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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE SHERWIN-WILLIAMS COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STEPHEN J. PERISUTTI
THE SHERWIN-WILLIAMS COMPANY
101 PROSPECT AVENUE, N.W.
CLEVELAND, OHIO 44115
(216) 566-2543
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[Sherwin Williams Logo]
THE SHERWIN-WILLIAMS COMPANY
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 26, 2000
------------------
The Annual Meeting of Shareholders of THE SHERWIN-WILLIAMS COMPANY will be
held in the Landmark Conference Center, 927 Midland Building, 101 Prospect
Avenue, N.W., Cleveland, Ohio on Wednesday, April 26, 2000 at 10:00 A.M., local
time, for the following purposes:
1. To fix the number of directors of Sherwin-Williams at twelve and to
elect twelve directors to hold office until the next Annual Meeting of
Shareholders and until their successors are elected; and
2. To transact such other business as may properly come before the Annual
Meeting.
Shareholders of record at the close of business on February 28, 2000 are
the only shareholders entitled to notice of and to vote at the Annual Meeting.
This year, we are offering shareholders of record the convenience of voting
electronically by the Internet or telephone. We encourage you to vote
electronically and help us save money. If you vote by the Internet or telephone,
you should not return your proxy card. If you choose to vote by mail, please
sign, date and return your proxy card in the envelope provided.
L. E. STELLATO
Secretary
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115-1075
March 14, 2000
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY VOTE
BY THE INTERNET, BY TELEPHONE OR BY COMPLETING AND RETURNING THE ENCLOSED PROXY
CARD. VOTING EARLY WILL HELP AVOID ADDITIONAL SOLICITATION COSTS AND WILL NOT
PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING IF YOU WISH TO DO SO.
<PAGE> 3
THE SHERWIN-WILLIAMS COMPANY
101 PROSPECT AVENUE, N.W.
CLEVELAND, OHIO 44115-1075
PROXY STATEMENT
March 14, 2000
PRELIMINARY
The enclosed proxy is requested by the Board of Directors in connection
with the Annual Meeting of Shareholders to be held April 26, 2000 for the
purpose of considering and acting upon the matters specified in the foregoing
Notice of Annual Meeting of Shareholders. The mailing date of this Proxy
Statement is on or about March 14, 2000.
References contained in this Proxy Statement to certain numbers and values
of shares of common stock have been restated to reflect the effect of the
two-for-one stock split distributed to shareholders on March 28, 1997.
ANNUAL REPORT
Sherwin-Williams' Annual Report to Shareholders for the year ended December
31, 1999 is enclosed with this Proxy Statement. Additional financial and other
reports may be submitted at the Annual Meeting but it is not intended that any
action will be taken relating to those reports.
VOTING PROCEDURES
WHO IS ENTITLED TO VOTE?
Only record holders of common stock at the close of business on February
28, 2000, the record date, are entitled to vote at the Annual Meeting. At the
close of business on the record date, 165,732,411 shares of common stock were
outstanding. Each share of common stock owned on the record date is entitled to
one vote.
HOW DO I VOTE?
If you are a shareholder of record, you can vote in person at the Annual
Meeting or you can vote by proxy. There are three ways to vote by proxy:
- Log on the Internet at http://proxy.shareholder.com/shw and follow the
directions;
- Call 1-800-481-9816 and follow the directions; or
- Complete, sign and mail the proxy card in the enclosed return envelope.
If you are a shareholder of record and you vote by the Internet or
telephone, your vote must be received by 5:00 p.m. E.S.T. on April 25, 2000; you
should not return your proxy card. If you hold shares through a bank or broker,
you should complete, sign and date the voting instruction card provided to you
by your bank or broker, or vote by the Internet or telephone as permitted by
your bank or broker. You may also be represented by another person present at
the Annual Meeting by executing a proxy designating such person to act on your
behalf.
HOW DO I VOTE IF I AM A PARTICIPANT IN THE STOCK OWNERSHIP AND AUTOMATIC
DIVIDEND REINVESTMENT PLAN OR THE EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN?
If you are a participant in one of these plans, your proxy card also serves
as voting instructions for the number of shares which you are entitled to direct
the vote under each plan. You may vote your shares by the Internet, telephone or
mail in the same manner outlined above. If you are a participant in the Employee
Stock Purchase and Savings Plan, your vote
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must be received by the close of business on April 20, 2000.
WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS?
The Board of Directors recommends that you vote FOR fixing the number of
directors at twelve and electing the twelve nominees for directors.
The Board of Directors is not aware of matters other than those specified
in the foregoing Notice of Annual Meeting of Shareholders that will be brought
before the Annual Meeting for action. However, if any other matters that may
properly come before the Annual Meeting are brought up for vote, it is intended
that the proxy holders may vote or act according to their judgment.
WHAT CONSTITUTES A QUORUM FOR THE ANNUAL MEETING?
For a quorum, there must be present in person or by proxy shareholders of
record entitled to exercise not less than fifty percent of the voting power of
Sherwin-Williams. Proxy cards marked as withholding authority will be treated as
present for purposes of determining a quorum.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
The proposal to fix the number of directors at twelve requires the
affirmative vote of the holders of a majority of the shares represented at the
Annual Meeting and entitled to vote on that proposal, with the nominees
receiving the greatest number of votes being elected. All other proposals and
other business as may properly come before the Annual Meeting require the
affirmative vote of a majority of the votes cast, except as otherwise provided
by statute or Sherwin-Williams' Amended Articles of Incorporation or
Regulations. Proxy cards marked as withholding authority will be treated as
represented and entitled to vote on any applicable proposal.
The proxy holders will vote your shares in accordance with your directions.
If you sign and return your proxy card, but do not properly direct how your
shares should be voted on a proposal, the proxy holders will vote your shares
FOR fixing the number of directors at twelve and electing the twelve nominees
for directors, and in the proxy holder's discretion upon such other business as
may properly come before the Annual Meeting. If you do not timely vote, the
proxy holders cannot vote your shares (or, in the case of the Employee Stock
Purchase and Savings Plan, your shares will be voted in the same proportion as
the trustee votes those shares for which it receives proper instructions). Any
unallocated shares held in the Employee Stock Purchase and Savings Plan also
will be voted by the trustee in the same proportion as the trustee votes those
shares for which it receives proper instructions.
CAN I CHANGE MY VOTE AFTER I SUBMIT MY PROXY?
Yes. You can change your vote before the proxy holders vote your shares by
timely:
- Filing a written revocation with Sherwin-Williams' Vice President,
General Counsel and Secretary;
- Returning a later signed and dated proxy card;
- Entering a new vote by the Internet or telephone; or
- Voting in person at the Annual Meeting.
ELECTION OF DIRECTORS
At the Annual Meeting, the number of directors is to be fixed at twelve,
and twelve directors are to be elected to hold office until the next Annual
Meeting of Shareholders and until their successors are elected. The nominees are
listed below. Should any nominee decline or be unable to accept such nomination
or be unable to serve, an event which management does not now expect, the Board
of Directors reserves the right in its discretion to substitute another person
as a nominee or to reduce the number of nominees. In this event, the proxy
holders may vote in their discretion for any substitute nominee proposed by the
Board of Directors unless you indicate otherwise.
All of the nominees currently are directors of Sherwin-Williams. All of the
nominees, ex-
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cept Mr. Connor and Mr. Scaminace who were appointed directors by unanimous
action of the Board of Directors in October 1999, were elected by the
shareholders at the 1999 Annual Meeting. The following is information regarding
each nominee:
JAMES C. BOLAND
President and Chief Executive Officer, CAVS/Gund Arena Company
Director since 1998
James C. Boland, 60, has served as President and Chief Executive Officer of
CAVS/Gund Arena Company (the Cleveland Cavaliers and the Cleveland Rockers
professional basketball teams and Gund Arena) since January 1998. Prior to his
retirement from Ernst & Young in September 1998, Mr. Boland served for 22 years
as a partner of Ernst & Young in various roles including Vice Chairman and
Regional Managing Partner as well as a member of the firm's Management Committee
from 1988 to 1996 and as Vice Chairman of National Accounts from 1997 to his
retirement. Mr. Boland is also a Director of Invacare Corporation and is a
Trustee of Leadership Cleveland, the Great Lakes Science Center, Bluecoats, Inc.
and The 50 Club of Cleveland.
JOHN G. BREEN
Chairman, Sherwin-Williams
Director since 1979
John G. Breen, 65, has served as Chairman of Sherwin-Williams since April 1980.
Mr. Breen served as Chief Executive Officer of Sherwin-Williams from January
1979 to October 1999 and President of Sherwin-Williams from March 1999 to
October 1999. Mr. Breen is also a Director of National City Corporation, Mead
Corporation, Parker-Hannifin Corporation and The Goodyear Tire and Rubber
Company. Mr. Breen is a Trustee of Catholic Charities Corporation, the Cleveland
Opera, John Carroll University, the Musical Arts Association (The Cleveland
Orchestra) and University Hospitals of Cleveland, and is a Member of the
Visiting Committee of Case Western Reserve University School of Medicine.
DUANE E. COLLINS
Chairman, President and Chief Executive Officer, Parker-Hannifin Corporation
Director since 1996
Duane E. Collins, 63, has served as Chairman of Parker-Hannifin Corporation
(manufacturer of motion control products) since October 1999 and President and
Chief Executive Officer of Parker-Hannifin since July 1993. Mr. Collins is also
a Director of Mead Corporation, National City Bank and the Greater Cleveland
Growth Association, is a Trustee of the Cleveland YMCA and University Hospitals
Health System (Cleveland), and is a Member of the Visiting Committee of Case
Western Reserve University Weatherhead School of Management.
CHRISTOPHER M. CONNOR
Vice Chairman and Chief Executive Officer, Sherwin-Williams
Director since 1999
Christopher M. Connor, 43, has served as Vice Chairman and Chief Executive
Officer of Sherwin-Williams since October 1999. Mr. Connor served as President,
Paint Stores Group of Sherwin-Williams from August 1997 to October 1999 and
President & General Manager, Diversified Brands Division of Sherwin-Williams
from April 1994 to August 1997.
DANIEL E. EVANS
Chairman, Chief Executive Officer and Secretary, Bob Evans Farms, Inc.
Director since 1990
Daniel E. Evans, 63, has served as Chairman, Chief Executive Officer and
Secretary of Bob Evans Farms, Inc. (food products and restaurants) since 1971.
Mr. Evans is also a Director of Evans Enterprises, Inc., Motorists Mutual
Insurance Company and National City Corporation.
ROBERT W. MAHONEY
Chairman, Diebold, Incorporated
Director since 1995
Robert W. Mahoney, 63, has served as Chairman of Diebold, Incorporated
(manufacturer of financial self-service transaction systems and security
products) since April 1988. Mr. Mahoney served as Chief Executive Officer of
Diebold from April 1988 to November 1999 and President of Diebold from July 1993
to
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November 1996. Mr. Mahoney is also a Director of The Timken Company, is a
Trustee of Mount Union College, the Ohio Foundation of Independent Colleges, the
Professional Football Hall of Fame and Canton (Ohio) Junior Achievement, and is
a Member of the Stark (County, Ohio) Development Board and the Chamber of
Commerce Leadership Canton (Ohio) Advisory Board.
WILLIAM G. MITCHELL
Retired Vice Chairman, Centel Corporation
Director since 1979
William G. Mitchell, 69, prior to his retirement in May 1987, served as Vice
Chairman of Centel Corporation (independent telephone and electric properties)
since May 1986. Mr. Mitchell is also a Director of The Northern Trust Company,
Northern Trust Corporation and Peoples Energy Corporation.
A. MALACHI MIXON, III
Chairman and Chief Executive Officer, Invacare Corporation
Director since 1993
A. Malachi Mixon, III, 59, has served as Chief Executive Officer of Invacare
Corporation (manufacturer and distributor of home health care products) since
January 1980 and Chairman of Invacare since September 1983. Mr. Mixon served as
President of Invacare from January 1980 to November 1996. Mr. Mixon is also a
Director of The Lamson and Sessions Co. and NCS HealthCare, Inc., is Chairman of
The Cleveland Clinic Foundation and the Cleveland Institute of Music, and is a
Trustee of Case Western Reserve University.
CURTIS E. MOLL
Chairman and Chief Executive Officer, MTD Products, Inc.
Director since 1997
Curtis E. Moll, 60, has served as Chairman and Chief Executive Officer of MTD
Products, Inc. (manufacturer of outdoor power equipment and tools, dies and
stampings for the automotive industry) since October 1980. Mr. Moll is also a
Director of Shiloh Industries, Inc.
HELEN O. PETRAUSKAS
Vice President -- Environmental and Safety Engineering, Ford Motor Company
Director since 1993
Helen O. Petrauskas, 55, has served as Vice President -- Environmental and
Safety Engineering of Ford Motor Company (automobile manufacturing) since March
1983. Mrs. Petrauskas is also a Director of MCN Energy Inc., and is a Member of
the Advisory Board -- Center for Risk Analysis, Harvard School of Public Health
and a Member of the Board of Directors of the Environmental Law Institute.
JOSEPH M. SCAMINACE
President and Chief Operating Officer, Sherwin-Williams
Director since 1999
Joseph M. Scaminace, 46, has served as President and Chief Operating Officer of
Sherwin-Williams since October 1999. Mr. Scaminace served as President, Consumer
Group of Sherwin-Williams from July 1998 to October 1999, President & General
Manager, Coatings Division of Sherwin-Williams from June 1997 to July 1998, and
President & General Manager, Automotive Division of Sherwin-Williams from April
1994 to June 1997. Mr. Scaminace is also a Trustee of The Cleveland Clinic
Foundation, Marymount Health Care Systems and Womankind.
RICHARD K. SMUCKER
President, The J.M. Smucker Company
Director since 1991
Richard K. Smucker, 51, has served as President of The J.M. Smucker Company
(makers of food products) since January 1987. Mr. Smucker is also a Director of
The J.M. Smucker Company, International Multifoods Corporation and Wm. Wrigley
Jr. Company, and is a Trustee of the Musical Arts Association (The Cleveland
Orchestra).
COMPENSATION OF DIRECTORS
Currently, each director who is not a Sherwin-Williams employee receives an
annual retainer of $35,000, earned and payable monthly. In addition, each such
director receives $1,750 for each meeting of the Board of Directors or Committee
of the Board of Direc-
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tors that he or she attends, or $2,000 for each meeting of a Committee of the
Board of Directors that he or she chairs. Officers of Sherwin-Williams who also
serve as directors do not receive any compensation specifically for services as
a member of the Board of Directors or any Committee. Directors are permitted to
defer all or a portion of their fees under the Director Deferred Fee Plan.
Deferred fees may be invested in either a common stock account, a shadow stock
account or an interest bearing cash account.
In addition, directors who are not Sherwin-Williams employees may receive
stock options and restricted stock under the 1997 Stock Plan for Nonemployee
Directors. This plan was approved by the shareholders at the 1997 Annual
Meeting. During 1999, each nonemployee director received a grant of 4,000
options at an exercise price equal to the fair market value of common stock on
the date of grant. One third of the options become exercisable on each of the
first, second and third anniversary dates of the date of grant. No shares of
restricted stock were awarded to any nonemployee director during 1999.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 1999. Each director
attended at least 75% of the meetings of the Board of Directors and committees
on which he or she served.
The Board of Directors has established, among other committees, an Audit
Committee, a Board Composition Committee and a Compensation and Management
Development Committee. The functions and members of these Committees are as
follows:
AUDIT. The Audit Committee has the responsibility of reviewing the quality
and adequacy of Sherwin-Williams' accounting, financial and internal audit
policies, procedures and controls, and the quality and integrity of its
financial reports. The Committee recommends to the Board of Directors
independent public accountants to audit Sherwin-Williams' books, records and
accounts for the ensuing fiscal year. The Committee reviews all reports and
recommendations of the independent public accountants with respect to matters
within their area of responsibility and reports to the Board of Directors on the
scope and depth of the audit. In addition, the Committee has the responsibility
of reviewing Sherwin-Williams' standards and policies of proper business
conduct, including Sherwin-Williams' implementation of and compliance with such
standards and policies.
The Audit Committee met twice during 1999 and is currently composed of five
outside Directors: J. C. Boland, W. G. Mitchell, C. E. Moll, H. O. Petrauskas
and R. K. Smucker (Chairman).
BOARD COMPOSITION. The Board Composition Committee develops plans for the
composition of the Board of Directors. Matters considered by this Committee
include the size of the Board of Directors and the ratio of inside to outside
directors, as well as the skills and disciplines desired as represented by
individual directors. The Committee also is charged with the responsibility to
conduct searches for prospective members, interview candidates and make
selections and recommendations to the Board of Directors. The Committee has not
undertaken to consider nominees recommended by shareholders but has and may
continue to employ professional search firms to assist it in identifying
potential members of the Board of Directors with the desired skills and
disciplines.
The Board Composition Committee did not meet in 1999 and is currently
composed of three outside Directors: D. E. Collins (Chairman), W. G. Mitchell
and A. M. Mixon, III.
COMPENSATION AND MANAGEMENT DEVELOPMENT. The Compensation and Management
Development Committee establishes general policies on an annual basis for
changes in compensation for all key employees of Sherwin-Williams. The Committee
reviews and approves the compensation for the Chairman, Chief Executive Officer,
and the other executive officers and other key salaried employees. The Committee
also administers Sherwin-Williams' Management Incentive Plan, Executive Life
Insurance Plan, Executive Disability Income Plan, Deferred Compensation Savings
Plan, Key Management Deferred Compensation Plan, Retirement Equalization
Program, Pension
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Investment Plan Equalization Program and 1994 Stock Plan and recommends to the
Board of Directors for approval other types of incentive compensation and
similar plans.
The Compensation and Management Development Committee met three times
during 1999 and is currently composed of five outside Directors: D. E. Collins,
D. E. Evans, R. W. Mahoney, W. G. Mitchell (Chairman) and A. M. Mixon, III.
COMPENSATION COMMITTEE
INTERLOCKS AND
INSIDER PARTICIPATION
The following outside directors served on the Compensation and Management
Development Committee of Sherwin-Williams' Board of Directors during 1999: J. M.
Biggar, D. E. Collins, D. E. Evans, R. W. Mahoney, W. G. Mitchell and A. M.
Mixon, III. Mr. Breen, Chairman of Sherwin-Williams, serves on the Compensation
and Management Development Committee of the Board of Directors of Parker-
Hannifin Corporation, of which Mr. Collins is Chairman, President and Chief
Executive Officer.
During 1999, Sherwin-Williams paid to Accuspray, Inc. approximately
$1,200,000 for products purchased by Sherwin-Williams. Mr. Mixon is a minority
shareholder of Accuspray. Sherwin-Williams expects to make purchases from
Accuspray in 2000.
COMPENSATION AND MANAGEMENT DEVELOPMENT
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
MANAGEMENT COMPENSATION PROGRAM. Sherwin-Williams' management compensation
program is administered by the Compensation and Management Development Committee
of the Board of Directors. The Committee is composed of five outside directors
and reports to the Board of Directors on all compensation matters regarding
certain members of Sherwin-Williams' management, including the executive
officers. The executive officers are identified in Sherwin-Williams' 1999 Annual
Report to Shareholders. The program is designed to attract, motivate and retain
key executives and to establish and maintain a performance and
achievement-oriented environment. The program provides for (a) competitive base
salary levels which reflect, in part, individual performance, (b) additional
annual incentive compensation based on the achievement of financial and other
performance goals, and (c) long-term stock-based incentive opportunities. The
program consists of both cash and equity-based compensation.
The annual base salary, annual incentive compensation and long-term
incentive opportunities are intended to be competitive with market base salary
and incentive compensation opportunities. The Committee utilizes data from
various commercially available executive compensation surveys in order to
identify, on an annual basis, the base salary and incentive opportunities
available at manufacturing companies with comparable sales. The Committee
believes that these companies likely compete with Sherwin-Williams for executive
talent. These companies may include some of the companies comprising the peer
group identified in the performance graphs if such companies participated in one
or more of the compensation surveys. For the various components of compensation,
the Committee uses the median compensation paid to executive officers holding
equivalent positions or having similar responsibilities in manufacturing
companies with comparable sales. The amount of compensation paid to the
executive officers is not based upon the cumulative total return on
Sherwin-Williams common stock as reflected in either of the performance graphs.
BASE SALARY. Annual cash compensation consists, in part, of a base salary.
With regard to base salary, a salary range for each executive officer is
approved on the basis of such person's position and level of responsibility by
using the compensation surveys, with the median market base salary from the
surveys approximating the midpoint of the range. Once a range is formulated,
salary levels are based upon the executive officer's performance and, to a
lesser extent, tenure in the particular position. With regard to performance,
the executive officer's performance for the prior year is reviewed based on
performance criteria (both quantitative and qualitative) which vary by
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executive officer and which usually relate to the particular business unit or
function for which such person has responsibility. The base salary of each
executive officer is reviewed and approved annually.
ANNUAL INCENTIVE COMPENSATION. Annual cash compensation also consists of
the opportunity to earn additional compensation under the Management Incentive
Plan. All of the executive officers participate in the Management Incentive
Plan. In determining the amount of annual incentive compensation paid to any of
the executive officers, great emphasis is placed on establishing incentive
opportunities which are directly linked with Sherwin-Williams' performance and
the maximization of shareholder value. The Committee establishes a threshold
goal of increased company earnings, and 75% of this earnings increase must be
met before incentive compensation is paid, subject to adjustments for
non-recurring or unusual items and awards for individual performance.
Accordingly, this earnings goal requires Sherwin-Williams to improve its
earnings performance before incentive compensation is paid (except as provided
in the foregoing sentence). Sherwin-Williams exceeded 75% of the earnings goal
established for 1999.
Annual incentive compensation awarded to an executive officer is also
determined by using the median incentive compensation (identified from the
compensation surveys), which is generally equivalent to the amount an executive
officer could receive under the Management Incentive Plan if a 100% average of
the Sherwin-Williams' and the individual's goals are attained. Under the
Management Incentive Plan, annual bonus awards for the executive officers range
from zero, if less than a 75% average of the stated goals are reached, to
between 45% and 75% of the executive officer's base salary (depending upon the
executive officer's position) if a 100% average of the stated goals are
attained. In the event Sherwin-Williams and an executive officer exceed a 100%
average of the stated goals, incentive compensation can be awarded up to an
aggregate maximum amount of 70% to 110% of the executive officer's base salary
(depending upon position). Consequently, incentive compensation paid to an
executive officer in any year may exceed the median incentive compensation
determined by the compensation surveys.
Decisions on annual incentive compensation awarded to an executive officer
are based upon financial performance goals, such as earnings per share and the
return on stockholders' equity, for each Management Incentive Plan year, and the
accomplishment by the executive officer of individual performance goals.
Individual performance goals vary by executive officer and usually relate to the
particular business unit or function for which such person has responsibility.
The financial performance goals are generally weighted more heavily.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentive compensation may be
awarded to any one or all of the executive officers under the 1994 Stock Plan.
All of the executive officers participate in the 1994 Stock Plan. Under the 1994
Stock Plan, the Committee may grant stock options to the executive officers
based on competitive market practices. Competitive market practices are
determined by the compensation surveys mentioned above, and the Committee grants
stock options based upon the median market value of the underlying stock
relating to stock options that comparable companies have been granting to their
executive officers. The specific number of stock options granted to an executive
officer is based upon the executive officer's position and level of
responsibility. The option exercise price is equal to the fair market value of
Sherwin-Williams common stock on the date options are granted. Stock options
typically vest at the rate of one-third per year for three years (beginning one
year from the date of grant) and expire ten years from the date of grant.
Awards of restricted stock under the 1994 Stock Plan, which are subject to
a "substantial risk of forfeiture", may be granted to the executive officers.
The granting of restricted stock is determined in the same manner that the
granting of stock options is determined. If granted, shares of restricted stock
vest in accordance with performance and time restrictions. The number of shares
of restricted stock which may actually vest at the end of the restriction period
depends upon Sherwin-Williams' relative return on average shareholder equity
versus a group of peer companies. With
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regard to outstanding shares of restricted stock granted prior to December 31,
1996, the companies that comprise this group of peer companies are the same
companies that comprise the peer group identified in the performance graphs
(except for one company for which sufficient financial data is not available to
calculate cumulative total return). For shares of restricted stock granted after
December 31, 1996, the restricted stock peer group also does not include four
companies which have been acquired by other companies and two companies which
have filed for bankruptcy. Depending on Sherwin-Williams' performance at the end
of the restriction period, from 0% to 100% of the shares of restricted stock may
vest. The restriction period is typically four years from the date of grant of
the restricted stock. The amount of outstanding stock options and shares of
restricted stock generally is not considered by the Committee in making awards
of stock options and restricted stock.
CHIEF EXECUTIVE OFFICER COMPENSATION. Effective October 1999, Christopher
M. Connor, previously President of the Paint Stores Group, succeeded John G.
Breen as Chief Executive Officer. Mr. Connor is also Vice-Chairman. Mr. Breen
continues to serve as Chairman until his expected retirement in April 2000. The
compensation of Mr. Connor and Mr. Breen during 1999 consisted of the same
elements as the other executive officers - base salary, annual incentive
compensation and long-term incentive compensation.
The Committee determined Messrs. Breen's and Connor's compensation for 1999
based on a number of factors and criteria. Their base salary range was
determined using the median base salary of chief executive officers for
manufacturing companies having comparable sales as Sherwin-Williams. Mr. Breen's
base salary within the range was established based upon a review by the
Committee of Mr. Breen's 1998 performance (which was measured, in part, by
Sherwin-Williams' 1998 performance) and his tenure with Sherwin-Williams. For
1999, the average salary increase given generally to Sherwin-Williams' salaried
employees was 4.0%, and the range of potential increases was 0% to 8.5%. Mr.
Breen received a base salary increase of 5.0% in January 1999, bringing his base
salary to $1,010,438. Mr. Breen's increase was based primarily upon the
Committee's evaluation of Mr. Breen's 1998 performance relating to the financial
and other performance measures set forth in the next paragraph and his tenure
with Sherwin-Williams. When Mr. Connor was named Chief Executive Officer, his
base salary was set within the range at $650,000.
In addition, Mr. Breen earned a bonus of $1,100,000 and Mr. Connor earned a
bonus of $510,000 in 1999 as annual incentive compensation under the Management
Incentive Plan. The amount of Mr. Breen's bonus was based primarily upon
Sherwin-Williams' results for 1999 financial performance goals relating to
earnings per share, return on stockholders' equity, return on sales, cash flow
and working capital as a percent of sales. Mr. Breen's achievement of certain
other 1999 goals relating to management succession planning and acquisition
strategies were also factors, but were weighted less heavily. Mr. Connor's bonus
was based upon Mr. Connor's achievement of his goals as President of the Paint
Stores Group.
In February and October 1999, Mr. Breen was awarded 170,000 and 250,000
stock options, and Mr. Connor was awarded 90,000 and 300,000 stock options. A
portion of the October 1999 grant was designed to replace the grant which
otherwise would have been made in February 2000. In 1999, Mr. Breen was awarded
40,000 shares of restricted stock, and Mr. Connor was awarded 35,000 shares of
restricted stock. In determining the number of stock options and shares of
restricted stock awarded to Messrs. Breen and Connor, the Committee also
identified the median market value of the underlying shares relating to stock
options and of shares of restricted stock which comparable companies granted to
their chief executive officers. The amount of outstanding stock options and
shares of restricted stock generally is not considered by the Committee in
making awards of stock options and restricted stock.
POLICY ON DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal
Revenue Code generally provides that certain compensation in excess of $1
million per year paid to a company's chief executive officer and any of its
8
<PAGE> 11
four other highest paid executive officers is not deductible to a company unless
the compensation qualifies for an exception. This deduction limit generally
applies only to compensation that could otherwise be deducted by a company in a
taxable year. For 1999, the Committee does not expect that Section 162(m) will
limit Sherwin-Williams' deductibility of compensation paid to any of such
executive officers.
Section 162(m) provides an exception to the deductibility limit for
performance-based compensation if certain procedural requirements, including
shareholder approval of the material terms of the performance goal, are
satisfied. The Committee believes that grants of options, stock appreciation
rights and restricted stock under the 1994 Stock Plan qualify for full
deductibility under Section 162(m). Compensation paid under the Management
Incentive Plan does not qualify for the exemption for performance-based
compensation. At this time, based upon Sherwin-Williams' current compensation
structure, the Committee believes it is in the best interests of
Sherwin-Williams and its shareholders for the Committee to retain flexibility in
awarding incentive compensation under the Management Incentive Plan which does
not qualify for the exemption for performance-based compensation. The Committee
will continue to review and evaluate, as necessary, the impact of Section 162(m)
on Sherwin-Williams' compensation programs.
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
W.G. Mitchell, Chairman
D.E. Collins
D.E. Evans
R.W. Mahoney
A.M. Mixon, III
9
<PAGE> 12
PERFORMANCE GRAPHS
The following graphs compare the cumulative total shareholder return on
Sherwin-Williams common stock with the cumulative total return of the companies
listed on the Standard & Poor's 500 Stock Index and a peer group of companies
selected on a line-of-business basis. The "Peer Group" is comprised of the
following companies: Akzo Nobel nv, Armstrong World Industries, Inc., BASF
Corporation, Ferro Corporation, H.B. Fuller Company, Genuine Parts Company, Grow
Group, Inc.*, Guardsman Products, Inc.*, Hechinger Company*, The Home Depot,
Inc., Imperial Chemicals Industries PLC, Lilly Industries, Inc., Lowe's
Companies, Inc., Masco Corporation, Morton International, Inc.*, Newell Co., PPG
Industries, Inc., Pratt & Lambert United, Inc.*, RPM, Inc., Standard Brands
Paint Company*, The Stanley Works, USG Corporation and The Valspar Corporation.
An asterisk indicates that the company is included in the performance graphs
through the last day it was publicly traded.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SHERWIN-WILLIAMS, S&P 500 INDEX AND THE PEER GROUP
[COMPARISON OF FIVE YEAR CUMULATIVE RETURN GRAPH]
<TABLE>
<CAPTION>
SHERWIN-WILLIAMS S&P 500 PEER GROUP
---------------- ------- ----------
<S> <C> <C> <C>
'1994' $100 $100 $100
'1995' $124 $138 $112
'1996' $173 $169 $139
'1997' $174 $226 $186
'1998' $187 $290 $250
'1999' $137 $351 $327
</TABLE>
Assumes $100 invested on December 31, 1994 in Sherwin-Williams common stock, the
S&P 500 Index and the Peer Group, including reinvestment of dividends, through
December 31, 1999.
10
<PAGE> 13
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN
AMONG SHERWIN-WILLIAMS, S&P 500 INDEX AND THE PEER GROUP
[COMPARISON OF TEN YEAR CUMULATIVE RETURN GRAPH]
<TABLE>
<CAPTION>
SHERWIN-WILLIAMS S&P 500 PEER GROUP
---------------- ------- ----------
<S> <C> <C> <C>
'1989' $100 $100 $100
'1990' $111 $ 97 $ 92
'1991' $162 $126 $137
'1992' $188 $136 $153
'1993' $223 $150 $183
'1994' $212 $152 $188
'1995' $264 $209 $212
'1996' $368 $257 $261
'1997' $370 $342 $350
'1998' $397 $440 $471
'1999' $290 $533 $615
</TABLE>
Assumes $100 invested on December 31, 1989 in Sherwin-Williams common stock, the
S&P 500 Index and the Peer Group, including reinvestment of dividends, through
December 31, 1999.
11
<PAGE> 14
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------- -----------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND AWARD(S) OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1,2) SARS (#) SATION($)(3)
------------------ ---- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. G. Breen(4) 1999 1,010,438 1,100,000 1,015,000 420,000 339,853
Chairman 1998 962,312 740,000 -0- 130,000 275,097
1997 905,616 740,000 1,107,500 150,000 294,399
C. M. Connor(4) 1999 467,248 510,000 779,375 390,000 123,157
Vice Chairman and 1998 364,141 325,000 -0- 39,000 92,725
Chief Executive Officer 1997 274,085 250,000 276,875 50,000 66,566
J. M. Scaminace 1999 449,941 430,000 580,000 290,000 121,130
President and Chief 1998 365,851 275,000 -0- 39,000 97,275
Operating Officer 1997 299,480 235,000 276,875 50,000 73,065
L. J. Pitorak 1999 377,741 306,000 253,750 112,000 103,427
Senior Vice President 1998 351,832 275,000 -0- 39,000 101,874
-- Finance, Treasurer 1997 319,764 260,000 276,875 50,000 74,309
and Chief Financial Officer
L. E. Stellato 1999 291,652 240,000 177,625 55,000 88,534
Vice President, General 1998 277,742 220,000 -0- 17,000 81,572
Counsel and Secretary 1997 266,604 225,000 276,875 24,000 72,147
C. G. Ivy 1999 268,900 220,000 177,625 55,000 72,988
Vice President -- 1998 255,969 200,000 -0- 17,000 74,085
Corporate Planning 1997 244,578 200,000 276,875 24,000 73,426
& Development
</TABLE>
- ---------------
(1) The value of restricted stock indicated in the table is equal to the number
of shares of restricted stock multiplied by the closing price of common
stock on the date of grant. At December 31, 1999, the number and value
(calculated by using the closing price of common stock on December 31, 1999)
of shares of restricted stock held by Messrs. Breen, Connor, Scaminace,
Pitorak, Stellato and Ivy were 80,000 shares with a value of $1,680,000,
45,000 shares with a value of $945,000, 35,000 shares with a value of
$735,000, 20,000 shares with a value of $420,000, 17,000 shares with a value
of $357,000, and 17,000 shares with a value of $357,000, respectively. The
number of shares and values indicated are not necessarily indicative of the
actual number of shares and values which may be realized by the named
executive officers.
(2) Dividends are paid on all restricted stock at the same rate as paid on
Sherwin-Williams common stock.
(3) The amounts disclosed in this column for 1999 include: (a) company
contributions in the amount of $8,000 for each of Messrs. Connor, Scaminace,
Pitorak, Stellato and Ivy under the Pension Investment Plan, a defined
contribution plan (Mr. Breen does not participate in this plan); (b) company
contributions in the amounts of $22,707, $22,043, $22,592, $17,137 and
$14,798 for Messrs. Connor, Scaminace, Pitorak, Stellato and Ivy,
respectively, under the Pension Investment Plan Equalization Program, a
defined contribution plan (Mr. Breen does not participate in this plan); (c)
company contributions in the amount of $6,720 for each of Messrs. Breen,
Connor, Scaminace, Pitorak, Stellato and Ivy under the Employee Stock
Purchase and Savings Plan, a defined contribution plan; (d) company
contributions in the amounts of $118,737, $44,121, $41,254, $39,185, $30,169
and $26,900 for Messrs. Breen, Connor, Scaminace, Pitorak, Stellato and Ivy,
respectively, under the Deferred Compensation Savings Plan, a defined
contribution plan; (e) the dollar value of compensatory split-dollar life
insurance benefits in the amounts of $49,207, $39,161, $40,639, $24,177,
$24,404 and $13,948 for Messrs. Breen, Connor, Scaminace, Pitorak, Stellato
and Ivy, respectively, under the Executive Life Insurance Plan; (f) the
dollar value of additional compensatory split-dollar life insurance benefits
in the amount of $161,573 for Mr. Breen (such policy was purchased by
Sherwin-Williams in 1996 and replaces Mr. Breen's benefits accruing under
the Retirement Equalization Program after January 1, 1996; see "Retirement
Plan"); and (g) payments by Sherwin-Williams in the amounts of $3,616,
$2,448, $2,474, $2,753, $2,104 and $2,622 for Messrs. Breen, Connor,
Scaminace, Pitorak, Stellato and Ivy, respectively, related to premiums
under the Executive Disability Income Plan.
(4) Effective October 1999, Mr. Connor succeeded Mr. Breen as Chief Executive
Officer.
12
<PAGE> 15
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/ POTENTIAL REALIZABLE VALUE
UNDERLYING SARS AT ASSUMED ANNUAL RATES
OPTIONS/ GRANTED TO OF STOCK PRICE APPRECIATION
SARS EMPLOYEES EXERCISE OR FOR OPTION TERM(4)
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------------
(#)(1,2) YEAR ($/SH)(3) DATE 5% ($) 10% ($)
NAME ---------- ---------- ----------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. G. Breen 170,000 3.24 25.0625 2/02/09 2,679,484 6,790,339
250,000 4.76 20.25 10/21/09 3,182,677 8,064,893
C. M. Connor 90,000 1.71 25.0625 2/02/09 1,418,550 3,594,885
300,000 5.71 20.25 10/21/09 3,819,212 9,677,871
J. M. Scaminace 90,000 1.71 25.0625 2/02/09 1,418,550 3,594,885
200,000 3.81 20.25 10/21/09 2,546,141 6,451,914
L. J. Pitorak 50,000 .95 25.0625 2/02/09 788,084 1,997,159
62,000 1.18 20.25 10/21/09 789,304 2,000,093
L. E. Stellato 25,000 .48 25.0625 2/02/09 394,042 998,579
30,000 .57 20.25 10/21/09 381,921 967,787
C. G. Ivy 25,000 .48 25.0625 2/02/09 394,042 998,579
30,000 .57 20.25 10/21/09 381,921 967,787
Value realizable for all
shareholders(5) N/A N/A N/A N/A 2,689,102,412 6,814,752,982
2,110,090,781 5,347,415,208
Value realizable for the named
executive officers as a % of
value realizable for all
shareholders N/A N/A N/A N/A 0.263% 0.263%
0.526% 0.526%
</TABLE>
- ---------------
(1) Generally, one-third of the options granted are exercisable on each of the
first, second and third anniversary dates of the grant.
(2) All options granted become immediately exercisable, in full, upon (a) a
filing pursuant to any federal or state law in connection with any tender
offer for shares of common stock (other than a tender offer by
Sherwin-Williams) or (b) the signing of any agreement for the merger of
Sherwin-Williams into, or its consolidation with, another corporation or for
the sale of substantially all of the assets of Sherwin-Williams to another
corporation; which tender offer, merger, consolidation or sale, if
consummated, would, in the opinion of the Board of Directors, likely result
in a change in control of Sherwin-Williams. In the event any such tender
offer, merger, consolidation or sale is abandoned or, in the opinion of the
Board of Directors, is not likely to be consummated, the Board of Directors
may nullify the effect of the immediately preceding sentence and reinstate
the provisions providing for accrual in installments, without prejudice to
any exercise of options that may have occurred prior to such nullification.
(3) The exercise price is equal to the fair market value of common stock on the
date of grant.
(4) The amounts disclosed in these columns, which reflect appreciation of the
price of common stock at 5% and 10% annual rates over the ten year terms of
the options, are not intended to be a forecast of the price of common stock
and are not necessarily indicative of the actual values which may be
realized by the named executive officers or the shareholders. These assumed
rates of 5% and 10% would result in the price of common stock increasing
from $25.0625 per share to approximately $40.82 per share and $65.01 per
share, respectively, and from $20.25 per share to approximately $32.99 per
share and $52.52 per share, respectively.
(5) The amounts disclosed reflect appreciation of the price of common stock at
5% and 10% annual rates over a ten year period for all shareholders based on
the total number of shares of common stock outstanding on February 3, 1999
and October 22, 1999, respectively, (the dates on which the options set
forth in this table were granted) and assuming a per share price equal to
the exercise price of such options.
13
<PAGE> 16
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE OPTIONS/SARS AT FY-END (#) AT FY-END ($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. G. Breen -0- -0- 192,667 556,667 -0- 93,750
C. M. Connor -0- -0- 74,491 432,667 61,051 112,500
J. M. Scaminace -0- -0- 111,733 332,667 252,887 75,000
L. J. Pitorak -0- -0- 67,000 154,668 31,398 23,250
L. E. Stellato -0- -0- 101,266 74,334 518,774 11,250
C. G. Ivy -0- -0- 86,866 74,334 357,974 11,250
</TABLE>
- ---------------
(1) The value realized on the exercise of options is based on the difference
between the exercise price and the fair market value of common stock on the
date of exercise.
(2) The value of unexercised in-the-money options is based on the difference
between the exercise price and the fair market value of common stock on
December 31, 1999.
RETIREMENT PLAN
The Salaried Employees' Retirement Plan provides retirement benefits for
some salaried employees hired on or before December 31, 1983. Normal monthly
benefits equal one-twelfth of one percent of the average annual earnings times
the number of years of credited service up to a maximum of forty years. At
December 31, 1999, the maximum annual benefit under the provisions of the
Retirement Plan is $130,000 due to limitations imposed by the Internal Revenue
Code. Mr. Breen is the only executive officer named in the Summary Compensation
Table who participates in the Retirement Plan.
Sherwin-Williams has established a Retirement Equalization Program to
provide eligible employees with the benefits they would have received under the
Retirement Plan but for the maximum limitations imposed by the Internal Revenue
Code. Mr. Breen also participates in the Retirement Equalization Program.
In connection with Sherwin-Williams' purchase of an additional split-dollar
life insurance policy for Mr. Breen in 1996 (as mentioned in Footnote 3 of the
Summary Compensation Table), Mr. Breen agreed to waive all future benefits
accruing under the Retirement Equalization Program after January 1, 1996. At
December 31, 1999, the value of such benefits waived (valued in the form of a
single life annuity) was $147,648.
The following Retirement Plan Table sets forth the estimated aggregate
annual normal benefits payable under the Retirement Plan and the Retirement
Equalization Program commencing at age 65 in the form of a single life annuity.
14
<PAGE> 17
RETIREMENT PLAN TABLE(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------
REMUNERATION 15 20 25 30
- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$1,300,000 195,000 260,000 325,000 390,000
1,400,000 210,000 280,000 350,000 420,000
1,500,000 225,000 300,000 375,000 450,000
1,600,000 240,000 320,000 400,000 480,000
1,700,000 255,000 340,000 425,000 510,000
1,800,000 270,000 360,000 450,000 540,000
1,900,000 285,000 380,000 475,000 570,000
2,000,000 300,000 400,000 500,000 600,000
2,100,000 315,000 420,000 525,000 630,000
</TABLE>
- ---------------
(1) Benefits are based upon average annual earnings (salary and bonus) for the
highest five consecutive years out of the last ten years of employment with
Sherwin-Williams. For Mr. Breen, this average amount equaled $1,675,285 at
December 31, 1999. Mr. Breen was credited with twenty-one years of service
under the Retirement Plan at December 31, 1999. Benefits may be adjusted for
a surviving spouse's pension or other options under the Retirement Plan.
These benefits reflect the applicable deduction for social security.
SUPPLEMENTAL RETIREMENT BENEFITS. Pursuant to a provision of Mr. Breen's
employment contract, Sherwin-Williams also will pay to Mr. Breen, upon
retirement, supplemental benefits so that his total retirement benefits will not
be less than the amount of benefits he would have received under the Gould Inc.
Salaried Retirement Plan if Mr. Breen had continued to be employed by Gould Inc.
(Mr. Breen's previous employer) until his retirement and had received
compensation in the amount and form paid to him by Sherwin-Williams. The
following Supplemental Benefit Table sets forth the estimated aggregate annual
supplemental benefits payable to Mr. Breen, under this provision of his
employment contract, commencing at age 65 in the form of a single life annuity.
The total amount of benefits payable to Mr. Breen will be equal to the
amount determined in accordance with the Retirement Plan Table set forth above,
plus the amount determined in accordance with the Supplemental Benefit Table set
forth below, minus $147,648 (which is the value of the benefits waived by Mr.
Breen as described above).
SUPPLEMENTAL BENEFIT TABLE(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------
REMUNERATION 15 20 25 30
- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$1,300,000 367,769 302,769 237,769 172,769
1,400,000 397,769 327,769 257,769 187,769
1,500,000 427,769 352,769 277,769 202,769
1,600,000 457,769 377,769 297,769 217,769
1,700,000 487,769 402,769 317,769 232,769
1,800,000 517,769 427,769 337,769 247,769
1,900,000 547,769 452,769 357,769 262,769
2,000,000 577,769 477,769 377,769 277,769
2,100,000 607,769 502,769 397,769 292,769
</TABLE>
- ---------------
(1) These supplemental benefits are based upon the average annual salary and
bonus paid to Mr. Breen for the highest five years out of the last fifteen
years of employment with Sherwin-Williams. For Mr. Breen, this average
amount equaled $1,675,285 at December 31, 1999. Mr. Breen was credited with
twenty-one years of service at December 31, 1999 for purposes of determining
these supplemental benefits. These benefits reflect the applicable deduction
for social security.
15
<PAGE> 18
EMPLOYMENT CONTRACTS,
TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT CONTRACTS. Messrs. Breen and Ivy have employment contracts with
Sherwin-Williams. In addition to their basic compensation, incentive
compensation, and participation in the employee benefit plans and the 1994 Stock
Plan, each is entitled to receive, in the event Sherwin-Williams terminates his
employment for any reason, except in the event termination is the result of a
change of control of Sherwin-Williams, an amount equal to one and one-half times
the sum of his annual salary and any bonus paid or payable to him for the
preceding year. In the event termination of employment is the result of a change
of control of Sherwin-Williams, Mr. Breen is entitled to receive, at the time of
his termination of employment, a cash amount equal to two times his annual
assured compensation, and Mr. Ivy is entitled to receive, at the time of his
termination of employment, an amount equal to his annual assured compensation.
Annual assured compensation is defined as the sum of (a) twenty-six times his
highest regular bi-weekly salary in effect within the three year period
preceding termination, plus (b) the greater of the highest bonus paid or payable
within the three year period preceding termination or the bonus he would have
received for the year of termination had he reached 100% of any stated goals (as
explained in the Compensation and Management Development Committee Report on
Executive Compensation). Assuming a termination date of February 29, 2000 as a
result of a change of control, the cash amounts payable under these contracts
would have been approximately $4,220,876 and $501,216 for Messrs. Breen and Ivy,
respectively. Amounts received under the employment contracts due to a
termination of employment resulting from a change of control will be offset
against the amounts payable under the severance pay agreements described below.
SEVERANCE PAY AGREEMENTS. To ensure continuity and the continued
dedication of key executives during any period of uncertainty caused by the
possible threat of a takeover, Sherwin-Williams has entered into severance pay
agreements with key executives, including each of the executive officers named
in the Summary Compensation Table. In the event there is a change of control of
Sherwin-Williams and the employment of the executive terminates under certain
conditions described in the agreements at any time during the two year period
following a change of control, the executive will receive an agreed upon amount
of severance pay. For Messrs. Breen and Ivy, the amounts payable to them under
their employment contracts will be offset against the amounts payable to them
under their severance pay agreements.
For each of Messrs. Breen, Connor and Scaminace, the severance pay
agreements provide that upon termination of employment, whether voluntary or
involuntary, unless the termination is because of death or by Sherwin-Williams
for cause, each will receive, in addition to accrued salary, bonus and vacation
pay, a lump sum cash amount equal to four times the sum of (a) twenty-six times
his highest regular bi-weekly compensation in effect within the three year
period preceding termination, plus (b) the greater of his highest bonus received
within the three year period preceding termination or the bonus he would have
received for the year of termination had he reached 100% of any stated goals (as
explained in the Compensation and Management Development Committee Report on
Executive Compensation). In addition, each will continue to participate in
Sherwin-Williams' employee welfare benefit plans and other benefit arrangements
for a period of four years following termination, and receive special retirement
benefits so that the total retirement benefits received will be equal to the
retirement benefits which would have been received had his employment with
Sherwin-Williams continued during the four year period following termination.
Each will also receive an additional payment equal to the amount of any excise
tax imposed on him by Section 4999 of the Internal Revenue Code and any taxes,
interest or penalties incurred with respect thereto. Assuming a termination date
of February 29, 2000, the lump sum cash amounts payable under the foregoing
provisions of the severance pay agreements (including any amount relating to the
excise tax described above) would have been approximately $13,154,936,
$7,622,018 and $6,463,766 for Messrs. Breen, Connor and Scaminace, respectively.
16
<PAGE> 19
For each of Messrs. Pitorak, Stellato and Ivy the severance pay agreements
provide that upon termination of employment for any reason (including his right
to terminate his employment for any reason during the thirty day period
immediately following the first anniversary date of a change of control) other
than death, disability, by Sherwin-Williams for cause or by the executive for
other than good reason, each will receive, in addition to accrued salary, bonus
and vacation pay, a lump sum cash amount equal to three times the sum of (a)
twenty-six times his highest regular bi-weekly compensation in effect within the
three year period preceding termination, plus (b) the greater of his highest
bonus received within the three year period preceding termination or the bonus
he would have received for the year of termination had he reached 100% of any
stated goals (as explained in the Compensation and Management Development
Committee Report on Executive Compensation). In addition, each will continue to
participate in Sherwin-Williams' employee welfare benefit plans and other
benefit arrangements for a period of three years following termination, and
receive special retirement benefits so that the total retirement benefits
received will be equal to the retirement benefits which would have been received
had his employment with Sherwin-Williams continued during the three year period
following termination. Each will also receive an additional payment equal to the
amount of any excise tax imposed on him by Section 4999 of the Internal Revenue
Code and any taxes, interest or penalties incurred with respect thereto.
Assuming a termination date of February 29, 2000, the lump sum cash amounts
payable under the foregoing provisions of the severance pay agreements
(including any amount relating to the excise tax described above) would have
been approximately $2,136,420, $2,491,290 and $1,503,648 for Messrs. Pitorak,
Stellato and Ivy, respectively.
The salary and other benefits provided by the severance pay agreements will
be payable either from an escrow fund established by Sherwin-Williams with a
national banking institution or from Sherwin-Williams' general funds.
Sherwin-Williams has agreed to indemnify each executive for any legal expense
incurred in the enforcement of his rights under the severance pay agreements.
ESTATE PROTECTION PLAN TRUST. In connection with Sherwin-Williams'
purchase of the additional split-dollar life insurance policy for Mr. Breen in
1996, Sherwin-Williams established a rabbi trust for the benefit of Mr. Breen.
Upon a change in control or a potential change in control of Sherwin-Williams,
Sherwin-Williams is required to fund the trust in an amount equal to
Sherwin-Williams' entire interest in the cash value of the life insurance
policy, plus an amount sufficient to pay future premiums for the policy.
17
<PAGE> 20
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as to each director and nominee, each
executive officer named in the Summary Compensation Table and all directors and
executive officers as a group, information regarding the amount and nature of
shares of common stock beneficially owned and the amount of shadow stock units
owned at December 31, 1999. All of the directors and executive officers have
sole voting and investment power over the shares of common stock listed or share
voting and investment power with his or her spouse, except as otherwise provided
below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE AMOUNT OF
OF COMMON STOCK PERCENT OF SHADOW STOCK
BENEFICIALLY COMMON STOCK UNITS
NAME OF BENEFICIAL OWNER OWNED(1,2,3) BENEFICIALLY OWNED OWNED(4)
------------------------ ----------------- ------------------ ------------
<S> <C> <C> <C>
J. C. Boland 2,332 * 2,000
J. G. Breen 1,196,374 * 165,928
D. E. Collins 11,332 * 5,907
C. M. Connor 217,029 * 14,218
D. E. Evans 7,232 * 0
C. G. Ivy 329,443 * 17,258
R. W. Mahoney 8,332 * 0
W. G. Mitchell 11,096 * 0
A. M. Mixon, III 13,332 * 11,679
C. E. Moll(5) 10,402 * 0
H. O. Petrauskas 6,650 * 2,912
L. J. Pitorak 163,016 * 16,841
J. M. Scaminace 226,135 * 17,168
R. K. Smucker 9,303 * 0
L. E. Stellato 164,584 * 15,855
All directors and executive 2,681,031 1.62% 295,590
officers as a group
</TABLE>
- ---------------
*Represents beneficial ownership of less than 1% of the total number of shares
of common stock outstanding.
(1) The amounts listed include shares of common stock held under plans offered
by Sherwin-Williams for which the directors and executive officers have the
right to direct the vote, including the following number of shares under the
Employee Stock Purchase and Savings Plan: Mr. Breen, 385,000; Mr. Connor,
35,329; Mr. Scaminace, 24,488; Mr. Pitorak, 15,339; Mr. Stellato, 20,060;
Mr. Ivy 139,084; and all executive officers as a group, 680,923.
(2) The amounts listed include the following number of shares of common stock
owned by immediate family members of the directors and executive officers,
for which each such person disclaims beneficial ownership: Mr. Ivy, 21,038;
Mr. Moll, 540; and all directors and executive officers as a group, 21,578.
(3) The amounts listed include the following number of shares of common stock
for which the directors and executive officers have the right to acquire
beneficial ownership, within sixty days from December 31, 1999, through the
exercise of stock options: Mr. Boland, 1,332; Mr. Breen, 342,666; Mr.
Collins, 3,332; Mr. Connor, 125,491; Mr. Evans, 2,666; Mr. Ivy, 108,866; Mr.
Mahoney, 3,332; Mr. Mitchell, 3,332; Mr. Mixon, 3,332; Mr. Moll, 3,332; Ms.
Petrauskas, 3,332; Mr. Pitorak, 113,334; Mr. Scaminace, 162,733; Mr.
Smucker, 3,332; Mr. Stellato, 123,266; and all directors and executive
officers as a group, 1,197,173.
(4) Shadow stock units are owned by outside directors under the Director
Deferred Fee Plan, whereby outside directors may defer payment of all or a
portion of their directors' fees into a shadow stock account. Shadow stock
units are owned by executive officers under the Deferred Compensation
Savings Plan and Key Management Deferred Compensation Savings Plan, whereby
eligible employees may defer payment of a portion of such employee's
compensation into a shadow stock account. The value of shadow stock units
fluctuates according to the market value of common stock. Directors and
executive officers have no voting rights associated with shadow stock units,
and such ownership does not result in any beneficial ownership of common
stock.
(5) Includes 2,000 shares owned by the MTD Products, Inc. pension fund, of which
Mr. Moll is a trustee.
18
<PAGE> 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as to each beneficial owner of more than
five percent of Sherwin-Williams common stock, information regarding shares of
common stock owned by each at December 31, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------------ -------------------- ----------
<S> <C> <C>
AMVESCAP PLC(1)
11 Devonshire Square 11,153,412(1) 6.72%
London, England EC2M 4YR
The Sherwin-Williams Company
Employee Stock Purchase
and Savings Plan 24,884,733(2) 15.04%
101 Prospect Avenue, N.W.
Cleveland, Ohio 44115
</TABLE>
- ---------------
(1) AMVESCAP PLC has shared voting and dispositive power over all 11,153,412
shares with its subsidiaries, AVZ, Inc., AIM Management Group Inc., AMVESCAP
Group Services, Inc., INVESCO, Inc., INVESCO North American Holdings, Inc.,
INVESCO Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO
Management & Research, Inc., INVESCO Realty Advisers, Inc. and INVESCO (NY)
Asset Management, Inc. These parties hold such shares on behalf of other
persons who have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of such shares. This
information is based upon a Schedule 13G dated February 3, 2000.
(2) Shares owned pursuant to the Employee Stock Purchase and Savings Plan are
voted by the trustee in accordance with written instructions of plan
participants. If no instructions are received by the trustee, the trustee
votes such shares (along with any unallocated shares held in the plan) in
the same proportion as it votes those shares for which it receives proper
instructions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and executive officers, and persons owning more than ten percent of a registered
class of Sherwin-Williams' equity securities, to file reports of ownership and
changes in ownership of these equity securities with the Securities and Exchange
Commission and the New York Stock Exchange. To Sherwin-Williams' knowledge,
based solely on the information furnished to Sherwin-Williams and written
representations by such persons, all of the directors and executive officers
complied with their respective filing requirements in 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sherwin-Williams provided an interest free loan during 1999 in the amount
of $160,200 to John G. Morikis to facilitate his relocation to Cleveland in
connection with his promotion to President of the Paint Stores Group.
Please also refer to the information set forth under the caption entitled
"Compensation Committee Interlocks and Insider Participation" on page six.
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP to examine the
consolidated financial statements and other records of Sherwin-Williams for the
fiscal year ending December 31, 2000. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they wish and to respond to appropriate shareholder
questions.
EXPENSE AND METHOD OF PROXY SOLICITATION
The enclosed proxy is solicited by the Board of Directors and the entire
cost of solicitation will be paid by Sherwin-Williams. In addition to the
solicitation of proxies by use of the mails, officers and other Sherwin-Williams
employees may solicit the return of proxies.
19
<PAGE> 22
Georgeson Shareholder Communications Inc. has also been retained to aid in the
solicitation of proxies, for which it will receive a fee estimated at $15,000
plus reasonable expenses. Proxies will be solicited by personal interview, mail,
telephone and electronic means.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholder proposals must be received at Sherwin-Williams' headquarters,
101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075, Attention: Vice
President, General Counsel and Secretary, on or before November 13, 2000 in
order to be included in the proxy material relating to the 2001 Annual Meeting
of Shareholders. In addition, if Sherwin-Williams is not provided with written
notice of a shareholder proposal on or before January 27, 2001, proxies
solicited by the Board of Directors for the 2001 Annual Meeting of Shareholders
will confer discretionary authority to vote on the shareholder proposal if
presented at such Annual Meeting. In order to remove any question as to the date
on which a proposal was received by Sherwin-Williams, it is suggested that
proposals be submitted by certified mail-return receipt requested.
ANNUAL REPORT ON FORM 10-K
SHERWIN-WILLIAMS WILL PROVIDE TO EACH SHAREHOLDER WHO IS SOLICITED TO VOTE
AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS, UPON THE WRITTEN REQUEST OF SUCH
PERSON AND WITHOUT CHARGE, A COPY OF SHERWIN-WILLIAMS' 1999 ANNUAL REPORT ON
FORM 10-K. PLEASE DIRECT REQUESTS TO SHERWIN-WILLIAMS AT 101 PROSPECT AVENUE,
N.W., CLEVELAND, OHIO 44115-1075, ATTENTION: INVESTOR RELATIONS.
20
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C>
[Logo] Sherwin Williams(R) Two New Ways to Vote
VOTE BY INTERNET OR TELEPHONE
24 Hours a Day - 7 Days a Week
It's Fast and Convenient
INTERNET TELEPHONE MAIL
-------- --------- ----
http://proxy.shareholder.com/shw 1-800-481-9816
- - Go to the website address listed - Mark, sign and date your proxy card.
above. - Use any touch-tone telephone.
- Detach your proxy card.
- - Have your proxy card ready. OR - Have your proxy card ready. OR
- Return your proxy card in the
- - Enter your Control Number located in - Enter your Control Number located postage-paid envelope provided.
the box below. in the box below.
- - Follow the simple instructions on the - Follow the simple recorded
website. instructions.
Your Internet or telephone vote authorizes the named
proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card. If
you have submitted your proxy by the Internet or
telephone there is no need for you to mail back your
proxy card.
1-800-481-9816
CALL TOLL-FREE TO VOTE
----------------------------------------------------
CONTROL NUMBER
FOR INTERNET/TELEPHONE VOTING
THE INTERNET AND TELEPHONE VOTING FACILITIES WILL CLOSE AT 5:00 P.M. E.S.T. ON APRIL 25, 2000.
* DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY THE INTERNET OR TELEPHONE *
- ------------------------------------------------------------------------------------------------------------------------------------
|
------- |
|
------- |
|
A VOTE "FOR" THIS PROPOSAL IS RECOMMENDED BY THE BOARD OF DIRECTORS. |
|
1. ELECTION OF 12 DIRECTORS: J.C. BOLAND, J.G. BREEN, D.E. COLLINS, |
C.M.CONNOR, D.E. EVANS, R.W. MAHONEY, W.G. MITCHELL, A.M. MIXON, III, |
C.E. MOLL, H.O. PETRAUSKAS, J.M. SCAMINACE, R.K. SMUCKER |
|
FOR all [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS [ ] |
nominees to vote for all nominees | PLEASE
| DETACH HERE
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL |
NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME ON | YOU MUST
THE LINE BELOW). | DETACH
|THIS PORTION
| OF THE
In their discretion, the proxy | CARD
holders are authorized to vote upon |
such other business as may properly | BEFORE
come before the Annual Meeting or any | RETURNING
adjournment thereof. | IT IN THE
------------------------------ | ENCLOSED
Change of Address and/ [ ] | ENVELOPE
or Comments Mark Here |
------------------------------ |
Please sign exactly as your name |
appears hereon. Joint owners should |
each sign. When signing as attorney, |
executor, administrator, trustee, |
guardian or in other representative |
capacity, please give your full |
title. |
|
Dated:________________________, 2000 |
|
____________________________________ |
Signature |
|
____________________________________ |
Signature |
|
VOTES MUST BE INDICATED [X] |
SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK. |
</TABLE>
<PAGE> 24
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
OF
THE SHERWIN-WILLIAMS COMPANY
Wednesday, April 26, 2000
Landmark Conference Center
927 Midland Building
101 Prospect Avenue, N.W.
Cleveland, Ohio
AGENDA
------
- Fix the number of directors at twelve and elect twelve
directors to hold office until the next Annual Meeting
of Shareholders and until their successors are elected.
- Transact such other business as may properly come before
the Annual Meeting.
--------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Whether or not you plan to attend the Annual Meeting, please
promptly vote by the Internet, by telephone, or by
completing and returning the attached proxy card. Voting
early will help avoid additional solicitation costs and will
not prevent you from voting in person at the Annual Meeting
if you wish to do so.
--------------------------------------------------------------
- --------------------------------------------------------------------------------
[Logo] Sherwin THE SHERWIN-WILLIAMS COMPANY
Williams(R) PROXY/VOTING INSTRUCTION CARD
ANNUAL MEETING OF SHAREHOLDERS - APRIL 26, 2000
The undersigned authorizes C.M. CONNOR, J.M. SCAMINACE and L.E.
STELLATO, and each of them, with power of substitution, to vote and otherwise
represent all of the shares of common stock of The Sherwin-Williams Company,
which the undersigned is entitled to vote as a recordholder, at the Annual
Meeting of Shareholders to be held on Wednesday, April 26, 2000, and any
adjournment(s) thereof, as indicated on the reverse side, and, in their
discretion, on all other matters as may properly come before the Annual Meeting.
This card also provides voting instructions for shares of common stock, if any,
held for the account of the undersigned by The Bank of New York, as agent of the
Stock Ownership and Automatic Dividend Reinvestment Plan, and by Fidelity
Management Trust Company, as trustee of the Employee Stock Purchase and Savings
Plan.
THIS CARD IS SOLICITED JOINTLY BY THE BOARD OF DIRECTORS, THE BANK OF
NEW YORK (WITH RESPECT TO SHARES HELD UNDER THE DIVIDEND REINVESTMENT PLAN) AND
FIDELITY (WITH RESPECT TO SHARES HELD UNDER THE STOCK PURCHASE AND SAVINGS
PLAN). YOU ARE ENCOURAGED TO SPECIFY YOUR VOTE BY COMPLETING THE REVERSE SIDE OF
THIS CARD. WHEN PROPERLY COMPLETED AND SIGNED, YOUR SHARES WILL BE VOTED IN
ACCORDANCE WITH YOUR DIRECTIONS. TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATION, SIMPLY SIGN, DATE AND RETURN THIS CARD; NO BOXES NEED
BE MARKED. IF YOU SIGN, DATE AND RETURN
THIS CARD WITHOUT SPECIFYING YOUR VOTE,
YOUR SHARES WILL BE VOTED FOR PROPOSAL 1
AND IN THE PROXY HOLDER'S DISCRETION
UPON SUCH OTHER BUSINESS AS MAY PROPERLY THE SHERWIN WILLIAMS COMPANY
COME BEFORE THE ANNUAL MEETING. IF YOU P.O. BOX 11031
DO NOT TIMELY RETURN THIS CARD, THE PROXY NEW YORK, N.Y. 10203-0031
HOLDERS CAN NOT VOTE YOUR SHARES (OR,
IN THE CASE OF THE STOCK PURCHASE AND
SAVINGS PLAN, IF YOU DO NOT RETURN THIS
CARD BY THE CLOSE OF BUSINESS ON
APRIL 20, 2000, YOUR SHARES WILL BE VOTED
IN THE SAME PROPORTION AS FIDELITY VOTES
THOSE SHARES FOR WHICH IT RECEIVES PROPER
INSTRUCTIONS).
(Continued and to be dated and signed on
reverse side.)
- --------------------------------------------------------------------------------
