,147 $ 40,642
========== ========= =========== =========
THREE MONTHS ENDED JUNE 30:
Paint Stores ........................................... $ 812,927 $ 106,084 $ 769,050 $ 101,971
Consumer ............................................... 376,796 73,053 398,902 70,505
Automotive Finishes .................................... 122,074 17,307 122,283 17,507
International Coatings ................................. 70,193 8,731 85,535 4,799
Administrative ......................................... 2,081 (31,635) 2,015 (34,379)
---------- --------- ----------- ---------
Consolidated totals $1,384,071 $ 173,540 $ 1,377,785 $ 160,403
========== ========= =========== =========
THREE MONTHS ENDED
SEPTEMBER 30:
Paint Stores ........................................... $ 842,760 $ 129,838 $ 798,710 $ 121,872
Consumer ............................................... 307,314 52,128 332,833 50,206
Automotive Finishes .................................... 119,356 18,323 120,325 18,490
International Coatings ................................. 73,871 9,344 87,301 5,727
Administrative ......................................... 2,182 (29,823) 2,262 (33,797)
---------- --------- ----------- ---------
Consolidated totals $1,345,483 $ 179,810 $ 1,341,431 $ 162,498
========== ========= =========== =========
THREE MONTHS ENDED
DECEMBER 31:
Paint Stores ........................................... $ 711,193 $ 107,965 $ 665,042 $ 94,556
Consumer ............................................... 237,095 (5,691) 243,967 (14,856)
Automotive Finishes .................................... 113,984 16,727 109,801 14,208
International Coatings ................................. 82,099 12,442 90,018 8,060
Administrative ......................................... 2,045 (41,121) 2,239 (25,408)
---------- --------- ----------- ---------
Consolidated totals $1,146,416 $ 90,322 $ 1,111,067 $ 76,560
========== ========= =========== =========
</TABLE>
NOTE 15 -- NET INCOME PER SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
BASIC
AVERAGE SHARES OUTSTANDING ....... 167,924,660 172,162,472 172,107,459
============ ============ ============
NET INCOME ....................... $ 303,860 $ 272,864 $ 260,614
============ ============ ============
NET INCOME PER SHARE ............. $ 1.81 $ 1.58 $ 1.51
============ ============ ============
DILUTED
AVERAGE SHARES OUTSTANDING ....... 167,924,660 172,162,472 172,107,459
NON-VESTED RESTRICTED STOCK GRANTS 263,567 235,317 312,988
STOCK OPTIONS--
TREASURY STOCK METHOD .......... 838,069 1,137,890 1,611,895
------------ ------------ ------------
AVERAGE SHARES ASSUMING DILUTION . 169,026,296 173,535,679 174,032,342
============ ============ ============
NET INCOME ........................ $ 303,860 $ 272,864 $ 260,614
============ ============ ============
NET INCOME PER SHARE .............. $ 1.80 $ 1.57 $ 1.50
============ ============ ============
</TABLE>
Net income per share has been computed in accordance with SFAS No. 128.
NOTE 16 -- COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." The adoption of this statement had no impact on the
Company's Net income or Shareholders' equity. SFAS No. 130 requires other
comprehensive income to include foreign currency translation adjustments and
minimum pension liability adjustments, which prior to adoption were reported
separately in Shareholders' equity. The December 31, 1997 financial statements
have been reclassified to conform to the requirements of SFAS No. 130.
Cumulative other comprehensive loss consists of the following components:
FOREIGN MINIMUM CUMULATIVE
CURRENCY PENSION OTHER
TRANSLATION LIABILITY COMPREHENSIVE
ADJUSTMENTS ADJUSTMENTS LOSS
----------- ----------- -------------
Balance at January 1, 1997 $ (18,982) $ (18,982)
Other comprehensive loss (14,107) $ (428) (14,535)
--------- ------ ---------
Balance at December 31, 1997 (33,089) (428) (33,517)
Other comprehensive loss (11,838) 428 (11,410)
--------- ------ ---------
Balance at December 31, 1998 (44,927) $ 0 (44,927)
======
OTHER COMPREHENSIVE LOSS (100,697) (100,697)
--------- ---------
BALANCE AT DECEMBER 31, 1999 $(145,624) $(145,624)
========= =========
37
<PAGE> 31
- --------------------------------------------------------------------------------
DIRECTORS, OFFICERS, MANAGERS
- --------------------------------------------------------------------------------
DIRECTORS, OFFICERS, MANAGERS
BOARD OF DIRECTORS
JAMES C. BOLAND, 60(*)
President and Chief Executive Officer
CAVS/Gund Arena Company
JOHN G. BREEN, 65
Chairman
The Sherwin-Williams Company
DUANE E. COLLINS, 63
Chairman, President and Chief
Executive Officer
Parker-Hannifin Corporation
CHRISTOPHER M. CONNOR, 43
Vice Chairman and
Chief Executive Officer
The Sherwin-Williams Company
DANIEL E. EVANS, 63
Chairman, Chief Executive Officer
and Secretary
Bob Evans Farms, Inc.
ROBERT W. MAHONEY, 63
Chairman
Diebold, Incorporated
WILLIAM G. MITCHELL, 69(*)
Retired, former Vice Chairman
Centel Corporation
A. MALACHI MIXON, III, 59
Chairman and Chief Executive Officer
Invacare Corporation
CURTIS E. MOLL, 60(*)
Chairman and Chief Executive Officer
MTD Products, Inc.
HELEN O. PETRAUSKAS, 55(*)
Vice President - Environmental and
Safety Engineering
Ford Motor Company
JOSEPH M. SCAMINACE, 46
President and Chief Operating Officer
The Sherwin-Williams Company
RICHARD K. SMUCKER, 51(*)
President
The J. M. Smucker Company
CORPORATE OFFICERS
JOHN G. BREEN, 65(**)
Chairman
CHRISTOPHER M. CONNOR, 43(**)
Vice Chairman and Chief Executive
Officer
JOSEPH M. SCAMINACE, 46(**)
President and Chief Operating Officer
LARRY J. PITORAK, 53(**)
Senior Vice President - Finance,
Treasurer and Chief Financial Officer
JOHN L. AULT, 54(**)
Vice President -
Corporate Controller
CYNTHIA D. BROGAN, 48
Vice President and
Assistant Treasurer
MARK J. DVOROZNAK, 41
Vice President -
Corporate Audit and Loss Prevention
THOMAS E. HOPKINS, 42(**)
Vice President -
Human Resources
CONWAY G. IVY, 58(**)
Vice President -
Corporate Planning and Development
JAMES J. SGAMBELLONE, 42
Vice President -
Taxes and Assistant Secretary
LOUIS E. STELLATO, 49(**)
Vice President, General
Counsel and Secretary
RICHARD M. WEAVER, 45
Vice President - Administration
OPERATING MANAGERS
THOMAS R. BRUMMETT, 54
President & General Manager
Eastern Division
Paint Stores Group
ROBERT J. DAVISSON, 39
President & General Manager
Southeastern Division
Paint Stores Group
DONALD R. FIELDS, 64
President
International Division
MICHAEL A. GALASSO, 52(**)
President & General Manager
Automotive Division
BLAIR P. LACOUR, 53
President & General Manager
Mid Western Division
Paint Stores Group
JOHN G. MORIKIS, 36(**)
President
Paint Stores Group
STEVEN J. OBERFELD, 47
President & General Manager
South Western Division
Paint Stores Group
THOMAS W. SEITZ, 51(**)
President
Consumer Group
* Audit Committee Member
** Executive Officer as defined by the Securities Exchange Act of 1934
Committed to being America's Paint Company
38
<PAGE> 32
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of shareholders
will be held at 10:00 a.m.,
April 26, 2000 in the
Landmark Conference Center,
927 Midland Building,
101 Prospect Avenue, N.W.,
Cleveland, Ohio.
INVESTOR RELATIONS
Conway G. Ivy
The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115-1075
Internet: www.sherwin.com
FORM 10-K
The Company's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission, is available without charge. To obtain a copy, contact the Investor
Relations Office.
DIVIDEND REINVESTMENT PROGRAM
A dividend reinvestment program is available to shareholders of common stock.
For information, contact our transfer agent, The Bank of New York.
HEADQUARTERS
The Sherwin-Williams Company
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115-1075
(216) 566-2000
INDEPENDENT AUDITORS
Ernst & Young LLP
Cleveland, Ohio
STOCK TRADING
Sherwin-Williams Common Stock - Symbol,
SHW - is traded on the New York Stock
Exchange.
TRANSFER AGENT & REGISTRAR
The Bank of New York
Shareholder Relations Department-11E
P.O. Box 11258
Church Street Station
New York, NY 10286
1-800-432-0140
E-mail address:
[email protected]
COMMON STOCK TRADING STATISTICS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
HIGH .......................... $ 32.875 $ 37.875 $ 33.375 $ 28.875 $ 20.750
LOW ........................... 18.750 19.438 24.125 19.500 16.000
CLOSE DECEMBER 31 ............. 21.000 29.375 27.750 28.000 20.375
SHAREHOLDERS OF RECORD ........ 11,475 11,929 11,964 11,933 12,078
SHARES TRADED (THOUSANDS) ..... 161,118 128,942 98,855 72,638 85,144
% OF AVERAGE SHARES OUTSTANDING 96% 75% 51% 42% 50%
</TABLE>
QUARTERLY STOCK PRICES AND DIVIDENDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------------------------------------ -------------------------------------------
QUARTER HIGH LOW DIVIDEND Quarter High Low Dividend
------- -------- -------- -------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1ST $ 30.688 $ 23.063 $ .12 1st $ 35.625 $ 25.750 $ .1125
2ND 32.875 27.000 .12 2nd 37.875 30.063 .1125
3RD 30.000 19.438 .12 3rd 35.000 19.438 .1125
4TH 23.125 18.750 .12 4th 29.813 20.563 .1125
</TABLE>
39
<PAGE> 33
[MAP]
Map shows the approximate geographical separation of each domestic division and
the number of paint stores and automotive branches in each state or province and
in the Virgin Islands, Puerto Rico, Mexico and South America.
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
STATE OR JURISDICTION
OF INCORPORATION OR
SUBSIDIARIES ORGANIZATION
------------ ---------------------
<S> <C>
DOMESTIC SUBSIDIARIES
Contract Transportation Systems Co. Delaware
DIMC, Inc. Delaware
Dupli-Color Products Company Delaware
Sherwin-Williams Automotive Finishes Corp. Delaware
SW Racing Corp. Delaware
SWIMC, Inc. Delaware
The Sherwin-Williams Acceptance Corporation Nevada
Thompson Minwax International Corp. Delaware
FOREIGN SUBSIDIARIES
Compania Sherwin-Williams, S.A. de C.V. Mexico
Distribuidores Pinturas del Mundo S.R.L. Peru
Kriesol, S.A. Uruguay
Marson Chilena, S.A. Chile
Productos Quimicos y Pinturas, S.A. de C.V. Mexico
Proquipsa, S.A. de C.V. Mexico
Quetzal Pinturas, S.A. de C.V. Mexico
Ronseal (Ireland) Limited Ireland
Ronseal Limited United Kingdom
Sherwin-Williams Argentina I.y C.S.A. Argentina
Sherwin-Williams do Brasil Industria e Comercio Ltda. Brazil
Sherwin-Williams Canada Inc. Canada
Sherwin-Williams (Caribbean) N.V. Curacao
Sherwin-Williams Cayman Islands Limited Cayman Islands
Sherwin-Williams Chile S.A. Chile
Sherwin-Williams Foreign Sales Corporation Limited U.S. Virgin Islands
Sherwin-Williams Japan Co., Ltd. Japan
Sherwin-Williams (West Indies) Limited Jamaica
SW Paints Ltda. Brazil
The Sherwin-Williams Company Resources Limited Jamaica
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of The Sherwin-Williams Company of our report dated January 25, 2000,
included in the 1999 Annual Report to Shareholders of The Sherwin-Williams
Company.
We also consent to the incorporation by reference in the following
Registration Statements and related Prospectuses of our report dated January 25,
2000, with respect to the consolidated financial statements and schedule
included in this Annual Report (Form 10-K) of The Sherwin-Williams Company:
<TABLE>
<CAPTION>
REGISTRATION
NUMBER DESCRIPTION
- ------------ -----------
<S> <C>
333-66295 The Sherwin-Williams Company Deferred Compensation Savings
Plan, The Sherwin-Williams Company Key Management Deferred
Compensation Plan and The Sherwin-Williams Company
Director Deferred Fee Plan Form S-8 Registration Statement
333-61735 The Sherwin-Williams Company Form S-3 Registration Statement
333-41659 The Sherwin-Williams Company Form S-3 Registration Statement
333-25671 The Sherwin-Williams Company 1997 Stock Plan for Nonemployee
Directors Form S-8 Registration Statement
333-25669 The Sherwin-Williams Company 1994 Stock Plan Form S-8
Registration Statement
333-25607 The Sherwin-Williams Company S-4 Registration Statement
333-01093 The Sherwin-Williams Company Form S-3 Registration Statement
333-00725 The Sherwin-Williams Company Form S-4 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 10, 2000
ERNST & YOUNG LLP
<PAGE> 1
EXHIBIT 24(a)
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 under the provisions of the Securities Exchange Act of
1934, as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 31, 2000 /s/ J. G. Breen
----------------------------- -------------------------
J. G. Breen
Chairman and 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 under the provisions of the Securities Exchange Act of
1934, as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints J.M. Scaminace, 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 Annual Report on 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 31, 2000 /s/ C. M. Connor
----------------------------- --------------------------
C. M. Connor
Vice Chairman and Chief Executive
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace 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 Annual Report on 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 31, 2000 /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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 31, 2000 /s/ J. L. Ault
----------------------------- ------------------------
J. L. Ault
Vice President - Corporate Controller
<PAGE> 5
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 under the provisions of the Securities Exchange Act of
1934, as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, 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 Annual Report on 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 31, 2000 /s/ J. M. Scaminace
----------------------------- -----------------------------
J. M. Scaminace
President and Chief Operating Officer,
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999 hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2000 /s/ D. E. Collins
----------------------------- ---------------------------
D. E. Collins
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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, 2000 /s/ D. E. Evans
----------------------------- -------------------------
D. E. Evans
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2000 /s/ R. W. Mahoney
----------------------------- ---------------------------
R. W. Mahoney
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 31, 2000 /s/ C. E. Moll
----------------------------- ------------------------
C. E. Moll
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2000 /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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2000 /s/ A. M. Mixon, III
----------------------------- ------------------------------
A. M. Mixon, III
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2000 /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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2000 /s/ R. K. Smucker
----------------------------- ---------------------------
R. K. Smucker
Director
<PAGE> 14
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 under the provisions of the Securities Exchange Act of 1934,
as amended, and any rules and regulations of the Securities and Exchange
Commission, an Annual Report on Form 10-K for the fiscal year ended December 31,
1999, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 28, 2000 /s/ J. C. Boland
----------------------------- --------------------------
J. C. Boland
Director
<PAGE> 1
Exhibit 24(b)
CERTIFICATE
-----------
I, the undersigned, Secretary of The Sherwin-Williams Company (the
"Company"), hereby certify that attached hereto is a true and complete copy of a
resolution of the Board of Directors of the Company, duly adopted at a meeting
held on February 2, 2000, and that such resolution is in full force and effect
and has not been amended, modified, revoked or rescinded as of the date hereof.
IN WITNESS WHEREOF, I have executed this certificate as of this 13th
day of March, 2000.
/s/L. E. Stellato
----------------------------------
L.E. Stellato, Secretary
<PAGE> 2
RESOLVED, that the appropriate officers of the Company are each hereby
authorized to execute and deliver a power of attorney appointing C.M. Connor,
J.M. Scaminace, L.J. Pitorak and L.E. Stellato or any of them, with full power
of substitution and resubstitution, to act as attorneys-in-fact for the Company
and for such officers for the purpose of executing and filing with the
Securities and Exchange Commission ("SEC") and any national securities exchange,
on behalf of the Company, the Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 and any and all amendments, exhibits and other documents
in connection therewith, and to take other action deemed necessary and
appropriate to effect the filing of such Annual Report on Form 10-K and any and
all such amendments, exhibits and other documents in connection therewith.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 18,623
<SECURITIES> 0
<RECEIVABLES> 629,638
<ALLOWANCES> 23,592
<INVENTORY> 703,388
<CURRENT-ASSETS> 1,597,377
<PP&E> 1,447,927
<DEPRECIATION> 736,251
<TOTAL-ASSETS> 4,052,090
<CURRENT-LIABILITIES> 1,189,862
<BONDS> 624,365
0
0
<COMMON> 206,309
<OTHER-SE> 1,492,223
<TOTAL-LIABILITY-AND-EQUITY> 4,052,090
<SALES> 5,003,837
<TOTAL-REVENUES> 5,003,837
<CGS> 2,755,323
<TOTAL-COSTS> 2,755,323
<OTHER-EXPENSES> 29,540
<LOSS-PROVISION> 32,819
<INTEREST-EXPENSE> 61,168
<INCOME-PRETAX> 490,118
<INCOME-TAX> 186,258
<INCOME-CONTINUING> 303,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,860
<EPS-BASIC> 1.81
<EPS-DILUTED> 1.80
</TABLE>
