-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RZMXWImNaqvWdmhDHKND1GKBuKCv1FML6ayH/sxGVRQHWlCchKxdSlYK1OEEFzZ8 G01CYxdx9h2AzVkWKmhOVA== 0000950152-96-000949.txt : 19960314 0000950152-96-000949.hdr.sgml : 19960314 ACCESSION NUMBER: 0000950152-96-000949 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960313 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHERWIN WILLIAMS CO CENTRAL INDEX KEY: 0000089800 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 340526850 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04851 FILM NUMBER: 96534170 BUSINESS ADDRESS: STREET 1: 101 PROSPECT AVE NW CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2165662200 10-K405 1 SHERWIN WILLIAMS 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-K
(MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ______ TO _______
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:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED ------------------- ------------------------------------ 9.875% Debentures due 2016 New York Stock Exchange Common Stock, Par Value $1.00 New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of January 31, 1996, 85,523,699 shares of the Registrant's Common Stock, with a par value of $1.00 each, were outstanding, net of treasury shares. The aggregate market value of such voting stock held by non-affiliates of the Registrant as of that date was $3,578,435,300. DOCUMENTS INCORPORATED BY REFERENCE Definitive Proxy Statement dated March 13, 1996, as regards certain information required to be disclosed in Part III. ================================================================================ 2 THE SHERWIN-WILLIAMS COMPANY AND CONSOLIDATED SUBSIDIARIES As used in this Form 10-K, the terms "Company" and "Registrant" mean The Sherwin-Williams Company and its consolidated subsidiaries, taken as a whole, unless the context indicates otherwise. TABLE OF CONTENTS
ITEM NO. PAGE NO. - --------- -------- Part I 1. Business Segment Information a. General Development of Business 1 b. Narrative Description of Business 1 c. Financial Information About Business Segments 7 d. Foreign and Domestic Operations and Export Sales 7 2. Description of Property 8 3. Legal Proceedings 9 4. Submission of Matters to a Vote of Security Holders 9 Executive Officers of the Registrant 9 Part II 5. Market for Common Equity and Related Stockholder Matters 11 6. Selected Financial Data 11 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 8. Financial Statements and Supplementary Data 18 9. Changes in and Disagreements on Accounting and Financial Disclosure 19 Part III 10. Directors and Executive Officers of the Registrant 20 11. Executive Compensation 20 12. Security Ownership of Certain Beneficial Owners and Management 20 13. Certain Relationships and Related Transactions 20 Part IV 14. Financial Statement Schedule, Reports on Form 8-K and Exhibits a. Financial Statements, Financial Statement Schedule and Exhibits 21 b. Reports on Form 8-K 21 Signatures 39 Exhibit Index 41 Consent of Independent Auditors 45
NOTE ON INCORPORATION BY REFERENCE In Part III of this Form 10-K, various information and data are incorporated by reference from the Company's Definitive Proxy Statement dated March 13, 1996 ("Proxy Statement"). Any reference in this Form 10-K to disclosures in the Proxy Statement shall constitute incorporation by reference only of that specific information and data into this Form 10-K. 3 PART I ITEM 1. BUSINESS SEGMENT INFORMATION GENERAL DEVELOPMENT OF BUSINESS The Sherwin-Williams Company, which was first incorporated under the laws of the State of Ohio eighteen years after its founding in 1866, is engaged in the manufacture, distribution and sale of coatings and related products to professional, industrial, commercial and retail customers primarily throughout North America. PAINT STORES SEGMENT The Paint Stores Segment exclusively distributes Sherwin-Williams(R) branded architectural coatings, industrial maintenance products and industrial finishes produced by the Coatings Segment of the Company and similar coatings and related items produced by others. Paint, wallcoverings, floorcoverings, window treatments, spray equipment and other associated products are marketed by store personnel and direct sale representatives to the do-it-yourself customer, professional painter, contractor, industrial and commercial maintenance customer, property manager, architect and manufacturer of products requiring a factory finish. Competitors of the Segment are other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated outlets. Product quality, service and price determine the competitive advantage in the highly fragmented paint product market. The loss of any single customer would not have a material adverse effect on the business of the Segment. In order to sustain continued growth in the competitive marketplace, the Segment recognizes that the superior knowledge of, and service provided by, its store employees are critical to success. Substantial progress was made during 1995 in employee selection, training, development and retention. All store employees are required to complete an Employee Certification Process in order to become certified in their position and eligible for promotion. This process, coined internally as Sherwin-Williams University or "SWU", requires employees to complete specific training in all areas of in-store activity, such as product knowledge, product application, customer service and store operations. By the end of 1995, virtually all paint store employees had received such certification in their positions. While customers receive the ultimate benefit through enhanced customer service, employees are also more knowledgeable and able to better manage their operations. This training, along with a new job posting system which allows employees to preview and apply for internal promotion opportunities if they meet the certification and eligibility requirements, has improved employee retention to approximately three times better than the industry average in 1995. This investment in store employees will have an impact on the future growth and success of the Paint Stores Segment. During 1996, the Segment plans to introduce several new products, including the following: Woodscapes(TM), a premium exterior stain line designed to provide long-lasting color with an extended warranty; Healthspec(TM), an interior paint product line with low odor characteristics which will permit application in occupied commercial buildings such as hospitals, institutions and schools; and LowTemp 35(TM), an exterior latex house paint to be marketed to contractors which will permit application in temperatures as low as 35 degrees Fahrenheit, extending their painting season up to 20 percent in some areas of the country. In response to consumer demand, a semi-gloss has also been added to the EverClean(R) product line. Marketing programs for this line expansion will be targeted at both retail and wholesale customers in 1996. In addition to promoting new products, aggressive advertising campaigns will also highlight the wide selection of wallcovering products available with a low-price guarantee at Sherwin-Williams stores, further emphasizing the wide array of products and services available through the stores. 1 4 COATINGS SEGMENT The five divisions within the Coatings Segment (Coatings, Consumer Brands, Automotive, Transportation Services and Diversified Brands) participate in the manufacture, distribution or sale of coatings and related products. The Segment has sales to certain customers that, individually, may be a significant portion of its revenues. However, the loss of any single customer would not have a material adverse effect on the overall business of the Segment. All technical expenditures are sponsored by the Company and occur in the Coatings Segment. The expenditures for research and development appear on page 26 of this report. COATINGS DIVISION The Coatings Division manufactures paint and paint-related products for do-it-yourself customers, professional painters, contractors, industrial and commercial maintenance accounts, and manufacturers of factory finished products. Sherwin-Williams(R) branded architectural and industrial finishes are manufactured exclusively for the Paint Stores Segment. Labels, color cards, traffic paint, adhesives, private label and other branded products are manufactured for the Paint Stores Segment, the Consumer Brands Division and other divisions of the Company. Competitive factors for the Division are product innovation, manufactured product quality, service, distribution and price. Domestic competitors of the Division consist of other coatings manufacturers located throughout the United States. There are approximately 900 such manufacturers at the regional and national levels. The Coatings Division continues to strive to be the lowest cost producer of high quality coatings to gain an advantage over its competitors. The Coatings Division integrated the Company's international architectural operations into the Division's operations beginning in 1994. There are many competitors in each of the foreign markets served as the Division sells its products around the world through subsidiaries and joint ventures and licenses technology, trademarks and trade names. At December 31, 1995, the Division had 41 licensing agreements in 32 foreign countries. The majority of the licensees' sales are in South America, the strongest market. New licensing agreements were signed in Belgium, Lebanon and Vietnam in 1995. The Division increased the focus on international growth during 1995, acquiring Sherwin-Williams Argentina I. y C.S.A. (a former licensee) and purchasing a manufacturing facility for its Brazilian operations. Additional new business development will take place following a predetermined regional approach for the establishment of subsidiaries, joint ventures and licensees in selected countries. During 1995, the Division integrated the manufacturing processes of several newly-acquired companies into its operations. This integration includes application of the Division's manufacturing quality standards to the new operations to achieve overall production synergies which will increase effective capacity while enhancing product quality. In 1995, the Division began full operations at its Fort Wayne, Indiana powder coatings facility and also began construction of a new powder coatings facility in Harrisburg, Pennsylvania. Powder coatings technology represents an environmentally-friendly coating which can be applied with minimal waste. The addition of these facilities into its manufacturing base will allow the Division to meet the increasing demand for powder coatings. In 1996, the primary goal of the Division will involve integrating the manufacturing operations of the Pratt & Lambert United, Inc. (Pratt & Lambert) facilities which were acquired in January 1996 into the Division's core operations. Raw material and conversion cost synergies are expected to be achieved while increasing production volume. In addition, continued efforts will be made toward improving product quality and customer service, as well as continued attainment and/or renewal of ISO 9000 certification at all of the Division's newly-acquired and existing facilities. CONSUMER BRANDS DIVISION The Consumer Brands Division is responsible for the sales and marketing of branded and private label products by a direct sales staff to unaffiliated home centers, mass merchandisers, independent dealers and distributors. Many of the country's leading retailers are among the Division's regional and 2 5 national customers. The Division's competition for sales to these leading retailers comes from over 500 regional and national paint manufacturers and distributors of branded and private label paint and associated products. The competitive factors that will set the leaders apart from the rest are service, brand recognition, distribution and price. During 1995, the Division targeted the best regional home centers for paint and stain partnerships to expand its distribution outlets throughout the United States with notable success being achieved in previously under-represented geographic regions. This progress took place despite the consolidation of retailers in the home center and independent paint store categories. The acquisition of F.L.R. Paints, Incorporated earlier in the year provided the addition of the H&C(R) product line of concrete stains and sealers. This product line is marketed nationally as a masonry coating with superior waterproofing and color enhancing qualities. Also during 1995, the Division successfully launched its own nationally-broadcast television show, Room by Room(TM), on the Home and Garden Television Network. This advertising method allows the Division to reach millions of potential customers while providing decorating suggestions for the average do-it-yourselfer. In 1996, the Division will build on its already strong marketing programs, focusing on its new Ralph Lauren(TM) product line, which was first introduced at the end of 1995. In addition, the Division will integrate marketing and sales programs for Pratt & Lambert products, which have a strong presence in the independently-owned paint and decorator stores. With continued emphasis on demographically-targeted marketing programs and strategic product placement, the Division looks forward to becoming the total paint and stain supplier to more independent dealers, home centers and mass merchants across the United States in the upcoming year. AUTOMOTIVE DIVISION The Automotive Division develops and manufactures motor vehicle finish and refinish products which are marketed under the Sherwin-Williams(R) and other branded labels in the United States and Canada through its network of 143 company-operated branches. The branches are supported by a direct sales staff, and products are also marketed through jobbers and wholesale distributors. The Division is the sole distributor of Standox(R) branded vehicle refinishing paints in the United States and Canada for American Standox, Inc., a joint venture. The Division sells directly to independent automotive body shops, automotive dealerships, fleet owners and refinishers, production shops, body builders and manufacturers requiring a factory finish (OEM). The Automotive Division has numerous competitors in its domestic and foreign markets with broad product offerings and several others with niche products. A subsidiary in Jamaica generally markets a full line of products. Products manufactured in Kingston, Jamaica are sold through 9 stores and other dealers and by a direct sales force to independent dealers, painters, contractors, automotive body shops and industrial and commercial maintenance accounts in Jamaica. A portion of the income for the Division comes from the licensing of technology, trademarks and trade names to foreign companies. The Division has 16 licensees in 15 foreign countries, including new agreements signed in Syria and India in 1995. Key competitive factors for the Automotive Division are distribution, product quality, technology and service. Strong distribution and high quality products have been the Division's greatest competitive advantages. The Division opened its new state-of-the-art distribution service center in Richmond, Kentucky during 1995 and achieved ISO 9002 combined manufacturing/distribution certification at this site. The remaining distribution facilities of the Division were also certified during 1995, which emphasizes the Division's ongoing commitment to quality. New product development and customer service also remain primary goals to the Division. Several new products were introduced during the year to meet customer needs and expectations, including the 3.5 volatile organic compounds (VOC) Acrylic Urethane (WesThane(TM)) system and the new high solids 2.1 VOC clearcoats. These technically-advanced products were successfully designed to meet customer requirements while adhering to strict VOC environmental regulations. 3 6 During 1996, the Division will continue the development of new products and will introduce the spectrophotometer as an important sales aid at the jobber and shop mixing locations. This color-reading device will be used to select colors to exact specifications using the latest technological advances. In furtherance of the Division's international growth, Productos Quimicos Y Pinturas, S.A. de C.V. and its affiliated companies (Productos) were acquired in January 1996. Productos is the second largest automotive paint distributor in Mexico, manufacturing and marketing the Excelo(TM) brand product line for the vehicle refinish market. The Division will concentrate on combining this acquisition with its other international operations in 1996. TRANSPORTATION SERVICES DIVISION The Transportation Services Division provides warehousing, truckload freight, pool assembly, freight brokerage and consolidation services primarily for the Company and for certain external manufacturers, distributors and retailers throughout the United States. This Division provides the Company with total logistics service support which allows increased delivery schedules, lower field inventory levels and fewer out-of-stocks. The Transportation Services Division has many different and diverse competitors. In the trucking industry, there are a few large carriers having small or moderate market share while thousands of other carriers compete for the balance of the market. The warehousing and distribution service market is characterized by a large number of competitors with none having dominant share. Since the primary business of the Division is to provide services for the Company's other divisions, gaining market share is not of major significance. The Division's new 1,000,000 square foot state-of-the-art distribution service center in Fredericksburg, Pennsylvania began shipments in November 1995. This facility replaces four smaller facilities and will serve Paint Stores, Consumer Brands and Diversified Brands Divisions' customers throughout northeastern United States and Canada. Expansion of the Midwest distribution service center in Effingham, Illinois was also substantially completed, bringing the total square footage at that site to 1,300,000. These facilities will bring further efficiencies to the Division's overall distribution function while maintaining its standard of quality service. To emphasize its commitment to quality, the Division continued its pursuit of ISO 9003 certification during 1995, achieving such certification at all of its operating facilities except its new Fredericksburg facility. The Division's primary focus in 1996 will be to identify logistic synergies and merge the distribution functions of Pratt & Lambert with the Company. Efforts will be focused on implementing plans which will best serve customer needs while achieving overall cost savings for the Company. DIVERSIFIED BRANDS DIVISION The Diversified Brands Division (formerly the Specialty Division) competes in three areas: custom and industrial aerosols; paint applicators; and retail and wholesale consumer aerosols. The Division participates in the retail and wholesale paint, automotive, homecare products, institutional, insecticide and industrial markets. A wide variety of aerosol products are filled, packaged and distributed to regional and national customers. Approximately 8.1 percent of the Division's total sales represent aerosols and paint applicators sold to the Paint Stores Segment. The remaining products are marketed through mass merchandisers, home centers, automotive chains and maintenance distribution channels. There are various primary competitors in each of the Division's product lines. The main competitive factors are technical know-how, quality, service and price. Superior quality products, excellent regulatory-complying products, leadership positions in electronic commerce and strong customer relationships have enabled the Division to distinguish itself from the competition. Several new products were introduced by the Division during 1995, including Krylon(R) Living Color(R) Latex Enamel. Living Color(R) enamel represents the first spray product to deliver a latex paint in aerosol form while offering a versatile color palette to meet a variety of decorating needs. The product reinforces the Company's leadership in spray paint technology under the Krylon(R) brand, offering superior gloss, low odor and soap and water clean-up while being VOC compliant. Other 4 7 product introductions during 1995 included the Dupli-Color(R) Flawless(TM) kit, which makes it easier for consumers to make scratch repairs on their vehicles, and Rust Tough(R) Water-Based Enamel, a corrosion-protectant coating. These products exemplify the rewards of countless hours of research and development, to which the Division is committed. The new products introduced in 1995 will continue to be marketed via extensive advertising efforts throughout 1996, including a national television commercial featuring Krylon(R) Living Color(R), providing a positive impact on sales. The Division will also continue its research and development activities in search of products which meet or exceed customer expectations and which are technologically advanced in relation to those of its competitors. OTHER SEGMENT The Other Segment is responsible for the acquisition, development, leasing and management of properties for use by the Company and others. Obtaining real estate in the proper location at the appropriate cost is a critical component for achieving the desired operating success, particularly for paint stores and distribution service centers. This Segment has many competitors consisting of other real estate owners, developers and managers in certain states where we currently hold property. The main competitive factors are the availability of property and price. At the end of 1995, the Retail Properties Division owned or leased 211 properties, representing over 1,700,000 square feet of space, which are conducive to the sale of paint and associated products. Such properties include 131 freestanding buildings, for exclusive use by the Paint Stores Segment, and 80 multi-tenant properties, utilized when the basic needs of the paint store can be met and where external rental opportunities can be profitably operated. The paint store must be easily accessible to professional painters and contractors with sufficient access to pickup and delivery areas. Multi-tenant properties are usually smaller "strip" shopping centers with adequate parking and, generally, the paint store will be located at the end of the shopping area for the most convenient access. In 1996, the Division does not anticipate significant growth in the number of owned retail properties needed by the Paint Stores Segment. The occupancy rate for external space was 90.1 percent at December 31, 1995. The Non-Retail Properties Division owned or leased 20 properties approximating 3.7 million square feet. These properties consisted primarily of office buildings, manufacturing facilities and distribution service centers at the end of 1995. Occasionally, such properties are acquired or developed to provide the lowest cost alternative for expansion of distribution operations. Locations that have been utilized profitably in the past which can no longer contribute to the Company's future plans are currently offered for sale or lease. At the end of 1995, the Non-Retail Properties Division had achieved an overall occupancy rate of 93.9 percent. RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE With respect to the Paint Stores Segment, there are sufficient suppliers of each product purchased for resale that the Segment does not anticipate any significant sourcing problems. For the Coatings Segment, raw materials and fuel supplies are generally available from various sources in sufficient quantities that the Segment does not anticipate any significant sourcing problems during 1996. SEASONALITY The majority of the sales for the Paint Stores Segment and Coatings Segment traditionally occur during the second and third quarters. There is no significant seasonality in sales for the Other Segment. TRADEMARKS AND TRADE NAMES Customer recognition of trademarks and trade names collectively contribute significantly to the sales of the Company. The Paint Stores Segment is identified with names such as Sherwin-Williams(R), SuperPaint(R), Pro Mar(R), EverClean(R), Glas-Clad(R), Perma-Clad(R), Old Quaker(R), and Con-Lux(R). The 5 8 Coatings Segment employs a variety of trade names and trademarks in marketing its products, such as Sherwin-Williams(R), Dutch Boy(R), Kem-Tone(R), Martin-Senour(R), Cuprinol(R), Old Quaker(R), H&C(R), White Lightning(R), Acme(R), Krylon(R), Standox(R), Rust Tough(R), Rubberset(R) and Dupli-Color(R). PATENTS Although patents and licenses are not of material importance to the business of the Company as a whole, the Automotive and Coatings Divisions' international operations derive a substantial part of their income from the license of technology, trademarks and trade names to foreign companies. BACKLOG AND PRODUCTIVE CAPACITY Backlog orders are not significant in the business of any Segment. Sufficient productive capacity currently exists to fulfill the Company's needs for paint products through 1996. EMPLOYEES The Company employed approximately 18,500 persons at December 31, 1995. ENVIRONMENTAL COMPLIANCE See Management's Discussion and Analysis of Financial Condition and Results of Operations, on pages 11 through 17 of this report, for further details on environmental compliance. 6 9 BUSINESS SEGMENTS (MILLIONS OF DOLLARS)
1995 1994 1993 - -------------------------------------------------------------------------------------------- NET EXTERNAL SALES Paint Stores $ 2,131 $1,986 $1,830 Coatings 1,129 1,100 1,105 Other 14 14 14 - -------------------------------------------------------------------------------------------- Segment totals $ 3,274 $3,100 $2,949 INTERSEGMENT TRANSFERS Coatings $ 801 $ 720 $ 655 Other 19 18 17 - -------------------------------------------------------------------------------------------- Segment totals $ 820 $ 738 $ 672 OPERATING PROFITS Paint Stores $ 158 $ 141 $ 117 Coatings 202 201 194 Other 13 8 5 Corporate expenses -- net (55) (51) (52) - -------------------------------------------------------------------------------------------- Income before income taxes $ 318 $ 299 $ 264 IDENTIFIABLE ASSETS Paint Stores $ 550 $ 517 $ 494 Coatings 846 757 730 Other 45 44 51 Corporate 700 644 640 - -------------------------------------------------------------------------------------------- Consolidated totals $ 2,141 $1,962 $1,915 CAPITAL EXPENDITURES Paint Stores $ 29 $ 26 $ 29 Coatings 68 46 28 Other 4 1 1 Corporate 7 6 5 - -------------------------------------------------------------------------------------------- Consolidated totals $ 108 $ 79 $ 63 DEPRECIATION Paint Stores $ 24 $ 23 $ 21 Coatings 31 30 27 Other 2 3 3 Corporate 6 5 4 - -------------------------------------------------------------------------------------------- Consolidated totals $ 63 $ 61 $ 55
NOTES TO SEGMENT TABLES Operating profit is total revenue, including realized profit on intersegment transfers, less operating costs and expenses. Intersegment transfers are accounted for at values comparable to normal unaffiliated customer sales. Corporate expenses include interest which is unrelated to real estate leasing activities, certain provisions for disposition and termination of operations and environmental remediation which are not directly associated with or allocable to any operating segment, and other adjustments. Identifiable assets are those directly identified with each segment's operations. Corporate assets consist primarily of cash, investments, deferred pension assets and headquarters' property, plant and equipment. Export sales, sales of foreign subsidiaries and sales to any individual customer were each less than 10% of consolidated sales to unaffiliated customers during all years presented. 7 10 ITEM 2. DESCRIPTION OF PROPERTY The Company's corporate headquarters are located in Cleveland, Ohio. The Company's principal manufacturing and distribution facilities, operated by the Coatings Segment, are located as set forth below.
Leased or Manufacturing facilities Owned - ------------------------ ------ Anaheim, California Owned Baltimore, Maryland Owned Bedford Heights, Ohio Owned Bradenton, Florida Leased Chicago, Illinois Owned Coffeyville, Kansas Owned Columbus, Ohio Owned Crisfield, Maryland Leased Deshler, Ohio Owned Edison, New Jersey Owned Elk Grove, Illinois Owned Emeryville, California Owned Fort Wayne, Indiana Leased Fountain Inn, South Carolina Owned Garland, Texas Owned Greensboro, North Carolina (2) Owned Holland, Michigan Owned Lawrenceville, Georgia Owned Morrow, Georgia Owned Newark, New Jersey Owned Orlando, Florida Owned Richmond, Kentucky Owned Victorville, California Owned Kingston, Jamaica Owned
Leased or Distribution facilities Owned - ----------------------- ------ Bedford Heights, Ohio Leased Buford, Georgia Leased Dayton Valley, Nevada Owned Effingham, Illinois Leased Fredericksburg, Pennsylvania Owned Hunt Valley, Maryland Leased Lagrange, Georgia Owned Reno, Nevada Leased Richmond, Kentucky Owned Sparks, Nevada Leased Waco, Texas Leased Winter Haven, Florida Owned York, Pennsylvania Owned Calgary, Alberta, Canada Leased Mississauga, Ontario, Canada Leased Richmond Hill, Ontario, Canada Leased Scarborough, Ontario, Canada Owned San Juan, Puerto Rico Leased
In addition, the Coatings Segment operates 143 company-operated automotive branches, of which 1 is owned, in the United States and Canada and 9 leased stores in Jamaica. There were 2,089 company-operated paint stores in the United States, Canada and Puerto Rico at December 31, 1995, which constitute the entire operations of the Paint Stores Segment. All stores are leased locations with 209 being leased from the Company's Retail Properties Division in the Other Segment. At the end of 1995, the Paint Stores Segment was comprised of four separate operating geographic divisions: the Mid Western Division with 582 stores primarily located in the midwestern and upper west coast states and western Canada; the Eastern Division which has 449 stores along the upper east coast and New England states and eastern Canada; the Southeastern Division which has 545 stores principally covering the lower east and gulf coast states and Puerto Rico; and the South Western Division with 513 stores in the plains and the lower west coast states. The Paint Stores Segment opened 59 new stores in 1995, closed 16, relocated 44, and re-merchandised 429, thereby completing the re-merchandising program which began in 1993. All property within the Other Segment is owned by the Company except for 2 land leases in the Retail Properties Division and one property lease in the Non-Retail Properties Division. 8 11 ITEM 3. LEGAL PROCEEDINGS As previously reported in the Company's Quarterly Report for the period ended June 30, 1993, on July 16, 1993, the United States Department of Justice, on behalf of the United States Environmental Protection Agency, filed a complaint against the Company in the United States District Court for the Northern District of Illinois. The complaint alleges violations under various environmental statutes concerning the Company's operations at its southeast Chicago facility. The relief sought demands an undetermined amount of civil penalties and further demands certain, unspecified corrective action be taken to clean up the site. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names and ages of the current Executive Officers, the positions and offices with the Company held by them as of February 29, 1996 and the date when each was first elected or appointed an Executive Officer:
Date When First Elected Name Age Present Position or Appointed ---- --- ---------------- -------------- John G. Breen 61 Chairman and Chief Executive 1979 Officer, Director Thomas A. Commes 53 President and Chief Operating 1979 Officer, Director John L. Ault 50 Vice President -- Corporate 1987 Controller Frank E. Butler 60 President & General Manager, 1994 Coatings Division Christopher M. Connor 39 President & General Manager, 1994 Diversified Brands Division Conway G. Ivy 54 Vice President -- Corporate 1979 Planning and Development T. Scott King 43 President & General Manager, 1994 Consumer Brands Division Thomas Kroeger 47 Vice President -- Human Resources 1987 John C. Macatee 44 President, Paint Stores Group 1994 Larry J. Pitorak 49 Senior Vice President -- Finance, 1978 Treasurer and Chief Financial Officer Joseph M. Scaminace 42 President & General Manager, 1994 Automotive Division Louis E. Stellato 45 Vice President, General Counsel and 1989 Secretary
Following is a brief account of each Executive Officer's business experience with the Company during the last five year period: Mr. Breen has served as Chairman and Chief Executive Officer since June 1986 and has served as a Director since April 1979. 9 12 Mr. Commes has served as President and Chief Operating Officer since June 1986 and has served as a Director since April 1980. Mr. Ault has served as Vice President -- Corporate Controller since January 1987. Mr. Butler has served as President & General Manager, Coatings Division since February 1992 prior to which he served as President & General Manager, Consumer Division commencing May 1984. Mr. Connor has served as President & General Manager, Diversified Brands Division (formerly Specialty Division) since April 1994 prior to which he served as Senior Vice President -- Marketing, Paint Stores Group commencing September 1992. From June 1986 to September 1992, Mr. Connor served as President & General Manager, Western Division, Paint Stores Group. Mr. Ivy has served as Vice President -- Corporate Planning and Development since April 1992 prior to which he served as Vice President and Treasurer commencing January 1989. Mr. King has served as President & General Manager, Consumer Brands Division since February 1992 prior to which he served as Vice President, Director of Sales and Marketing, Consumer Division commencing June 1987. Mr. Kroeger has served as Vice President -- Human Resources since October 1987. Mr. Macatee has served as President, Paint Stores Group since September 1992 prior to which he served as President & General Manager, South Central Division, Paint Stores Group commencing June 1986. Mr. Pitorak has served as Senior Vice President -- Finance, Treasurer and Chief Financial Officer since April 1992 prior to which he served as Senior Vice President -- Finance and Chief Financial Officer commencing July 1991. From February 1988 to July 1991, Mr. Pitorak served as Vice President, General Counsel and Secretary. Mr. Scaminace has served as President & General Manager, Automotive Division since April 1994 prior to which he served as President & General Manager, Specialty Division commencing September 1985. Mr. Stellato has served as Vice President, General Counsel and Secretary since July 1991 prior to which he served as Assistant Secretary and Corporate Director of Taxes commencing December 1989. There are no family relationships between any of the persons named. 10 13 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Sherwin-Williams Common Stock is listed on the New York Stock Exchange and traded under the symbol SHW. QUARTERLY STOCK PRICES AND DIVIDENDS
Quarter High Low Dividend -------------------------------------------- 1995 1ST $34.875 $32.000 $ .16 2ND 38.000 33.375 .16 3RD 37.125 34.125 .16 4TH 41.500 34.375 .16 1994 1st $35.750 $31.250 $ .14 2nd 32.500 29.500 .14 3rd 34.125 30.250 .14 4th 33.375 29.750 .14
The number of shareholders of record for Sherwin-Williams Common Stock, par value $1.00 each, as of January 31, 1996 was 12,074. The closing market value per share as listed on the New York Stock Exchange as of the close of business on January 31, 1996 was $42.125. ITEM 6. SELECTED FINANCIAL DATA (MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------- OPERATIONS Net Sales $3,274 $3,100 $2,949 $2,748 $2,541 Income before cumulative effects of changes in accounting methods 201 187 165 145* 128 FINANCIAL POSITION Total assets $2,141 $1,962 $1,915 $1,730 $1,612 Long-term debt 24 20 38 60 72 PER COMMON SHARE DATA Income before cumulative effects of changes in accounting methods $ 2.34 $ 2.15 $ 1.85 $ 1.63* $ 1.45 Cash dividends .64 .56 .50 .44 .42
* Includes a reduction, beginning January 1, 1992, for the additional expense of accruing postretirement benefits. Such additional expense was $5.7 million after income taxes ($.06 per share) in 1992. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HIGHLIGHTS - -- Effective February 1, 1995, the Company acquired all outstanding shares of F.L.R. Paints, Incorporated thus acquiring the H&C(R) brand of high performance concrete stains and sealers. 11 14 - -- Effective August 29, 1995, the Company acquired the assets of Con-Lux Coatings, Inc., a manufacturer of environmentally-compliant, high performance chemical coatings, industrial maintenance and architectural finish products. - -- Effective November 1, 1995, the Company acquired the assets of White Lightning Products Corp., a manufacturer of high quality caulks and sealants. - -- Effective December 1, 1995, the Company acquired its licensee, Sherwin-Williams Argentina I.y C.S.A., one of the top three paint companies in the Argentine decorative coatings market. - -- During the fourth quarter of 1995, an Agreement and Plan of Merger to acquire all outstanding shares of common stock, at a price of $35 per share, was entered into with Pratt & Lambert United, Inc. (Pratt & Lambert), a manufacturer of coatings and adhesives sold to independent dealers, mass merchandisers, home centers and specialty markets. On January 10, 1996, the merger was effected, making Pratt & Lambert a wholly-owned subsidiary of the Company. FINANCIAL CONDITION -- 1995 The Company generated more than $282.7 million in cash flow from operations during 1995 and ended the year financially strong. The Company's financial strength entering 1995 and the year's cash flow allowed us to take advantage of the opportunity to make several key acquisitions and to increase the Company's investments in property and equipment which enhance manufacturing and distribution efficiency. The Consolidated Balance Sheets and Statements of Consolidated Cash Flows, on pages 23 and 24 of this report, present more detail of the Company's strong financial position and operating cash flow. Cash and short-term investments increased $18.1 million to $269.5 million at December 31, 1995. Increases and decreases in other components of working capital occurred primarily due to increased sales and moderate increases in manufacturing activity. Total assets grew by $179 million during 1995 to $2.1 billion. The current ratio of 2.0 remained constant at December 31, 1995 and 1994. Net property, plant and equipment increased $47.2 million from 1994. Capital expenditures of $108.4 million and fixed assets acquired of $9.4 million were partially offset by depreciation expense of $62.9 million and certain retirements of assets. Capital expenditures in 1995 were principally for the opening, remodeling or relocating of paint stores, the construction of distribution service centers and the upgrading of manufacturing facilities and research sites. Capital expenditures increased in the Paint Stores Segment during 1995 primarily due to increased store openings. In the Coatings Segment, capital expenditures increased due to completing the distribution service centers in Fredericksburg, Pennsylvania and Richmond, Kentucky and costs of the new powder coatings manufacturing facility currently under construction in Harrisburg, Pennsylvania. Capital expenditures also increased in the Other Segment primarily due to renovation costs at certain of the Company's managed properties. In 1996, the most significant capital expenditures planned relate to installation of new point-of-sale terminals in the Company's paint stores and improvements to a manufacturing facility of S-W Brazil. We plan to continue investing strategically in upgrading or expanding existing facilities, including those obtained through acquisition. We do not anticipate the need for any specific external financing to support our capital programs. Intangible assets and other long-term investments associated with acquisitions, including the Company's investment in its unconsolidated subsidiary in Argentina, accounted for the majority of the increase in other long-term assets. Intangible assets acquired during 1995 of $31.8 million exceeded 1995 amortization expense of $15.0 million. The balance of deferred pension assets of $233.6 million at December 31, 1995 represents the excess fair market value of the assets of the defined benefit pension plans over the actuarially-determined projected benefit obligations. The 1995 increase represents the recognition of the current year net pension credit, whose components are further described in Note 6 on page 30 of this report. Due to decreased interest rates on high-quality, long-term investments, the assumed discount rate used in computing the actuarial present value of the 12 15 benefit obligations of these plans was lowered to 7.25 percent at December 31, 1995, thereby increasing the unrecognized net loss of the plans. The unrecognized net loss represents the cumulative unamortized portion of items deferred in previous years due to changes in assumptions or actual results which differed from estimates in those years. These items are amortized as a component of the net pension credit over the average remaining service lives of the employees in the plans beginning in the year following their deferral. The actual return on plan assets of the defined benefit pension plans during 1995 exceeded the assumed asset earnings rate primarily due to actual returns realized on equity investments. These excess earnings are also deferred, causing an offsetting decrease to the cumulative unrecognized net loss amount. The effects of these changes, combined with an increased asset base, will increase the net pension credit in the coming year. The increase in long-term debt at December 31, 1995 was primarily due to debt incurred on several 1995 acquisitions. Debt may be added to the Company balance sheet if it exists on an acquired company and cannot be retired or if debt instruments are issued to defer a portion of the purchase price provided the seller. The Company did not incur any short-term borrowings during 1995 nor incur any borrowings to finance current operations. As more fully explained in Note 8, on page 33 of this report, the Company arranged additional financing flexibility during 1995. In addition, in early 1996, the Company increased the value of its commercial paper program to $600,000 and increased the value of its shelf registration of debt securities to $450,000. Certain short-term borrowings were incurred in January 1996 for the acquisition of Pratt & Lambert shares as explained below and in Note 2, on page 28 of this report. It is expected that the Company will remain in a borrowing position throughout 1996. The long-term liability for postretirement benefits increased from the excess of the net postretirement benefit expense, as determined in accordance with Statement of Financial Accounting Standards (SFAS) No. 106, over the costs for benefit claims incurred. The current portion of the accrued postretirement benefit liability, amounting to $8.2 million at December 31, 1995, is included in other accruals. Similar to the change in assumptions of the Company's defined benefit pension plans, the assumed discount rate used to calculate the actuarial present value of the accumulated postretirement benefit obligation was lowered to 7.25 percent at December 31, 1995, causing a cumulative unrecognized net loss for the postretirement plan. The effect of this change on the net postretirement benefit expense for 1996 will be negligible as the cumulative unrecognized net loss is below the threshold for required amortization. Plan amendments made January 1, 1993 significantly reduced the accumulated postretirement benefit obligation at that date, creating an unrecognized prior service credit. The reduction of the annual postretirement benefit expense for these amendments began in 1993 and will continue through 2004. See Note 7, on page 31 of this report, for additional information concerning the Company's postretirement benefit obligations. Other long-term liabilities include accruals for environmental-related liabilities and other non-current items. The decrease in these liabilities at December 31, 1995 is due to the fulfillment of certain obligations during 1995 and the reclassification of certain amounts to current liabilities. See Note 10, on page 34 of this report, for additional information concerning the Company's other long-term liabilities. The Company and certain other companies were named defendants in a number of lawsuits arising from the manufacture and sale of lead pigments and lead paints. It is possible that additional lawsuits may be filed against the Company in the future with similar allegations. The various existing lawsuits seek damages for personal injuries and property damages, along with costs incurred to abate the lead related paint from buildings. The Company believes that such lawsuits are without merit and is vigorously defending them. The Company does not believe that any potential liability ultimately determined to be attributable to the Company arising out of such lawsuits will have a material adverse effect on the Company's business or financial condition. The operations of the Company, like those of other companies in our industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations not only govern our current operations and products, but also impose liability on the Company for past 13 16 operations which were conducted utilizing practices and procedures considered acceptable under the laws and regulations existing at that time. The Company expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and our industry in the future. The Company believes it conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and ensure continued compliance. The Company is involved with environmental compliance and remediation activities at some of its current and former sites. The Company, together with other parties, has also been designated a potentially responsible party under federal and state environmental protection laws for the remediation of hazardous waste at a number of third-party sites, primarily Superfund sites. The Company may be similarly designated with respect to additional third-party sites in the future. The Company accrues for certain environmental remediation activities relating to its past operations and third-party sites, including Superfund sites, for which commitments or clean-up plans have been developed or for which costs or minimum costs can be reasonably estimated. The Company continuously assesses its potential liability for remediation activities with respect to its past operations and third-party sites. Any potential liability ultimately determined to be attributable to the Company, however, is subject to a number of uncertainties including, among others, the number of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributable to other parties, the nature and magnitude of the wastes involved, and the method and extent of remediation. The Company's environmental-related accruals are adjusted as information becomes available upon which more accurate costs can be reasonably estimated. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. The Company is a defendant in a lawsuit filed by the United States Department of Justice, on behalf of the United States Environmental Protection Agency, regarding the Company's operations at its southeast Chicago facility. The lawsuit, which alleges violations under various environmental statutes, seeks an undeterminable amount of civil penalties and further demands that certain, unspecified, corrective action be taken to clean up the site. The Company is also a defendant in a lawsuit brought by PMC, Inc. regarding one of the Company's former Chemical Division's manufacturing facilities. This facility is located adjacent to the Company's southeast Chicago facility referenced above and was sold to PMC, Inc. in 1985. PMC, Inc. is seeking an undisclosed amount for environmental remediation costs and other damages based upon contractual and tort theories, and under various environmental laws. The Company is vigorously defending both of these lawsuits. With respect to the Company's southeast Chicago facility and its former manufacturing facility adjacent thereto, both referenced above, the Company has evaluated its potential liability and, based upon its preliminary evaluation, has accrued an appropriate amount. However, due to the uncertainties surrounding these facilities, the Company's ultimate liability may result in costs that are significantly higher than currently accrued. In such event, the recording of the liability may result in a significant impact on net income for the annual or interim period during which the additional costs are accrued. In the opinion of the Company's management, any potential liability ultimately attributed to the Company for its environmental-related matters will not have a material adverse effect on the Company's financial condition, liquidity, cash flow or, except as set forth in the preceding paragraph, net income. See Note 10, on page 34 of this report, for discussion of the environmental-related accruals included in the Company's consolidated balance sheets. Capital expenditures and expenses for ongoing environmental compliance measures are included in the normal operating expenses of conducting business. The Company's capital expenditures and other expenses for ongoing environmental compliance measures were not material to the Company's financial condition or net income during 1995, and the Company does not expect such capital expenditures and other expenses to be material to the Company's financial condition or net income in the future. 14 17 Shareholders' equity increased $158.8 million during 1995 due primarily to current year net income offset partially by dividends paid to shareholders. The Company acquired 411,300 shares of its common stock in addition to shares received in exchange for stock issued in accordance with the Company's stock plans. Treasury stock amounting to 385,572 shares was issued to acquire the assets of White Lightning Products Corp. We acquire our own stock for general corporate purposes and, depending upon our cash position and market conditions, we may acquire additional shares of stock in the future. See the Statements of Consolidated Shareholders' Equity, on page 25 of this report, and Note 12, on page 35 of this report, for equity and capital stock detail. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. Accounting for assets to be disposed is also addressed by SFAS No. 121. The Company will adopt SFAS No. 121 during 1996 and, based on current circumstances, does not believe the effect of adoption will be material. At a meeting held February 21, 1996, the Board of Directors increased the quarterly dividend to $.175 per share. This represents the seventeenth consecutive increase and a compounded rate of increase of 28.9 percent since the dividend was reinstated in the fourth quarter of 1979. The 1995 annual dividend of $.64 per share marked the sixteenth consecutive year that the dividend approximated our payout ratio target of 30 percent of the prior year's earnings. The 1996 acquisition of Pratt & Lambert shares, for an approximate purchase price of $400 million, will impact the short-term borrowing position of the Company. The Company financed the merger through the use of available cash, a $50 million floating term note and other available sources of financing. The floating term note is accompanied by a two-year interest rate swap agreement. The swap agreement involves the exchange of fixed and floating rate interest payment obligations based upon a $50 million notional amount. Any market risk of the swap agreement related to the fluctuation in interest rates will be offset by a change to the interest payment obligation on the Company's floating term note. Preliminary estimates of the fair market value of the net assets to be recorded pursuant to the merger will approximate $58.3 million, with approximately $337.6 million recorded as goodwill. These estimates are tentative, pending completion of final appraisals. The goodwill ultimately recorded for the purchase will be amortized over its estimated life. Immediately after the merger, the Company repaid approximately $95 million of Pratt & Lambert's outstanding debt via issuance of short-term commercial paper. See Note 2, on page 28 of this report, for further details of the merger, subsequent debt repayment and related interest rate swap agreement. RESULTS OF OPERATIONS -- 1995 VS 1994 Consolidated net sales increased 5.6 percent, to $3.27 billion, over 1994 due primarily to volume and price increases in the Paint Stores Segment. Sales in the Paint Stores Segment increased 7.3 percent for the year as all divisions achieved sales improvements, particularly in paint and paint-related product lines. Comparable store sales increased 6.5 percent. Increased paint gallons sold to wholesale customers, which includes professional painters, contractors, and industrial and commercial maintenance accounts, generated the majority of the sales increase. Volume sales to retail customers remained sluggish. Selling price increases implemented to partially offset increased raw materials costs also contributed to the sales improvements. External sales in the Coatings Segment increased 2.7 percent over 1994. The Consumer Brands Division was the primary contributor to this sales increase due to increased gallon sales, particularly in its Dutch Boy(R) brand. In the Automotive Division, sales increases in the automotive branches were partially offset by declines in two of its major product lines which resulted from soft automotive aftermarket sales throughout 1995. Reduced consumer demand in the custom, automotive and industrial markets led to flat sales as compared to 1994 in the Diversified Brands Division. Revenue for the real estate operations in the Other Segment increased slightly for the year. 15 18 Consolidated gross profit as a percent of sales was slightly lower than 1994, decreasing to 42.7 percent from 42.8 percent. Margins increased slightly in the Paint Stores Segment due to gallon sales improvement combined with successful implementation of supplemental selling price increases during the year to partially offset increased costs for raw materials. The Coatings Segment's margins were lower than 1994 due to the adverse effects of raw material cost increases combined with a sales mix toward lower-margin products in the Automotive Division and production volume decreases in the Diversified Brands Division. Consolidated selling, general and administrative expenses as a percent of sales declined to 32.8 percent from 32.9 percent in 1994. The Paint Stores Segment carefully contained SG&A spending throughout 1995, leading to favorable SG&A costs as a percent of sales. The Coatings Segment's SG&A expenses as a percent of sales were higher than 1994 primarily due to increased market penetration costs for new customers in the Consumer Brands Division and to the marginally higher sales amount. Consolidated operating profits increased 4.0 percent in 1995. In the Paint Stores Segment, operating profits increased 12.7 percent over 1994 due to increased volume and controlled SG&A spending. Operating profits in the Coatings Segment improved 0.6 percent for the year. Increased raw material costs during 1995 combined with moderate production volume increases adversely impacted this Segment's results. The operating profits of the Other Segment increased in 1995 due primarily to reduced interest expense on average long-term debt allocable to its real estate operations combined with provisions incurred in 1994 for disposition of certain non-retail properties. Corporate expenses increased in 1995 due primarily to various environmental and disposition provisions which are not directly associated with or allocable to any individual segment. Refer to pages 1 through 7 of this report for additional Business Segment information. Interest expense decreased 21.3 percent for the year due to reduced average long-term debt resulting from normal maturities and 1994 debt purchases. As a result, interest coverage increased to 126.8 times from 93.8 times in 1994. Our fixed charge coverage, which is calculated using interest and rent expense, improved to 4.2 times from 4.1 times in 1994. Interest and net investment income increased 40.1 percent in 1995 due primarily to increased investment yields. Other costs and expenses decreased in 1995 primarily due to increased dividends and a net reduction of other expenses as more fully described in Note 4 on page 29 of this report. The effective income tax rate decreased in 1995, as shown in Note 14 on page 36 of this report, primarily due to increased tax-exempt investment vehicles. Net income increased 7.5 percent in 1995 to $200.7 million from $186.6 million in 1994. Net income per share increased 8.8 percent to $2.34 from $2.15. We believe that the acquisition of Pratt & Lambert has long-term strategic benefits for the Company and will be essentially earnings neutral for the year 1996. RESULTS OF OPERATIONS -- 1994 VS 1993 Consolidated net sales increased in 1994 by $150.8 million to $3.1 billion, an increase of 5.1 percent. The growth in sales was driven primarily by gains in the Paint Stores Segment. The Paint Stores Segment realized an 8.5 percent sales increase, despite continued sluggish retail sales, as all operating divisions achieved sales results better than the results of 1993. Comparable-store sales increased 7.8 percent. Strong emphasis was placed on store level pricing discipline, however, continued competitive pressures allowed the implementation of only selective price increases during the year. Most of the Segment's sales increase resulted from increased paint gallons sold to wholesale customers, complemented by wholesale sales increases in most other major product lines. Sales of the Coatings Segment were essentially flat for 1994. Reduced demand by certain large customers as they adjusted their inventories downward affected many of the divisions within the Segment. The Consumer Brands Division also was impacted by the loss of a portion of the business of 16 19 a home center account. New customers added to our distribution base during 1994 partially offset the effect of the above declines. Improved 1994 sales for the Automotive Division resulted primarily from sales growth in its branch distribution network and strong gains at original equipment manufacturers. Krylon(R) branded products provided the primary impetus for the improved sales results of the Diversified Brands Division. Consolidated gross profit dollars were 6.0 percent higher than 1993 while gross profit as a percent of sales increased to 42.8 percent from 42.5 percent in 1993. The Paint Stores Segment's 1994 gross margin remained constant in comparison to 1993. Despite continued sales mix shifts to lower-margin items in the Diversified Brands and Automotive Divisions, manufacturing efficiencies, stable raw material costs for most of the year, cost containment and a favorable sales mix in the Segment's other divisions led to an increase in the Coatings Segment's 1994 gross margin. Consolidated selling, general and administrative expenses decreased as a percent of sales to 32.9 percent from 33.3 percent in 1993. The Paint Stores Segment's SG&A costs as a percent of sales were below 1993 due primarily to containment of selling and administrative expenses combined with the sales gain achieved. The Coatings Segment's SG&A expenditures were approximately the same in 1994 as in 1993. Due to this segment's flat sales, a slight increase in SG&A costs as a percent of sales resulted. As a result of the above, consolidated operating profits increased 14.0 percent over 1993. The Paint Stores Segment's operating profits improved 20.3 percent due primarily to volume gains and the containment of SG&A costs. Despite sluggish sales, the Coatings Segment's operating profits increased 3.4 percent due primarily to the favorable edge in gross margin. The operating profits of the Other Segment increased in comparison to 1993 due primarily to reduced interest expense on long-term debt allocable to the real estate operations as a result of various debt purchases. Corporate expenses, which are not directly associated with or allocable to any operating segment, were approximately the same as 1993. Total interest expense decreased 50.1 percent from 1993 due to purchases of long-term debt and normal maturities. Correspondingly, our interest coverage improved to 93.8 times in 1994 compared to 42.0 times in 1993. Our fixed charge coverage, which is calculated using interest and rent expense, improved to 4.1 times in 1994 versus 3.7 times in 1993. Interest and net investment income increased 17.1 percent to $8.2 million primarily as a result of increased investment yields partially offset by reduced cash and short-term investment balances resulting primarily from the purchase of common stock for treasury purposes during the year. Other costs and expenses increased in 1994 primarily due to increased costs related to financing and investing activities which are further explained in Note 4 on page 29 of this report. As shown in Note 14, on page 36 of this report, the effective income tax rate remained the same in 1994 as in 1993. Net income increased 12.9 percent to $186.6 million and net income per share increased 16.2 percent to $2.15. Approximately $.04 of the increase in net income per share over 1993 was due to the purchase of common stock for treasury purposes at various times throughout 1994. 17 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors The Sherwin-Williams Company Cleveland, Ohio We have audited the accompanying consolidated balance sheets of The Sherwin-Williams Company and subsidiaries as of December 31, 1995, 1994 and 1993, and the related statements of consolidated income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed at Item 14(a). The financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Sherwin-Williams Company and subsidiaries at December 31, 1995, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents farily, in all material respects, the information set forth therein. /s/ Ernst & Young LLP Cleveland, Ohio January 19, 1996 18 21 REPORT OF MANAGEMENT Shareholders The Sherwin-Williams Company We have prepared the accompanying consolidated financial statements and related information included herein for the years ended December 31, 1995, 1994 and 1993. The primary responsibility for the integrity of the financial information rests with management. This information is prepared in accordance with generally accepted accounting principles based upon our best estimates and judgments and giving due consideration to materiality. The Company maintains accounting and control systems which are designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and which produce records adequate for preparation of financial information. There are limits inherent in all systems of internal control based on the recognition that the cost of such systems should not exceed the benefits to be derived. We believe our system provides this appropriate balance. The Board of Directors pursues its responsibility for these financial statements through the Audit Committee, composed exclusively of outside directors. The Committee meets periodically with management, internal auditors and our independent auditors to discuss the adequacy of financial controls, the quality of financial reporting and the nature, extent and results of the audit effort. Both the internal auditors and independent auditors have private and confidential access to the Audit Committee at all times. /s/ J. G. Breen /s/ L. J. Pitorak /s/ J. L. Ault J. G. Breen L. J. Pitorak J. L. Ault Chairman and Senior Vice President -- Finance, Vice President -- Chief Executive Officer Treasurer and Chief Financial Officer Corporate Controller
FINANCIAL STATEMENTS See "Item 14 -- Financial Statement Schedule, Reports on Form 8-K and Exhibits" for the required Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 19 22 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 regarding Directors is contained under the caption "Election of Directors" in the Proxy Statement which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, which information under such caption is incorporated herein by reference. The information required by Item 10 regarding Executive Officers is contained under the caption "Executive Officers of the Registrant" in Part I of this Form 10-K which information under such caption is incorporated herein by reference. The information required by Item 10 regarding certain significant employees is contained under the captions "Corporate Officers of the Company" and "Operating Managers of the Company" (excluding the Executive Officers) in the Proxy Statement which information under such captions is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is contained under certain captions and tables in the Proxy Statement which information under such captions and tables is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is contained under the captions "Security Ownership of Management" and "Security Ownership of Certain Beneficial Owners" in the Proxy Statement which information under such captions is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None 20 23 PART IV ITEM 14. FINANCIAL STATEMENT SCHEDULE, REPORTS ON FORM 8-K AND EXHIBITS (a) (1) Financial Statements (i) Statements of Consolidated Income for the Years Ended December 31, 1995, 1994 and 1993 (ii) Consolidated Balance Sheets at December 31, 1995, 1994 and 1993 (iii) Statements of Consolidated Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 (iv) Statements of Consolidated Shareholders' Equity for the Years Ended December 31, 1995, 1994 and 1993 (v) Notes to Consolidated Financial Statements for the Years Ended December 31, 1995, 1994 and 1993 (2) Financial Statement Schedule Financial Schedule No. II for the Years Ended December 31, 1995, 1994 and 1993 -- All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (3) Exhibits See Exhibit Index at page 41 of this report which is incorporated herein by reference.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended December 31, 1995. 21 24 STATEMENTS OF CONSOLIDATED INCOME (Thousands of Dollars Except Per Share Data)
1995 1994 1993 - ------------------------------------------------------------------------------------------ Net sales $3,273,819 $3,100,069 $2,949,303 Costs and expenses: Cost of goods sold 1,877,083 1,772,671 1,696,959 Selling, general and administrative expenses 1,075,442 1,018,470 981,268 Interest expense 2,532 3,217 6,453 Interest and net investment income (11,518) (8,222) (7,020) Other 11,782 15,420 7,279 - ------------------------------------------------------------------------------------------ 2,955,321 2,801,556 2,684,939 - ------------------------------------------------------------------------------------------ Income before income taxes 318,498 298,513 264,364 Income taxes 117,844 111,942 99,137 - ------------------------------------------------------------------------------------------ Net income $ 200,654 $ 186,571 $ 165,227 =========================================================================================== Net income per share $ 2.34 $ 2.15 $ 1.85 ===========================================================================================
See notes to consolidated financial statements. 22 25 CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
1995 1994 1993 - ------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 249,484 $ 251,415 $ 230,092 Short-term investments 20,000 39,700 Accounts receivable, less allowance 334,304 310,984 297,527 Inventories: Finished goods 395,817 396,299 371,572 Work in process and raw materials 67,270 62,921 57,346 - ------------------------------------------------------------------------------------------ 463,087 459,220 428,918 Deferred income taxes 71,583 73,956 58,705 Other current assets 100,440 93,049 96,145 - ------------------------------------------------------------------------------------------ Total current assets 1,238,898 1,188,624 1,151,087 Deferred pension assets 233,574 225,962 214,583 Intangibles and other assets 212,224 138,243 154,925 Property, plant and equipment: Land 45,203 42,211 45,487 Buildings 282,011 227,390 219,395 Machinery and equipment 629,786 596,878 556,694 Construction in progress 30,434 26,074 17,178 - ------------------------------------------------------------------------------------------ 987,434 892,553 838,754 Less allowances for depreciation 531,077 483,351 444,684 - ------------------------------------------------------------------------------------------ 456,357 409,202 394,070 - ------------------------------------------------------------------------------------------ Total Assets $2,141,053 $1,962,031 $1,914,665 =========================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 276,863 $ 258,930 $ 254,997 Compensation and taxes withheld 78,148 79,110 71,476 Other accruals 232,035 218,240 187,324 Accrued taxes 31,891 40,768 39,804 - ------------------------------------------------------------------------------------------ Total current liabilities 618,937 597,048 553,601 Long-term debt 24,018 20,465 37,901 Postretirement benefits other than pensions 175,766 172,114 166,025 Other long-term liabilities 110,206 119,060 123,967 Shareholders' equity: Common stock -- $1.00 par value: 85,454,813, 84,825,830 and 88,506,337 shares outstanding at December 31, 1995, 1994 and 1993, respectively 101,110 100,370 99,994 Other capital 182,311 159,562 150,203 Retained earnings 1,242,167 1,096,066 957,858 Cumulative foreign currency translation adjustment (20,657) (20,006) (20,384) Treasury stock, at cost (292,805) (282,648) (154,500) - ------------------------------------------------------------------------------------------ Total shareholders' equity 1,212,126 1,053,344 1,033,171 - ------------------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $2,141,053 $1,962,031 $1,914,665 ===========================================================================================
See notes to consolidated financial statements. 23 26 STATEMENTS OF CONSOLIDATED CASH FLOWS (Thousands of Dollars)
1995 1994 1993 - --------------------------------------------------------------------------------------- OPERATIONS Net income $ 200,654 $ 186,571 $ 165,227 Non-cash adjustments: Depreciation 62,947 60,571 55,063 Deferred income tax expense (3,316) (18,329) (21,873) Provisions for disposition of operations 6,267 5,712 4,916 Provisions for environmental remediation 10,136 14,400 7,059 Amortization of intangible assets 14,971 13,153 13,753 Defined benefit pension plans net credit (7,612) (11,379) (16,113) Net increase in postretirement liability 3,652 5,139 2,921 Other 10,077 15,099 23,746 Change in current items -- net: Increase in accounts receivable (19,571) (13,836) (26,106) Decrease (increase) in inventories 3,922 (28,748) (19,553) Increase in accounts payable 17,283 3,933 23,458 Increase (decrease) in accrued taxes (8,877) 964 16,697 Increase in accrued employee welfare costs 8,246 6,991 14,957 Other current items (13,066) 19,751 13,067 Costs incurred for disposition of operations (4,703) (6,949) (5,767) Other 1,715 (2,520) 4,528 - --------------------------------------------------------------------------------------- Net operating cash 282,725 250,523 255,980 - --------------------------------------------------------------------------------------- INVESTING Capital expenditures (108,392) (78,660) (62,985) Decrease (increase) in short-term investments (20,000) 39,700 (36,689) Acquisitions of assets (72,349) (9,215) (3,157) Increase in other investments (27,250) Other 2,189 7,806 (5,213) - --------------------------------------------------------------------------------------- Net investing cash (225,802) (40,369) (108,044) - --------------------------------------------------------------------------------------- FINANCING Payments of long-term debt (804) (19,607) (33,711) Payments of cash dividends (54,553) (48,363) (44,373) Proceeds from stock options exercised 11,104 6,301 9,535 Purchases of stock for treasury (17,367) (128,148) (16,144) Other 2,766 986 2,148 - --------------------------------------------------------------------------------------- Net financing cash (58,854) (188,831) (82,545) - --------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (1,931) 21,323 65,391 Cash and cash equivalents at beginning of year 251,415 230,092 164,701 - --------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 249,484 $ 251,415 $ 230,092 ======================================================================================= Taxes paid on income $ 122,687 $ 132,573 $ 102,513 Interest paid on debt 2,526 3,314 7,886 - ---------------------------------------------------------------------------------------
See notes to consolidated financial statements. 24 27 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (Thousands of Dollars)
Cumulative Common Other Retained Translation Treasury Stock Capital Earnings Adjustment Stock - -------------------------------------------------------------------------------------------------- Balance at January 1, 1993 $ 99,374 $134,901 $ 828,851 $(18,923) $(138,356) Treasury stock acquired (13,841) Stock issued 620 15,302 (2,303) Net income 165,227 Cash dividends -- $.50 per share (44,373) Increase in unfunded pension losses -- net of taxes 8,153 Current year translation adjustment (1,461) - -------------------------------------------------------------------------------------------------- Balance at December 31, 1993 99,994 150,203 957,858 (20,384) (154,500) Treasury stock acquired (126,794) Stock issued 376 9,359 (1,354) Net income 186,571 Cash dividends -- $.56 per share (48,363) Current year translation adjustment 378 - -------------------------------------------------------------------------------------------------- Balance at December 31, 1994 100,370 159,562 1,096,066 (20,006) (282,648) Treasury stock acquired (14,404) Stock issued 740 22,749 4,247 Net income 200,654 Cash dividends -- $.64 per share (54,553) Current year translation adjustment (651) - -------------------------------------------------------------------------------------------------- Balance at December 31, 1995 $ 101,110 $182,311 $1,242,167 $(20,657) $(292,805) ==================================================================================================
See notes to consolidated financial statements. 25 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of Dollars Unless Otherwise Indicated) NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES Consolidation. The consolidated financial statements include all significant controlled subsidiaries. Inter-company accounts and transactions have been eliminated. Business segments. Business segment information appears on pages 1 through 7 of this report. Foreign currency translation. All consolidated foreign operations use the local currency of the country of operation as the functional currency and translate the local currency asset and liability accounts at year-end exchange rates while income and expense accounts are translated at average exchange rates. The resulting translation adjustments are accumulated as a separate component of Shareholders' Equity titled "Cumulative foreign currency translation adjustment". Cash flows. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Nature of operations. The Company is engaged in the manufacture, distribution and sale of coatings and related products to professional, industrial, commercial and retail customers primarily in North America. Use of estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Environmental Matters. Capital expenditures for ongoing environmental compliance measures are recorded in the consolidated balance sheets and related expenses are included in the normal operating expenses of conducting business. The Company is involved with environmental compliance and remediation activities at some of its current and former sites and at a number of third-party sites. The Company accrues for certain environmental remediation activities for which commitments or clean-up plans have been developed or for which costs or minimum costs can be reasonably estimated. All accrued amounts are recorded on an undiscounted basis. See Note 4 and Note 10 for discussion of the environmental-related expense and accruals included in the financial statements. Property, plant and equipment. Property, plant and equipment is stated on the basis of cost. Depreciation is provided principally by the straight-line method. The major classes of assets and ranges of depreciation rates are as follows: Buildings 2% - 6 2/3% Machinery and equipment 4% - 20% Furniture and fixtures 5% - 20% Automobiles and trucks 10% - 33 1/3%
Investment in Life Insurance. The Company invests in broad-based corporate owned life insurance. The cash surrender value of the policies, net of policy loans, are included in Other Assets. The net expense associated with such investment is included in Other Costs and Expenses. Such expense is immaterial to income before income taxes. Intangibles. Intangible assets were $122,862, $105,821 and $115,765, net of accumulated amortization of $65,114, $62,744 and $49,562, at December 31, 1995, 1994 and 1993, respectively. These assets are amortized by the straight-line method over the expected period of benefit. The Company reviews such assets for impairment and revises the related estimated remaining lives if necessary. Technical expenditures. Total technical expenditures include research and development costs, quality control, product formulation expenditures and other similar items. Research and development costs 26 29 included in technical expenditures were $17,238, $16,319 and $17,190 for 1995, 1994 and 1993, respectively. Advertising expenses. The cost of advertising is expensed as incurred. The Company incurred $152,588, $148,973 and $144,778 in advertising costs during 1995, 1994 and 1993, respectively. Impact of Recently Issued Accounting Standards. In March 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement 121 in the first quarter of 1996 and, based on current circumstances, does not believe the effect of adoption will be material. Net income per share. Net income per share was computed based on the average number of shares and share equivalents outstanding during the year. See computation on page 43 of this report. Letters of credit. The Company occasionally enters into standby letter of credit agreements to guarantee various operating activities. These agreements, which expire in 1996, provide credit availability to the various beneficiaries if certain contractual events occur. Amounts outstanding under these agreements totaled $17,075, $20,091 and $24,656 at December 31, 1995, 1994 and 1993, respectively. Fair value of financial instruments. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value. Short-term investments: The carrying amounts reported in the consolidated balance sheets for marketable debt and equity securities are based on quoted market prices and approximate fair value. Investments in Securities: The Company maintains certain long-term investments in a fund to provide for payment of health care benefits of certain qualified employees. These investments are classified as held-to-maturity securities with the related carrying amounts included in Other Assets. The estimated fair values of these securities, shown below, are based on quoted market prices.
December 31, ----------------------------------------------------------------------------------------- 1995 1994 1993 ----------------------------------------------------------------------------------------- Carrying amount $34,085 $37,726 $38,064 Fair value 34,709 37,668 43,235 -----------------------------------------------------------------------------------------
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.
December 31, --------------------------------------------------------------------------------------------- 1995 1994 1993 --------------------------------------------------------------------------------------------- CARRYING FAIR Carrying Fair Carrying Fair AMOUNT VALUE Amount Value Amount Value --------------------------------------------------------------------------------------------- Publicly traded debt $ 15,900 $20,065 $16,077 $17,643 $29,235 $37,071 Non-traded debt 8,715 6,162 5,083 3,243 10,084 7,446 ---------------------------------------------------------------------------------------------
27 30 Interest rate swaps: The Company occasionally enters into interest rate swaps primarily to hedge against interest rate risks. These agreements generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Counterparties to these agreements are major financial institutions. Management believes the risk of incurring losses related to credit risk is remote. The fair values for the Company's off-balance-sheet instruments, shown below, are based on pricing models or formulas using current assumptions for comparable instruments. All fair value amounts shown represent a liability position at the respective date.
December 31, ----------------------------------------------------------------------------------------- 1995 1994 1993 ----------------------------------------------------------------------------------------- Carrying amount $ 1,275 $1,802 $ 2,309 Fair value 943 1,996 1,094 Notional amount 9,711 9,446 35,009 Number of agreements outstanding 1 1 2 -----------------------------------------------------------------------------------------
Non-traded investments: It was not practicable to estimate the fair value of the Company's investment in certain non-traded investments because of the lack of quoted market prices and the inability to estimate fair values without incurring excessive costs. The carrying amounts, included in other assets, of $31,491, $18,829 and $25,778 at December 31, 1995, 1994 and 1993, respectively, represent the Company's best estimate of current economic values of these investments. Reclassification. Certain amounts in the 1994 and 1993 financial statements have been reclassified to conform with the 1995 presentation. NOTE 2 -- SUBSEQUENT EVENTS Acquisition. Effective January 8, 1996, the Company accepted for payment 10,825,550 shares of common stock (or approximately 96.3% of the total shares outstanding) of Pratt & Lambert United, Inc. (Pratt & Lambert) pursuant to a cash tender offer commenced on November 9, 1995 pursuant to the Agreement and Plan of Merger dated as of November 4, 1995 (Merger Agreement) entered into between the Company, SWACQ, Inc. (a wholly-owned subsidiary of the Company) and Pratt & Lambert. The terms of the Merger Agreement provided that the Company would acquire all of the outstanding shares of Pratt & Lambert for a cash price of $35 per share, or a total purchase price of approximately $400,000. Pursuant to the laws of the State of New York, the merger was effected on January 10, 1996 (merger date) without a vote of the shareholders. Effective on the merger date, SWACQ, Inc. was merged into Pratt & Lambert, making Pratt & Lambert a wholly-owned subsidiary of the Company. As a result of the merger, all shares not tendered were converted into the right to receive $35 per share in cash, without interest. The acquisition was financed through the use of available cash, a $50,000 floating term note and other available sources of financing. The floating term note is accompanied by a two-year interest rate swap agreement which involves the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amount. The notional amount upon which the interest is based is $50,000. Any market risk of the swap agreement related to the fluctuation in interest rates will be offset by a change to the interest payment obligation on the Company's floating term note. The merger will be accounted for under the purchase method of accounting, and the results of operations of Pratt & Lambert will be included in the results of operations of the Company beginning in 1996. Pratt & Lambert is principally engaged in the production and sale of coatings and adhesives to the dealer, mass merchandiser, home center and specialty markets. In August 1994, Pratt & Lambert, Inc. merged with United Coatings, Inc., a supplier primarily to the mass merchant market. Pratt & Lambert's annual sales during 1995 were approximately $479,000. 28 31 Debt Repayment. Subsequent to the merger, the Company repaid approximately $95,000 of Pratt & Lambert's outstanding debt. The debt repayment was financed through the issuance of short-term commercial paper. Depending on cash flows and market conditions in 1996, a portion of the short-term commercial paper may be refinanced into long-term debt. NOTE 3 -- INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined principally on the last-in, first-out (LIFO) method which provides a better matching of current costs and revenues. The following presents the effect on inventories, net income and net income per share had the Company used the first-in, first-out (FIFO) and average cost methods of inventory valuation adjusted for income taxes at the statutory rate and assuming no other adjustments. This information is presented to enable the reader to make comparisons with companies using the FIFO method of inventory valuation.
1995 1994 1993 - ----------------------------------------------------------------------------------------------- Percentage of total inventories on LIFO 97% 97% 97% Excess of FIFO and average cost over LIFO $ 102,725 $ 80,199 $ 80,094 Increase (decrease) in net income due to LIFO (14,642) (68) 2,217 Increase (decrease) in net income per share due to LIFO (.17) -- .02 - -----------------------------------------------------------------------------------------------
NOTE 4 -- OTHER COSTS AND EXPENSES A summary of significant items included in other costs and expenses is as follows:
1995 1994 1993 - ----------------------------------------------------------------------------------------------- Dividend and royalty income $ (10,433) $ (7,500) $ (5,445) Net expense of financing and investing activities 9,376 12,660 4,155 Provisions for environmental remediation 10,136 4,700 6,059 Provisions for disposition and termination of operations (see Note 5) 1,007 1,812 916 Miscellaneous 1,696 3,748 1,594 - ----------------------------------------------------------------------------------------------- $ 11,782 $ 15,420 $ 7,279 ===============================================================================================
The net expense of financing and investing activities represents the realized gains or losses associated with disposing of fixed assets, the net gain or loss associated with the investment of certain long-term asset funds, the premium associated with the retirement or acquisition of certain outstanding 9.875 percent debentures during 1993 and 1994, and, in 1994 and 1995, the net pre-tax expense associated with the Company's investment in broad-based corporate owned life insurance. During the three years ended December 31, 1995, provisions for environmental remediation reflect the increased estimated costs of environmental-related matters at current, former and third-party sites (see Note 10). NOTE 5 -- DISPOSITION AND TERMINATION OF OPERATIONS The Company is continually re-evaluating its operating facilities with regard to the long-term strategic goals established by management and the board of directors. Operating facilities which are not expected to sufficiently contribute to the Company's future plans are closed or sold. At the time of the decision to close or sell a facility, a provision is made and the expense included in other costs and expenses to reduce property, plant and equipment to its estimated net realizable value. Similarly, provisions are made which reduce all other assets to their estimated net realizable values and provide for all qualified exit costs such as lease cancellation penalties, post-closure rent 29 32 expenses and incremental post-closure expenses, and the estimated costs of employee termination benefits if management has approved a termination plan and communicated such plan to the affected employees. The expenses associated with the provisions for such exit costs and termination benefits are included in cost of goods sold. Adjustments to all previous accruals, as closure or disposition occurs, are included in other costs and expenses. In prior years, the provisions for disposition, actual costs and accruals balances in the table below included certain amounts for environmental-related matters. All such matters are now disclosed together in Note 10. The provisions made in 1995 represent the reduction to net realizable value for certain assets and exit costs associated with closing certain warehouses due to distribution consolidations within the Company. In 1994, provisions were made for the closing of certain warehouses which were replaced during 1995 by larger, more efficient facilities. In 1993, provisions were made for the closing of certain warehouses, small manufacturing facilities and selected unprofitable retail paint stores as part of production and distribution consolidations. A summary of the financial data related to the closing or sale of the facilities is as follows:
1995 1994 1993 - ----------------------------------------------------------------------------------------------- Beginning accruals -- January 1 $ 25,982 $ 26,110 $ 25,722 Provisions included in cost of goods sold 5,260 3,900 4,000 Provisions and adjustments to prior accruals included in costs and expenses -- other 1,007 1,812 916 - ----------------------------------------------------------------------------------------------- Total provisions 6,267 5,712 4,916 Actual costs incurred (4,704) (5,840) (4,528) - ----------------------------------------------------------------------------------------------- Ending accruals -- December 31 $ 27,545 $ 25,982 $ 26,110 =============================================================================================== Net after-tax provision $ 4,073 $ 3,713 $ 3,195 Net after-tax provision per share $ .05 $ .04 $ .04 - -----------------------------------------------------------------------------------------------
NOTE 6--PENSION BENEFITS Substantially all employees of the Company participate in noncontributory defined benefit or defined contribution pension plans. Defined benefit plans covering salaried employees provide benefits that are based primarily on years of service and employees' compensation. The defined benefit plan covering hourly employees generally provides benefits of stated amounts for each year of service. Multi-employer plans are primarily defined benefit plans which provide benefits of stated amounts for union employees. The Company's funding policy for defined benefit pension plans is to fund at least the minimum annual contribution required by applicable regulations. Plan assets consist primarily of cash, equity and fixed-income securities. There were 969,400 shares of the Company's stock included in these assets at December 31, 1995, 1994 and 1993. Due to decreased rates of high-quality long-term investments, the assumed discount rate was changed December 31, 1995, increasing the projected benefit obligation. The decreased interest rates during 1995 positively impacted the return on plan assets in the defined benefit pension trusts. The effect of the change in the assumed discount rate and the increased earnings on plan assets resulted in a net decrease in the unrecognized net loss, whose amortization will be reduced beginning in 1996. Changes in the assumed discount rate and rate of return on plan assets at December 31, 1994 and 1993 previously increased the unrecognized net loss, whose amortization in 1995 and 1994, respectively, reduced the net pension credit. 30 33 The net pension credit for defined benefit plans and its components was as follows:
1995 1994 1993 - ----------------------------------------------------------------------------------------------- Service cost $ 2,401 $ 2,800 $ 2,489 Interest cost 8,929 8,402 8,299 Actual return on plan assets (53,926) 7,418 (25,731) Net amortization and deferral 34,984 (29,999) (1,170) - ----------------------------------------------------------------------------------------------- Net pension credit $ (7,612) $ (11,379) $ (16,113) ===============================================================================================
Based on the latest actuarial information available, the following table sets forth the funded status and amounts recognized in the Company's consolidated balance sheets for the defined benefit pension plans:
1995 1994 1993 - ----------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $ (116,335) $ (103,860) $ (105,530) Accumulated benefit obligation $ (118,585) $ (105,480) $ (107,530) Projected benefit obligation $ (128,335) $ (111,650) $ (117,970) Plan assets at fair value 323,216 277,841 293,076 - ----------------------------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 194,881 166,191 175,106 Unrecognized net asset at January 1, 1986, net of amortization (9,865) (12,787) (15,708) Unrecognized prior service cost 393 441 1,201 Unrecognized net loss 48,165 72,117 53,984 - ----------------------------------------------------------------------------------------------- Deferred pension assets recognized in the consolidated balance sheets $ 233,574 $ 225,962 $ 214,583 =============================================================================================== Assumptions used in determining actuarial present value of benefit obligations: Discount rate 7.25% 8.25% 7.25% Weighted-average rate of increase in future compensation levels 5.00% 5.00% 5.00% Long-term rate of return on plan assets 8.50% 8.50% 8.50% - -----------------------------------------------------------------------------------------------
The Company's annual contribution for its defined contribution pension plans, which is based on a level percentage of compensation for covered employees, offset the pension credit by $20,326 for 1995, $20,193 for 1994 and $19,809 for 1993. The cost of multiemployer and foreign plans charged to income was immaterial for the three years ended December 31, 1995. NOTE 7 -- BENEFITS OTHER THAN PENSIONS In addition to providing pension benefits, the Company provides certain health care and life insurance benefits under company-sponsored plans for active and retired employees. The health care plans are contributory and contain cost-sharing features such as deductibles and coinsurance. There were 14,823, 14,160 and 13,883 active employees entitled to receive benefits under these plans as of December 31, 1995, 1994 and 1993, respectively. The cost of these benefits for active employees is recognized as claims are incurred and amounted to $37,194, $32,694 and $35,597 for 1995, 1994 and 1993, respectively. The Company has a fund, to which it no longer intends to contribute, that provides for payment of health care benefits of certain qualified employees. Distributions from the fund amounted to $5,265 in 1995, $4,662 in 1994 and $5,719 in 1993. Substantially all employees of the Company who were hired prior to January 1, 1993 and who are not members of a collective bargaining unit are eligible for certain health care and life insurance benefits upon retirement from active service with the Company. There were 4,008, 4,093 and 4,126 31 34 retired employees entitled to receive benefits as of December 31, 1995, 1994 and 1993, respectively. The plans are unfunded. The assumed discount rate used in determining the actuarial present value of the accumulated postretirement benefit obligation was 7.25% in 1995 and 1993 and 8.25% in 1994. The change in the assumed discount rate at December 31, 1995, caused by decreased interest rates of high-quality long-term investments, increased the accumulated postretirement benefit obligation, the effect of which increased the unrecognized net loss. Amortization of the loss will begin in 1996. The assumed weighted-average annual rate of increase in the per capita cost of covered benefits (i.e., the health care cost trend rate) is 8.5 percent for 1996 and decreases gradually to 5.5 percent for 2003 and thereafter. The assumed health care cost trend rate was lowered one percentage point at December 31, 1993 for each year thereafter, which decreased the accumulated postretirement benefit obligation. The health care cost trend rate has a significant effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by $11,667 and the aggregate service and interest cost components of net periodic postretirement benefit cost for 1995 by $1,036. Based on the latest actuarial information available, the following table sets forth the amounts recognized in the Company's consolidated balance sheets for postretirement benefits other than pensions:
1995 1994 1993 - ----------------------------------------------------------------------------------------------- Actuarial present value of accumulated postretirement benefit obligation: Retirees $ (105,200) $ (93,049) $ (94,000) Fully eligible active participants (17,590) (14,240) (19,900) Other active participants (49,120) (41,811) (40,680) - ----------------------------------------------------------------------------------------------- (171,910) (149,100) (154,580) Effect of changes in the accumulated postretirement benefit obligation to be amortized over future years: Unrecognized prior service credit (24,268) (26,961) (29,655) Unrecognized net (gain) loss 12,262 (4,203) 9,110 - ----------------------------------------------------------------------------------------------- Total accrued postretirement benefit liability $ (183,916) $ (180,264) $ (175,125) =============================================================================================== Accrued postretirement benefit liabilities recognized in the consolidated balance sheets: Amount included in current liabilities $ (8,150) $ (8,150) $ (9,100) Amount of long-term postretirement benefits other than pensions (175,766) (172,114) (166,025) - ----------------------------------------------------------------------------------------------- Total accrued postretirement benefit liability $ (183,916) $ (180,264) $ (175,125) =============================================================================================== The expense for postretirement benefit plans and its components was as follows: Service cost $ 2,723 $ 3,112 $ 2,450 Interest cost 11,998 11,459 11,420 Net amortization of unrecognized prior service credit (2,693) (2,693) (2,693) Net amortization and deferral 61 - ----------------------------------------------------------------------------------------------- Net postretirement benefit expense $ 12,028 $ 11,939 $ 11,177 ===============================================================================================
32 35 NOTE 8 -- LONG-TERM DEBT
Sinking Fund/ Interim Payments Amount Outstanding ------------------------ --------------------------------------------- Due Date Amount Commence 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------ 9.875% Debentures 2016 $5,000 2007 $ 15,900 $ 15,900 $ 29,000 8% to 12% Mortgage Notes Through Varies Payable 2,632 3,365 4,418 secured by certain land and 2005 currently buildings and other 8.5% Promissory Note 2004 Varies 1996 978 1,000 8.15% Promissory Note 2000 1,000 8% Promissory Notes Through Varies 1996 3,350 1999 Floating Rate Broward County Industrial Revenue Bond 3,994 6.25% Convertible Subordinated Debentures (Convertible into common stock at $2.875 a share) 235 Other Obligations 158 200 254 - ------------------------------------------------------------------------------------------------------------------------------ $ 24,018 $ 20,465 $ 37,901 ==============================================================================================================================
Maturities of long-term debt are as follows for the next five years: $755 in 1996; $662 in 1997; $467 in 1998; $2,506 in 1999; and $1,178 in 2000. Interest expense on long-term debt amounted to $2,387, $2,768 and $6,136 for 1995, 1994 and 1993, respectively. There were no interest charges capitalized during the periods presented. The Company had the following other financing arrangements available at December 31, 1995 outlined below. There were no outstanding borrowings under these arrangements at the end of 1995. Under a 364-day revolving credit agreement with a group of thirteen banks effective August 31, 1995, the Company may borrow up to $100,000. The agreement may be extended for additional 364-day periods under the terms thereof. Under a five-year revolving credit agreement with the same group of thirteen banks effective August 31, 1995, as amended November 30, 1995, the Company may borrow up to $500,000. The agreement may be extended for additional one-year periods under the terms thereof. Amounts outstanding under the agreement may be converted into two-year term loans at any time. Both revolving credit agreements contain net worth and certain non-financial covenants. There are no compensating balance arrangements. The Company has a commercial paper program under which $280,000 aggregate principal amount of unsecured short-term notes can be issued. Under a shelf registration with the Securities and Exchange Commission covering $200,000 of unsecured debt securities with maturities ranging from nine months to thirty years, the Company may issue securities from time to time in one or more series and will offer the securities on terms determined at the time of sale. Subsequent to the date of the financial statements, the Company issued a $50,000 term note and approximately $205,000 in other available sources of financing as more fully explained in Note 2. NOTE 9 -- LEASES The Company leases certain stores, warehouses, office space and equipment. Renewal options are available on the majority of leases and, under certain conditions, options exist to purchase some properties. Rental expense for operating leases was $95,536, $93,637 and $91,672 for 1995, 1994 and 1993, respectively. Certain store leases require the payment of contingent rentals based on sales in excess of specified minimums. Contingent rentals included in rent expense were $9,102 in 1995, $8,985 33 36 in 1994 and $9,234 in 1993. Rental income, as lessor, from real estate leasing activities and sublease rental income for all years presented was not significant. Following is a schedule, by year and in the aggregate, of future minimum lease payments under noncancellable operating leases having initial or remaining terms in excess of one year at December 31, 1995: 1996 $ 72,026 1997 61,097 1998 47,739 1999 35,275 2000 23,775 Later years 61,157 -------- Total minimum lease payments $301,069 ========
NOTE 10 -- OTHER LONG-TERM LIABILITIES Other long-term liabilities consist of the following:
1995 1994 1993 - -------------------------------------------------------------------------------------------- Environmental-related $ 70,310 $ 71,049 $ 65,755 Other 39,896 48,011 58,212 - -------------------------------------------------------------------------------------------- $110,206 $119,060 $123,967 ============================================================================================
The Company has provided for the estimated costs associated with environmental remediation activities at some of its current and former sites. Also, the Company, together with other parties, has been designated a potentially responsible party under federal and state environmental protection laws for the remediation of hazardous waste at a number of third-party sites, primarily Superfund sites. In general, these laws provide that potentially responsible parties may be held jointly and severally liable for investigation and remediation costs regardless of fault. The Company provides for its estimated potential liability for investigation and remediation costs with respect to such third-party sites. The Company initially provides for the estimated cost of certain environmental-related activities relating to its current, former and third-party sites when minimum costs can be reasonably estimated. These estimates are determined based on currently-available facts regarding each site. If the best estimate of costs can only be identified within a range and no specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is accrued. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. The Company believes that any additional liability in excess of amounts provided which may result from the resolution of these matters will not have a material adverse effect on the financial condition, liquidity or cash flow of the Company. In addition to the long-term portion of environmental-related accruals shown above, current accruals for certain environmental-related liabilities associated with current, former and third-party sites are included in other accruals in current liabilities on the consolidated balance sheets. NOTE 11 -- STOCK PURCHASE PLAN As of December 31, 1995, 11,203 employees participated through regular payroll deductions in the Company's Employee Stock Purchase and Savings Plan. The Company's contribution charged to income amounted to $26,795, $22,242 and $20,658 for 1995, 1994 and 1993, respectively. Additionally, the Company made contributions on behalf of participating employees, which represent salary 34 37 reductions for income tax purposes, amounting to $12,775 in 1995, $11,456 in 1994 and $10,335 in 1993. At December 31, 1995, there were 13,075,095 shares of the Company's stock being held by this plan, representing 15.3 percent of the total number of shares outstanding. Shares of company stock credited to each member's account under the plan are voted by the trustee under confidential instructions from each individual plan member. Shares for which no instructions are received are voted by the trustee in the same proportion as those for which instructions are received. NOTE 12 -- CAPITAL STOCK
Shares Shares in Treasury Outstanding - ------------------------------------------------------------------------------------------- Balance at January 1, 1993 10,993,257 88,380,906 Stock issued upon: Exercise of stock options 73,224 462,736 Conversion of 6.25% Convertible Subordinated Debentures 8,695 Restricted stock grants 75,500 Treasury stock acquired 421,500 (421,500) - ------------------------------------------------------------------------------------------- Balance at December 31, 1993 11,487,981 88,506,337 Stock issued upon: Exercise of stock options 42,292 319,124 Conversion of 6.25% Convertible Subordinated Debentures 20,169 Cancellation of restricted stock grants (6,000) Treasury stock acquired 4,013,800 (4,013,800) - ------------------------------------------------------------------------------------------- Balance at December 31, 1994 15,544,073 84,825,830 Stock issued upon: Exercise of stock options 85,613 521,043 Conversion of 6.25% Convertible Subordinated Debentures 61,668 Restricted stock grants 72,000 Treasury Stock: Acquired 411,300 (411,300) Issued for acquisition (385,572) 385,572 - ------------------------------------------------------------------------------------------- Balance at December 31, 1995 15,655,414 85,454,813 ==========================================================================================
An aggregate of 4,889,865, 5,663,772 and 4,087,364 shares of stock at December 31, 1995, 1994 and 1993, respectively, were reserved for future restricted stock grants, the exercise and future grants of stock options, and, prior to their expiration in February 1995, the conversion of convertible subordinated debentures. At December 31, 1995, there were 300,000,000 shares of common stock and 30,000,000 shares of serial preferred stock authorized for issuance. The Company has a shareholders' rights plan which designates 1,000,000 shares of the authorized serial preferred stock as cumulative redeemable serial preferred stock which may be issued if the Company becomes the target of coercive and unfair takeover tactics. NOTE 13 -- STOCK PLAN The Company's stock plan permits the granting of stock options, stock appreciation rights and restricted stock to eligible employees. The 1994 Stock Plan succeeded the 1984 Stock Plan which expired on February 15, 1994. Although no further grants may be made under the 1984 Stock Plan, all rights granted under such plan remain. The 1994 Stock Plan authorized an additional 2,000,000 shares to be added to authorized shares of the 1984 Stock Plan which were not granted as of the 1984 Stock Plan's expiration date. Non-qualified and incentive stock options have been granted to certain officers and key employees under the plans at prices not less than fair market value of the shares, as 35 38 defined by the plans, at the date of grant. The options generally become exercisable to the extent of one-third of the optioned shares for each full year of employment following the date of grant and generally expire ten years after the date of grant. Restricted stock grants, with an outstanding balance of 186,000 shares at December 31, 1995, were awarded to certain officers and key employees which require four years of continuous employment from the date of grant before receiving the shares without restriction. The number of shares to be received without restriction is based on the Company's performance relative to a peer group of companies. There were 104,000 and 121,500 shares issued without restriction pursuant to these grants during 1995 and 1993, respectively. Unamortized deferred compensation expense with respect to the restricted stock amounted to $4,024 at December 31, 1995, $1,612 at December 31, 1994 and $3,760 at December 31, 1993 and is being amortized over the four-year vesting period. Deferred compensation expense aggregated $1,563, $1,416 and $3,271 in 1995, 1994 and 1993, respectively. No stock appreciation rights have been granted.
- ------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------- PRICE Price Price SHARES RANGE Shares Range Shares Range - ------------------------------------------------------------------------------------------------------------------------- Stock Options: Outstanding beginning of year 2,606,459 $10.94 - $35.88 2,671,545 $ 7.72-$35.88 2,944,255 $ 7.72-$28.88 Granted 504,200 32.69 - 36.56 334,400 32.19- 35.06 327,000 30.75- 35.88 Exercised (606,656) 10.94 - 33.25 (361,416) 7.72- 31.63 (535,960) 9.22- 28.38 Canceled (15,869) 25.13 - 35.31 (38,070) 12.56- 33.25 (63,750) 10.94- 30.75 - ------------------------------------------------------------------------------------------------------------------------- Outstanding end of year 2,488,134 $10.94 - $36.56 2,606,459 $10.94-$35.88 2,671,545 $ 7.72-$35.88 - ------------------------------------------------------------------------------------------------------------------------- Exercisable 1,671,194 1,969,569 1,579,103 Reserved for future grants 2,401,731 2,995,630 1,333,963 - -------------------------------------------------------------------------------------------------------------------------
NOTE 14--INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are currently in effect. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993 - ------------------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation $ 21,630 $ 23,829 $30,580 Deferred employee benefit items 26,360 26,494 24,109 - ------------------------------------------------------------------------------------------- Total deferred tax liabilities $ 47,990 $ 50,323 $54,689 =========================================================================================== Deferred tax assets: Dispositions, environmental and other similar items $ 32,425 $ 36,076 $30,044 Other items (each less than 5% of total assets) 82,193 77,013 65,721 - ------------------------------------------------------------------------------------------- Total deferred tax assets $114,618 $113,089 $95,765 ===========================================================================================
36 39 Significant components of the provisions for income taxes are as follows:
1995 1994 1993 - ------------------------------------------------------------------------------------------- Current: Federal $ 97,936 $106,132 $100,121 Foreign 2,470 1,775 1,483 State and Local 20,754 22,364 19,406 - ------------------------------------------------------------------------------------------- Total Current 121,160 130,271 121,010 Deferred: Federal (3,062) (15,465) (18,467) Foreign State and Local (254) (2,864) (3,406) - ------------------------------------------------------------------------------------------- Total Deferred (3,316) (18,329) (21,873) - ------------------------------------------------------------------------------------------- Total income tax expense $117,844 $111,942 $ 99,137 ===========================================================================================
A reconciliation of the statutory federal income tax rate and the effective tax rate follows:
1995 1994 1993 - ---------------------------------------------------------------------------------------------- Statutory tax rate 35.0% 35.0% 35.0% Effect of: State and local taxes 4.2 4.2 3.9 Investment vehicles (2.6) (2.0) (1.1) Other, net 0.4 0.3 (0.3) - ---------------------------------------------------------------------------------------------- Effective tax rate 37.0% 37.5% 37.5% ==============================================================================================
It is the Company's intention to reinvest undistributed earnings of foreign subsidiaries; accordingly, no deferred income taxes have been provided thereon. At December 31, 1995, such undistributed earnings amounted to $4,500. Included in the Company's deferred tax assets are valuation reserves of $17,784, $14,021 and $9,758 at December 31, 1995, 1994 and 1993, respectively, resulting from the uncertainty as to future recognition of certain foreign net operating losses and other foreign assets. NOTE 15--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
1995 - --------------------------------------------------------------------- NET NET GROSS NET INCOME QUARTER SALES PROFIT INCOME PER SHARE - --------------------------------------------------------------------- 1ST $ 716,796 $ 292,559 $ 18,733 $ .22 2ND 904,729 387,947 73,207 .85 3RD 911,387 390,498 74,948 .87 4TH 740,907 325,732 33,766 .39
Year-end adjustments during the fourth quarter of $1,565 increased net income by $1,017 ($.01 per share). Cost of goods sold decreased by a net of $8,268 ($5,374 after-tax, $.06 per share) as a result of physical inventory adjustments of $13,528 ($8,793 after-tax, $.10 per share) which were partially offset by certain provisions for the disposition and termination of operations of $5,260 ($3,419 after-tax, $.04 per share). Administrative expenses were increased by $60 ($39 after-tax, no per share effect) due to other year-end adjustments. Other costs and expenses increased $6,643 ($4,318 after-tax, $.05 per share) due to the provisions for environmental-related matters at certain current, former and third-party sites of $7,136 ($4,638 after-tax, $.05 per share) which were partially 37 40 offset by reductions to prior accruals for the disposition and termination of operations of $493 ($320 after-tax, no per share effect).
1994 - -------------------------------------------------------------------- Net Net Gross Net Income Quarter Sales Profit Income per Share - -------------------------------------------------------------------- 1st $ 639,157 $261,890 $ 15,508 $.17 2nd 880,531 378,775 69,155 .80 3rd 876,743 377,529 71,229 .83 4th 703,638 309,204 30,679 .36
Net income for the fourth quarter was reduced $809 ($.01 per share) due to certain year-end adjustments. A net decrease in cost of goods sold resulted from physical inventory adjustments of $19,017 ($12,361 after-tax, $.14 per share) which were partially offset by certain provisions for the disposition and termination of operations of $13,600 ($8,840 after-tax, $.10 per share). A net increase in administrative expenses due to other year-end adjustments of $2,150 ($1,398 after-tax, $.01 per share) and in other costs and expenses due to the remaining provisions for the disposition and termination of operations of $1,812 ($1,178 after-tax, $.02 per share) and provisions for environmental remediation at certain sites of $2,700 ($1,755 after-tax, $.02 per share) more than offset the gain in cost of goods sold. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (SCHEDULE II) Changes in the allowance for doubtful accounts are as follows:
1995 1994 1993 - ------------------------------------------------------------------------------------------------ Beginning balance $ 10,820 $ 8,589 $ 1,983 Bad debt expense 13,793 11,801 16,514 Net uncollectible accounts written off (9,459) (9,570) (9,908) - ------------------------------------------------------------------------------------------------ Ending balance $ 15,154 $ 10,820 $ 8,589 ================================================================================================
Activity related to other asset reserves:
1995 1994 1993 - ------------------------------------------------------------------------------------------------ Beginning balance $ 80,853 $ 54,079 $ 40,124 Charges to expense 15,672 20,850 13,785 Other additions (deductions) (12,628) 5,924 170 - ------------------------------------------------------------------------------------------------ Ending balance $ 83,897 $ 80,853 $ 54,079 ================================================================================================
Charges to expense consist primarily of amortization of intangibles and, in 1994, adjustments to reduce certain assets to their estimated net realizable values. Other additions (deductions) consist primarily of actual costs incurred and balance sheet reclassifications and, in 1995, removal of fully-amortized items. 38 41 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, and State of Ohio, on the 13th day of March, 1996. THE SHERWIN-WILLIAMS COMPANY By: /s/ L. E. STELLATO ------------------------------------------ L. E. Stellato, Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities indicated on March 13, 1996.
SIGNATURE --------- * J. G. BREEN Chairman and Chief Executive Officer, - ----------------------------------- Director (Principal Executive Officer) J. G. Breen * T. A. COMMES President and Chief Operating Officer, - ----------------------------------- Director T. A. Commes * L. J. PITORAK Senior Vice President -- Finance, - ----------------------------------- Treasurer and Chief Financial Officer L. J. Pitorak (Principal Financial Officer) * J. L. AULT Vice President -- Corporate Controller - ----------------------------------- (Principal Accounting Officer) J. L. Ault * J. M. BIGGAR Director - ----------------------------------- J. M. Biggar * L. CARTER Director - ----------------------------------- L. Carter * D. E. COLLINS Director - ----------------------------------- D. E. Collins * D. E. EVANS Director - ----------------------------------- D. E. Evans * R. W. MAHONEY Director - ----------------------------------- R. W. Mahoney * W. G. MITCHELL Director - ----------------------------------- W. G. Mitchell
39 42
SIGNATURE --------- * A. M. MIXON, III Director - ----------------------------------- A. M. Mixon, III * H. O. PETRAUSKAS Director - ------------------------------- H. O. Petrauskas * R. K. SMUCKER Director - ------------------------------- R. K. Smucker
* 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. By: /s/ L. E. STELLATO March 13, 1996 ----------------------------------- L. E. Stellato, Attorney-in-fact
40 43 EXHIBIT INDEX 2. Not applicable. 3. (a) Amended Articles of Incorporation, as amended April 28, 1993, filed as Exhibit 4(a) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and incorporated herein by reference. (b) Regulations of the Company, as amended, dated April 27, 1988, filed as Exhibit 4(b) to Post-Effective Amendment No. 1, dated April 29, 1988, to Form S-8 Registration Statement Number 2-91401, and incorporated herein by reference. 4. (a) Indenture between the Company and Chemical Bank, as Trustee, dated as of February 1, 1996, filed as Exhibit 4(a) to Form S-3 Registration Statement Number 333-01093, dated February 20, 1996 (also deemed to be filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-22705, dated June 24, 1988), and incorporated herein by reference. (b) 364-Day Revolving Credit Agreement, by and among the Company and several banking institutions, dated August 31, 1995, filed as Exhibit (b)(1) to the Tender Offer Statement on Schedule 14D-1/Schedule 13D filed November 9, 1995, as amended, and incorporated herein by reference. (c) Five Year Revolving Credit Agreement, by and among the Company and several banking institutions, dated August 31, 1995, filed as Exhibit (b)(2) to the Tender Offer Statement on Schedule 14D-1/Schedule 13D filed November 9, 1995, as amended, and incorporated herein by reference. (d) Addendum to Five Year Revolving Credit Agreement, by and among the Company and several banking institutions, dated November 30, 1995 (filed herewith). (e) Term Loan/Bankers' Acceptance Agreement, by and between the Company and SunTrust Bank, Atlanta, dated January 9, 1996 (filed herewith). (f) Term Loan/Bankers' Acceptance Agreement, by and between the Company and SunTrust Bank, Atlanta, dated February 1, 1996 (filed herewith). (g) Indenture between Sherwin-Williams Development Corporation, as issuer, the Company, as guarantor, and Harris Trust and Savings Bank, as Trustee, dated June 15, 1986, filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-6626, dated June 20, 1986, and incorporated herein by reference. (h) Rights Agreement between the Company and Ameritrust Company National Association, dated January 25, 1989, filed as Exhibit 2.1 to Form 8-A, dated January 26, 1989, and incorporated herein by reference. 9. Not applicable. 10. *(a) Form of Director and Officer Indemnification Agreement filed as Exhibit 28(a) to Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and incorporated herein by reference. *(b) Employment Agreements with J.G. Breen, T.A. Commes and C.G. Ivy filed as Exhibit 28(b) to Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and incorporated herein by reference. *(c) Amendments to Employment Agreements with J.G. Breen, T.A. Commes and C.G. Ivy (filed herewith). *(d) Form of Severance Pay Agreements filed as Exhibit 10(c) to Form 10-K dated March 13, 1990, and incorporated herein by reference. *(e) The Sherwin-Williams Company Deferred Compensation Savings Plan filed as Exhibit 10(d) to Form 10-K dated March 13, 1992, and incorporated herein by reference. *(f) Amendment No. 1 to The Sherwin-Williams Company Deferred Compensation Plan (filed herewith).
41 44 *(g) The Sherwin-Williams Company Key Management Deferred Compensation Plan (1994 Amendment and Restatement) (filed herewith). (h) Asset Purchase Agreement, dated July 17, 1990, as amended, between the Company and DeSoto, Inc., for the purchase of certain assets of DeSoto, Inc.'s U.S. Consumer Paint Business filed as Exhibit 10(g) to Form 10-K dated March 15, 1991, and incorporated herein by reference. *(i) Form of Executive Disability Income Plan filed as Exhibit 10(g) to Form 10-K dated March 13, 1992, and incorporated herein by reference. *(j) Form of Executive Life Insurance Plan filed as Exhibit 10(h) to Form 10-K dated March 13, 1992, and incorporated herein by reference. *(k) Form of Directors' Deferred Fee Plan filed as Exhibit 10(i) to Form 10-K dated March 13, 1992, and incorporated herein by reference. (l) License Agreement, dated February 1, 1991, as amended, between the Company and SWIMC, Inc. filed as Exhibit 10(j) to Form 10-K dated March 15, 1993, and incorporated herein by reference. (m) License Agreement, dated February 1, 1991, as amended, between the Company and DIMC, Inc. filed as Exhibit 10(k) to Form 10-K dated March 15, 1993, and incorporated herein by reference. *(n) Form of The Sherwin-Williams Company Management Compensation Program filed as Exhibit 10(l) to Form 10-K dated March 15, 1995, and incorporated herein by reference. *(o) The Sherwin-Williams Company 1994 Stock Plan, as amended and restated in its entirety, effective April 27, 1994, filed as Exhibit 4(d) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and incorporated herein by reference. (p) Agreement and Plan of Merger, dated as of November 4, 1995, by and among the Company, SWACQ, Inc. and Pratt & Lambert United, Inc., filed as Exhibit(c)(1) to the Tender Offer Statement on Schedule 14D-1/Schedule 13D filed November 9, 1995, as amended, and incorporated herein by reference. 11. Computation of Net Income Per Share -- Page 43. 12. Not applicable. 13. Not applicable. 16. Not applicable. 18. Not applicable. 21. Subsidiaries -- Page 44. 22. Not applicable. 23. Consent of Independent Auditors -- Page 45. 24. Powers of Attorney (filed herewith). 27. Financial Data Schedule. 28. Not applicable. 99. Not applicable. *Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
42 EX-4.D 2 EXHIBIT 4(D) 1 Exhibit 4(d) ADDENDUM TO FIVE YEAR REVOLVING CREDIT AGREEMENT This Addendum to that certain Five Year Revolving Credit Agreement ("Agreement") dated August 31, 1995 by and among The Sherwin-Williams Company ("Company"), whose principal place of business is located at 101 Prospect Avenue, N.W., Cleveland, Ohio 44115, Bank of America National Trust and Savings Association ("BOA"), as Administrative Agent, and the financial institutions listed on Addendum Schedule A hereto, together with each of their successors and assigns (collectively referred to as "Banks" and individually a "Bank") is made and entered into this 22nd day of November, 1995 and is effective November 30, 1995. W I T N E S S E T H: WHEREAS, on August 31, 1995, the Company, BOA and the Banks entered into the Agreement pursuant to which the Banks agreed to make Loans (as such term is defined in the Agreement) to the Company in such aggregate amounts as the Company may request; provided, however, that in no event shall the aggregate principal amount of all Loans outstanding under the Agreement during the Commitment Period (as such term is defined in the Agreement) be in excess of $250 million; and WHEREAS, on October 20, 1995 the Board of Directors of the Company authorized the Company to increase the principal amount of the indebtedness which the Company may have outstanding under the Agreement, at any one time, from $250 million to $500 million during the Commitment Period; and WHEREAS, the Company and the Banks desire to amend the Agreement as provided herein. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows: SECTION ONE Capitalized terms used but not defined herein shall have the same meaning ascribed to them in the Agreement. SECTION TWO The following paragraph of Section 2.1 of the Agreement dated as of August 31, 1995, shall be deleted in its entirety and the following shall be substituted therefor: SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and conditions of this Agreement, each Bank will participate to the extent hereinafter provided in making Loans to the Company in such aggregate amounts as the Company may request; provided, however, that in no event shall the aggregate principal amount of all Loans outstanding under this Agreement during the Commitment Period be in excess of $500 million. 2 SECTION THREE Attached hereto as Addendum Schedule A is the name and Commitment of each Bank revised to reflect this Addendum as well as the percentage of total Commitments of each such Bank pursuant to the Agreement. SECTION FOUR Except as otherwise specifically provided in Section Two of this Addendum, all other terms and conditions of the Agreement shall remain in full force and effect. SECTION FIVE Neither BOA nor any Bank shall issue any press release regarding this Addendum or the Agreement without the prior written consent of the Company. SECTION SIX This Addendum may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and when taken together shall constitute one and the same Agreement. SECTION SEVEN This Addendum, taken together with the Agreement, supersedes any prior agreements or understandings of the parties hereto, and contains the entire agreement of the parties hereto, with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Addendum as of the date indicated above. The Sherwin-Williams Company By: /s/ Larry J. Pitorak ------------------------------------- Larry J. Pitorak Senior Vice President - Finance, Treasurer and Chief Financial Officer By: /s/ James J. Sgambellone ------------------------------------- James J. Sgambellone Assistant Secretary and Corporate Director of Taxes
3 ADDENDUM SCHEDULE A THE SHERWIN-WILLIAMS COMPANY FIVE-YEAR REVOLVING CREDIT AGREEMENT AS AMENDED
BANK COMMITMENT PERCENT (000'S) Trust Company Bank $ 57,142,857.14 11.4286% Bank of America, Illinois 57,142,857.14 11.4286% National City Bank 50,000,000.00 10.0000% Society National Bank 50,000,000.00 10.0000% First National Bank of Chicago 35,714,285.71 7.1429% First Interstate Bank of California 35,714,285.71 7.1429% The Bank of Nova Scotia 35,714,285.71 7.1429% Chemical Bank 35,714,285.71 7.1429% NationsBank, N.A. (Carolinas) 28,571,428.57 5.7143% Deutsche Bank AG 28,571,428.57 5.7143% First Union National Bank of North Carolina 28,571,428.57 5.7143% The Bank of New York 28,571,428.57 5.7143% ABN-AMRO Bank N.V. 28,571,428.57 5.7143% TOTAL $500,000,000.00 100.000%
4
Amount of Percentage of Commitment Commitments ---------- ------------- $57,142,857.14 11.4286% Trust Company Bank By: /s/ Ruther E. Whitner ------------------------ Name: Ruth E. Whitner Title: Assistant Vice President By: /s/ Brian K. Peters ------------------------ Name: Brian K. Peters Title: Vice President Trust Company Bank P.O. Box 4418, Center 128 Atlanta, Georgia 30302 Telephone: (404) 588-7915 Facsimile: (404) 827-6270
5
Amount of Percentage of Commitment Commitments -------------- ------------- $57,142,857.14 11.4286% Bank of America, Illinois By: /s/ M. Kathleen McVay ------------------------- Name: M. Kathleen McVay Title: Authorized Officer Bank of America, Illinois 231 S. LaSalle Street Chicago, Illinois 60697 Telephone: (312) 828-3077 Facsimile: (312) 987-0303
5 6
Amount of Percentage of Commitment Commitments ---------- ------------- $50,000,000.00 10.0% National City Bank By: /s/ Robert E. Little ---------------------------- Name: Robert E. Little Title: V.P. and Sr. Lending Officer National City Bank National City Center Box 5756 Cleveland, Ohio 44101-0756 Telephone: (216) 575-3018 Facsimile: (216) 575-9396
6 7
Amount of Percentage of Commitment Commitments ---------- ------------- $50,000,000.00 10.0% Society National Bank By: /s/ Marianne T. Meil ------------------------- Name: Marianne T. Meil Title: Assistant Vice President Society National Bank 127 Public Square Cleveland, Ohio 44ll4 Telephone: (216) 689-3549 Facsimile: (216) 689-4981
7 8
Amount of Percentage of Commitment Commitments ---------- ------------- $35,714,285.71 7.1429% First National Bank of Chicago By: /s/ Marguerite Canestraro ------------------------- Name: Marguerite Canestraro Title: Authorized Agent First National Bank of Chicago 1301 East Ninth Street Suite 2150 Cleveland, Ohio 44114-1824 Telephone: (216) 574-9845 Facsimile: (216) 574-9278
8 9
Amount of Percentage of Commitment Commitments ---------- ------------- $35,714,285.71 7.1429% First Interstate Bank of California By: /s/ Peter G. Olson --------------------- Name: Peter G. Olson Title: Senior Vice President First Interstate Bank of California 222 W. Adams Street Suite 2180 Chicago, Illinois 60606 Telephone: (312) 553-2353 Facsimile: (312) 553-4783
9 10
Amount of Percentage of Commitment Commitments -------------- ------------- $35,714,285.71 7.1429% The Bank of Nova Scotia By: /s/ J.H. Youssef --------------------------------- Name: J.H. Youssef Title: Senior Manager Finance & Administration The Bank of Nova Scotia 181 West Madison Street Suite 3700 Chicago, Illinois 60602 Telephone: (312) 201-4100 Facsimile: (312) 201-4108
10 11
Amount of Percentage of Commitment Commitments ---------- ------------- $35,714,285.71 7.1429% Chemical Bank By: /s/ John F. Gehebe ------------------------ Name: John F. Gehebe Title: Assistant Vice President Chemical Bank 270 Park Avenue New York, New York 10017 Telephone: (212) 270-3531 Facsimile: (212) 270-4711
11 12
Amount of Percentage of Commitment Commitments ---------- ------------- $28,571,428.57 5.7143% NationsBank, N.A. (Carolinas) By: /s/ Michael D. Monte --------------------- Name: Michael D. Monte Title: Senior Vice President NationsBank, N.A. (Carolinas) Corporate Bank 100 North Tryon Street NC1-007-08-04 Charlotte, North Carolina 28255 Telephone: (704) 386-9015 Facsimile: (704) 386-3271
12 13
Amount of Percentage of Commitment Commitments - ---------- ------------- $28,571,428.57 5.7143% Deutsche Bank AG By: /s/ Jean Hannigan Hans-Josef Thiele --------------------------------------- Name: Jean M. Hannigan Hans-Josef Thiele Title: Assistant Vice Vice President President Deutsche Bank AG New York Branch 31 West 52nd Street New York, New York 10019 Telephone: (212) 474-8648 Facsimile: (212) 474-8212
13 14
Amount of Percentage of Commitment Commitments ---------- ------------- $28,571,428.57 5.7143% First Union National Bank of North Carolina By: /s/ Mark M. Harden ---------------------- Name: Mark M. Harden Title: Vice President First Union National Bank of North Carolina 301 South College Street TW-19 Floor Charlotte, North Carolina 28288-0745 Telephone: (704) 374-2420 Facsimile: (704) 374-2802 Attn: Laurie Hart
14 15
Amount of Percentage of Commitment Commitments ---------- ------------- $28,571,428.57 5.7143% The Bank of New York By: /s/ Robert J. Joyce ----------------------------- Name: Robert J. Joyce Title: Vice President The Bank of New York One Wall Street New York, New York 10286 Telephone: (212) 635-7919 Facsimile: (212) 635-6434
15 16
Amount of Percentage of Commitment Commitments ---------- ------------- $28,571,428.57 5.7143% ABN-AMRO Bank N.V. By: /s/ JM Janovsky Dennis F. Lennor ------------------------------------- Name: J.M. Janovsky / Dennis F. Lennor Title: Group V.P. / Vice President ABN-AMRO Bank N.V. Pittsburgh Branch One PPG Place Suite 2950 Pittsburgh, Pennsylvania 15222-5400 Telephone: (412) 566-2269 Facsimile: (412) 566-2266
16 EX-4.E 3 EXHIBIT 4(E) 1 EXHIBIT 4(e) TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT THIS TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT is made and entered into this 9th day of January, 1996, by and between The Sherwin-Williams Company, a corporation organized and existing under the laws of the State of Ohio ("Borrower"), and SunTrust Bank, Atlanta, a Georgia banking corporation, and its successors and assigns ("Bank"). W I T N E S S E T H: WHEREAS, Borrower has requested Bank to establish a two (2) year $50,000,000 term loan/bankers' acceptance facility to finance working capital, capital expenditures, and other general corporate purposes, including, but not limited to, acquisitions of stock, assets or other ownership interests of Borrower; and WHEREAS, Bank is willing to establish said term loan/bankers' acceptance facility in the foregoing amount, subject to the terms and conditions contained herein. NOW, THEREFORE, in consideration of the mutual promises contained herein the parties hereto, intending to be legally bound, agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meaning: "ACCEPTANCES" shall have the meaning set forth in Section 3.1 hereof. "ACCEPTANCE OBLIGATIONS" shall mean the aggregate outstanding face amount of all Acceptances (whether matured or unmatured) in respect of which no payment, conversion or deposit has been made. "ACCEPTANCE RATE" shall mean for any Interest Period the all-in discount rate (including any acceptance commission of Bank) equal to the equivalent of LIBOR, plus 0.20% per annum. "AGREEMENT" shall mean this Term Loan/Bankers' Acceptance Agreement, either as originally executed or as it may be from time to time supplemented, amended, renewed or extended. "AGREEMENT DATE" shall mean January 9, 1996. 1 2 "ALTERNATE BASE RATE" shall mean the higher of: (i) the rate of interest in effect for any given day as publicly announced from time to time by Bank as its "reference rate" and (ii) the Federal Funds Rate plus 50 basis points. Any change by Bank of its "reference rate" shall take effect at the opening of business on the day specified in the public announcement of such change. "ALTERNATE BASE RATE LOAN" shall mean the Term Loan bearing interest at the Alternate Base Rate. "BANK" shall mean SunTrust Bank, Atlanta and any successor or assign thereto. "BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which Atlanta banks are open for the transaction of business. "BUSINESS DAY" shall mean, with respect to a LIBOR Loan, any day other than a Saturday, Sunday or a day on which commercial banks are required or authorized to close of domestic or international business, including dealings in Dollar deposits, in Atlanta, Georgia or London, England and with respect to all other matters, any day other than a Saturday, Sunday or a day on which commercial banks are required or authorized to close in Atlanta, Georgia. "CONSOLIDATED NET WORTH" shall mean the excess of the net book value of the assets of Borrower and its Consolidated Subsidiaries over all of their liabilities (other than Subordinated Indebtedness), as determined on a consolidated basis in accordance with generally accepted accounting principles as applied by Borrower in the calculation of such amount in Borrower's then most recent financial statements furnished to its stockholders, plus the aggregate value of all treasury stock purchased after the Agreement Date (at cost) by Borrower (to the extent that the aggregate value of such treasury stock for purposes of this calculation does not exceed Two Hundred Fifty Million Dollars ($250,000,000)). The calculation of Consolidated Net Worth shall exclude any amounts which would otherwise be required to be included therein as a result of the future adoption by the Financial Accounting Standards Board of any policy, statement, rule or regulation requiring Borrower to record an accumulative liability on its Financial Report(s). "CONSOLIDATED SUBSIDIARY" shall mean, at any particular time, every Subsidiary which is consolidated in Borrower's financial statements contained in its then most recent Financial Report. "DEBT" shall mean, collectively, all indebtedness at any one time outstanding hereunder and owed by Borrower to Bank pursuant to this Agreement and includes the principal of and interest on the Term Note, any Acceptance Obligations and any funding indemnities incurred under Section 4.4 of this Agreement. 2 3 "EVENT OF DEFAULT" shall mean any of the events referred to in Article VII hereof. "FEDERAL FUNDS RATE" shall mean, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Banking Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Banking Day, the rate for such day shall be the arithmetic mean, as determined by Bank, of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on such day by each of three leading brokers of Federal funds transactions in New York City selected by Bank. "FINANCIAL REPORT" shall mean the annual or periodic report prepared in accordance with generally accepted accounting principles, except as otherwise indicated, filed by Borrower with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of such Commission) on Form 10-K or 10-Q pursuant to the Securities Exchange Act of 1934 ("Exchange Act"), as then in effect (or any comparable forms under similar Federal statutes then in force), and the most recent financial statements furnished by Borrower to its stockholders (which annual financial statement shall be certified by Borrower's independent certified public accountants). "INDEMNIFIED PERSONS" shall have the meaning set forth in Section 3.4 hereof. "INTEREST PERIOD" shall mean, with respect to the Term Loan, a period of 3 months; provided, that (i) the first and last day of an Interest Period must be a Quarter Date, and (ii) no Interest Period shall extend beyond the Maturity Date. "LIBOR" shall mean with respect to each Interest Period for a LIBOR Loan, the rate per annum equal to the quotient of (i) the rate offered for deposits in Dollars of amounts equal or comparable to the principal amount of such LIBOR Loan offered for a term comparable to such Interest Period, which rate appears on the Telerate Page 3750 as of 11:00 A.M. (London, England) time, two (2) Business Days prior to the first day of such Interest Period; provided that, if no such offered rates appear on such page, the rate used for such Interest Period shall be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of rates offered to Bank by not less than two major banks in London, England at approximately 10:00 A.M. (Atlanta, Georgia time), two (2) Business Days prior to the first day of such Interest Period for deposits in Dollars in the London interbank market for a period comparable to such Interest Period in an amount comparable to the principal amount of such LIBOR Loan, (ii) divided by a number equal to 1.00 minus the Reserve Percentage. The rate so determined in accordance herewith shall be rounded upwards to the nearest whole multiple of 1/100th of 1%. "Telerate Page 3750" shall mean the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on that service or another service as may be 3 4 nominated by the British Bankers' Association as the information vendor for the purpose of displaying British bankers' Association Interest Settlement Rate for Dollars). "LIBOR LOAN" shall mean the Term Loan bearing interest based on LIBOR. "LOAN DOCUMENTS" shall mean and include, as the context requires, this Agreement, the Term Note, the Acceptances, the SWAP Agreement and any and all other instruments, agreements, documents and writings contemplated hereby or executed in connection herewith. "MATERIAL" shall mean the measure of a matter of significance which shall be determined as being an amount equal to five percent (5%) or more of Borrower's Consolidated Net Worth. "MATURITY DATE" shall mean January 9, 1998, or such later date as the parties may agree that the unpaid principal and all accrued interest and all other amounts due hereunder shall be paid in full. "PLAN" shall mean any employee pension benefit plan within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended from time to time ("ERISA") sponsored and maintained by Borrower, any Consolidated Subsidiary, or of any member of a controlled group of corporations, as the term "controlled group of corporations" is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which Borrower or any Consolidated Subsidiary is a part, for employees thereof. "POSSIBLE DEFAULT" shall mean an event, condition or thing known to Borrower which constitutes, or which with the lapse of any applicable grace period or the giving of notice or both would constitute, any Event of Default and which has not been appropriately waived by Bank in writing or fully corrected prior to becoming an Event of Default. "QUARTER DATE" shall mean the last day of each March, June, September and December. "REPORTABLE EVENT" shall mean a reportable event as that term is defined in Title IV of ERISA except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "RESERVE PERCENTAGE" shall mean, for any day, the stated maximum rate (expressed as a decimal) of all reserves required to be maintained with respect to liabilities or assets consisting of or including"eurocurrency liabilities", as prescribed by Regulation D of the Board of Governors of the Federal Reserve System (or by any other governmental body having jurisdiction with respect thereto), including without limitation any basic, marginal, emergency, supplemental, special, transitional or other reserves, the rate so determined to be rounded upward to the nearest whole multiple of 1/100 of 1%. 4 5 "SUBORDINATED INDEBTEDNESS" shall mean indebtedness which has been subordinated (by written terms or agreement being in form and substance reasonably satisfactory to Bank) in favor of the prior payment in full of Borrower's Debt to Bank. "SUBSIDIARY" shall mean an existing or future corporation(s), the majority of the outstanding capital stock or voting power, or both, of which is (or upon the exercise of all outstanding warrants, options and other rights would be) owned at the time in question by Borrower or by another such corporation(s) or by any combination of Borrower and such corporation(s). "SWAP AGREEMENT" shall mean that certain Interest Rate and Currency Exchange Agreement, dated January 9, 1996, and the Schedule thereto by and between Borrower and Bank. "TERM LOAN" shall have the meaning set forth in Section 2.1 hereof. "TERM NOTE" shall mean the promissory note executed by Borrower payable to the order of Bank, in substantially the form of Exhibit A attached hereto, evidencing the Term Loan, either as originally executed or as it may from time to time be supplemented, modified, amended, renewed or extended. "VOTING STOCK" shall mean stock of a corporation of a class or classes having general voting power under ordinary circumstances to elect a majority of the board of directors, managers or trustees of such corporation (irrespective of whether or not the stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" shall mean each Consolidated Subsidiary all of whose outstanding stock, other than directors' qualifying shares, shall at the time be owned by Borrower and/or by one or more Wholly-Owned Consolidated Subsidiaries. ARTICLE II AMOUNT AND TERMS OF TERM LOAN/BANKERS' ACCEPTANCE FACILITY SECTION 2.1. TERM LOAN. Bank agrees, on the terms and subject to the conditions contained herein, to make a term loan ("Term Loan") to Borrower on the Agreement Date in the principal amount of Fifty Million and 00/100 Dollars ($50,000,000). The Term Loan shall be evidenced by the Term Note or by Acceptances if funded at the Acceptance Rate; provided, that at no time shall a LIBOR Loan and Acceptances be outstanding hereunder simultaneously. On the Agreement Date, Bank shall credit the amount of the Term Loan in immediately available funds to an account of Borrower with Bank or otherwise transfer said amount in immediately available funds in accordance with Borrower's instructions. 5 6 SECTION 2.2. INTEREST. Interest shall accrue on the unpaid principal amount of the Term Loan at the following rates per annum: (a) LIBOR for an Interest Period of three months, plus 0.20% per annum or (b) the Acceptance Rate, as the case may be. SECTION 2.3. INTEREST PAYMENT DATES. Interest on the Term Loan shall be payable (a) on a Quarter Date and (b) on the Maturity Date. SECTION 2.4. REPAYMENT OF THE TERM LOAN. Borrower shall repay the principal amount of the Term Loan on the Maturity Date. SECTION 2.5. OPTIONAL PREPAYMENTS. At the option of Borrower, Borrower may prepay the Term Loan, in whole or in part from time to time, without premium or penalty, but with accrued interest to the date of such prepayment on the principal amount prepaid; provided, that (a) each partial prepayment shall be in the minimum principal amount of $1,000,000; (b) each partial prepayment of the Term Loan may occur only on the last day of the then current Interest Period with respect to a LIBOR Loan or on the maturity date of the relevant Acceptances; and (c) each partial prepayment shall be applied to installments of principal in the inverse order of their maturities. SECTION 2.6. SELECTION OF SUCCESSIVE INTEREST RATES; CONVERSION. Bank may request, and Borrower shall agree if so requested, that on the last day of any Interest Period the Term Loan be continued as a LIBOR Loan or be converted into Acceptances in the same principal amount or in a principal amount as reduced by any repayment made pursuant to Section 2.4 hereof, or that on the maturity date of any Acceptances the Term Loan be continued as Acceptances or be converted into a LIBOR Loan in the same principal amount or in a principal amount as reduced by any repayment made pursuant to Section 2.4 hereof, it being agreed by Borrower that this right of Bank to select the interest rates/funding mechanics on the Term Loan hereunder is a part of the consideration for entering into this Agreement and the other Loan Documents. Notwithstanding the foregoing, if an Event of Default shall exist at the end of an Interest Period applicable to a LIBOR Loan or on the maturity date of any Acceptances, such outstanding LIBOR Loan or such outstanding Acceptances shall be converted to an Alternate Base Rate Loan. ARTICLE III ACCEPTANCES SECTION 3.1. ACCEPTANCES. In the event Bank elects to fund the Term Loan with Acceptances, Bank may in its sole discretion in each instance as provided in this Agreement, accept, in accordance with their tenor, drafts denominated in minimum denominations of $1,000,000 or such amounts as Bank may require, drawn on Bank by Borrower in accordance with Section 3.2(b) hereof and payable to the order of Bank ("Acceptances"). Such drafts presented for acceptance shall be equal to the principal amount of the Term Loan then outstanding plus an amount equal to the amount of interest that will accrue for the term of the 6 7 then current Interest Period. Such interest shall be calculated at the Acceptance Rate and adjusted for being calculated on a discount basis. All such drafts shall have a tenor of approximately ninety (90) days with each date of acceptance being a Quarter Date. The maturity date of each Acceptance shall be a Quarter Date. No Acceptance will be created hereunder if its maturity date would otherwise extend beyond the Maturity Date unless otherwise agreed to by the parties. In no event shall the aggregate Acceptance Obligations (net of any discounted interest calculated at the Acceptance Rate deducted upon acceptance) of Bank at any time exceed the outstanding principal amount of the Term Loan. SECTION 3.2. CREATION AND DISCOUNT OF ACCEPTANCES. (a) In the event Bank elects to fund the Term Loan with Acceptances then, prior to 11:00 A.M. (Atlanta, Georgia time) on any Quarter Date, Bank, in its sole discretion, may request that Borrower elect the Acceptance Rate. Upon such election, Bank shall promptly (a) complete the drafts specified in Section 3.2(b) hereof, (b) duly accept such draft(s), (c) discount the drafts at the Acceptance Rate, (d) provide Borrower with written or telephonic notice (i) of Bank's creation of such Acceptances (specifying the date, the face amount and the maturity date thereof) and (ii) the Acceptance Rate, and (e) fund the outstanding Term Loan with the proceeds of such Acceptances. (b) In the event Bank elects to fund the Term Loan with Acceptances, Borrower shall either (i) deliver, or cause to be delivered to Bank, fully executed drafts for acceptance by Bank, or (ii) authorize Bank by telephone to complete, or cause to be completed, pre-signed drafts previously delivered to Bank by Borrower or (iii) authorize Bank by telephone to act as Borrower's agent to complete and sign drafts as provided hereunder. Borrower hereby appoints any officer (or any employee under the direct supervision of an officer) of Bank to act as its agent for the limited purpose of representing and acting as Borrower's attorney-in-fact in the completion of any such drafts (including, but not limited to, date, place of issuance, amount, draft number, date of maturity and transaction information) and the issuance and safekeeping of any such drafts. Neither Bank nor its agent(s) shall be liable to Borrower for executing, failing to execute or for any error in the execution of any orders or instructions from Borrower, except in the case of Bank's gross negligence or willful misconduct. SECTION 3.3. MATURITY. On the maturity date of each Acceptance, Borrower shall pay to Bank an amount equal to the face amount of each Acceptance (including all discounted interest deducted upon acceptance). SECTION 3.4. SPECIAL INDEMNIFICATION. Borrower shall indemnify and hold Bank and Bank's affiliates, shareholders, directors, officers, employees and agents ("Indemnified Persons") harmless from any and all claims, demands, losses, costs, damages, liabilities and expense, including attorneys' fees (excluding consequential, incidental or special damages), which any Indemnified Person may suffer or incur (a) by reason of Borrower's failure to perform any of the Acceptance Obligations arising under this Agreement or under any Acceptances properly created in accordance with Section 3.2 hereof; or (b) arising out of any transaction or contract 7 8 to which any Acceptance relates, or any goods or documents involved therein. The indemnity contained in this Section 3.4 shall survive termination of this Agreement. ARTICLE IV GENERAL PAYMENT PROVISIONS SECTION 4.1. USE OF PROCEEDS. The proceeds of the Term Loan and any Acceptance shall be used by Borrower solely to finance working capital of Borrower and other general corporate purposes including, but not limited to, the acquisition of assets, stock or other ownership interests. SECTION 4.2. ILLEGALITY. Notwithstanding any other provisions of this Agreement, if the introduction of, or any change in the interpretation or application of any applicable law, regulation or directive shall make it unlawful for Bank to make, maintain or fund any LIBOR Loan, the obligation of Bank hereunder to make, maintain or fund such LIBOR Loan shall forthwith be suspended for the duration of such illegality, and Borrower shall, at its option, if any LIBOR Loan is then outstanding, prepay such LIBOR Loan or convert such LIBOR Loan to an Alternate Base Rate Loan, subject to Section 4.4 hereof. SECTION 4.3. INCREASED COSTS. In the event that the introduction of, or any change in or in the interpretation of or application of, any applicable law, treaty or governmental regulation, or the compliance by Bank with any guideline, request or directive (whether or not having the force of law) from any central bank or other U.S. or foreign financial, monetary or other governmental authority, shall: (a) subject Bank to any tax of any kind whatsoever with respect to this Agreement, the Term Loan or any Acceptance or change the basis of taxation of payments to Bank of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax in the overall net income of Bank); (b) impose, modify, or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances, loans or acceptances by, or other credit extended by or committed to be extended by, any office of Bank (other than any change by way of imposition or increase of reserve requirements under Regulation D of the Board of Governors of the Federal Reserve System in the case of a LIBOR Loan included in the Reserve Percentage); or (c) impose on Bank or on the London interbank market any other condition with respect to this Agreement, the Term Note or any LIBOR Loan thereunder or any Acceptance; and the result of any of the foregoing is to increase the cost to Bank of making or committing to make, renewing or maintaining any LIBOR Loan or any Acceptance or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any LIBOR Loan or any Acceptance, THEN, IN ANY CASE, Borrower shall promptly pay from time to time, upon demand of Bank, such additional amounts as will compensate Bank for such additional cost or such reduction, as the case may be. Bank shall certify the amount of such additional cost or reduced amount to Borrower, including a description of the calculation thereof in reasonable detail, and such certification shall be conclusive absent manifest error. 8 9 SECTION 4.4. INDEMNITY. Borrower hereby agrees to indemnify Bank and hold Bank harmless from any loss, cost or expense (excluding incidental, consequential or special damages) it may sustain or incur as a direct consequence of the payment or conversion of a LIBOR Loan on a day other than the last day of the Interest Period applicable thereto, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired or deemed acquired by Bank to fund such LIBOR Loan. Bank shall certify the amount of its loss or expense to Borrower, and such certification shall be conclusive absent manifest error. SECTION 4.5. MAKING OF PAYMENTS. All payments of principal of, or interest on, the Term Note or of the Acceptance Obligations shall be made in immediately available funds to Bank at its principal office in Atlanta, Georgia. All payments due on a date which is not a Business Day shall be deemed to be due on the next following Business Day, unless such Business Day falls in the next calendar month, in which case the due date will be the first preceding Business Day. All such payments shall be made not later than 11:00 A.M. (Atlanta, Georgia time) and funds received after that hour shall be deemed to have been received by Bank on the next following Business Day. SECTION 4.6. DEFAULT RATE OF INTEREST. If Borrower shall fail to pay on the due date therefor, whether by acceleration or otherwise, any principal owing under the Term Note or this Agreement or the face amount of any Acceptance on its maturity date, then interest shall accrue on such unpaid principal from the due date until and including the date on which such principal or other amount is paid in full at (i) the then applicable interest rate with respect to a LIBOR Loan until the end of the Interest Period applicable thereto plus an additional two per cent (2%) per annum and (ii) thereafter and with respect to Acceptances or Alternate Base Rate Loans, a rate of interest equal to the Alternate Base Rate plus an additional two percent (2.0) per annum ("Default Rate"). SECTION 4.7. CALCULATION OF INTEREST. Interest payable on the Term Note and the discount determined on each Acceptance shall be calculated on the basis of a year of 360 days and shall be paid for the actual number of days elapsed. SECTION 4.8. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE. In the event Bank shall have determined, in good faith and reasonably, that United States dollar deposits of the relevant amount for the relevant Interest Period for LIBOR Loans are not available to the Bank in the London Interbank Eurodollar market or that, by reason of circumstances affecting such market, adequate and reasonable means do not exist for ascertaining LIBOR applicable to such determination to Borrower then (i) any notice of the Term Loan to a LIBOR Loan previously given and not yet converted shall be deemed a notice to make an Alternate Base Rate Loan unless Borrower notifies Bank to the contrary, and (ii) Borrower shall be obligated either to prepay or to convert any outstanding LIBOR Loan on the last day of the then current Interest Period with respect thereto. 9 10 ARTICLE V REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Bank that: SECTION 5.1. CORPORATE EXISTENCE. Borrower is a corporation duly organized and in good standing under the laws of the State of Ohio. SECTION 5.2. AUTHORIZATION; NO CONFLICT. The execution, delivery, and performance by Borrower of this Agreement, the Term Note and all other Loan Documents are within Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not and will not contravene or conflict with any provision of applicable law in effect on the date hereof or of the Amended Articles of Incorporation or Regulations of Borrower or of any agreement for borrowed money or other material agreement binding upon Borrower. Borrower has duly executed and delivered this Agreement. SECTION 5.3. VALIDITY AND BINDING NATURE. This Agreement, the Term Note and all other Loan Documents are legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. SECTION 5.4. LITIGATION AND LIENS. To the best of Borrower's knowledge, no litigation or proceeding is pending which would, if successful, have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries taken as a whole, which is not already reflected in Borrower's Financial Reports delivered to Bank prior to the date of this Agreement. The Internal Revenue Service has not alleged any Material default by Borrower in the payment of any tax or threatened to make any Material assessment in respect thereof which would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. SECTION 5.5. ERISA COMPLIANCE. Neither Borrower nor any Consolidated Subsidiary has incurred any Material accumulated funding deficiency within the meaning of ERISA and the regulations thereunder. No Reportable Event has occurred with respect to any Plan which would have a Material adverse financial impact on Borrower or any of its Consolidated Subsidiaries, taken as a whole. The Pension Benefit Guaranty Corporation, established under ERISA, has not asserted that Borrower or any Consolidated Subsidiary has incurred any Material liability in connection with any Plan. No Material lien has been attached and no person has threatened to attach such a lien on any property of Borrower and any Consolidated Subsidiary as a result of Borrower's or any Consolidated Subsidiary's failure to comply with ERISA. SECTION 5.6. ENVIRONMENTAL MATTERS. To the best of Borrower's knowledge, Borrower and each Subsidiary is in substantial compliance with all applicable existing laws and regulations (other than laws and regulations the validity or applicability of which are being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate 10 11 proceedings diligently prosecuted) relating to environmental control in all jurisdictions where Borrower or any Subsidiary is presently doing business and Borrower and each Subsidiary (to the extent applicable to its operations) is in substantial compliance with the Occupational Safety and Health Act of 1970 and all rules, regulations and applicable orders thereunder (other than rules, regulations and orders the validity or applicability of which are being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate proceedings diligently prosecuted). SECTION 5.7. FINANCIAL REPORTS. The Financial Reports of Borrower and the Consolidated Subsidiaries, furnished to Bank prior to the date of this Agreement or from time to time pursuant to this Agreement shall be true and complete, prepared in accordance with generally accepted accounting principles, except as stated therein, and fairly present Borrower's and its Consolidated Subsidiaries' financial condition and the results of their operations for the period encompassed by such Financial Reports. Since the dates of Borrower's most recent Financial Reports until the date of this Agreement there has been no material adverse change in the consolidated financial condition of Borrower and the Consolidated Subsidiaries taken as a whole. SECTION 5.8. REGULATION U. Neither Borrower nor any of its Consolidated Subsidiaries is generally engaged in the business of purchasing or selling margin stock or extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System). Bank represents and warrants to Borrower that it is not relying on and will not rely on any margin stock (as described above) in determining whether to extend a loan to Borrower under this Agreement. SECTION 5.9. GOVERNMENT REGULATION. Neither Borrower nor any of its Consolidated Subsidiaries is registered or is required to be registered as a public utility under the Public Utility Holding Company Act of 1935 or as an investment company under the Investment Company Act of 1940. SECTION 5.10. TAXES. Borrower and its Consolidated Subsidiaries have filed all United States federal income tax returns and all other material tax returns which are required to have been filed by them (subject to any available extensions) and have paid all taxes indicated as due on such returns except for any such taxes being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate proceedings diligently prosecuted (Borrower has made adequate and reasonable provision for all material taxes not yet due and payable), if any, and all material assessments, if any. SECTION 5.11. DEFAULTS. No Possible Default exists which would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. 11 12 ARTICLE VI COVENANTS Until all obligations of Borrower hereunder, under the Term Note and under all Acceptances are satisfied and paid in full, Borrower agrees that, unless at any time Bank shall otherwise expressly agree in writing: SECTION 6.1. INSURANCE. Borrower will (a) maintain insurance to such extent and against such hazards and liabilities as is commonly maintained by companies similarly situated, and (b) upon Bank's written request, furnish to Bank such information about Borrower's and its Consolidated Subsidiaries' insurance as Bank may from time to time reasonably request, which information shall be prepared in form and detail reasonably satisfactory to Bank. SECTION 6.2. FINANCIAL REPORTS. Borrower will furnish to Bank: (i) within sixty (60) days after the end of each of the first three quarter-annual periods of each of its fiscal years (and, in any event, in each case as soon as available), the quarterly Financial Report of Borrower and the Consolidated Subsidiaries as at the end of that period, prepared on a consolidated basis; (ii) within ninety (90) days after the end of each of its fiscal years (and, in any event, in each case as soon as available), the annual Financial Report of Borrower and the Consolidated Subsidiaries for that year prepared on a consolidated basis; (iii) within sixty (60) days after the end of each of its quarterly accounting periods and within ninety (90) days after the end of its annual accounting period, a statement signed by a financial officer of Borrower reflecting compliance with Section 6.3 hereof and to the effect that no Event of Default has occurred and is continuing or, if there is any such event, describing it and the steps being taken, if any, to cure such event; (iv) promptly after filing with the Securities and Exchange Commission, any Form 8-K or Schedule 13D filings applicable to Borrower (or any successor forms or schedules promulgated by the Securities and Exchange Commission from time to time which encompass the matters currently addressed in Form 8-K and Schedule 13D); (v) written notice of any change in the rating assigned to Borrower's senior unsecured long-term debt by Moody's, S&P or Duff & Phelps within thirty (30) days of such change; and (vi) such other financial information regarding Borrower as Bank may reasonably request. 12 13 SECTION 6.3. NET WORTH. Borrower will not permit its Consolidated Net Worth at any time to fall below Eight Hundred Million Dollars ($800,000,000). SECTION 6.4. REGULATIONS U AND X. Borrower will not nor will it permit any Subsidiary to take any action that would result in any non-compliance of the loan made hereunder with Regulation U and X of the Board of Governors of the Federal Reserve System. Borrower's use of proceeds from the loan made pursuant to this Agreement will not cause a violation of Regulation U or X. SECTION 6.5. MERGER AND SALE OF ASSETS. Borrower will not merge or consolidate with nor permit any Consolidated Subsidiary to merge or consolidate with any other corporation or sell, lease or transfer or otherwise dispose of all or, during any twelve (12) month period, a substantial part of its assets to any person or entity (except as otherwise provided herein); provided, however, if no Possible Default shall then exist or immediately thereafter will begin to exist: (i) Any Consolidated Subsidiary may merge with (a) Borrower (provided that Borrower shall be the continuing or surviving corporation) or (b) any one or more other Consolidated Subsidiaries provided that either the continuing or surviving corporation shall be a Wholly-Owned Consolidated Subsidiary, or after giving effect to any merger pursuant to this sub-clause (b), Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries shall own not less than the same percentage of the outstanding Voting Stock of the continuing or surviving corporation as Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries owned of the merged Consolidated Subsidiary immediately prior to such merger, (ii) Any Consolidated Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to (a) Borrower, (b) any Wholly-Owned Consolidated Subsidiary or (c) any Consolidated Subsidiary of which Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries shall own not less than the same percentage of Voting Stock as Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries then own of the Consolidated Subsidiary making such sale, lease, transfer or other disposition, (iii) Borrower may sell the stock or assets of any Consolidated Subsidiary if such sale or other disposition is determined by the board of directors of Borrower to be in the best interests of Borrower and such sale is for a consideration which represents the fair value (as determined in good faith by the board of directors of Borrower) thereof at the time of such sale of such stock or assets, (iv) Borrower may merge with any other corporation, provided that Borrower shall be the surviving corporation, 13 14 (v) Borrower or any Consolidated Subsidiary may sell all or any part of the assets of any of its divisions or operations to a third party if such sale or other disposition is determined by the board of directors of Borrower and/or such Consolidated Subsidiary, as the case may be, to be in the best interests of Borrower and/or such Consolidated Subsidiary, as the case may be, and such sale is for a consideration which represents the fair value (as determined in good faith by the board of directors of Borrower) thereof at the time of such sale or other disposition of such assets, (vi) Borrower or any Subsidiary may sell or transfer all or any part of the assets of any of its divisions or operations to any Subsidiary. In the event there occurs a Change in Control of Borrower, the Term Loan or all Acceptance Obligations, as the case may be, shall be immediately due and payable without notice to Borrower. For purposes of this paragraph, a "Change of Control" shall occur if: (a) there shall be consummated (i) any consolidation or merger of Borrower in which Borrower is not the continuing or surviving corporation or pursuant to which shares of Borrower's common stock would be converted into cash, securities or other property, other than a merger of Borrower in which the holders of Borrower's common stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of fifty percent (50%) or more of the assets or earning power of Borrower; (b) any "person" (as such term is used in Sections as 13(d) and 14(d)(2) of the Exchange Act, as amended, other than Borrower or any employee benefit or stock ownership plan sponsored by Borrower, or any person or entity organized, appointed or established by Borrower for or pursuant to the terms of any such Plan, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Borrower representing fifteen percent (15%) or more of the combined voting power of Borrower's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise; or (c) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the board of directors of Borrower and any new director whose election by such board of directors or nomination for election by Borrower's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. 14 15 Notwithstanding subparagraph (a) through (c) above, with respect to the transactions set forth in subparagraphs (a) and (b) above, a Change of Control shall not be deemed to have occurred if any such transaction (i) is approved by a vote of at least two-thirds (2/3) of the directors of Borrower and (ii) at the time of such vote, at least two-thirds (2/3) of such directors then in office were members of the board of directors of Borrower immediately prior to such transaction. SECTION 6.6. NOTICE. As long as any indebtedness of Borrower remains outstanding hereunder, Borrower will cause its treasurer, or in his absence another representative of Borrower designated by the treasurer, to promptly notify Bank whenever any Material Possible Default may occur or any warranty made in Article V hereof or elsewhere in this Agreement may for any reason cease in any Material respect to be true and complete. SECTION 6.7. LIENS. Borrower will not and will not permit any Consolidated Subsidiary to create, assume or suffer to exist any lien upon any of its property or assets (hereinafter "Properties") whether now owned or hereafter acquired without effectively providing that any borrowings under this Agreement shall be secured equally and ratably with all other indebtedness thereby secured; provided that this Section shall not apply to the following: (i) liens for taxes not yet due or which are being actively contested in good faith by appropriate proceedings, (ii) other liens incidental to the conduct of its business or the ownership of its Properties which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of its Properties or materially impair the use thereof in the operation of its business, (iii) liens on Properties of a Consolidated Subsidiary to secure obligations of such Consolidated Subsidiary to Borrower or another Consolidated Subsidiary, (iv) liens on Properties of Borrower and/or its Consolidated Subsidiaries existing on the date hereof, (v) any lien existing on any Properties of any corporation at the time it becomes a Consolidated Subsidiary, existing prior to the time of acquisition upon any Properties acquired by Borrower or any Consolidated Subsidiary through purchase, merger, consolidation or otherwise, whether or not assumed by Borrower or such Consolidated Subsidiary, (vi) any lien placed upon any asset other than real property (hereinafter in this subparagraph (vi) "Asset") at the time of acquisition by Borrower or any Consolidated Subsidiary to secure all or a portion of [or to secure indebtedness 15 16 incurred prior to, at the time of, or (in the case of any Asset acquired with the intent to obtain subsequent financing thereof secured by a lien) within one (1) year after the acquisition of such Asset for the purpose of financing all or a portion of] the purchase price thereof, provided that any such lien shall not encumber any other Properties of Borrower or such Consolidated Subsidiary, (vii) any lien placed upon any real property now owned or hereafter acquired by Borrower or any of its Subsidiaries securing indebtedness in an amount up to eighty percent (80%) of the fair market value of such real property, (viii) liens in favor of the United States of America or any department or agency thereof, or in favor of any state government or political subdivision thereof, or in favor of a prime contractor under a government contract of the United States, or of any state government or any political subdivision thereof, and, in each case, resulting from acceptance of partial, progress, advance or other payments in the ordinary course of business under government contracts of the United States, or of any state government or any political subdivision thereof, or subcontracts thereunder, (ix) liens created, assumed or existing in connection with a tax-free financing, (x) any lien renewing, extending or refunding any lien permitted by clauses (iv), (v), (vi), (vii), (viii) and (ix) above, provided that the principal amount secured is not materially increased, and the lien is not extended to other Properties, and (xi) liens other than those permitted by clauses (i) through (x) above, provided that the aggregate amount of all indebtedness secured by liens permitted by this clause (xi) shall not at any time exceed fifteen percent (15%) of Consolidated Net Worth. SECTION 6.8. ERISA COMPLIANCE. Neither Borrower nor any Consolidated Subsidiary will incur any Material accumulated funding deficiency within the meaning of the ERISA and the regulations thereunder, or any Material liability to the Pension Benefit Guaranty Corporation or any successor thereto in connection with any Plan. Borrower will furnish to Bank as soon as possible and in any event within thirty (30) days after Borrower or such Consolidated Subsidiary knows or has reason to know that any Material Reportable Event with respect to any Plan has occurred a statement of the chief financial officer of Borrower or such Consolidated Subsidiary setting forth details as to such Reportable Event and the action which Borrower or such Consolidated Subsidiary proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the Pension Benefit Guaranty Corporation if a copy of such notice is available to Borrower or such Consolidated Subsidiary. SECTION 6.9. NOTICE OF DEFAULT. Borrower will, and will cause each Consolidated Subsidiary to, give prompt notice in writing to Bank of the occurrence of any Possible Default 16 17 and of any other development, financial or otherwise, with respect to which there is a significant probability of a Material adverse impact on Consolidated Net Worth or on Borrower's ability to repay its obligation to Bank hereunder. SECTION 6.10. CONDUCT OF BUSINESS. Borrower will, and will cause each Consolidated Subsidiary to, carry on and conduct its business in substantially the same manner as it is presently conducted and to do all things necessary to remain duly incorporated, validly existing and in good standing as a corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted. SECTION 6.11. TAXES. Borrower will, and will cause each Consolidated Subsidiary to, pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or property, except those which are being contested in good faith by appropriate proceedings. SECTION 6.12. ENVIRONMENTAL. Borrower will use its best good faith efforts to comply and to cause each Subsidiary to comply with all such laws and regulations (other than laws and regulations the validity or applicability of which are being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate proceedings diligently prosecuted) which may be legally imposed in the future in jurisdictions in which Borrower or any Subsidiary may then be doing business. ARTICLE VII EVENTS OF DEFAULT Each of the following shall constitute an Event of Default: SECTION 7.1. NON-PAYMENT OF TERM NOTE OR INTEREST. If the interest on the Term Note shall not be paid in full when due and payable and shall remain unpaid for a period of three (3) consecutive business days after written notice thereof to Borrower from Bank. If the principal on the Term Note or the Acceptance Obligations shall not be paid in full when due and payable. SECTION 7.2. COVENANTS. If Borrower shall fail or omit to perform and observe any agreement or other provision (other than those referenced in Section 7.1 hereof) contained or referred to in this Agreement or in any Related Writing that is on Borrower's part to be complied with, and such failure or omission, if not fully corrected within thirty (30) days after the giving of written notice thereof to Borrower by Bank that such failure or omission would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole (provided, however, that the financial covenant in Section 6.3 shall be applied without regard to any materiality standard). 17 18 SECTION 7.3. WARRANTIES. If any representation, warranty or statement made in or pursuant to this Agreement or any Related Writing or any other information furnished by Borrower to Bank or any other holder of the Term Note, shall be false or erroneous in any respect which would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. SECTION 7.4. CROSS DEFAULT. If Borrower or any of its Consolidated Subsidiaries (i) default in the payment of principal or interest due and owing upon any other Material obligation for borrowed money beyond any period of grace provided with respect thereto or (ii) default in the performance of any other agreement, term or condition contained in any agreement under which such obligation is created, and any such default is not waived by the holders of such agreement or instrument, and if the effect of such unwaived default would (a) accelerate the maturity of such indebtedness or permit the holder thereof to cause such indebtedness to become due prior to its stated maturity and (b) have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. SECTION 7.5. TERMINATION OF OPERATIONS, BANKRUPTCY OR INSOLVENCY. If Borrower or a Consolidated Subsidiary representing in excess of ten percent (10%) of total consolidated assets of Borrower and the Consolidated Subsidiaries shall (i) discontinue business (except as permitted under Section 6.5 hereof) or (ii) generally not pay (or admit in writing its inability to pay) its debts as such debts become due, or (iii) make a general assignment for the benefit of creditors, or (iv) apply for or consent to the appointment of a receiver, a custodian, a trustee, an interim trustee or a liquidator of all or a substantial part of its assets, or (v) be adjudicated an insolvent debtor or have entered against it an order for relief under Title 11 of the United States Code, as the same may be amended from to time to time, or (vi) file a voluntary petition in bankruptcy or file a petition or an answer seeking reorganization or an arrangement with creditors or seeking to take advantage of any other law (whether federal or state) relating to relief of debtors, or admit (by answer, by default or otherwise) the substantive allegations of a petition filed against it in any bankruptcy, reorganization, insolvency or other comparable proceeding (whether federal or state) relating to relief of debtors, or (vii) suffer or permit to continue unstayed and in effect for sixty (60) consecutive days any judgment, decree or order entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets. ARTICLE VIII EFFECT OF DEFAULT SECTION 8. EFFECT OF EVENT OF DEFAULT. Upon the occurrence and continuance of any Event of Default, the principal and all accrued interest due under the Term Note or the Acceptance Obligations shall become immediately due and payable, without notice and Bank may exercise any remedies available under law or in equity. 18 19 ARTICLE IX MISCELLANEOUS SECTION 9.1. BANK'S INDEPENDENT INVESTIGATION. Bank, by its signature to this Agreement, acknowledges and agrees that it has made its own independent investigation of the creditworthiness, financial condition and affairs of Borrower and any Subsidiary in connection with the Term Loan. SECTION 9.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing on the part of Bank or the holder of the Term Note in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held by operation of law, by contract or otherwise. SECTION 9.3. AMENDMENTS. Except as otherwise specifically provided herein, no amendment, modification, termination, or waiver of any provision of this Agreement or the Term Note, nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by Borrower Bank and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.4. CONFIDENTIALITY. Unless Borrower otherwise agrees in writing, Bank hereby agrees to keep all Proprietary Information (as defined below) confidential and not to disclose or reveal any Proprietary Information to any person or entity other than Bank's directors, officers, employees, affiliates, and agents, and then only on a confidential need-to-know basis; provided, however that Bank may disclose Proprietary Information (a) as required by law, rule, regulation, or judicial process, (b) to its attorneys and accountants, (c) as requested or required by a state, federal, or foreign authority or examiner regulating banks or banking, or (d) to actual or potential assignees or participants as permitted by Section 9.9 hereof who agree to be bound by the provisions of this Section. For purposes of this Agreement, the term "Proprietary Information" shall include all information about Borrower, any Subsidiary, or any of their respective affiliates which has been furnished by Borrower, any Subsidiary, or any of their respective affiliates, whether furnished before or after the date hereof, and regardless of the manner furnished; provided, however, that Proprietary Information shall not include information which (x) is or becomes generally available to the public other than as a result of a disclosure by Bank not permitted by this Agreement, (y) was available to Bank on a nonconfidential basis prior to its disclosure to Bank by Borrower, any Subsidiary, or any of their respective affiliates, or (z) becomes available to Bank on a nonconfidential basis from a person and/or entity other than Borrower, any Subsidiary, or any of their respective affiliates who, to the best knowledge of Bank, is not otherwise bound by a confidentiality agreement with Borrower, any Subsidiary, or any of their respective affiliates, or, to the best knowledge of Bank, is not otherwise prohibited from transmitting the information to Bank. 19 20 SECTION 9.5. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Borrower or a Subsidiary, mailed or delivered to it, addressed to it at the address of Borrower herein specified, and if to Bank, mailed or delivered to it, addressed to the address of Bank specified in this Agreement. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when received. If to Bank: SunTrust Bank, Atlanta 25 Park Place Atlanta, Georgia 30303 Attention: Ruth E. Whitner, Assistant Vice President Telephone: (404) 588-7915 Telecopy: (404) 827-6270 If to Borrower: The Sherwin-Williams Company 101 Prospect Avenue, N.W. Cleveland, Ohio 44115 Attention: Cynthia D. Brogan, Director, Treasury Services Telephone: (216) 566-2106 Telecopy: (216) 566-2984
SECTION 9.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and when taken together shall constitute one and the same agreement. SECTION 9.7. ENTIRE AGREEMENT. This Agreement supersedes any prior agreement or understanding of the parties hereto, and contains the entire agreement of the parties hereto, with respect to the matters covered hereby. SECTION 9.8. GOVERNING LAW. This Agreement, and the Term Note shall be governed by and construed in accordance with the laws of the State of Georgia and the respective rights and obligations of Borrower and Bank shall be governed by Georgia law. SECTION 9.9. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. 20 21 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date indicated above. THE SHERWIN-WILLIAMS COMPANY SUNTRUST BANK, ATLANTA By: /s/ Larry J. Pitorak By: /s/ Ruth E. Whitner ------------------------------------------- ----------------------------------- LARRY J. PITORAK RUTH E. WHITNER Title: SENIOR VICE PRESIDENT- Title: ASSISTANT VICE PRESIDENT FINANCE, TREASURER AND CHIEF FINANCIAL OFFICER By: /s/ James J. Sgambellone By: /s/ Brian K. Peter ---------------------------------------- ------------------------------------- JAMES J. SGAMBELLONE BRIAN K. PETER Title: ASSISTANT SECRETARY AND Title: VICE PRESIDENT CORPORATE DIRECTOR OF TAXES
21 EX-4.F 4 EXHIBIT 4(F) 1 EXHIBIT 4(f) TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT THIS TERM LOAN/BANKERS' ACCEPTANCE AGREEMENT is made and entered into this 1st day of February, 1996, by and between The Sherwin-Williams Company, a corporation organized and existing under the laws of the State of Ohio ("Borrower"), and SunTrust Bank, Atlanta, a Georgia banking corporation, and its successors and assigns ("Bank"). W I T N E S S E T H: WHEREAS, Borrower has requested Bank to establish a three (3) year $50,000,000 term loan/bankers' acceptance facility to finance working capital, capital expenditures, and other general corporate purposes, including, but not limited to, acquisitions of stock, assets or other ownership interests of Borrower; and WHEREAS, Bank is willing to establish said term loan/bankers' acceptance facility in the foregoing amount, subject to the terms and conditions contained herein. NOW, THEREFORE, in consideration of the mutual promises contained herein the parties hereto, intending to be legally bound, agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meaning: "ACCEPTANCES" shall have the meaning set forth in Section 3.1 hereof. "ACCEPTANCE OBLIGATIONS" shall mean the aggregate outstanding face amount of all Acceptances (whether matured or unmatured) in respect of which no payment, conversion or deposit has been made. "ACCEPTANCE RATE" shall mean for any Interest Period the all-in discount rate (including any acceptance commission of Bank) equal to the equivalent of LIBOR, plus 0.20% per annum. "AGREEMENT" shall mean this Term Loan/Bankers' Acceptance Agreement, either as originally executed or as it may be from time to time supplemented, amended, renewed or extended. "AGREEMENT DATE" shall mean February 1, 1996. 1 2 "ALTERNATE BASE RATE" shall mean the higher of: (i) the rate of interest in effect for any given day as publicly announced from time to time by Bank as its "reference rate" and (ii) the Federal Funds Rate plus 50 basis points. Any change by Bank of its "reference rate" shall take effect at the opening of business on the day specified in the public announcement of such change. "ALTERNATE BASE RATE LOAN" shall mean the Term Loan bearing interest at the Alternate Base Rate. "BANK" shall mean SunTrust Bank, Atlanta and any successor or assign thereto. "BANKING DAY" shall mean a day, other than a Saturday or Sunday, on which Atlanta banks are open for the transaction of business. "BUSINESS DAY" shall mean, with respect to a LIBOR Loan, any day other than a Saturday, Sunday or a day on which commercial banks are required or authorized to close of domestic or international business, including dealings in Dollar deposits, in Atlanta, Georgia or London, England and with respect to all other matters, any day other than a Saturday, Sunday or a day on which commercial banks are required or authorized to close in Atlanta, Georgia. "CONSOLIDATED NET WORTH" shall mean the excess of the net book value of the assets of Borrower and its Consolidated Subsidiaries over all of their liabilities (other than Subordinated Indebtedness), as determined on a consolidated basis in accordance with generally accepted accounting principles as applied by Borrower in the calculation of such amount in Borrower's then most recent financial statements furnished to its stockholders, plus the aggregate value of all treasury stock purchased after the Agreement Date (at cost) by Borrower (to the extent that the aggregate value of such treasury stock for purposes of this calculation does not exceed Two Hundred Fifty Million Dollars ($250,000,000)). The calculation of Consolidated Net Worth shall exclude any amounts which would otherwise be required to be included therein as a result of the future adoption by the Financial Accounting Standards Board of any policy, statement, rule or regulation requiring Borrower to record an accumulative liability on its Financial Report(s). "CONSOLIDATED SUBSIDIARY" shall mean, at any particular time, every Subsidiary which is consolidated in Borrower's financial statements contained in its then most recent Financial Report. "DEBT" shall mean, collectively, all indebtedness at any one time outstanding hereunder and owed by Borrower to Bank pursuant to this Agreement and includes the principal of and interest on the Term Note, any Acceptance Obligations and any funding indemnities incurred under Section 4.4 of this Agreement. 2 3 "EVENT OF DEFAULT" shall mean any of the events referred to in Article VII hereof. "FEDERAL FUNDS RATE" shall mean, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Banking Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Banking Day, the rate for such day shall be the arithmetic mean, as determined by Bank, of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on such day by each of three leading brokers of Federal funds transactions in New York City selected by Bank. "FINANCIAL REPORT" shall mean the annual or periodic report prepared in accordance with generally accepted accounting principles, except as otherwise indicated, filed by Borrower with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of such Commission) on Form 10-K or 10-Q pursuant to the Securities Exchange Act of 1934 ("Exchange Act"), as then in effect (or any comparable forms under similar Federal statutes then in force), and the most recent financial statements furnished by Borrower to its stockholders (which annual financial statement shall be certified by Borrower's independent certified public accountants). "INDEMNIFIED PERSONS" shall have the meaning set forth in Section 3.4 hereof. "INTEREST PERIOD" shall mean, with respect to the Term Loan, a period of 3 months; provided, that (i) the first and last day of an Interest Period must be a Quarter Date, and (ii) no Interest Period shall extend beyond the Maturity Date. "LIBOR" shall mean with respect to each Interest Period for a LIBOR Loan, the rate per annum equal to the quotient of (i) the rate offered for deposits in Dollars of amounts equal or comparable to the principal amount of such LIBOR Loan offered for a term comparable to such Interest Period, which rate appears on the Telerate Page 3750 as of 11:00 A.M. (London, England) time, two (2) Business Days prior to the first day of such Interest Period; provided that, if no such offered rates appear on such page, the rate used for such Interest Period shall be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of rates offered to Bank by not less than two major banks in London, England at approximately 10:00 A.M. (Atlanta, Georgia time), two (2) Business Days prior to the first day of such Interest Period for deposits in Dollars in the London interbank market for a period comparable to such Interest Period in an amount comparable to the principal amount of such LIBOR Loan, (ii) divided by a number equal to 1.00 minus the Reserve Percentage. The rate so determined in accordance herewith shall be rounded upwards to the nearest whole multiple of 1/100th of 1%. "Telerate Page 3750" shall mean the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on that service or another service as may be 3 4 nominated by the British Bankers' Association as the information vendor for the purpose of displaying British bankers' Association Interest Settlement Rate for Dollars). "LIBOR LOAN" shall mean the Term Loan bearing interest based on LIBOR. "LOAN DOCUMENTS" shall mean and include, as the context requires, this Agreement, the Term Note, the Acceptances and any and all other instruments, agreements, documents and writings contemplated hereby or executed in connection herewith. "MATERIAL" shall mean the measure of a matter of significance which shall be determined as being an amount equal to five percent (5%) or more of Borrower's Consolidated Net Worth. "MATURITY DATE" shall mean February 5, 1999, or such later date as the parties may agree that the unpaid principal and all accrued interest and all other amounts due hereunder shall be paid in full. "PLAN" shall mean any employee pension benefit plan within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended from time to time ("ERISA") sponsored and maintained by Borrower, any Consolidated Subsidiary, or of any member of a controlled group of corporations, as the term "controlled group of corporations" is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which Borrower or any Consolidated Subsidiary is a part, for employees thereof. "POSSIBLE DEFAULT" shall mean an event, condition or thing known to Borrower which constitutes, or which with the lapse of any applicable grace period or the giving of notice or both would constitute, any Event of Default and which has not been appropriately waived by Bank in writing or fully corrected prior to becoming an Event of Default. "QUARTER DATE" shall mean the fifth day of each February, May, August and November beginning May 5, 1996. "REPORTABLE EVENT" shall mean a reportable event as that term is defined in Title IV of ERISA except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "RESERVE PERCENTAGE" shall mean, for any day, the stated maximum rate (expressed as a decimal) of all reserves required to be maintained with respect to liabilities or assets consisting of or including"eurocurrency liabilities", as prescribed by Regulation D of the Board of Governors of the Federal Reserve System (or by any other governmental body having jurisdiction with respect thereto), including without limitation any basic, marginal, emergency, supplemental, special, transitional or other reserves, the rate so determined to be rounded upward to the nearest whole multiple of 1/100 of 1%. 4 5 "SUBORDINATED INDEBTEDNESS" shall mean indebtedness which has been subordinated (by written terms or agreement being in form and substance reasonably satisfactory to Bank) in favor of the prior payment in full of Borrower's Debt to Bank. "SUBSIDIARY" shall mean an existing or future corporation(s), the majority of the outstanding capital stock or voting power, or both, of which is (or upon the exercise of all outstanding warrants, options and other rights would be) owned at the time in question by Borrower or by another such corporation(s) or by any combination of Borrower and such corporation(s). "TERM LOAN" shall have the meaning set forth in Section 2.1 hereof. "TERM NOTE" shall mean the promissory note executed by Borrower payable to the order of Bank, in substantially the form of Exhibit A attached hereto, evidencing the Term Loan, either as originally executed or as it may from time to time be supplemented, modified, amended, renewed or extended. "VOTING STOCK" shall mean stock of a corporation of a class or classes having general voting power under ordinary circumstances to elect a majority of the board of directors, managers or trustees of such corporation (irrespective of whether or not the stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" shall mean each Consolidated Subsidiary all of whose outstanding stock, other than directors' qualifying shares, shall at the time be owned by Borrower and/or by one or more Wholly-Owned Consolidated Subsidiaries. ARTICLE II AMOUNT AND TERMS OF TERM LOAN/BANKERS' ACCEPTANCE FACILITY SECTION 2.1. TERM LOAN. Bank agrees, on the terms and subject to the conditions contained herein, to make a term loan ("Term Loan") to Borrower on the Agreement Date in the principal amount of Fifty Million and 00/100 Dollars ($50,000,000). The Term Loan shall be evidenced by the Term Note or by Acceptances if funded at the Acceptance Rate; provided, that at no time shall a LIBOR Loan and Acceptances be outstanding hereunder simultaneously. On the Agreement Date, Bank shall credit the amount of the Term Loan in immediately available funds to an account of Borrower with Bank or otherwise transfer said amount in immediately available funds in accordance with Borrower's instructions. SECTION 2.2. INTEREST. Interest shall accrue on the unpaid principal amount of the Term Loan at the following rates per annum: (a) LIBOR for an Interest Period of three months, plus 0.20% per annum or (b) the Acceptance Rate, as the case may be. 5 6 SECTION 2.3. INTEREST PAYMENT DATES. Interest on the Term Loan shall be payable (a) on a Quarter Date and (b) on the Maturity Date. SECTION 2.4. REPAYMENT OF THE TERM LOAN. Borrower shall repay the principal amount of the Term Loan on the Maturity Date. SECTION 2.5. OPTIONAL PREPAYMENTS. At the option of Borrower, Borrower may prepay the Term Loan, in whole or in part from time to time, without premium or penalty, but with accrued interest to the date of such prepayment on the principal amount prepaid; provided, that (a) each partial prepayment shall be in the minimum principal amount of $1,000,000; (b) each partial prepayment of the Term Loan may occur only on the last day of the then current Interest Period with respect to a LIBOR Loan or on the maturity date of the relevant Acceptances; and (c) each partial prepayment shall be applied to installments of principal in the inverse order of their maturities. SECTION 2.6. SELECTION OF SUCCESSIVE INTEREST RATES; CONVERSION. Bank may request, and Borrower shall agree if so requested, that on the last day of any Interest Period the Term Loan be continued as a LIBOR Loan or be converted into Acceptances in the same principal amount or in a principal amount as reduced by any repayment made pursuant to Section 2.4 hereof, or that on the maturity date of any Acceptances the Term Loan be continued as Acceptances or be converted into a LIBOR Loan in the same principal amount or in a principal amount as reduced by any repayment made pursuant to Section 2.4 hereof, it being agreed by Borrower that this right of Bank to select the interest rates/funding mechanics on the Term Loan hereunder is a part of the consideration for entering into this Agreement and the other Loan Documents. Notwithstanding the foregoing, if an Event of Default shall exist at the end of an Interest Period applicable to a LIBOR Loan or on the maturity date of any Acceptances, such outstanding LIBOR Loan or such outstanding Acceptances shall be converted to an Alternate Base Rate Loan. ARTICLE III ACCEPTANCES SECTION 3.1. ACCEPTANCES. In the event Bank elects to fund the Term Loan with Acceptances, Bank may in its sole discretion in each instance as provided in this Agreement, accept, in accordance with their tenor, drafts denominated in minimum denominations of $1,000,000 or such amounts as Bank may require, drawn on Bank by Borrower in accordance with Section 3.2(b) hereof and payable to the order of Bank ("Acceptances"). Such drafts presented for acceptance shall be equal to the principal amount of the Term Loan then outstanding plus an amount equal to the amount of interest that will accrue for the term of the then current Interest Period. Such interest shall be calculated at the Acceptance Rate and adjusted for being calculated on a discount basis. All such drafts shall have a tenor of approximately ninety (90) days with each date of acceptance being a Quarter Date. The maturity date of each Acceptance shall be a Quarter Date. No Acceptance will be created hereunder if 6 7 its maturity date would otherwise extend beyond the Maturity Date unless otherwise agreed to by the parties. In no event shall the aggregate Acceptance Obligations (net of any discounted interest calculated at the Acceptance Rate deducted upon acceptance) of Bank at any time exceed the outstanding principal amount of the Term Loan. SECTION 3.2. CREATION AND DISCOUNT OF ACCEPTANCES. (a) In the event Bank elects to fund the Term Loan with Acceptances then, prior to 11:00 A.M. (Atlanta, Georgia time) on any Quarter Date, Bank, in its sole discretion, may request that Borrower elect the Acceptance Rate. Upon such election, Bank shall promptly (a) complete the drafts specified in Section 3.2(b) hereof, (b) duly accept such draft(s), (c) discount the drafts at the Acceptance Rate, (d) provide Borrower with written or telephonic notice (i) of Bank's creation of such Acceptances (specifying the date, the face amount and the maturity date thereof) and (ii) the Acceptance Rate, and (e) fund the outstanding Term Loan with the proceeds of such Acceptances. (b) In the event Bank elects to fund the Term Loan with Acceptances, Borrower shall either (i) deliver, or cause to be delivered to Bank, fully executed drafts for acceptance by Bank, or (ii) authorize Bank by telephone to complete, or cause to be completed, pre-signed drafts previously delivered to Bank by Borrower or (iii) authorize Bank by telephone to act as Borrower's agent to complete and sign drafts as provided hereunder. Borrower hereby appoints any officer (or any employee under the direct supervision of an officer) of Bank to act as its agent for the limited purpose of representing and acting as Borrower's attorney-in-fact in the completion of any such drafts (including, but not limited to, date, place of issuance, amount, draft number, date of maturity and transaction information) and the issuance and safekeeping of any such drafts. Neither Bank nor its agent(s) shall be liable to Borrower for executing, failing to execute or for any error in the execution of any orders or instructions from Borrower, except in the case of Bank's gross negligence or willful misconduct. SECTION 3.3. MATURITY. On the maturity date of each Acceptance, Borrower shall pay to Bank an amount equal to the face amount of each Acceptance (including all discounted interest deducted upon acceptance). SECTION 3.4. SPECIAL INDEMNIFICATION. Borrower shall indemnify and hold Bank and Bank's affiliates, shareholders, directors, officers, employees and agents ("Indemnified Persons") harmless from any and all claims, demands, losses, costs, damages, liabilities and expense, including attorneys' fees (excluding consequential, incidental or special damages), which any Indemnified Person may suffer or incur (a) by reason of Borrower's failure to perform any of the Acceptance Obligations arising under this Agreement or under any Acceptances properly created in accordance with Section 3.2 hereof; or (b) arising out of any transaction or contract to which any Acceptance relates, or any goods or documents involved therein. The indemnity contained in this Section 3.4 shall survive termination of this Agreement. 7 8 ARTICLE IV GENERAL PAYMENT PROVISIONS SECTION 4.1. USE OF PROCEEDS. The proceeds of the Term Loan and any Acceptance shall be used by Borrower solely to finance working capital of Borrower and other general corporate purposes including, but not limited to, the acquisition of assets, stock or other ownership interests. SECTION 4.2. ILLEGALITY. Notwithstanding any other provisions of this Agreement, if the introduction of, or any change in the interpretation or application of any applicable law, regulation or directive shall make it unlawful for Bank to make, maintain or fund any LIBOR Loan, the obligation of Bank hereunder to make, maintain or fund such LIBOR Loan shall forthwith be suspended for the duration of such illegality, and Borrower shall, at its option, if any LIBOR Loan is then outstanding, prepay such LIBOR Loan or convert such LIBOR Loan to an Alternate Base Rate Loan, subject to Section 4.4 hereof. SECTION 4.3. INCREASED COSTS. In the event that the introduction of, or any change in or in the interpretation of or application of, any applicable law, treaty or governmental regulation, or the compliance by Bank with any guideline, request or directive (whether or not having the force of law) from any central bank or other U.S. or foreign financial, monetary or other governmental authority, shall: (a) subject Bank to any tax of any kind whatsoever with respect to this Agreement, the Term Loan or any Acceptance or change the basis of taxation of payments to Bank of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax in the overall net income of Bank); (b) impose, modify, or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances, loans or acceptances by, or other credit extended by or committed to be extended by, any office of Bank (other than any change by way of imposition or increase of reserve requirements under Regulation D of the Board of Governors of the Federal Reserve System in the case of a LIBOR Loan included in the Reserve Percentage); or (c) impose on Bank or on the London interbank market any other condition with respect to this Agreement, the Term Note or any LIBOR Loan thereunder or any Acceptance; and the result of any of the foregoing is to increase the cost to Bank of making or committing to make, renewing or maintaining any LIBOR Loan or any Acceptance or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any LIBOR Loan or any Acceptance, THEN, IN ANY CASE, Borrower shall promptly pay from time to time, upon demand of Bank, such additional amounts as will compensate Bank for such additional cost or such reduction, as the case may be. Bank shall certify the amount of such additional cost or reduced amount to Borrower, including a description of the calculation thereof in reasonable detail, and such certification shall be conclusive absent manifest error. SECTION 4.4. INDEMNITY. Borrower hereby agrees to indemnify Bank and hold Bank harmless from any loss, cost or expense (excluding incidental, consequential or special damages) it may sustain or incur as a direct consequence of the payment or conversion of a LIBOR Loan 8 9 on a day other than the last day of the Interest Period applicable thereto, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired or deemed acquired by Bank to fund such LIBOR Loan. Bank shall certify the amount of its loss or expense to Borrower, and such certification shall be conclusive absent manifest error. SECTION 4.5. MAKING OF PAYMENTS. All payments of principal of, or interest on, the Term Note or of the Acceptance Obligations shall be made in immediately available funds to Bank at its principal office in Atlanta, Georgia. All payments due on a date which is not a Business Day shall be deemed to be due on the next following Business Day, unless such Business Day falls in the next calendar month, in which case the due date will be the first preceding Business Day. All such payments shall be made not later than 11:00 A.M. (Atlanta, Georgia time) and funds received after that hour shall be deemed to have been received by Bank on the next following Business Day. SECTION 4.6. DEFAULT RATE OF INTEREST. If Borrower shall fail to pay on the due date therefor, whether by acceleration or otherwise, any principal owing under the Term Note or this Agreement or the face amount of any Acceptance on its maturity date, then interest shall accrue on such unpaid principal from the due date until and including the date on which such principal or other amount is paid in full at (i) the then applicable interest rate with respect to a LIBOR Loan until the end of the Interest Period applicable thereto plus an additional two per cent (2%) per annum and (ii) thereafter and with respect to Acceptances or Alternate Base Rate Loans, a rate of interest equal to the Alternate Base Rate plus an additional two percent (2.0) per annum ("Default Rate"). SECTION 4.7. CALCULATION OF INTEREST. Interest payable on the Term Note and the discount determined on each Acceptance shall be calculated on the basis of a year of 360 days and shall be paid for the actual number of days elapsed. SECTION 4.8. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE. In the event Bank shall have determined, in good faith and reasonably, that United States dollar deposits of the relevant amount for the relevant Interest Period for LIBOR Loans are not available to the Bank in the London Interbank Eurodollar market or that, by reason of circumstances affecting such market, adequate and reasonable means do not exist for ascertaining LIBOR applicable to such determination to Borrower then (i) any notice of the Term Loan to a LIBOR Loan previously given and not yet converted shall be deemed a notice to make an Alternate Base Rate Loan unless Borrower notifies Bank to the contrary, and (ii) Borrower shall be obligated either to prepay or to convert any outstanding LIBOR Loan on the last day of the then current Interest Period with respect thereto. 9 10 ARTICLE V REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Bank that: SECTION 5.1. CORPORATE EXISTENCE. Borrower is a corporation duly organized and in good standing under the laws of the State of Ohio. SECTION 5.2. AUTHORIZATION; NO CONFLICT. The execution, delivery, and performance by Borrower of this Agreement, the Term Note and all other Loan Documents are within Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not and will not contravene or conflict with any provision of applicable law in effect on the date hereof or of the Amended Articles of Incorporation or Regulations of Borrower or of any agreement for borrowed money or other material agreement binding upon Borrower. Borrower has duly executed and delivered this Agreement. SECTION 5.3. VALIDITY AND BINDING NATURE. This Agreement, the Term Note and all other Loan Documents are legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. SECTION 5.4. LITIGATION AND LIENS. To the best of Borrower's knowledge, no litigation or proceeding is pending which would, if successful, have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries taken as a whole, which is not already reflected in Borrower's Financial Reports delivered to Bank prior to the date of this Agreement. The Internal Revenue Service has not alleged any Material default by Borrower in the payment of any tax or threatened to make any Material assessment in respect thereof which would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. SECTION 5.5. ERISA COMPLIANCE. Neither Borrower nor any Consolidated Subsidiary has incurred any Material accumulated funding deficiency within the meaning of ERISA and the regulations thereunder. No Reportable Event has occurred with respect to any Plan which would have a Material adverse financial impact on Borrower or any of its Consolidated Subsidiaries, taken as a whole. The Pension Benefit Guaranty Corporation, established under ERISA, has not asserted that Borrower or any Consolidated Subsidiary has incurred any Material liability in connection with any Plan. No Material lien has been attached and no person has threatened to attach such a lien on any property of Borrower and any Consolidated Subsidiary as a result of Borrower's or any Consolidated Subsidiary's failure to comply with ERISA. SECTION 5.6. ENVIRONMENTAL MATTERS. To the best of Borrower's knowledge, Borrower and each Subsidiary is in substantial compliance with all applicable existing laws and regulations (other than laws and regulations the validity or applicability of which are being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate 10 11 proceedings diligently prosecuted) relating to environmental control in all jurisdictions where Borrower or any Subsidiary is presently doing business and Borrower and each Subsidiary (to the extent applicable to its operations) is in substantial compliance with the Occupational Safety and Health Act of 1970 and all rules, regulations and applicable orders thereunder (other than rules, regulations and orders the validity or applicability of which are being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate proceedings diligently prosecuted). SECTION 5.7. FINANCIAL REPORTS. The Financial Reports of Borrower and the Consolidated Subsidiaries, furnished to Bank prior to the date of this Agreement or from time to time pursuant to this Agreement shall be true and complete, prepared in accordance with generally accepted accounting principles, except as stated therein, and fairly present Borrower's and its Consolidated Subsidiaries' financial condition and the results of their operations for the period encompassed by such Financial Reports. Since the dates of Borrower's most recent Financial Reports until the date of this Agreement there has been no material adverse change in the consolidated financial condition of Borrower and the Consolidated Subsidiaries taken as a whole. SECTION 5.8. REGULATION U. Neither Borrower nor any of its Consolidated Subsidiaries is generally engaged in the business of purchasing or selling margin stock or extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System). Bank represents and warrants to Borrower that it is not relying on and will not rely on any margin stock (as described above) in determining whether to extend a loan to Borrower under this Agreement. SECTION 5.9. GOVERNMENT REGULATION. Neither Borrower nor any of its Consolidated Subsidiaries is registered or is required to be registered as a public utility under the Public Utility Holding Company Act of 1935 or as an investment company under the Investment Company Act of 1940. SECTION 5.10. TAXES. Borrower and its Consolidated Subsidiaries have filed all United States federal income tax returns and all other material tax returns which are required to have been filed by them (subject to any available extensions) and have paid all taxes indicated as due on such returns except for any such taxes being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate proceedings diligently prosecuted (Borrower has made adequate and reasonable provision for all material taxes not yet due and payable), if any, and all material assessments, if any. SECTION 5.11. DEFAULTS. No Possible Default exists which would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. 11 12 ARTICLE VI COVENANTS Until all obligations of Borrower hereunder, under the Term Note and under all Acceptances are satisfied and paid in full, Borrower agrees that, unless at any time Bank shall otherwise expressly agree in writing: SECTION 6.1. INSURANCE. Borrower will (a) maintain insurance to such extent and against such hazards and liabilities as is commonly maintained by companies similarly situated, and (b) upon Bank's written request, furnish to Bank such information about Borrower's and its Consolidated Subsidiaries' insurance as Bank may from time to time reasonably request, which information shall be prepared in form and detail reasonably satisfactory to Bank. SECTION 6.2. FINANCIAL REPORTS. Borrower will furnish to Bank: (i) within sixty (60) days after the end of each of the first three quarter-annual periods of each of its fiscal years (and, in any event, in each case as soon as available), the quarterly Financial Report of Borrower and the Consolidated Subsidiaries as at the end of that period, prepared on a consolidated basis; (ii) within ninety (90) days after the end of each of its fiscal years (and, in any event, in each case as soon as available), the annual Financial Report of Borrower and the Consolidated Subsidiaries for that year prepared on a consolidated basis; (iii) within sixty (60) days after the end of each of its quarterly accounting periods and within ninety (90) days after the end of its annual accounting period, a statement signed by a financial officer of Borrower reflecting compliance with Section 6.3 hereof and to the effect that no Event of Default has occurred and is continuing or, if there is any such event, describing it and the steps being taken, if any, to cure such event; (iv) promptly after filing with the Securities and Exchange Commission, any Form 8-K or Schedule 13D filings applicable to Borrower (or any successor forms or schedules promulgated by the Securities and Exchange Commission from time to time which encompass the matters currently addressed in Form 8-K and Schedule 13D); (v) written notice of any change in the rating assigned to Borrower's senior unsecured long-term debt by Moody's, S&P or Duff & Phelps within thirty (30) days of such change; and (vi) such other financial information regarding Borrower as Bank may reasonably request. 12 13 SECTION 6.3. NET WORTH. Borrower will not permit its Consolidated Net Worth at any time to fall below Eight Hundred Million Dollars ($800,000,000). SECTION 6.4. REGULATIONS U AND X. Borrower will not nor will it permit any Subsidiary to take any action that would result in any non- compliance of the loan made hereunder with Regulation U and X of the Board of Governors of the Federal Reserve System. Borrower's use of proceeds from the loan made pursuant to this Agreement will not cause a violation of Regulation U or X. SECTION 6.5. MERGER AND SALE OF ASSETS. Borrower will not merge or consolidate with nor permit any Consolidated Subsidiary to merge or consolidate with any other corporation or sell, lease or transfer or otherwise dispose of all or, during any twelve (12) month period, a substantial part of its assets to any person or entity (except as otherwise provided herein); provided, however, if no Possible Default shall then exist or immediately thereafter will begin to exist: (i) Any Consolidated Subsidiary may merge with (a) Borrower (provided that Borrower shall be the continuing or surviving corporation) or (b) any one or more other Consolidated Subsidiaries provided that either the continuing or surviving corporation shall be a Wholly-Owned Consolidated Subsidiary, or after giving effect to any merger pursuant to this sub-clause (b), Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries shall own not less than the same percentage of the outstanding Voting Stock of the continuing or surviving corporation as Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries owned of the merged Consolidated Subsidiary immediately prior to such merger, (ii) Any Consolidated Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to (a) Borrower, (b) any Wholly-Owned Consolidated Subsidiary or (c) any Consolidated Subsidiary of which Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries shall own not less than the same percentage of Voting Stock as Borrower and/or one or more Wholly-Owned Consolidated Subsidiaries then own of the Consolidated Subsidiary making such sale, lease, transfer or other disposition, (iii) Borrower may sell the stock or assets of any Consolidated Subsidiary if such sale or other disposition is determined by the board of directors of Borrower to be in the best interests of Borrower and such sale is for a consideration which represents the fair value (as determined in good faith by the board of directors of Borrower) thereof at the time of such sale of such stock or assets, (iv) Borrower may merge with any other corporation, provided that Borrower shall be the surviving corporation, 13 14 (v) Borrower or any Consolidated Subsidiary may sell all or any part of the assets of any of its divisions or operations to a third party if such sale or other disposition is determined by the board of directors of Borrower and/or such Consolidated Subsidiary, as the case may be, to be in the best interests of Borrower and/or such Consolidated Subsidiary, as the case may be, and such sale is for a consideration which represents the fair value (as determined in good faith by the board of directors of Borrower) thereof at the time of such sale or other disposition of such assets, (vi) Borrower or any Subsidiary may sell or transfer all or any part of the assets of any of its divisions or operations to any Subsidiary. In the event there occurs a Change in Control of Borrower, the Term Loan or all Acceptance Obligations, as the case may be, shall be immediately due and payable without notice to Borrower. For purposes of this paragraph, a "Change of Control" shall occur if: (a) there shall be consummated (i) any consolidation or merger of Borrower in which Borrower is not the continuing or surviving corporation or pursuant to which shares of Borrower's common stock would be converted into cash, securities or other property, other than a merger of Borrower in which the holders of Borrower's common stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of fifty percent (50%) or more of the assets or earning power of Borrower; (b) any "person" (as such term is used in Sections as 13(d) and 14(d)(2) of the Exchange Act, as amended, other than Borrower or any employee benefit or stock ownership plan sponsored by Borrower, or any person or entity organized, appointed or established by Borrower for or pursuant to the terms of any such Plan, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Borrower representing fifteen percent (15%) or more of the combined voting power of Borrower's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise; or (c) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the board of directors of Borrower and any new director whose election by such board of directors or nomination for election by Borrower's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. 14 15 Notwithstanding subparagraph (a) through (c) above, with respect to the transactions set forth in subparagraphs (a) and (b) above, a Change of Control shall not be deemed to have occurred if any such transaction (i) is approved by a vote of at least two-thirds (2/3) of the directors of Borrower and (ii) at the time of such vote, at least two-thirds (2/3) of such directors then in office were members of the board of directors of Borrower immediately prior to such transaction. SECTION 6.6. NOTICE. As long as any indebtedness of Borrower remains outstanding hereunder, Borrower will cause its treasurer, or in his absence another representative of Borrower designated by the treasurer, to promptly notify Bank whenever any Material Possible Default may occur or any warranty made in Article V hereof or elsewhere in this Agreement may for any reason cease in any Material respect to be true and complete. SECTION 6.7. LIENS. Borrower will not and will not permit any Consolidated Subsidiary to create, assume or suffer to exist any lien upon any of its property or assets (hereinafter "Properties") whether now owned or hereafter acquired without effectively providing that any borrowings under this Agreement shall be secured equally and ratably with all other indebtedness thereby secured; provided that this Section shall not apply to the following: (i) liens for taxes not yet due or which are being actively contested in good faith by appropriate proceedings, (ii) other liens incidental to the conduct of its business or the ownership of its Properties which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of its Properties or materially impair the use thereof in the operation of its business, (iii) liens on Properties of a Consolidated Subsidiary to secure obligations of such Consolidated Subsidiary to Borrower or another Consolidated Subsidiary, (iv) liens on Properties of Borrower and/or its Consolidated Subsidiaries existing on the date hereof, (v) any lien existing on any Properties of any corporation at the time it becomes a Consolidated Subsidiary, existing prior to the time of acquisition upon any Properties acquired by Borrower or any Consolidated Subsidiary through purchase, merger, consolidation or otherwise, whether or not assumed by Borrower or such Consolidated Subsidiary, (vi) any lien placed upon any asset other than real property (hereinafter in this subparagraph (vi) "Asset") at the time of acquisition by Borrower or any Consolidated Subsidiary to secure all or a portion of [or to secure indebtedness 15 16 incurred prior to, at the time of, or (in the case of any Asset acquired with the intent to obtain subsequent financing thereof secured by a lien) within one (1) year after the acquisition of such Asset for the purpose of financing all or a portion of] the purchase price thereof, provided that any such lien shall not encumber any other Properties of Borrower or such Consolidated Subsidiary, (vii) any lien placed upon any real property now owned or hereafter acquired by Borrower or any of its Subsidiaries securing indebtedness in an amount up to eighty percent (80%) of the fair market value of such real property, (viii) liens in favor of the United States of America or any department or agency thereof, or in favor of any state government or political subdivision thereof, or in favor of a prime contractor under a government contract of the United States, or of any state government or any political subdivision thereof, and, in each case, resulting from acceptance of partial, progress, advance or other payments in the ordinary course of business under government contracts of the United States, or of any state government or any political subdivision thereof, or subcontracts thereunder, (ix) liens created, assumed or existing in connection with a tax-free financing, (x) any lien renewing, extending or refunding any lien permitted by clauses (iv), (v), (vi), (vii), (viii) and (ix) above, provided that the principal amount secured is not materially increased, and the lien is not extended to other Properties, and (xi) liens other than those permitted by clauses (i) through (x) above, provided that the aggregate amount of all indebtedness secured by liens permitted by this clause (xi) shall not at any time exceed fifteen percent (15%) of Consolidated Net Worth. SECTION 6.8. ERISA COMPLIANCE. Neither Borrower nor any Consolidated Subsidiary will incur any Material accumulated funding deficiency within the meaning of the ERISA and the regulations thereunder, or any Material liability to the Pension Benefit Guaranty Corporation or any successor thereto in connection with any Plan. Borrower will furnish to Bank as soon as possible and in any event within thirty (30) days after Borrower or such Consolidated Subsidiary knows or has reason to know that any Material Reportable Event with respect to any Plan has occurred a statement of the chief financial officer of Borrower or such Consolidated Subsidiary setting forth details as to such Reportable Event and the action which Borrower or such Consolidated Subsidiary proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the Pension Benefit Guaranty Corporation if a copy of such notice is available to Borrower or such Consolidated Subsidiary. SECTION 6.9. NOTICE OF DEFAULT. Borrower will, and will cause each Consolidated Subsidiary to, give prompt notice in writing to Bank of the occurrence of any Possible Default 16 17 and of any other development, financial or otherwise, with respect to which there is a significant probability of a Material adverse impact on Consolidated Net Worth or on Borrower's ability to repay its obligation to Bank hereunder. SECTION 6.10. CONDUCT OF BUSINESS. Borrower will, and will cause each Consolidated Subsidiary to, carry on and conduct its business in substantially the same manner as it is presently conducted and to do all things necessary to remain duly incorporated, validly existing and in good standing as a corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted. SECTION 6.11. TAXES. Borrower will, and will cause each Consolidated Subsidiary to, pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or property, except those which are being contested in good faith by appropriate proceedings. SECTION 6.12. ENVIRONMENTAL. Borrower will use its best good faith efforts to comply and to cause each Subsidiary to comply with all such laws and regulations (other than laws and regulations the validity or applicability of which are being contested by Borrower or a Subsidiary, as the case may be, in good faith by appropriate proceedings diligently prosecuted) which may be legally imposed in the future in jurisdictions in which Borrower or any Subsidiary may then be doing business. ARTICLE VII EVENTS OF DEFAULT Each of the following shall constitute an Event of Default: SECTION 7.1. NON-PAYMENT OF TERM NOTE OR INTEREST. If the interest on the Term Note shall not be paid in full when due and payable and shall remain unpaid for a period of three (3) consecutive business days after written notice thereof to Borrower from Bank. If the principal on the Term Note or the Acceptance Obligations shall not be paid in full when due and payable. SECTION 7.2. COVENANTS. If Borrower shall fail or omit to perform and observe any agreement or other provision (other than those referenced in Section 7.1 hereof) contained or referred to in this Agreement or in any Related Writing that is on Borrower's part to be complied with, and such failure or omission, if not fully corrected within thirty (30) days after the giving of written notice thereof to Borrower by Bank that such failure or omission would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole (provided, however, that the financial covenant in Section 6.3 shall be applied without regard to any materiality standard). 17 18 SECTION 7.3. WARRANTIES. If any representation, warranty or statement made in or pursuant to this Agreement or any Related Writing or any other information furnished by Borrower to Bank or any other holder of the Term Note, shall be false or erroneous in any respect which would have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. SECTION 7.4. CROSS DEFAULT. If Borrower or any of its Consolidated Subsidiaries (i) default in the payment of principal or interest due and owing upon any other Material obligation for borrowed money beyond any period of grace provided with respect thereto or (ii) default in the performance of any other agreement, term or condition contained in any agreement under which such obligation is created, and any such default is not waived by the holders of such agreement or instrument, and if the effect of such unwaived default would (a) accelerate the maturity of such indebtedness or permit the holder thereof to cause such indebtedness to become due prior to its stated maturity and (b) have or reasonably could have a Material adverse impact on the financial condition of Borrower and the Consolidated Subsidiaries, taken as a whole. SECTION 7.5. TERMINATION OF OPERATIONS, BANKRUPTCY OR INSOLVENCY. If Borrower or a Consolidated Subsidiary representing in excess of ten percent (10%) of total consolidated assets of Borrower and the Consolidated Subsidiaries shall (i) discontinue business (except as permitted under Section 6.5 hereof) or (ii) generally not pay (or admit in writing its inability to pay) its debts as such debts become due, or (iii) make a general assignment for the benefit of creditors, or (iv) apply for or consent to the appointment of a receiver, a custodian, a trustee, an interim trustee or a liquidator of all or a substantial part of its assets, or (v) be adjudicated an insolvent debtor or have entered against it an order for relief under Title 11 of the United States Code, as the same may be amended from to time to time, or (vi) file a voluntary petition in bankruptcy or file a petition or an answer seeking reorganization or an arrangement with creditors or seeking to take advantage of any other law (whether federal or state) relating to relief of debtors, or admit (by answer, by default or otherwise) the substantive allegations of a petition filed against it in any bankruptcy, reorganization, insolvency or other comparable proceeding (whether federal or state) relating to relief of debtors, or (vii) suffer or permit to continue unstayed and in effect for sixty (60) consecutive days any judgment, decree or order entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets. ARTICLE VIII EFFECT OF DEFAULT SECTION 8. EFFECT OF EVENT OF DEFAULT. Upon the occurrence and continuance of any Event of Default, the principal and all accrued interest due under the Term Note or the Acceptance Obligations shall become immediately due and payable, without notice and Bank may exercise any remedies available under law or in equity. 18 19 ARTICLE IX MISCELLANEOUS SECTION 9.1. BANK'S INDEPENDENT INVESTIGATION. Bank, by its signature to this Agreement, acknowledges and agrees that it has made its own independent investigation of the creditworthiness, financial condition and affairs of Borrower and any Subsidiary in connection with the Term Loan. SECTION 9.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing on the part of Bank or the holder of the Term Note in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held by operation of law, by contract or otherwise. SECTION 9.3. AMENDMENTS. Except as otherwise specifically provided herein, no amendment, modification, termination, or waiver of any provision of this Agreement or the Term Note, nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by Borrower Bank and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.4. CONFIDENTIALITY. Unless Borrower otherwise agrees in writing, Bank hereby agrees to keep all Proprietary Information (as defined below) confidential and not to disclose or reveal any Proprietary Information to any person or entity other than Bank's directors, officers, employees, affiliates, and agents, and then only on a confidential need-to-know basis; provided, however that Bank may disclose Proprietary Information (a) as required by law, rule, regulation, or judicial process, (b) to its attorneys and accountants, (c) as requested or required by a state, federal, or foreign authority or examiner regulating banks or banking, or (d) to actual or potential assignees or participants as permitted by Section 9.9 hereof who agree to be bound by the provisions of this Section. For purposes of this Agreement, the term "Proprietary Information" shall include all information about Borrower, any Subsidiary, or any of their respective affiliates which has been furnished by Borrower, any Subsidiary, or any of their respective affiliates, whether furnished before or after the date hereof, and regardless of the manner furnished; provided, however, that Proprietary Information shall not include information which (x) is or becomes generally available to the public other than as a result of a disclosure by Bank not permitted by this Agreement, (y) was available to Bank on a nonconfidential basis prior to its disclosure to Bank by Borrower, any Subsidiary, or any of their respective affiliates, or (z) becomes available to Bank on a nonconfidential basis from a person and/or entity other than Borrower, any Subsidiary, or any of their respective affiliates who, to the best knowledge of Bank, is not otherwise bound by a confidentiality agreement with Borrower, any Subsidiary, or any of their respective affiliates, or, to the best knowledge of Bank, is not otherwise prohibited from transmitting the information to Bank. 19 20 SECTION 9.5. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Borrower or a Subsidiary, mailed or delivered to it, addressed to it at the address of Borrower herein specified, and if to Bank, mailed or delivered to it, addressed to the address of Bank specified in this Agreement. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when received. If to Bank: SunTrust Bank, Atlanta 25 Park Place Atlanta, Georgia 30303 Attention: Ruth E. Whitner, Assistant Vice President Telephone: (404) 588-7915 Telecopy: (404) 827-6270 If to Borrower: The Sherwin-Williams Company 101 Prospect Avenue, N.W. Cleveland, Ohio 44115 Attention: Cynthia D. Brogan, Director, Treasury Services Telephone: (216) 566-2106 Telecopy: (216) 566-2984 SECTION 9.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and when taken together shall constitute one and the same agreement. SECTION 9.7. ENTIRE AGREEMENT. This Agreement supersedes any prior agreement or understanding of the parties hereto, and contains the entire agreement of the parties hereto, with respect to the matters covered hereby. SECTION 9.8. GOVERNING LAW. This Agreement, and the Term Note shall be governed by and construed in accordance with the laws of the State of Georgia and the respective rights and obligations of Borrower and Bank shall be governed by Georgia law. SECTION 9.9. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. 20 21 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date indicated above. THE SHERWIN-WILLIAMS COMPANY SUNTRUST BANK, ATLANTA By: /s/ Larry J. Pitorak By: /s/ Ruth E. Whitner -------------------------- -------------------------- LARRY J. PITORAK RUTH E. WHITNER Title: SENIOR VICE PRESIDENT- Title: ASSISTANT VICE PRESIDENT FINANCE, TREASURER AND CHIEF FINANCIAL OFFICER By: /s/ James J. Sgambellone By: /s/ Frank R. Collison -------------------------- -------------------------- JAMES J. SGAMBELLONE FRANK R. COLLISON Title: ASSISTANT SECRETARY AND Title: VICE PRESIDENT CORPORATE DIRECTOR OF TAXES 21 EX-10.C 5 EXHIBIT 10(C) 1 EXHIBIT 10(c) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into this 22nd day of February, 1996, by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio corporation ("Sherwin-Williams") and JOHN G. BREEN (the "Employee") to amend and clarify that certain Employment Agreement between the parties dated January 15, 1979 (the "Agreement"). NOW, THEREFORE, the Agreement is hereby amended as follows: 1. Section 8 of the Agreement is amended by adding at the end thereof the following: As used in this Section 8, the term "annual assured compensation" shall mean an amount equal to the sum of: (i) twenty-six (26) times the Employee's highest regular bi-weekly salary in effect within the three (3) year period preceding the date of termination (before reduction for any withholding, deduction or salary deferral, including but not limited to any deduction for withholding income or FICA taxes and/or any deduction or deferral pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended); and (ii) any incentive or bonus payments made or to be made to the Employee under any incentive or bonus plan of Sherwin-Williams, a subsidiary or affiliate under which the Employee is or was covered at any time preceding the change of control (an "Incentive Plan") determined based upon the greater of: (1) the highest incentive or bonus payment paid or payable to the Employee at any time during the three (3) year period preceding the date of termination; or (2) the target incentive or bonus the Employee would have received for the calendar year in which the change of control occurred if the Employee had reached one hundred percent (100%) of any stated goals under any or all Incentive Plans. 2. Section 9 of the Agreement is amended by adding at the end thereof the following: As used in this Section 9, the term "total compensation" shall mean the Employee's annual salary and any incentive or bonus payments paid or payable to the Employee pursuant to an Incentive Plan for the same period. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first written above. /s/ John G. Breen ---------------------------------------- John G. Breen THE SHERWIN-WILLIAMS COMPANY By: /s/ Thomas Kroeger ------------------------------- Thomas Kroeger Title: Vice President - Human Resources 2 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into this 22nd day of February, 1996, by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio corporation ("Sherwin-Williams") and THOMAS A. COMMES (the "Employee") to amend and clarify that certain Employment Agreement between the parties dated March 16, 1979 (the "Agreement"). NOW, THEREFORE, the Agreement is hereby amended as follows: 1. Section 6 of the Agreement is amended by adding at the end thereof the following: As used in this Section 6, the term "annual assured compensation" shall mean an amount equal to the sum of: (i) twenty-six (26) times the Employee's highest regular bi-weekly salary in effect within the three (3) year period preceding the date of termination (before reduction for any withholding, deduction or salary deferral, including but not limited to any deduction for withholding of income or FICA taxes and/or any deduction or deferral pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended); and (ii) any incentive or bonus payments made or to be made to the Employee under any incentive or bonus plan of Sherwin-Williams, a subsidiary or affiliate under which the Employee is or was covered at any time preceding the change of control (an "Incentive Plan") determined based upon the greater of: (1) the highest incentive or bonus payment paid or payable to the Employee at any time during the three (3) year period preceding the date of termination; or (2) the target incentive or bonus the Employee would have received for the calendar year in which the change of control occurred if the Employee had reached one hundred percent (100%) of any stated goals under any or all Incentive Plans. 2. Section 7 of the Agreement is amended by adding at the end thereof the following: As used in this Section 7, the term "total compensation" shall mean the Employee's annual salary and any incentive or bonus payments paid or payable to the Employee pursuant to an Incentive Plan for the same period. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first written above. /s/ Thomas A. Commes ---------------------------------------- Thomas A. Commes THE SHERWIN-WILLIAMS COMPANY By: /s/ Thomas Kroeger ------------------------------- Thomas Kroeger Title: Vice President - Human Resources 3 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into this 22nd day of February, 1996, by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio corporation ("Sherwin-Williams") and CONWAY G. IVY (the "Employee") to amend and clarify that certain Employment Agreement between the parties dated March 16, 1979 (the "Agreement"). NOW, THEREFORE, the Agreement is hereby amended as follows: 1. Section 7 of the Agreement is amended by adding at the end thereof the following: As used in this Section 7, the term "annual assured compensation" shall mean an amount equal to the sum of: (i) twenty-six (26) times the Employee's highest regular bi-weekly salary in effect within the three (3) year period preceding the date of termination (before reduction for any withholding, deduction or salary deferral, including but not limited to any deduction for withholding of income or FICA taxes and/or any deduction or deferral pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended); and (ii) any incentive or bonus payments made or to be made to the Employee under any incentive or bonus plan of Sherwin-Williams, a subsidiary or affiliate under which the Employee is or was covered at any time preceding the change of control (an "Incentive Plan") determined based upon the greater of: (1) the highest incentive or bonus payment paid or payable to the Employee at any time during the three (3) year period preceding the date of termination; or (2) the target incentive or bonus the Employee would have received for the calendar year in which the change of control occurred if the Employee had reached one hundred percent (100%) of any stated goals under any or all Incentive Plans. 2. Section 8 of the Agreement is amended by adding at the end thereof the following: As used in this Section 8, the term "total compensation" shall mean the Employee's annual salary and any incentive or bonus payments paid or payable to the Employee pursuant to an Incentive Plan for the same period. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first written above. /s/ Conway G. Ivy --------------------------------------- Conway G. Ivy THE SHERWIN-WILLIAMS COMPANY By: /s/ Thomas Kroeger ------------------------------ Thomas Kroeger Title: Vice President - Human Resources EX-10.F 6 EXHIBIT 10(F) 1 EXHIBIT 10(f) AMENDMENT NO. 1 TO THE SHERWIN-WILLIAMS COMPANY DEFERRED COMPENSATION SAVINGS PLAN This Amendment No. 1 to The Sherwin-Williams Company Deferred Compensation Savings Plan (the "Plan") is made effective as of January 1, 1993. WITNESSETH: WHEREAS, The Sherwin-Williams Company (the "Company") established the Plan effective January 1, 1991; WHEREAS, pursuant to Article X of the Plan, the Company retains the right to amend the Plan at any time in whole or in part; and WHEREAS, the Company wishes to amend the investment direction provisions of the Plan to permit participants who are eligible to diversify investments under The Sherwin-Williams Company Employee Stock Ownership and Savings Plan (the "Stock Plan") to diversify the investment of such participant's Accrued Benefit among various additional investment accounts authorized in the Plan. NOW, THEREFORE, the Plan is hereby amended as follows, effective January 1, 1993: 1. ARTICLE I of the Plan is hereby amended by adding thereto the following definitions in appropriate alphabetical order and renumbering the existing definitions accordingly: 1. ___ FIXED INCOME ACCOUNT. The investment account established pursuant to Section 4.4. 1. ___ GOVERNMENT ACCOUNT. The investment account established pursuant to Section 4.4. 1. ___ MUTUAL EOUITY ACCOUNT. The investment account established pursuant to Section 4.4. 2. Section 4.4 of the Plan is deleted in its entirety and the following Section 4.4 is adopted in lieu thereof: 4.4 INVESTMENT ACCOUNTS. The Administrator shall establish the following investment accounts under the Plan: (a) DEFERRED CASH ACCOUNT. The Deferred Cash Account shall accrue interest computed using the base lending rate of interest as announced by Society National Bank, Cleveland, Ohio, or its successor, in effect on the Valuation Date 2 immediately preceding the month for which interest is accrued. The interest shall be computed on the "Average Balance" of the Deferred Cash Account for such month. For purposes hereof, the Average Balance shall be determined by averaging the beginning and ending balance of the Deferred Cash Account. (b) SHADOW STOCK ACCOUNT. The Shadow Stock Account shall be credited with a quantity of Shadow Stock units and fractions thereof (to the nearest thousandths) equal to the amount of Common Stock that could have been purchased with the amount of Participant's Accrued Benefit credited to the Shadow Stock Account on each Valuation Date based on the Fair Market Value of Common Stock on such Valuation Date. There will be credited to the Shadow Stock Account amounts equal to the cash dividends, and other distributions, paid on shares of issued and outstanding Common Stock represented by the Shadow Stock Account which Participants would have received had they been a record owner of a number of shares of Common Stock equal to the amount of Shadow Stock in the Shadow Stock Account at the time of payment of such cash dividends or other distributions. The amounts credited to the Shadow Stock Account shall be converted to a quantity of Shadow Stock units and fractions thereof (to the nearest thousandths) that could have been purchased with the dividends or other distributions based on the Fair Market Value of Common Stock on the date of payment of such dividends or other distributions. (c) FIXED INCOME ACCOUNT. The Fixed Income Account shall be credited with earnings and losses computed using the return on the Fixed Income Fund as described in Section 4.06 of the Stock Plan in effect for the Valuation Date immediately preceding the month for which earnings are accrued. The earnings shall be computed on the Average Balance of the Fixed Income Account for such month. The Average Balance shall be determined by averaging the beginning and ending balance of the Fixed Income Account for that month. (d) GOVERNMENT ACCOUNT. The Government Account shall be credited with earnings and losses computed using the return on the Government Fund as described in Section 4.06 of the Stock 3 Plan, in effect for the Valuation Date immediately preceding the month for which earnings are accrued. The earnings shall be computed on the Average Balance of the Government Fund for such month. The Average Balance shall be determined by averaging the beginning and ending balance of the Government Account for that month. (e) MUTUAL EQUITY ACCOUNT. The Mutual Equity Account shall be credited with earnings and losses computed using the return on the Mutual Equity Fund as described in Section 4.06 of the Stock Plan, in effect for the Valuation Date immediately preceding the month for which earnings are accrued. The earnings shall be computed on the Average Balance of the Mutual Equity Fund for such month. The Average Balance shall be determined by averaging the beginning and ending balance of the Mutual Equity Account for that month. 3. Article IV of the Plan is hereby amended by adding thereto a new Section 4.5: 4.5 INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such limitations as may from time-to-time be required by law, or contained elsewhere in the Plan, each Participant, except as provided in Section 4.6 hereof, may direct the Company prior to the Plan Year for which such direction is to become effective as to how his Accrued Benefit should be invested between the Deferred Cash Account and the Shadow Stock Account. A Participant's investment direction shall specify the percentage of his Accrued Benefit which is to be invested in each of the Deferred Cash Account and the Shadow Stock Account. A Participant's investment direction pursuant to this Section 4.5 is irrevocable with respect to his benefits accrued for the Plan Year and such amounts cannot be transferred between investment accounts. If a Participant fails to direct the investment of any of his Accrued Benefit, all such undirected amounts will be credited to the Shadow Stock Account. Notwithstanding any other provisions herein to the contrary, for the Plan Year ending January 1, 1991, Participants may not direct the Company as to how their Accrued Benefits should be invested. All amounts previously held in the Equalization Plan and Key Management Plan which are transferred to 4 the Plan as of January 1, 1991 will be invested in the Deferred Cash Account or Shadow Stock Account in the same manner as such amounts were held in the Equalization Plan and Key Management Plan. All amounts deferred during the 1991 Plan Year shall be invested in the Shadow Stock Account. 4. Article IV of the Plan is hereby amended by adding thereto a new Section 4.6: 4.6 DIVERSIFICATION OF INVESTMENTS. Notwithstanding anything contained in the Plan to the contrary, a Participant who is eligible to diversify investments pursuant to Section 8.05(A) of the Stock Plan shall be permitted to direct the Company beginning with the Plan Year following the Plan Year in which the Participant satisfies the age and service requirements set forth in such Section to invest his Accrued Benefit allocated to the Shadow Stock Account to the same extent and subject to the same limitations as set forth in Section 8.05, in the Deferred Cash Account, the Fixed Income Account, the Government Account and the Mutual Equity Account, except that any such direction shall be given prior to the Plan Year for which such direction is to become effective. A Participant's investment direction shall specify the percentage of his Accrued Benefit which is to be invested in each of the investment accounts. A Participant's investment direction is irrevocable with respect to his benefits accrued for the Plan Year and such amounts cannot be transferred between investment accounts. If a Participant fails to direct the investment of any of his Accrued Benefit, all such undirected amounts will be credited to the Shadow Stock Account. 5. Section 6.2 of the Plan is deleted in its entirety and the following Section 6.2 is adopted in lieu thereof: 6.2 FORM OF PAYMENT. The amount to which a Participant (or his Beneficiary) is entitled shall be distributed in cash. A Participant's Accrued Benefit will be paid by the Company to him or, in the event of his death, to the Participant's Beneficiary, in a manner elected by the Participant, either (i) in a cash lump sum or (ii) in substantially equal monthly cash installments over a period not exceeding one hundred twenty (120) months. When a Participant first enrolls in the Plan, he shall elect the form in which his Accrued Benefit will be paid. Such election will be irrevocable, and will not be subject to change, 5 except in accordance with Section 6.3. If a Participant fails to elect a manner of payment, the Participant shall receive a cash lump sum. Upon the commencement of installment payments hereunder, an amount equal to the aggregate value (as determined in accordance with Section 6.1) of the Participant's Shadow Stock Account, Fixed Income Account, Government Account and Mutual Equity Account shall be credited to his Deferred Cash Account and the Participant's Shadow Stock Account, Fixed Income Account, Government Account and Mutual Equity Account shall be eliminated. Amounts held pending distribution pursuant to this paragraph shall continue to be credited with interest in accordance with the provisions of Section 4.4.(a). IN WITNESS WHEREOF, pursuant to the action of its Board of Directors at a meeting held the 21st day of October, 1992, the Company has caused this amendment to be executed by its duly authorized officer. ATTEST/WITNESS: THE SHERWIN-WILLIAMS COMPANY /s/ Diane Hale Hupp By: /s/ Louis E. Stellato - ------------------- ----------------------------------- Print Name: Louis E. Stellato --------------------------- Title: Vice President, General Counsel ------------------------------- and Secretary EX-10.G 7 EXHIBIT 10(G) 1 EXHIBIT 10(g) THE SHERWIN-WILLIAMS COMPANY ---------------------------- KEY MANAGEMENT DEFERRED COMPENSATION PLAN ----------------------------------------- (1994 AMENDMENT AND RESTATEMENT) The Sherwin-Williams Company, an Ohio corporation, hereby amends and restates in its entirety, effective as of January 1, 1994, The Sherwin-Williams Company Key Management Deferred Compensation Plan (the "Plan"), which was originally established effective January 1, 1980. All deferred compensation credited to a Participant's account under this Plan or any predecessor plan shall continue to be governed by the terms and conditions of this Plan or the predecessor plan, as applicable, as such plan was in effect at the time such deferred compensation was credited. ARTICLE I DEFINITIONS ----------- As used herein, the following words and phrases shall have the respective meanings set forth below unless a different meaning is plainly required by the context: (1) ACCOUNT(S). The account or accounts established and maintained by the Committee (or the person, group or entity designated by the Committee) to record a Participant's interest in the Plan as set forth in Section 4.01. (2) AWARD DATE. The date on which a Participant would have otherwise received a salary payment or Incentive Award but for an election to defer such salary or Incentive Award made pursuant to Article III of the Plan. (3) BENEFICIARY(IES). Any person or persons designated in accordance with the provisions of Article VI. (4) BOARD. The Board of Directors of the Company. (5) COMMITTEE. The committee which administers the Plan as provided for in Article IX. (6) COMMON STOCK. The common stock of the Company, par value $1.00 per share. (7) COMPANY. The Sherwin-Williams Company, a corporation duly organized and existing under the laws of the State of Ohio, and its successors and assigns. 2 (8) DEFERRED CASH ACCRUAL ACCOUNT. The Account established and maintained for a Participant with respect to any amounts of Deferred Compensation which are to be so invested pursuant to Article IV. (9) DEFERRED COMPENSATION. The amount of a Participant's salary and/or Incentive Award which such Participant elects to defer pursuant to Article III of the Plan. (10) DISTRIBUTABLE INTEREST. The balance in a Participant's Accounts on his Settlement Date determined in accordance with Section 5.01. (11) EFFECTIVE DATE. The effective date of the Plan is January 1, 1980. (12) ELIGIBLE EMPLOYEE(S). Eligible Employees shall include: (i) certain officers (including officers who are members of the Board of Directors) and other key employees of the Company and (ii) such key employees of any Subsidiary which, with the consent of the Board of Directors of the Company, adopts this Plan by resolution of its Board of Directors. (13) EMPLOYMENT PERIOD. The period commencing on the later of: (i) the Effective Date of this Plan or (ii) the Participant's employment date, and ending on the Participant's Settlement Date. (14) FAIR MARKET VALUE. The value determined with respect to Common Stock on the applicable date, in accordance with the following: (a) If the Common Stock is quoted on an established securities market, the closing price of Common Stock on such established securities market on the relevant date or, if there were no sales on such date, the closing price on the nearest preceding date on which there were such sales; or (b) If the Common Stock is not quoted on an established securities market, the fair market value determined by an independent appraiser in accordance with regulations prescribed by the Secretary of the Treasury. (15) INCENTIVE AWARD. A bonus award granted under an Incentive Plan. (16) INCENTIVE PLAN. Any employee bonus program maintained by The Sherwin-Williams Company or a Subsidiary pursuant to which Incentive Awards are granted in connection with the achievement of certain performance related goals. 2 3 (17) PLAN. The Sherwin-Williams Company Key Management Deferred Compensation Plan, as amended from time-to-time. (18) PARTICIPANT. Any person so designated in accordance with the provisions of Article II. (19) PLAN YEAR. The twelve (12) consecutive month period commencing January 1 of any year and ending December 31 of the same year. (20) SETTLEMENT DATE. The date on which a Participant ceases to receive salary payments from the Company and every Subsidiary by reason of permanent termination of employment. (21) SHADOW STOCK. A unit of measure equivalent to one share of Common Stock. (22) SHADOW STOCK ACCOUNT. The Account established and maintained for a Participant with respect to any amounts of Deferred Compensation which the Participant elects to be so invested pursuant to Article IV. (23) SUBSIDIARY. Any corporation in which the Company owns, directly or indirectly, a majority of the outstanding voting stock. (24) TRUST. The trust fund established pursuant to Section 8.1. (25) VALUATION DATE. The last business day of each calendar month. ARTICLE II PARTICIPATION ------------- Participation in the Plan is voluntary. An Eligible Employee shall become a Participant in the Plan as of the first Plan Year for which such Eligible Employee is so designated by the Committee, in its sole discretion, and such Eligible Employee elects, pursuant to Article III hereof, to defer salary and/or an Incentive Award to the Plan. Once an Eligible Employee becomes a Participant, he shall remain a Participant (regardless of whether he elects to defer further salary or Incentive Awards in future Plan Years) until the later of: (i) his Settlement Date or (ii) the date of his final payment if the Participant elects payments over a period of years pursuant to Article V. 3 4 ARTICLE III ELECTION TO DEFER COMPENSATION AND/OR INCENTIVE AWARDS ------------------------------------------------------ 3.01 ELECTION TO DEFER. For each Plan Year or portion thereof during the Employment Period, a Participant may elect (subject to the limitations set forth herein) to defer (i) a portion of his salary not to exceed 25% per Plan Year and/or (ii) all or a portion of the Participant's Incentive Award to be paid in such Plan Year, as the Participant may determine, with respect to such Plan Year. 3.02 TIME OF ELECTION. An election to defer any portion of a Participant's salary for a particular Plan Year and/or Incentive Award to be paid in a particular Plan Year pursuant to Section 3.01 must be made by the Participant at the time and in the manner specified by the Committee; provided, however, that each such election must be made prior to the beginning of the particular Plan Year to which it applies. Notwithstanding the foregoing, an individual who initially qualifies as a Participant by reason of either (i) being a newly hired employee; or (ii) promotion, may elect to defer salary and/or an Incentive Award (provided such Incentive Award has not yet been determined as of the date of his election to defer pursuant to Section 3.01) by making such election within thirty (30) days of such qualification. ARTICLE IV ACCOUNTS -------- 4.01 ESTABLISHMENT OF ACCOUNTS. The Committee shall establish and maintain the following Accounts, in the form of special ledger accounts, which shall reflect the interest, and any increases or decreases thereto, of each Participant in the Plan: (a) DEFERRED CASH ACCRUAL ACCOUNT. The Deferred Cash Accrual Account shall accrue interest computed using the base lending rate of interest as announced by Society National Bank, Cleveland, Ohio, or its successor, in effect on the Valuation Date immediately preceding the month for which interest is accrued. The interest shall be computed on the "average balance" of the Deferred Cash Accrual Account for such month. The "average balance" shall be determined by averaging the beginning and ending balance of the Deferred Cash Accrual Account for such month. 4 5 (b) SHADOW STOCK ACCOUNT. The Shadow Stock Account shall be credited with a quantity of Shadow Stock units and fractions thereof (to the nearest thousandths) equal to the amount of Common Stock that could have been purchased with the amount of the Participant's Deferred Compensation credited to the Shadow Stock Account on the Valuation Date based on the Fair Market Value of Common Stock on such Valuation Date. There will be credited to the Shadow Stock Account amounts equal to the cash dividends, and other distributions, paid on shares of issued and outstanding Common Stock represented by the Shadow Stock Account which Participants would have received had they been a record owner of the number of shares of Common Stock equal to the amount of Shadow Stock in the Shadow Stock Account at the time of payment of such cash dividends or other distributions. The amounts credited to the Shadow Stock Account shall be converted to a quantity of Shadow Stock units and fractions thereof (to the nearest thousandths) that could have been purchased with the dividends or other distributions based on the Fair Market Value of Common Stock on the date of payment of such dividends or other distributions. 4.02 INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such limitations as may from time-to-time be required by law, or contained elsewhere in the Plan, each Participant may direct the Company, prior to the Plan Year for which such direction is to become effective, as to how his Deferred Compensation should be allocated between the Shadow Stock Account and the Deferred Cash Accrual Account. A Participant's investment direction shall designate the percentage of his Deferred Compensation which is to be invested in each Account. A Participant's investment direction is irrevocable with respect to his Deferred Compensation for the Plan Year and such amounts cannot be transferred between Accounts. If a Participant fails to direct the investment of any of his Deferred Compensation, all such undirected amounts shall be credited to the Participant's Deferred Cash Accrual Account. 4.03 CREDITING OF ACCOUNTS. Each Participant's Accounts shall be credited on each Award Date with an amount equal to that portion of his salary and/or Incentive Award, if any, in accordance with his investment directions pursuant to Section 4.02. 5 6 ARTICLE V PAYMENT OF BENEFITS ------------------- 5.01 DETERMINING DISTRIBUTABLE INTEREST. A Participant's Distributable Interest shall be sum of: (a) an amount equal to the sum of the Fair Market Value of the units of Shadow Stock allocated to his Shadow Stock Account as of the Participant's Settlement Date; and (b) the total amount allocated to his Deferred Cash Accrual Account as of the Participant's Settlement Date. 5.02 TRANSFER OF ACCOUNT BALANCE. Upon a Participant's Settlement Date, the balance, if any, of his Shadow Stock Account shall be credited to his Deferred Cash Accrual Account and his Shadow Stock Account charged accordingly. 5.03 ENTITLEMENT TO BENEFITS. (a) If a Participant's Settlement Date occurs by reason of his termination of employment for any reason other than his death, his Distributable Interest determined in accordance with Section 5.01 shall be distributed to the Participant. (b) If a Participant's Settlement Date occurs by reason of the Participant's death, his Distributable Interest determined in accordance with Section 5.01 shall be distributed to the Participant's designated Beneficiary or as otherwise provided in Section 5.07. 5.04 FORMS OF DISTRIBUTION. (a) A Participant may elect the form of distribution in which the Participant's Distributable Interest will be paid to such Participant or his Beneficiary, and may revoke such election and make a new election, at any time prior to the Participant's Settlement Date. A Participant's Distributable Interest shall be distributed (to the Participant or his Beneficiary), in either of the following forms, as may be elected by the Participant in accordance with this Subsection 5.04: (i) a lump sum cash distribution; or 6 7 (ii) substantially equal cash installments, over a period not exceeding ten years; provided, however, if as of the Participant's Settlement Date the Participant has not elected a form of distribution, the Participant's Distributable Interest shall be automatically paid to the Participant or Beneficiary in a lump sum cash distribution. Amounts held pending distribution pursuant to this Section 5.04 shall continue to be credited with interest in accordance with the provisions of Section 4.01(a). The payment of such Distributable Interest shall be made, or shall commence, as soon as reasonably practicable following the end of the calendar month in which occurs the Participant's Settlement Date. 5.05 HARDSHIP DISTRIBUTIONS. Upon thirty (30) days prior written application, a Participant may be permitted to make a lump sum withdrawal in cash from his Accounts prior to attaining his Settlement Date in accordance with the following rules: (a) An application for approval of such a withdrawal shall be made in writing on a form provided for such purpose by the Committee. (b) Withdrawals shall be approved only for an Unforeseeable Emergency. An "Unforeseeable Emergency" is a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent (as defined in Section 152(a) of the Internal Revenue Code of 1986, as amended) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of an event beyond the control of the Participant. Unforeseeable Emergencies shall not include obtaining funds to send a Participant's child to college or to purchase a home. (c) Withdrawals of amounts because of Unforeseeable Emergency are limited to the amount reasonably necessary to satisfy the need. (d) Withdrawal shall not be permitted to the extent that such hardship is or may be relieved through any of the following means: (i) Through reimbursement or compensation by insurance or otherwise; 7 8 (ii) By liquidation of the Participant's assets to the extent the liquidation of such assets would not itself cause severe financial hardship; or (iii) By cessation of deferrals under the Plan. 5.06 DISABILITY DISTRIBUTIONS. Upon thirty (30) days prior written application, a Participant may be permitted to receive a complete distribution in cash from his Accounts in one of the forms permitted by Section 5.04 prior to attaining his Settlement Date in accordance with the following rules: (a) An application for approval of such Disability distribution shall be made in writing on a form provided for such purpose by the Committee. (b) Distribution shall be approved only in the event the Participant has a Total and Permanent Disability. For purposes of this Section 5.06(a), Total and Permanent Disability shall mean a physical or mental condition that, in the sole discretion of the Committee, renders the Participant totally and permanently unable to perform the duties and obligations of such Participant's position for a consecutive period of twenty-six (26) weeks. The Committee shall have the right to request such information supporting a Participant's claim for a Total and Permanent Disability distribution as the Committee shall deem necessary, including, but not limited to, a physician's statement of disability, in such form as the Committee may provide. 5.07 DEATH PRIOR TO COMPLETE DISTRIBUTION. If a Participant or Beneficiary dies before receiving a complete distribution of his Distributable Interest under the Plan under any of the following circumstances: (a) without designating a Beneficiary therefor; (b) if there is no designated Beneficiary living upon the death of a Participant; or (c) if all such designated Beneficiaries die prior to the full distribution of his interest; then the undistributed balance of such Distributable Interest shall be distributed to the Participant or Beneficiary's surviving spouse, if any, and if there is no surviving spouse, then to the Participant or Beneficiary's estate in the manner and such one or combination of the ways set forth in Section 5.04 as the Committee, in its sole discretion, shall determine. 8 9 5.08 FORFEITURE OF BENEFITS. Notwithstanding anything in the Plan to the contrary, all rights to participate and all rights to any benefit hereunder shall immediately terminate and become null and void in the event the Committee shall determine that the Participant was involved in: (a) theft, embezzlement or unauthorized appropriation of Company property or the willful destruction of Company property, or (b) fraud against the Company. 5.09 FACILITY OF PAYMENT. Whenever and as often as any person entitled to payments hereunder shall be determined by the Committee, in its sole discretion, to be physically, mentally or legally incompetent or otherwise unable to apply such payments to his own best interest and advantage, the Committee, in its sole discretion, may direct all or any portion of such payments to be made in any one or more of the following ways: (i) directly to such person; (ii) to his legal guardian or representative; or (iii) to his spouse or to any other person responsible for the maintenance of such Participant, to be expended for his benefit. The decision of the Committee shall in each case be final and binding upon all persons in interest and neither the Company nor the Committee shall be under any duty to see to the proper application of such funds. 5.10 NOTICE. Each Participant and each Beneficiary of a deceased Participant shall file with the Committee from time-to-time in writing his post office address and each change of post office address. Any communication, statement or notice addressed to such person at his last post office address filed with the Committee, or if no such address was filed with the Committee, then at his last post office address as shown in the Company's records, if any, shall be binding on such person for all purposes of the Plan, and neither the Company nor the Committee shall be obligated to search for or ascertain the whereabouts of any Participant, former Participant or beneficiary. 5.11 MISSING PARTICIPANTS/BENEFICIARIES. If all or any part of the interest of any Participant, former Participant or Beneficiary becomes distributable hereunder and the whereabouts of such Participant, former Participant or Beneficiary is then unknown to the Committee 9 10 and the Committee fails to receive a claim for such distribution from the person entitled thereto or from any other person validly acting in his behalf within one (1) year thereafter, then such distribution may, in the discretion of the Committee, be disposed of as follows: (1) If the whereabouts of the person next entitled thereto is known to the Committee, or is disclosed to the Committee within a period of two (2) years thereafter, distribution may be made as though such Participant or Beneficiary had died at the end of said one (1) year period; (2) If the Committee is unable to complete distribution in the manner provided in paragraph (1) of this Section 5.11, but the whereabouts of one or more of the next of kin or surviving spouse of the Participant or former Participant whose interest hereunder is subject to distribution is known to the Committee, then distribution of such Distributable Interest then remaining undistributed hereunder may be made to any one or more or all of such next of kin and surviving spouse, and in such proportions, as the Committee determines; (3) If the Committee is unable to complete distribution pursuant to the provisions of either paragraph (1) or paragraph (2) of this Section 5.11 within the time limit therein designated, then at the end of the three (3) year period therein referred to the interest of such Participant or former Participant then remaining undistributed will be cancelled and no further payments with respect thereto will be made. If the last post office address of a Participant or Beneficiary, whose interest is subject to distribution by the terms of this Section 5.11 is known to the Committee, then the Committee will notify such person of any action contemplated by it pursuant to this Section 5.11, by letter addressed to him at such last known address. ARTICLE VI BENEFICIARIES ------------- 6.01 DESIGNATION OF BENEFICIARIES. A Participant may, by instrument in writing executed and delivered to the Committee during his lifetime, designate a Beneficiary or Beneficiaries to whom his Distributable Interest under the Plan shall be distributed in the event of his death prior to the full receipt of his interest under this Plan, and he may designate the 10 11 proportions to be distributed to each such Beneficiary if more than one Beneficiary is designated. Any such designation may be revoked or changed by the Participant at any time and from time-to-time, by similar instrument in writing delivered as aforesaid. 6.02 ASSUMPTION OF DEATH. If the Committee, after reasonable inquiry, is unable within one (1) year to determine whether any Beneficiary did in fact survive the event that entitled him to receive distribution of any sum hereunder, it shall be conclusively presumed that such Beneficiary did in fact die prior to such event. ARTICLE VII RIGHTS TO PAYMENTS ------------------ Neither a Participant nor a beneficiary hereunder or personal representative of either shall under any circumstances have any option or right to require payments hereunder otherwise than in accordance with the terms hereof or have any rights in or to the amounts in the Accounts except as specifically provided herein. The amounts in the Accounts shall remain the sole property of the Company unless and until required to be distributed in accordance with the provisions of the Plan, and shall not constitute a trust or be deemed to be held in trust for the benefit of any Participant or Beneficiary hereunder or any of their personal representatives. ARTICLE VIII THE TRUST --------- 8.1. ESTABLISHMENT OF TRUST. The Company has established an irrevocable trust fund for the purpose of providing a source from which to pay benefits under the Plan; provided, however, that the Trust is at all times subject to the claims of the Company's creditors in the event of the Company's insolvency or bankruptcy. 8.2 CONTRIBUTIONS TO THE TRUST. Contributions shall be made to the Trust in one or more installments during the Plan Year or as soon as practicable after the close of the Plan Year, but in no event later than ninety (90) days after the close of the Plan Year. An amount equal to the interest, earnings and appreciation of Shadow Stock shall be contributed to the Trust before the end of the calendar quarter immediately following the calendar quarter in which such interest, earnings and appreciation were credited in accordance with the terms of the Plan. 11 12 8.03 SPENDTHRIFT PROVISION. Although amounts held in the Trust are held subject to the claims of the Company's creditors in the event of the Company's insolvency or bankruptcy, no amount payable to a Participant or Beneficiary under the Plan will be subject in any manner to anticipation, alienation, attachment, garnishment, sale , transfer, assignment (either at law or in equity), levy, executions, pledge, encumbrance, charge or any other legal or equitable process by a Participant or Beneficiary, and any attempt to do so will be void; nor will any benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled thereto. However, (i) the withholding of taxes from Plan benefit payments, (ii) the recovery by the Plan of overpayment of benefits previously made to a Participant, or (iii) the direct deposit of benefit payments to an account in a banking institution (if not actually part of an arrangement constituting an assignment or alienation) shall not be construed as an assignment or alienation. ARTICLE IX COMMITTEE --------- 9.01 COMPOSITION OF COMMITTEE. This Plan shall be administered by a Committee composed of not less than three (3) members of the Board, as shall from time-to-time be duly appointed by the Board and who shall each thereafter serve, without compensation, until death, resignation or removal from such office. Any member of the Committee may resign at any time by notice in writing to the Company, and to the remaining members of the Committee. The Board may remove any member of the Committee at any time by written notice to him and to the remaining members of the Committee. In the event of the resignation, removal, death, inability or failure to act or continue to act of any member of the Committee at any time, a successor to such Member shall be appointed. It is the intention of the Company that there shall be at all times at least three Committee members acting hereunder, and that all vacancies shall be filled promptly. Nevertheless, in the event of and during any such vacancy, the remaining Committee members or member shall have and may exercise all powers of the Committee. 12 13 9.02 POWERS AND DUTIES OF COMMITTEE. Except as otherwise expressly provided in this Plan, the Committee shall have the full power and authority, within the limits provided by the Plan: (a) to construe the Plan and determine all questions arising in the administration of the Plan, including the power to determine the rights or eligibility of employees and Participants and their beneficiaries, and the amount of their respective interests, and to make equitable adjustments for any mistakes or errors made in the administration of the Plan, and its decisions and actions made in good faith shall be final and binding upon all persons hereunder; (b) to adopt such rules and regulations as it may deem reasonably necessary for the proper and efficient administration of the Plan and consistent with its purposes; (c) to enforce the Plan, in accordance with its terms and with the rules and regulations adopted by the Committee; and (d) to do all other acts which in its judgment are necessary or desirable for the proper and advantageous administration of the Plan. 9.03 COMMITTEE ACTION. The Committee shall act by the vote or concurrence of a majority of its members; but no member who is a Participant shall act on any matter that has particular reference to his own interest hereunder. No member of the Committee shall have any personal liability to anyone, either as such member or as an individual, for anything done or omitted to be done in good faith in carrying out the provisions of this Plan. 9.04 INDEMNIFICATION. In addition to such other rights of indemnification as the Committee members may have as members of the Board or as members of the Committee, the members of the Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which the Committee members or any of one or more of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company), or paid by them in satisfaction of a judgment in any such 13 14 action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for gross misconduct in his duties; provided that within sixty (60) days after the institution of such action, suit or proceeding, such Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. ARTICLE X AMENDMENTS AND TERMINATION -------------------------- The Board may at any time terminate the Plan or may from time-to-time amend any provision hereof in such manner and to such extent as the Board may in its sole discretion deem to be advisable and in the best interest of the Company; provided, that no such amendment shall divest any Participant, former Participant or Beneficiary or diminish his then interest hereunder. In the event the Plan is terminated, the amount of each Participant's Distributable Interest shall be determined in accordance with the provisions of Article V as if such Participant's service with the Company and every Subsidiary had terminated by reason of his termination of employment on the date of such Plan termination. Such interest so determined shall be fully vested in such Participant and shall be immediately distributable to him, or his Beneficiary, as the case may be, in one lump sum in cash. ARTICLE XI CHANGE OF CONTROL ----------------- In the event of a Change of Control, the amounts to which Participants are entitled under Section 5.01 of this Plan shall be immediately distributed in a lump sum cash payment to Participants. For purposes of this Plan, a Change of Control shall be deemed to have occurred if: (a) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving 14 15 corporation, immediately after the merger, or (ii) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of fifty percent (50%) or more of the assets or earning power of the Company; (b) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended, hereinafter the "Exchange Act") other than the Company or any employee benefit or stock ownership plan sponsored by the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, shall become the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act) of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise; or (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board and any new director whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, ceased for any reason to constitute a majority thereof. Notwithstanding subsections (a) through (c) above, with respect to the transactions set forth in subsections (a) and (b) above, a Change of Control shall not be deemed to have occurred if any such transaction (i) is approved by a vote of at least two-thirds (2/3) of the Board, and (ii) at the time of such vote, at least two-thirds (2/3) of the Board then in office were members of the Board immediately prior to such transaction. Any such approval pursuant to the preceding sentence shall provide that such approval is being given for the purpose of not triggering the benefits under this Plan. 15 16 ARTICLE XII MISCELLANEOUS ------------- 12.01 EFFECT OF IRS DETERMINATION. Notwithstanding anything in this Plan to the contrary, in the event the Internal Revenue Service rules unfavorably as to the tax consequences of deferrals made under this Plan for any Fiscal Year, the Board may take any such action as it deems necessary or appropriate, including action to restore Participants to substantially the same position they would have enjoyed had this Plan not been effective for such Fiscal Year. 12.02 ENFORCEABILITY. If any provision of this Plan is finally adjudicated by a court of competent jurisdiction as being illegal or unenforceable, this Plan shall be interpreted and administered as though said illegal or unenforceable provisions had been deleted from the Plan. 12.03 CLAIMS PROCEDURE. Any Participant who believes that he is entitled to a benefit under the Plan which he has not received because the Committee has denied the benefit in whole or in part, may file with the Committee a written claim specifying the basis of his complaint and the facts upon which he relies in making such claim. Such claim must be witnessed by the claimant or his authorized representative and shall be deemed filed when received by the Committee. Unless such claim is allowed in total by the Committee, the Committee shall respond in writing to the claimant advising him of the total or partial denial of his claim. Such notice shall include: (a) The reasons for denial of the claim; (b) Reference to the provisions of the Plan upon which the denial of the claim was based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material and information is necessary; and (d) An explanation of the review procedure. Within six (6) months after the mailing of such notice of denial, the claimant can appeal such denial by filing with a special review committee appointed by the Committee his written request for the review of said claim. A special review committee shall consist 16 17 of no less than three (3) disinterested parties to the claimant who are not part of the Committee. If an appeal is so filed within the six (6) month period, the special review committee shall conduct a full and fair review of such claim and mail to the claimant not later than sixty (60) days after receipt of a request for review a written decision of the matter based upon the facts and pertinent provisions of the Plan. Such decision shall state the reason for the decision as well as references to the pertinent Plan provisions in which the decision is based. During the full review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing to the special review committee, or, if he requests a hearing, to present his case in person or by an authorized representative at a hearing scheduled by the special review committee. In the event the claimant requests a hearing, the time period for the special review committee to render a decision upon a claim shall be extended from sixty (60) to one hundred twenty (120) days after receipt of request for review. 12.04 DECISIONS INVOLVING OWN BENEFITS. Notwithstanding any other provisions in this Plan, a Participant or Beneficiary, who has decision making or other administrative authority with respect to the Plan may not decide matters affecting his or her own benefits under the Plan as a Participant functioning in such capacity. 12.05 LIMITATIONS ON LIABILITY OF COMPANY. Neither the establishment of the Plan or any modification thereof, or the creation of any fund or account, or the payment of any benefits shall be construed as giving to any Participant or other person any legal or equitable right against the Company or any officer or employee thereof, except as provided by law or by any Plan provision. The Company does not in any way guarantee the Participant's benefits from loss or depreciation. In no event shall the Company's employees, officers, directors or stockholders be liable to any person on account of any claim arising by reason of the provisions of the Plan or of any instrument or instruments implementing its provisions, or fo rthe failure of any Participant, Beneficiary or other person to be entitled to any particular tax consequences with respect to the Plan, any contribution thereto or distribution therefrom. 17 18 12.06 UNFUNDED PLAN. The Plan is intended to be an unfunded plan for purposes of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The establishment of the Trust shall not cause this Plan to be deemed funded for the purposes of ERISA. All payments to be made hereunder shall be made in cash from either the Trust or the general revenues and assets of the Company. To the extent that any Participant or other person acquires a right to receive payments under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. 12.07 PAYMENT OF ADMINISTRATIVE EXPENSES. Expenses incurred in the administration and operating of the Plan shall be paid by the Company. IN WITNESS WHEREOF, the Company has caused the Plan to be executed effective as of the 1st day of January, 1993. ATTEST: THE SHERWIN-WILLIAMS COMPANY Diane Hale Hupp By: /s/ Thomas Kroeger - --------------------------- ---------------------------------- Title: Vice President - Human Resources -------------------------------- 18 EX-11 8 EXHIBIT 11 1 EXHIBIT 11 COMPUTATION OF NET INCOME PER SHARE (Thousands of Dollars Except Per Share Data)
1995 1994 1993 - -------------------------------------------------------------------------------------------- FULLY DILUTED Average shares outstanding 85,189,406 86,295,514 88,716,976 Options -- treasury stock method 636,278 579,924 744,892 Assumed conversion of 6.25% Convertible Subordinated Debentures 3,971 70,870 84,899 - -------------------------------------------------------------------------------------------- Average fully diluted shares 85,829,655 86,946,308 89,546,767 ============================================================================================ Net income $200,654 $186,571 $165,227 Add 6.25% Convertible Subordinated Debentures interest -- net of tax (1) -- 8 10 - -------------------------------------------------------------------------------------------- Net income applicable to fully diluted shares $200,654 $186,579 $165,237 ============================================================================================ Net income per share $2.34 $2.15 $1.85 ============================================================================================ PRIMARY Average shares outstanding 85,189,406 86,295,514 88,716,976 Options -- treasury stock method 553,867 566,222 718,920 - -------------------------------------------------------------------------------------------- Average shares and equivalents 85,743,273 86,861,736 89,435,896 ============================================================================================ Net income applicable to shares and equivalents $200,654 $186,571 $165,227 =========================================================================================== Net income per share $2.34 $2.15 $1.85 ============================================================================================ (1) All 6.25% Convertible Subordinated Debentures outstanding at December 31, 1994 were converted to common stock during the first quarter of 1995 without incurring further interest.
43 EX-21 9 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES FOREIGN SUBSIDIARIES Sherwin-Williams Argentina I. y C.S.A.* Sherwin-Williams do Brasil Industria e Comercio Ltda., Sao Paulo, Brazil* Sherwin-Williams Canada Inc., Toronto, Ontario, Canada 147926 Canada Inc., Gravenhurst, Ontario, Canada Compania Sherwin-Williams, S.A. de C.V., Mexico City, Mexico* Sherwin-Williams Cayman Islands Ltd., Grand Cayman* The Sherwin-Williams Co. Resources Limited, Kingston, Jamaica Sherwin-Williams (Caribbean) N.V., Curacao Sherwin-Williams (West Indies) Ltd., Kingston, Jamaica Sherwin-Williams Foreign Sales Corporation Limited, Charlotte Amalie, Virgin Islands UNITED STATES SUBSIDIARIES Contract Transportation Systems Company DIMC, Inc. Dupli-Color Products Company F.L.R. Paints, Incorporated INCO International Company Sherwin-Williams Acceptance Corporation Sherwin-Williams Automotive Finishes Corp. Sherwin-Williams Diversified Brands, Inc. Sherwin-Williams International Company SWIMC, Inc. *Unconsolidated 44 EX-23 10 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference of our report dated January 19, 1996, with respect to the consolidated financial statements and schedule of The Sherwin-Williams Company included in the Annual Report (Form 10-K) for the year ended December 31, 1995, in the following registration statements and related prospectuses:
REGISTRATION NUMBER DESCRIPTION - ------------ ----------- 333-01093 The Sherwin-Williams Company Form S-3 Registration Statement 333-00725 The Sherwin-Williams Company Form S-4 Registration Statement 33-64543 The Sherwin-Williams Company Form S-3 Registration Statement 33-62229 The Sherwin-Williams Company Employee Stock Purchase and Savings Plan Form S-8 Registration Statement 2-80510 Post-Effective Amendment Number 5 to Form S-8 Registration Statement relating to The Sherwin-Williams Company Employee Stock Purchase and Savings Plan 33-52227 The Sherwin-Williams Company 1994 Stock Plan Form S-8 Registration Statement 33-28585 The Sherwin-Williams Company 1984 Stock Plan Form S-8 Registration Statement 33-22705 The Sherwin-Williams Company Form S-3 Registration Statement
Cleveland, Ohio March 11, 1996 /s/ Ernst & Young LLP ERNST & YOUNG LLP 45 EX-24 11 EXHIBIT 24 1 EXHIBIT 24 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Officer and Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1996 /s/ J.G. Breen --------------------------------------- J.G. Breen Chairman of the Board and Chief Executive Officer, Director 2 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Officer and Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1996 /s/ T.A. Commes ---------------------------------------- T.A. Commes President and Chief Operating Officer, Director 3 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Officer of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1996 /s/ L.J. Pitorak -------------------------------------------- L.J. Pitorak Senior Vice President - Finance, Treasurer and Chief Financial Officer 4 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Officer of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1996 /s/ J.L. Ault --------------------------------------- J.L. Ault Vice President - Corporate Controller 5 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 21, 1996 /s/ J.M. Biggar --------------------------------------- J.M. Biggar Director 6 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1996 /s/ Leigh Carter ---------------------------------------- L. Carter Director 7 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: February 1, 1996 /s/ D.E. Collins ------------------------------------------ D.E. Collins Director 8 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 21, 1996 /s/ D.E. Evans ------------------------------------------ D.E. Evans Director 9 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 22, 1996 /s/ R.W. Mahoney ----------------------------------------- R.W. Mahoney Director 10 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 21, 1996 /s/ W.G. Mitchell ----------------------------------------- W.G. Mitchell Director 11 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 21, 1996 /s/ A.M. Mixon ------------------------------------------- A.M. Mixon Director 12 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 24, 1996 /s/ H.O. Petrauskas ------------------------------------------ H.O. Petrauskas Director 13 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ---------------------------- The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, a Form 10-K for the fiscal year ended December 31, 1995, hereby constitutes and appoints J.G. Breen, T.A. Commes, L.J. Pitorak and L.E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 24, 1996 /s/ R.K. Smucker ---------------------------------------- R.K. Smucker Director EX-27 12 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K FOR THE YEAR ENDED DEC. 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000089800 THE SHERWIN-WILLIAMS COMPANY 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 249,484 20,000 349,458 15,154 463,087 1,238,898 987,434 531,077 2,141,053 618,937 24,018 101,110 0 0 1,111,016 2,141,053 3,273,819 3,273,819 1,877,083 1,877,083 11,782 13,793 2,532 318,498 117,844 200,654 0 0 0 200,654 2.34 2.34
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