SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES ----- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2002, OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO _______.
COMMISSION FILE NO. 1-14187
DELAWARE 02-0642224
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
P.O. BOX 777; 2628 PEARL ROAD; MEDINA, OHIO 44258
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (330) 273-5090
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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 THE FILING REQUIREMENTS FOR THE PAST 90 DAYS.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT).
AS OF JANUARY 9, 2003
115,593,666 SHARES OF RPM INTERNATIONAL INC. COMMON STOCK WERE OUTSTANDING.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20
ITEM 4. CONTROLS AND PROCEDURES 20
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 25
SIGNATURES 28
CERTIFICATION OF CHIEF EXECUTIVE OFFICER 29
CERTIFICATION OF CHIEF FINANCIAL OFFICER 30
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PART I. -- FINANCIAL INFORMATION
ITEM 1. -- FINANCIAL STATEMENTS
RPM INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOVEMBER 30, 2002 MAY 31, 2002
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ASSETS
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 60,433 $ 42,172
TRADE ACCOUNTS RECEIVABLE (LESS ALLOWANCES OF
$16,902 AND $15,884, RESPECTIVELY) 364,781 397,659
INVENTORIES 250,252 251,446
PREPAID EXPENSES AND OTHER CURRENT ASSETS 106,235 110,037
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TOTAL CURRENT ASSETS 781,701 801,314
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PROPERTY, PLANT AND EQUIPMENT, AT COST 670,112 655,841
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION (320,584) (300,044)
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PROPERTY, PLANT AND EQUIPMENT, NET 349,528 355,797
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OTHER ASSETS
GOODWILL 596,525 592,329
OTHER INTANGIBLE ASSETS, NET OF AMORTIZATION 260,836 264,530
OTHER 30,763 22,433
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TOTAL OTHER ASSETS 888,124 879,292
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TOTAL ASSETS $ 2,019,353 $ 2,036,403
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 133,666 $ 160,767
CURRENT PORTION OF LONG-TERM DEBT 4,399 5,876
ACCRUED COMPENSATION AND BENEFITS 65,675 80,530
ACCRUED LOSS RESERVES 52,079 51,914
OTHER ACCRUED LIABILITIES 58,776 58,144
INCOME TAXES PAYABLE 1,640 7,483
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TOTAL CURRENT LIABILITIES 316,235 364,714
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LONG-TERM LIABILITIES
LONG-TERM DEBT, LESS CURRENT MATURITIES 687,197 707,921
OTHER LONG-TERM LIABILITIES 53,538 55,458
DEFERRED INCOME TAXES 47,276 50,204
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TOTAL LONG-TERM LIABILITIES 788,011 813,583
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STOCKHOLDERS' EQUITY
PREFERRED STOCK, $0.01 PAR VALUE; AUTHORIZED
50,000 SHARES; NONE ISSUED -- --
COMMON STOCK, PAR VALUE $0.01 AND WITHOUT PAR VALUE WITH A
STATED VALUE OF $.015 PER SHARE AS OF NOVEMBER 2002 AND MAY 2002,
RESPECTIVELY; AUTHORIZED 300,000 AND 200,000 SHARES,
RESPECTIVELY; OUTSTANDING 115,561 SHARES AND 114,696 SHARES,
RESPECTIVELY 1,156 1,786
PAID-IN CAPITAL 508,069 585,566
TREASURY STOCK, AT COST -- (88,364)
ACCUMULATED OTHER COMPREHENSIVE LOSS (48,423) (50,485)
RETAINED EARNINGS 454,305 409,603
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TOTAL STOCKHOLDERS' EQUITY 915,107 858,106
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,019,353 $ 2,036,403
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THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
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2002 2001 2002 2001
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NET SALES $1,060,381 $1,021,155 $ 517,968 $ 487,880
COST OF SALES 567,029 548,513 283,820 265,912
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GROSS PROFIT 493,352 472,642 234,148 221,968
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 365,606 355,695 181,499 174,076
INTEREST EXPENSE, NET 14,188 24,423 6,984 11,359
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INCOME BEFORE INCOME TAXES 113,558 92,524 45,665 36,533
PROVISION FOR INCOME TAXES 39,745 31,465 16,025 12,043
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NET INCOME $ 73,813 $ 61,059 $ 29,640 $ 24,490
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AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING:
BASIC 115,001 102,266 115,240 102,321
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DILUTED 115,981 102,512 116,201 102,828
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BASIC AND DILUTED EARNINGS PER SHARE OF
COMMON STOCK $ 0.64 $ 0.60 $ 0.26 $ 0.24
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CASH DIVIDENDS PER SHARE OF
COMMON STOCK $ 0.2550 $ 0.2500 $ 0.1300 $ 0.1250
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THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED NOVEMBER 30,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 73,813 $ 61,059
DEPRECIATION AND AMORTIZATION 28,081 28,818
ITEMS NOT AFFECTING CASH AND OTHER (2,872) (7,773)
CHANGES IN OPERATING WORKING CAPITAL (8,489) 12,048
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90,533 94,152
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CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (13,702) (13,117)
ACQUISITION OF NEW BUSINESSES, NET OF CASH ACQUIRED (9,387) --
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(23,089) (13,117)
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CASH FLOWS FROM FINANCING ACTIVITIES:
(DECREASE) IN DEBT (22,900) (34,271)
CASH DIVIDENDS (29,111) (25,435)
EXERCISE OF STOCK OPTIONS 2,828 345
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(49,183) (59,361)
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NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 18,261 21,674
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 42,172 23,926
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CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 60,433 $ 45,600
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THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2002
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included for the three and six month periods ended November 30, 2002 and 2001. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
NOTE B - INVENTORIES
Inventories were composed of the following major classes:
NOVEMBER 30, 2002 MAY 31, 2002
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(IN THOUSANDS)
Raw materials and supplies $ 89,353 $ 75,080
Finished goods 160,899 176,366
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$ 250,252 $ 251,446
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NOTE C - COMPREHENSIVE INCOME
Other comprehensive income includes foreign currency translation adjustments, minimum pension liability adjustments and unrealized gains or losses on securities. Total comprehensive income, comprised of net income and other comprehensive income, amounted to $30,995,000 and $18,540,000 during the second quarter of fiscal years 2003 and 2002, respectively, and $75,875,000 and $61,257,000 for the six months ended November 30, 2002 and 2001, respectively.
NOTE D - REINCORPORATION
At the annual shareholders meeting on October 11, 2002, RPM shareholders approved a plan to change RPM's legal place of incorporation from Ohio to Delaware. Under the plan, a new legal entity, RPM International Inc., was incorporated in Delaware and became the parent holding company of Ohio-based RPM, Inc. and several other intermediate holding companies and wholly owned subsidiaries. In addition to the creation of a newly formed Delaware legal entity, the legal structure of various operating companies were realigned in consistency with their respective business objectives. All of the outstanding treasury shares of RPM, Inc. were cancelled and retired without any consideration. In addition, each common share of RPM, Inc. issued and outstanding on October 15, 2002 was converted into one share of the Company, with a $0.01 par value per share. This transaction did not have any effect on the book value per share, post-reincorporation.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements include the accounts of RPM International Inc. and its majority-owned subsidiaries. Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate these estimates, including those related to allowances for doubtful accounts, inventories, allowances for recoverable taxes, useful lives of property, plant and equipment, goodwill, environmental and other contingent liabilities, income tax valuation allowances, pension plans and the fair value of financial instruments. We base our estimates on historical experience and other assumptions, which we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of our assets and liabilities. Actual results may differ from these estimates under different assumptions and conditions.
We have identified below the accounting policies that are critical to our financial statements.
REVENUE RECOGNITION
Revenues are recognized when title and risk of loss passes to customers. The Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition," provides guidance on the application of Generally Accepted Accounting Principles (GAAP) in the U.S. to selected revenue recognition issues. We have concluded that our revenue recognition policy is appropriate and in accordance with GAAP and SAB No. 101.
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS AND FOREIGN CURRENCY TRANSACTIONS
Our reporting currency is the U.S. dollar. However, the functional currency of all of our foreign subsidiaries is their local currency. We translate the amounts included in our consolidated statements of income from our foreign subsidiaries into U.S. dollars at year-to-date average exchange rates, which we believe are fairly representative of the actual exchange rates on the dates of the transactions. Our foreign subsidiaries' assets and liabilities are translated into U.S. dollars from local currency at the actual exchange rates as of the end of each reporting date, and we record the resulting foreign exchange translation adjustments in our consolidated balance sheets as a component of accumulated other comprehensive income (loss). If we determine that the functional currency of any of our foreign subsidiaries should be the U.S. dollar, our financial statements would be affected. Should this occur, we would adjust our reporting to appropriately account for such change(s).
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
As appropriate, we use permanently invested intercompany loans as a source of capital to reduce exposure to foreign currency fluctuations at our foreign subsidiaries. These loans are treated as analogous to equity for accounting purposes. Therefore, foreign exchange gains or losses on these intercompany loans are recorded in other comprehensive income (loss). If we were to determine that the functional currency of any of our subsidiaries should be the U.S. dollar, we would no longer record foreign exchange gains or losses on such intercompany loans.
GOODWILL
We adopted two new accounting standards issued by the Financial Accounting Standards Board in June 2001. Statement of Financial Accounting Standards, or SFAS, No. 141, "Business Combinations," eliminates the pooling method of accounting for all business combinations initiated after June 30, 2001, and addresses the initial recognition and measurement of goodwill and intangible assets acquired in a business combination. Accordingly, we apply the provisions of SFAS No. 141 to all business combinations initiated after its effective date. We also adopted SFAS No. 142, "Goodwill and Other Intangible Assets," effective June 1, 2001. Goodwill amortization ceased upon adoption of the standard, and the required initial impairment tests were performed. Results of these impairment tests have not generated any impairment loss to date.
Prospectively, goodwill will be tested on an annual basis, or more frequently as impairment indicators arise. Impairment tests, which involve the use of estimates related to the fair market values of the business operations with which goodwill is associated, are performed at the end of our first quarter. Losses, if any, resulting from impairment tests will be reflected in operating income in our income statement.
OTHER LONG-LIVED ASSETS
We assess for impairment of identifiable non-goodwill intangibles and other long-lived assets whenever events or changes in facts and circumstances indicate the possibility that the carrying value may not be recoverable. Factors considered important which might trigger an impairment evaluation, include the following:
- significant under-performance relative to historical or projected future operating results;
- significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
- significant negative industry or economic trends.
When we determine that the carrying value of non-goodwill intangibles and other long-lived assets may not be recoverable based upon the existence of one or more of the above described indicators, any impairment would be measured based on projected net cash flows expected from the asset(s), including eventual disposition.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
CONTINGENCIES
We are party to claims and lawsuits arising in the normal course of business.
Although we cannot precisely predict the amount of any liability that may
ultimately arise with respect to any of these matters, we record provisions when
we consider the liability probable and reasonably estimable. The provisions are
based on historical experience and legal advice, are reviewed quarterly and are
adjusted according to developments. Changes in the amount of the provisions
affect our consolidated statements of income. Due to the inherent uncertainties
in the loss reserve estimation process, actual results may differ.
(Additionally, refer to Item 1. Legal Proceedings, Part II - Other Information
contained elsewhere in this report.)
Our environmental-related accruals are similarly established and/or adjusted as information becomes available upon which costs can be reasonably estimated. Here again, actual costs may vary from these estimates because of the inherent uncertainties involved, including the identification of new sites and the development of new information about contamination. Certain sites are still being investigated and therefore we have been unable to fully evaluate the ultimate cost for those sites. As a result, reserves have not been taken for certain of these sites and costs may ultimately exceed existing reserves for other sites. We have received indemnities for potential environmental issues from purchasers of certain of our properties and businesses and from sellers of properties or businesses we have acquired. We have also purchased insurance to cover potential environmental liabilities at certain sites. If the indemnifying or insuring party fails to, or becomes unable to, fulfill its obligations under those agreements or policies, we may incur additional environmental costs in addition to any amounts reserved, which could have a material adverse effect on our financial condition, results of operations or cash flows.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
REPORTABLE SEGMENT INFORMATION
The Company has determined that it has two operating segments -- Industrial and Consumer -- based on the nature of business activities, products and services; the structure of management; and the structure of information as presented to the Board of Directors. Within each segment, individual operating companies or groups of companies generally address common markets, utilize similar technologies, and can share manufacturing or distribution capabilities. The Company evaluates the profit performance of its two operating segments based on earnings before interest and taxes since interest expense is essentially related to corporate acquisitions, as opposed to segment operations. In addition to the two operating segments, there are certain business activities, referred to as corporate/other, that do not constitute an operating segment, including corporate headquarters and related administrative expenses, results of our captive insurance company, gains or losses on the sales of certain assets and other expenses not directly associated with either operating segment. Related assets consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters property and equipment. Comparative six month and second quarter results on this basis are as follows:
SIX MONTHS ENDED NOVEMBER 30, QUARTER ENDED NOVEMBER 30,
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(In thousands) 2002 2001 2002 2001
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Net External Sales
Industrial Segment $ 578,562 $ 559,882 $ 286,317 $ 270,714
Consumer Segment 481,819 461,273 231,651 217,166
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TOTAL $ 1,060,381 $ 1,021,155 $ 517,968 $ 487,880
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Earnings Before Interest and Taxes (EBIT)(a)
Industrial Segment $ 79,580 $ 69,937 $ 34,543 $ 27,759
Consumer Segment 68,439 58,519 28,890 24,539
Corporate/Other (20,273) (11,509) (10,784) (4,406)
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TOTAL $ 127,746 $ 116,947 $ 52,649 $ 47,892
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NOVEMBER 30, 2002 MAY 31, 2002
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Identifiable Assets
Industrial Segment $ 985,229 $ 962,742
Consumer Segment 994,590 1,000,928
Corporate/Other 39,534 72,733
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TOTAL $ 2,019,353 $ 2,036,403
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(a) EBIT is defined as earnings before interest and taxes. EBIT is presented because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare companies on the basis of operating performance. EBIT is not intended to represent cash flows for the period, nor is it presented as an alternative to operating income or as an indicator of operating performance. EBIT should not be considered in isolation, but with Generally Accepted Accounting Principles in the U.S., and it is not indicative of operating income or cash flow from operations as determined by those principles. Our method of computation may or may not be comparable to other similarly titled measures of other companies. EBIT may not be indicative of historical operating results nor is it meant to be predictive of potential future results.
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 2002
NET SALES
Fiscal 2003 consolidated net sales for the second quarter increased $30.1 million, or 6.2 percent, to $518.0 million from last year's second quarter sales of $487.9 million. Continued strong demand for consumer/do-it-yourself (DIY) products along with improved sales of industrial products and services drove the improvement in sales levels. This growth principally represents unit volume, as pricing adjustments have remained negligible. Additionally, sales from several small product line acquisitions and slightly favorable year over year foreign exchange differences had an impact on second quarter sales of less than 1 percent. Although foreign exchange differences, on a net basis, were minimal overall during the quarter, the U.S. dollar was weaker against the euro, but stronger against Latin American and Canadian currencies.
Industrial segment sales grew 5.8 percent to $286.3 million during the second quarter, compared to $270.7 million a year ago. The mix of industrial sales this year includes considerable growth in relatively newer but lower margin services areas, such as roofing maintenance. As reported over the past several quarters, a number of higher cost maintenance and replacement projects have been delayed during the last 15-21 months, creating pent-up demand for those maintenance products and services, some of which materialized in this second quarter to help generate the sales increase. Consumer net sales grew 6.7 percent to $231.7 million during the second quarter, from $217.2 million during last year's second quarter, reflecting continued solid demand for our main consumer/do-it-yourself (DIY) product lines. For the balance of fiscal 2003, we continue to anticipate modest growth in industrial volume and some challenge to the recent growth rates within our consumer segment.
GROSS PROFIT MARGIN
Consolidated gross profit increased $12.2 million this second quarter over the same period last year, while consolidated gross margin declined slightly to 45.2 percent of sales from 45.5 percent a year ago. Higher sales volume along with a number of favorable raw material costs were the primary factors contributing to the gross profit growth. By segment, the industrial gross profit margin fell to 45.5 percent from 46.4 percent a year ago, as the benefits from improved sales levels and a number of lower raw material costs were more than offset by the lower-margin sales mix referred to above. The consumer segment gross margin improved to 44.9 percent from 44.4 percent last year, reflecting positive cost leverage from the higher sales volume and a number of favorable raw material costs. Additionally, manufacturing efficiencies from expanded Class A manufacturing initiatives are being realized in both operating segments, and these efforts will continue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)
Consolidated SG&A expense as a percentage of sales improved to 35.0 percent from 35.7 percent during the second quarter last year, which is largely attributable to the significant sales growth in the relatively newer but lower margin services areas referred to above. By segment, industrial SG&A of 33.4 percent compares favorably against 36.1 percent from the prior year, an improvement of 2.7 percent of sales. After removing the impact of services sales and expenses related to roofing maintenance, industrial SG&A would be 35.4 percent of sales this year against 37.2 percent last year, a 1.8 percent of sales improvement. This improvement reflects the benefits of higher sales volume this year, cost savings initiatives made during fiscal 2002, and continued cost-containment efforts throughout the segment in the current fiscal year. Consumer segment SG&A of 32.4 percent this year also compares favorably against 33.1 percent a year ago, as a result of higher sales volume and continued cost-containment efforts throughout this segment.
Corporate/Other costs, another component of SG&A expense, amounted to $10.8 million this year compared with $4.4 million during the second quarter of last year. This change includes increased product liability costs of $1.7 million and a change in export sales incentive tax legislation that went into effect this fiscal year, causing another $1.2 million of the increase in corporate/other costs. Consolidated SG&A is not affected by this tax law change, however, since this increase in corporate/other expense is offset by corresponding reductions of expense in the industrial and consumer operating segments. This approximate difference will continue each quarter through this fiscal year, as a result of the change in tax legislation. The remainder of the increase in corporate SG&A expense resulted from costs related to the company's reincorporation into Delaware from Ohio ($1.1 million), rising health care and other employee benefit costs, and increases in certain professional service costs. License fee and joint venture income of $0.3 million and $0.6 million during the second quarters of fiscal 2003 and 2002, respectively, are reflected as credits to consolidated SG&A expenses.
EARNINGS BEFORE INTEREST AND TAXES (EBIT)
We believe that EBIT best reflects the performance of our operating segments, as interest expense and income taxes are not consistently allocated to operating segments by the various constituencies utilizing our financial statements. Requests for operating performance measures received from research analysts, financial institutions and rating agencies typically focus on EBIT, and we believe EBIT disclosure is responsive to investors.
EBIT improved in both operating segments, increasing $4.8 million, or 9.9 percent, to $52.6 million during the second quarter of fiscal 2003. Industrial EBIT improved 24.4 percent on a 5.8 percent growth in sales, to $34.5 million, or 12.1 percent of sales, compared to the prior year second quarter EBIT of $27.8 million, or 10.3 percent of sales. Consumer EBIT improved 17.7 percent on a 6.7 percent growth in sales, to $28.9 million, or 12.5 percent of sales, from
$24.5 million, or 11.3 percent of sales a year ago. Generally, these EBIT improvements reflect the combination of the benefits from higher sales levels, certain lower raw material costs and continued cost-containment efforts throughout both operating segments. Offsetting the EBIT improvements achieved at both operating segments were the additional corporate/other SG&A expenses discussed above.
NET INTEREST EXPENSE
Net interest expense was $4.4 million lower than a year ago as a result of a combination of lower interest rates on the variable debt portion of total debt, and much lower debt levels year over year. Approximately 70 percent of the current debt structure is subject to variable interest rates. The average effective interest rate during this second quarter was 4.1 percent compared with 4.9 percent a year ago, contributing approximately $1.4 million of the interest savings, and debt levels averaged $234.9 million lower this year than during last year's second quarter, accounting for the remaining $3.0 million of interest savings this quarter.
INCOME TAX RATE
The effective income tax rate this year of 35.1 percent compares with 33.0 percent a year ago. A slight downward adjustment had been made to the reported tax rate during last year's second quarter, in order to bring last year's reported tax rate through six months to 34 percent, the then-expected full year fiscal 2002 effective tax rate as determined at that time. The effective income tax rate will tend to increase as our earnings grow and the one-time static benefit from the June 1, 2001 adoption of Statement of Financial Accounting Standards No. 142, related to the elimination of non-tax deductible goodwill amortization, becomes less and less significant.
NET INCOME
This year's second quarter net income of $29.6 million and earnings per share of common stock of $0.26 increased 21.0 percent and 8.3 percent, respectively, from last year's second quarter results.
During March 2002, RPM sold 11.5 million common shares (see Financing Activities below) through a follow-on public equity offering, and this transaction had a dilutive effect of approximately $.02 per share on this year's second quarter earnings.
SIX MONTHS ENDED NOVEMBER 30, 2002
NET SALES
Consolidated net sales for the first six months of fiscal 2003 of $1,060.4 million increased $39.2 million, or 3.8 percent, from last year's sales of $1,021.2 million during the same period. This growth is essentially the result of higher unit volume as pricing adjustments have been
negligible. Sales from several small product line acquisitions during the first six months, along with slightly favorable year over year foreign exchange differences, also had a minor impact on sales this first half. Although foreign exchange differences, on a net basis, were minimal overall during the past six months, the U.S. dollar was weaker against the euro, but stronger against Latin American and Canadian currencies.
Industrial segment sales grew 3.3 percent to $578.6 million, from $559.9 million during the same period last year, and consumer segment sales grew 4.5 percent to $481.8 million during this first half, in both cases for essentially the same reasons as those given above for the second quarter. For the balance of fiscal 2003, we continue to anticipate modest growth in industrial volume and some challenge to the recent growth rates within our consumer segment.
GROSS PROFIT MARGIN
The consolidated gross profit margin improved this first six months to 46.5 percent of sales from 46.3 percent a year ago. By segment, the industrial gross margin declined to 47.0 percent from 47.4 percent a year ago, while the consumer gross margin improved to 46.0 percent from 44.9 percent last year, in both cases for essentially the same reasons as those given above for the second quarter. Additionally, manufacturing efficiencies from expanded Class A manufacturing initiatives are being realized in both operating segments, and these efforts will continue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)
After six months, consolidated SG&A expense levels as a percentage of sales have improved to 34.5 percent from 34.8 percent a year ago, with this difference largely attributable to the significant sales growth in the relatively newer but lower margin services areas referred to above (see second quarter discussion). By segment, industrial SG&A of 33.2 percent compares favorably against 34.9 percent for the prior year, an improvement of 1.7 percent of sales. After removing the impact of services sales and expenses related to roofing maintenance, industrial SG&A would be 34.6 percent of sales so far this year against 35.7 percent a year ago, a 1.1 percent of sales improvement. This improvement reflects the savings realized as a result of certain cost reduction efforts made during fiscal 2002, continued cost-containment efforts throughout the segment in the current fiscal year. Consumer SG&A of 31.8 percent of sales this year also compares favorably against 32.2 percent a year ago, as a result of higher sales volume and continued cost-containment efforts throughout this segment as well.
Also included in consolidated SG&A expense are corporate/other costs that totaled $20.3 million this first six months, compared with $11.5 million during the same period last year. Reflected in this change are increased product liability costs of $3.0 million and the change in export sales incentive tax legislation that went into effect this fiscal year, referred to above. This latter change caused $2.2 million of the increase in corporate/other costs during the first half of this year. Consolidated SG&A is not affected by this tax law change, however, since this increase in
corporate expense is offset by corresponding reductions of expense in the industrial and consumer operating segments. The remainder of the increase in corporate SG&A expense resulted from costs related to essentially the same items as outlined in the discussion regarding the second quarter. License fee and joint venture income of approximately $0.5 million and $1.0 million during the six month periods ended November 30, 2002 and 2001, respectively, are reflected as credits to consolidated SG&A expenses.
EARNINGS BEFORE INTEREST AND TAXES (EBIT)
We believe that EBIT best reflects the performance of our operating segments as interest expense and income taxes are not consistently allocated to operating segments by the various constituencies utilizing our financial statements. Requests for operating performance measures received from research analysts, financial institutions and rating agencies typically focus on EBIT, and we believe EBIT disclosure is responsive to investors.
EBIT increased $10.8 million, or 9.2 percent, to $127.7 million during the first six months of fiscal 2003, from $116.9 million during the same period last year. EBIT improved in both operating segments, with industrial EBIT improving by 13.8 percent on a 3.3 percent growth in sales, to $79.6 million, or 13.8 percent of sales, compared to the prior year six months EBIT of $69.9 million, or 12.5 percent of sales. Consumer EBIT improved by 17 percent on a 4.5 percent growth in sales, to $68.4 million, or 14.2 percent of sales, compared to the prior year six months EBIT of $58.5 million, or 12.7 percent of sales. Generally, these EBIT improvements reflect the combination of benefits from the higher sales levels, certain lower raw material costs and continued cost-containment efforts throughout both operating segments. Offsetting the EBIT improvements achieved at both operating segments were the additional corporate/other SG&A expenses previously discussed.
NET INTEREST EXPENSE
Net interest expense was $10.2 million lower than a year ago as a result of a combination of lower interest rates on the variable portion of total debt, and much lower debt levels year over year. Approximately 70 percent of the current debt structure is subject to variable interest rates. The average effective interest rate during this first half was 4.0 percent compared with 5.1 percent a year ago, accounting for approximately $3.9 million of the interest savings these first six months. Additionally, debt levels averaged $239.9 million lower this year than during last year's first half, accounting for the remaining $6.3 million of the interest savings this year.
INCOME TAX RATE
The effective income tax rate provision this year of 35.0 percent compares with 34.0 percent a year ago. The effective income tax rate will tend to increase as our earnings grow and the one-time static benefit from the June 1, 2001 adoption of Statement of Financial Accounting
Standards No. 142, related to the elimination of non-tax deductible goodwill amortization, becomes less and less significant.
NET INCOME
Net income of $73.8 million for the first six months this year and earnings per share of common stock of $0.64 increased 20.9 percent and 6.7 percent, respectively, from the same period a year ago.
During March 2002, we sold 11.5 million common shares (see Financing Activities below) through a follow-on public equity offering, and this transaction had a dilutive effect of $.05 per share on this year's first six months' earnings. For all of fiscal 2003, this transaction is expected to have a dilutive effect on earnings of approximately $.07 per share, based on fiscal 2002 average interest rates.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM:
OPERATING ACTIVITIES
There was $90.5 million of cash generated from operations during the first six months of fiscal 2003 compared with $94.2 million during the same period a year ago. This difference mainly resides in the $20.5 million negative change in working capital year over year, less the $12.8 million positive change in net income during the same period. Payment terms were changed effective June 1, 2002 by a major customer of one of our consumer companies, which has negatively affected accounts receivable and cash this year by approximately $8 million. In addition, at May 31, 2001, as we completed our restructuring program, there was an inefficient build-up in accounts receivable and inventory, which was being worked down during the first six months a year ago, generating an abnormally higher amount of cash flow from operations. This year, we are back to a more normal relationship pattern in working capital relative to sales growth. Furthermore, there was a higher payout of accrued incentives during the past six months, as the fiscal year 2002 performance significantly surpassed that of the year ended May 31, 2001.
Cash provided from operations remains our primary source of financing internal growth, with limited use of short-term credit.
INVESTING ACTIVITIES
Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth through improved production and distribution efficiencies and capacity and to enhance administration. Capital expenditures during the first six months of fiscal 2003 of
$13.7 million compare with depreciation of $22.0 million, well within the maintenance level of spending. We are not capital intensive and capital expenditures generally do not exceed depreciation in a given year. Capital spending is expected to hold at approximately the maintenance level of between $40 and $50 million per year for the next several years, as many larger spending needs have been accomplished in recent years, such as to accommodate the restructuring program and to upgrade several major information technology platforms. We believe there is adequate production capacity to meet our needs for the next several years at normal growth rates.
During the first six months of fiscal 2003, there were investments totaling $9.4 million for several minor product line and minority interest acquisitions.
FINANCING ACTIVITIES
During the first quarter of fiscal 2002, our $200 million revolving credit facility was refinanced with a one-year term loan due July 12, 2002. During March 2002, we sold 11.5 million common shares through a follow-on public offering at $14.25 per share, closing on April 2, 2002. The entire proceeds of the offering, $156 million, were used to permanently pay down the outstanding balance under this $200 million term loan facility, which was then retired.
On November 27, 2001, we issued and sold $30 million aggregate principal amount of 7.3 percent senior unsecured notes due 2008, $10 million aggregate principal amount of 6.61 percent senior unsecured notes due 2006, and $15 million aggregate principal amount of 6.12 percent senior unsecured notes due 2004 to various insurance companies. The proceeds from these notes were used to reduce the outstanding balance under the $500 million revolving credit agreement.
On June 6, 2002, we entered into a securitization transaction with several banks for certain of our subsidiaries, providing for a wholly-owned special purpose entity (SPE) to receive investments of up to $125 million. This securitization is being accomplished by having certain subsidiaries sell various of their accounts receivable to the SPE, and by having the SPE then transfer those receivables to a conduit administered by the banks. This securitization transaction did not constitute a form of off-balance sheet financing, and is fully reflected in our financial statements. This transaction increases our liquidity and reduces our financing costs by replacing up to $125 million of existing borrowings at lower interest rates. As of November 30, 2002, $89 million was securitized under this agreement, which was used to reduce the outstanding balance of the $500 million revolver to $290 million, leaving $210 million of liquidity then available under that facility.
Our debt-to-capital ratio improved to 43 percent at November 30, 2002 compared with 45 percent at year-end May 31, 2002.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
The following summarizes our financial obligations and their expected maturities at November 30, 2002 and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.
Less than After
Total 1 year 1-3 years 3 years
----- --------- --------- -------
($ in millions)
Current portion of long-term debt $ 4.4 $ 4.4 $ - $ -
Long-term debt 687.2 - 547.0 140.2
Non-cancelable operating lease obligations(1) 62.2 16.4 19.3 26.5
------- ------ ------- -------
$ 753.8 $ 20.8 $ 566.3 $ 166.7
======= ====== ======= =======
|
(1) We calculate non-cancelable operating lease obligations on an annual basis and consequently such information is not available at November 30, 2002. Therefore, the amounts shown above are for the fiscal year end May 31, 2002.
The strength of the U.S. dollar has fluctuated among various foreign currencies, as mentioned above, with the net effect causing foreign net assets to slightly increase shareholder's equity compared to this past year end, May 31, 2002. This trend could continue if the dollar continues to weaken against, principally, the Canadian dollar or the euro.
We maintain excellent relations with our banks and other financial institutions to provide continual access to financing for future growth opportunities.
STOCKHOLDERS' EQUITY
Effective October 15, 2002, the Company changed its legal place of incorporation from Ohio to Delaware, following approval by its shareholders of a plan of reincorporation at its annual meeting on October 11, 2002. Under the plan, RPM International Inc. became the parent holding company of Ohio-based RPM, Inc. and several other intermediate holding companies and wholly-owned subsidiaries. In addition to the creation of a newly formed Delaware legal entity, the legal structure of various operating companies were realigned in consistency with their respective business objectives. In connection with the reincorporation, shareholders approved and adopted the Company's amended and restated certificate of incorporation, which authorizes the issuance of up to 300,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock, both at a par value of $0.01 per share. In conjunction with reincorporation, all of the outstanding treasury shares of RPM, Inc. were cancelled and retired without any consideration. In addition, each common share of RPM, Inc. issued and outstanding on October 15, 2002 was converted into one share of the Company, with a $0.01 par value per share. This transaction did not have any effect on the book value per share, post-reincorporation.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
OFF-BALANCE SHEET FINANCINGS
We do not have any off-balance sheet financings. We have no subsidiaries that
are not included in our financial statements, nor do we have any interests in or
relationships with any special purpose entities that are not reflected in our
financial statements.
OTHER MATTERS
ENVIRONMENTAL MATTERS
Environmental obligations continue to be appropriately addressed and, based upon the latest available information, it is not anticipated that the outcome of such matters will materially affect the Company's results of operations or financial condition. Our critical accounting policies and estimates set forth above describe our method of establishing and adjusting environmental-related accruals and should be read in conjunction with this disclosure. (Additionally refer to Note H to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended May 31, 2002).
FORWARD-LOOKING STATEMENTS
The foregoing discussion includes forward-looking statements relating to the
business of the Company. These forward-looking statements, or other statements
made by the Company, are made based on management's expectations and beliefs
concerning future events impacting the Company and are subject to uncertainties
and factors (including those specified below) which are difficult to predict
and, in many instances, are beyond the control of the Company. As a result,
actual results of the Company could differ materially from those expressed in or
implied by any such forward-looking statements. These uncertainties and factors
include (a) general economic conditions; (b) the price and supply of raw
materials, particularly titanium dioxide, certain resins, aerosols and solvents;
(c) continued growth in demand for the Company's products; (d) legal,
environmental and litigation risks inherent in the Company's construction and
chemicals businesses and risks related to the adequacy of insurance and reserves
for such matters; (e) the effect of changes in interest rates; (f) the effect of
fluctuations in currency exchange rates upon the Company's foreign operations;
(g) the effect of non-currency risks of investing in and conducting operations
in foreign countries, including those relating to domestic and international
political, social, economic and regulatory factors; (h) risks and uncertainties
associated with the Company's ongoing acquisition and divestiture activities;
and other risks detailed in the Company's other reports and statements filed
with the Securities and Exchange Commission, including the risk factors set
forth in the Company's prospectus and prospectus supplement included as part of
the Company's Registration Statement on Form S-3 (File No. 333-77028), as the
same may be amended from time to time.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 2002
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates and foreign exchange rates since it funds its operations through long- and short-term borrowings and denominates its business transactions in a variety of foreign currencies. There were no material changes in the Company's exposure to market risk from May 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
RPM INTERNATIONAL INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
EIFS LITIGATION
As previously reported, Dryvit is a defendant or co-defendant in numerous exterior insulated finish systems ("EIFS") related lawsuits. As of November 30, 2002, Dryvit was a defendant or co-defendant in approximately 629 single family residential EIFS cases, the vast majority of which are pending in North Carolina, South Carolina and Alabama. Dryvit is also defending EIFS lawsuits involving commercial structures and condominiums. The vast majority of Dryvit's EIFS lawsuits seek monetary relief for water intrusion related property damages, although some claims in certain lawsuits allege personal injuries from exposure to mold.
As previously reported, Dryvit settled the North Carolina class action styled Ruff, et al. v. Parex, Inc., et al. ("Ruff"). As of November 30, 2002, a cumulative total of 656 claims had been submitted to the Ruff claims administrator for verification and validation since the January 17, 2000 notice to the Ruff class. Of these 656 claims, 137 claims were rejected and 321 claims were paid in the amount of approximately $5.2 million pursuant to funding arrangements with Dryvit's insurers. The remaining claims are at various stages of investigation, review and validation by the Ruff claims administrator.
As previously reported, Dryvit is a defendant in an attempted state class action filed on November 14, 2000 in Jefferson County, Tennessee styled Bobby R. Posey, et al. v. Dryvit Systems, Inc. (formerly styled William J. Humphrey, et al. v. Dryvit Systems, Inc.) (Case No. 17,715-IV) ("Posey"). As previously reported, a preliminary approval order was entered on April 8, 2002 in the Posey case for a proposed nationwide class action settlement covering "All Persons who, as of June 5, 2002, in any State other than North Carolina, in whole or in part, with Dryvit EIFS installed after January 1, 1989, except persons who (1) prior to June 5, 2002, have settled with Dryvit, providing a release of claims relating to Dryvit EIFS; or (2) have not obtained a judgment against Settling Defendant for a Dryvit EIFS claim, or had a judgment entered against them on such a claim in Settling Defendants' favor; and (3) any employees of Dryvit." Nationwide notice to all eligible class members began on or about June 13, 2002. Any person who wished to be excluded from the Posey settlement were provided an opportunity to individually "opt out" and thus not be bound by the final Posey order.
A fairness hearing was held on October 1, 2002, for the court to determine whether the proposed settlement is fair, reasonable and adequate. A continuation of the fairness hearing was held on December 16, 2002 to address various modifications and clarifications to the proposed settlement. The modifications and clarifications are currently under review by the Posey court with a final decision expected during the third quarter of fiscal 2003. If the court grants final approval of the settlement and there are no appeals, all other pending attempted state EIFS class actions will be dismissed.
Certain of Dryvit's insurers have paid or are currently paying a portion of Dryvit's defense costs in the class actions, and individual commercial and residential EIFS lawsuits. Dryvit, the Company's wholly-owned captive insurer First Colonial Insurance Company and certain of Dryvit's umbrella insurers have been parties to cost-sharing agreements the terms of which have
RPM INTERNATIONAL INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
been subject to periodic renegotiation. Under these cost-sharing agreements, Dryvit's insurers have covered a substantial portion of Dryvit's indemnity and defense costs and Dryvit expects that its future EIFS litigation costs will continue to be substantially covered by insurance. Dryvit is currently in discussions with its insurers to secure funding for the Posey settlement and expects to secure sufficient funding commitments to cover a substantial portion of the costs of the Posey settlement. Based on consultation with its legal counsel, management believes that to the extent some of the Posey settlement costs are not covered by insurance commitments, such amounts will not have a material adverse effect on the Company's consolidated financial condition, results of operations or cash flows.
ASBESTOS LITIGATION
As previously reported, the Company and certain of its wholly-owned subsidiaries, principally Bondex International, Inc. (collectively referred to as "the Company"), are defendants in various asbestos-related bodily injury lawsuits. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposures to asbestos-containing products previously manufactured by the Company.
The Company continues to vigorously defend its asbestos-related lawsuits. In many cases, the plaintiffs are unable to demonstrate that any injuries they have incurred, in fact, resulted from exposure to one of the Company's products. In such cases, the Company is generally dismissed without payment. With respect to those cases where compensable disease, exposure and causation are established with respect to one of the Company's products, the Company generally settles for amounts that reflect the confirmed disease, the seriousness of the case, the particular jurisdiction and the number and solvency of other parties in the case.
The Company's third party insurers have historically been responsible, under various cost sharing agreements, for the payment of approximately 90% of the indemnity and defense costs associated with the Company's asbestos litigation. The Company expects that its insurers will cover a substantial portion of the costs associated with its asbestos litigation into the 2004 fiscal year. For the costs through the end of the current fiscal year associated with the portion of its known claims which are not covered by insurance, the Company has established a financial reserve in an amount which it deems to be adequate.
As of November 30, 2002, the Company had a total of 1,490 active asbestos cases compared to 1,656 cases as of November 30, 2001. For the quarter ended November 30, 2002, the Company secured dismissals and/or settlements of 1,090 plaintiffs (1,086 cases), the total cost of which collectively to the Company, net of insurer payments and excluding defense costs, amounted to $1,342,250, which compared to dismissals and/or settlements of 195 plaintiffs (15 cases) and $348,000 for the same quarter ended November 30, 2001. The Company has experienced increased costs in recent quarters from higher settlement demands in certain jurisdictions due primarily to the insolvency of other co-defendants in the asbestos litigation. The Company expects these costs to continue at least at the current level or possibly increase in future periods.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
At the present time, management does not believe that the Company's current asbestos cases will have a material adverse effect on the Company's consolidated financial condition or results of operations. However, the potential costs associated with its asbestos litigation is subject to many uncertainties, including (i) the ultimate number of claims filed against the Company, (ii) the cost of resolving current and future claims, (iii) the amount of insurance available to cover such claims, (iv) future earnings and cash flow of the Company, (v) the impact of bankruptcies of other companies whose share of liability may be imposed on the Company under certain state liability laws, (vi) the unpredictable aspects of the litigation process, and (vii) potential legislative changes. Accordingly, management cannot be certain that the future costs of the Company's asbestos litigation will not have a material adverse effect on the Company's future business, consolidated financial condition, results of operations, or cash flows.
ENVIRONMENTAL PROCEEDINGS
As previously reported, various of the Company's subsidiaries are, from time to time, identified as a "potentially responsible party" under the Comprehensive Environmental Response, Compensation and Liability Act and similar state environmental statutes. In some cases, the Company's subsidiaries are participating in the cost of certain clean-up efforts or other remedial actions. The Company's share of such costs, however, has not been material and management believes that these environmental proceedings will not have a material adverse effect on the Company's consolidated financial condition or results of operations. See "Business-Environmental Matters," in the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
The Annual Meeting of Shareholders of RPM, Inc. was held on October 11, 2002. The following matters were voted on at the meeting.
1. Election of Dr. Max D. Amstutz, E. Bradley Jones, Albert B. Ratner and Dr. Jerry Sue Thornton as Directors of the Company. The nominees were elected as Directors with the following votes:
DR. MAX D. AMSTUTZ
For 97,844,406
Withheld 5,244,634
Broker non-votes -0-
|
E. BRADLEY JONES
For 97,771,044
Withheld 5,317,996
Broker non-votes -0-
|
RPM INTERNATIONAL INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ALBERT B. RATNER
For 99,247,451
Withheld 3,841,590
Broker non-votes -0-
|
DR. JERRY SUE THORNTON
For 99,186,079
Withheld 3,902,961
Broker non-votes -0-
|
In addition to the Directors above, the following Directors' terms of office
continued after the Annual Meeting of Shareholders: Edward B. Brandon, William
A. Papenbrock, Frank C. Sullivan, Thomas C. Sullivan, Bruce A. Carbonari, James
A. Karman, Donald K. Miller and Joseph P. Viviano.
2. The proposal to approve the reincorporation of the Company as a Delaware corporation pursuant to an agreement and plan of merger was approved with the following votes:
For 85,112,380 Against 4,732,488 Abstain 621,420 Broker non-votes 12,622,753 |
3. The proposal to approve an increase in the authorized shares of common stock from 200,000,000 to 300,000,000 and to add a class of serial preferred stock in the amount of 50,000,000 shares was approved with the following votes:
For 71,002,708 Against 18,385,259 Abstain 1,078,320 Broker non-votes 12,622,753 |
4. The proposal to approve the 2002 Performance Accelerated Restricted Stock Plan was approved with the following votes:
For 92,107,859 Against 9,536,205 Abstain 1,444,976 Broker non-votes -0- |
For information on how the votes for the above matters were tabulated, see the Company's definitive Proxy Statement used in connection with the Annual Meeting of Shareholders on October 11, 2002.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
(a) Exhibits
Exhibit Number Exhibit Description
-------------- -------------------
2.1 Agreement and Plan of Merger, dated as of August 29,
2002, by and among RPM, Inc., the Company and RPM
Merger Company, which is incorporated herein by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K, as filed with the Commission on
October 15, 2002.
3.1 Amended and Restated Certificate of Incorporation of
the Company, which is incorporated herein by
reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Registration No.
333-101501), as filed with the Commission on November
27, 2002.
3.2 Amended and Restated By-Laws of the Company, which
are incorporated herein by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-8
(Registration No. 333-101501), as filed with the
Commission on November 27, 2002.
3.3 Specimen Certificate of Common Stock, par value $0.01
per share, of the Company, which is incorporated
herein by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Registration No.
333-101501), as filed with the Commission on November
27, 2002.
3.4 Second Amendment to Rights Agreement, dated as of
October 15, 2002, among RPM, Inc., National City Bank
(as successor rights agent to Computershare Investor
Services, formerly Harris Trust and Savings Bank) and
the Company, which is incorporated herein by
reference to Exhibit 4.4.2 to the Company's
Registration Statement on Form S-8 (Registration No.
333-101501), as filed with the Commission on November
27, 2002.
*10.1 Letter of Amendment to Employment Agreement and
Consulting Letter Agreement, dated as of October 14,
2002, by and between RPM, Inc., the Company and
Thomas C. Sullivan. (x)
*10.2 Letter of Amendment to Employment Agreement and
Consulting Letter Agreement, dated as of October 14,
2002, by and between RPM, Inc., the Company and James
A. Karman. (x)
*10.3 Form of Letter of Amendment to Employment Agreements
entered into by and between RPM, Inc., the Company
and each of P. Kelly Tompkins, Senior Vice President,
General Counsel and Secretary, Ronald A. Rice, Senior
Vice President - Administration and Assistant
Secretary, Glenn R. Hasman, Vice President - Finance
and Communications, Stephen J. Knoop, Vice President
- Corporate Development, Robert L. Matejka, Chief
Financial Officer and Vice President - Controller and
Keith R. Smiley, Vice President, Treasurer and
Assistant Secretary. (x)
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*10.4 Amended and Restated Employment Agreement between the
Company and Frank C. Sullivan - Chief Executive
Officer and President. (x)
*10.5 Amendment No. 3 to RPM International Inc. 1989 Stock
Option Plan, as amended, which is incorporated by
reference to Exhibit 4.5.1 to the Company's
Registration Statement on Form S-8 (Registration No.
033-32794), as filed with the Commission on November
27, 2002.
*10.6 Amendment No. 3 to RPM International Inc. 1996 Stock
Option Plan, which is incorporated herein by
reference to Exhibit 4.5.3 to the Company's
Registration Statement on Form S-8 (Registration No.
333-60104), as filed with the Commission on November
27, 2002.
*10.6.1 Form of Stock Option Agreement to be used in
connection with the RPM International Inc. 1996 Stock
Option Plan, as amended. (x)
*10.7 Amendment No. 2 to RPM International Inc. 401(k)
Trust and Plan, as amended (f/k/a the RPM, Inc. 401
(k) Trust and Plan), which is incorporated herein by
reference to Exhibit 4.5.2 to the Company's
Registration Statement on Form S-8 (Registration No.
333-101501), as filed with the Commission on November
27, 2002.
*10.8 Amendment No. 2 to RPM International Inc. Union 401
(k) Retirement Savings Trust and Plan, as amended
(f/k/a the RPM, Inc. Union 401(k) Retirement Savings
Trust and Plan), which is incorporated herein by
reference to Exhibit 4.6.2 to the Company's
Registration Statement on Form S-8 (Registration No.
333-101501), as filed with the Commission on November
27, 2002.
*10.9 Amendment No. 2 to the RPM International Inc. Benefit
Restoration Plan (f/k/a the RPM, Inc. Benefit
Restoration Plan). (x)
*10.10 Amendment No. 1 to RPM International Inc. Deferred
Compensation Plan
|
(f/k/a the RPM, Inc. Deferred Compensation
Plan), which is incorporated herein by reference
to Exhibit 4.5.1 to the Company's Registration
Statement on Form S-8 (Registration No.
333-101512), as filed with the Commission on
November 27, 2002.
*10.11 Amendment No. 1 to the RPM International Inc.
Incentive Compensation Plan (f/k/a the RPM, Inc.
Incentive Compensation Plan). (x)
*10.12 1997 RPM International Inc. Restricted Stock Plan
(f/k/a the 1997 RPM, Inc. Restricted Stock Option
Plan), and Form of Acceptance and Escrow Agreement
to be used in connection therewith. (x)
*10.12.1 Third Amendment to 1997 RPM International Inc.
Restricted Stock Plan. (x)
*10.13 2002 RPM International Inc. Performance Accelerated
Restricted Stock Plan (f/k/a the 2002 RPM, Inc.
Performance Accelerated Restricted Stock Plan). (x)
*10.14 Form of Indemnification Agreement entered into by and
between the Company and each of its Directors and
Executive Officers. (x)
10.15 Assignment, Assumption and Release Agreement, related
to the Five-Year Credit Agreement, dated as of
October 15, 2002, between RPM Inc, the Company, the
Lenders party thereto and Chase Manhattan Bank, as
Administrative Agent. (x)
10.16 Omnibus Amendment No. 1 to the Receivables Sale
Agreement and the Receivables Purchase Agreement, by
and among RPM, Inc., the Company, certain
subsidiaries of the Company, RPM Funding Corporation
and Bank One, dated as of October 15, 2002. (x)
10.16.1 Performance Undertaking by the Company related to the
Receivables Sale Agreement and Receivables Purchase
Agreement, dated as of October 15, 2002. (x)
11.1 Computation of Net Income per share of Common Stock. (x)
|
(x) Filed herewith.
(b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K during the three month period ended November 30, 2002:
Current Report on Form 8-K dated October 15, 2002, announcing the completion of the Company's reincorporation from Ohio to Delaware.
SIGNATURES
PURSUANT TO THE REQUIREMENTS 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.
RPM INTERNATIONAL INC.
BY /s/ Frank C. Sullivan
-----------------------------------------
FRANK C. SULLIVAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY /s/ Robert L. Matejka
-----------------------------------------
ROBERT L. MATEJKA
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CONTROLLER
DATED: JANUARY 13, 2003
|
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Frank C. Sullivan, President and Chief Executive Officer of RPM International Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of RPM International Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ Frank C. Sullivan Frank C. Sullivan President and Chief Executive Officer January 13, 2003 |
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Robert L. Matejka, Vice President, Chief Financial Officer and Controller of RPM International Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of RPM International Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ Robert L. Matejka Robert L. Matejka Vice President, Chief Financial Officer and Controller January 13, 2003 |
EXHIBIT 10.1
RPM, INC.
2628 PEARL ROAD, P.O. BOX 777
MEDINA, OHIO 44258
October 14, 2002
Mr. Thomas C. Sullivan
RPM, Inc.
P.O. Box 777
Medina, Ohio 44258
RE: AMENDMENT TO EMPLOYMENT AGREEMENT AND CONSULTING
AGREEMENT AND ASSUMPTION BY RPM INTERNATIONAL INC., A
DELAWARE CORPORATION ("NEW PARENT")
Dear Tom:
The purpose of this letter (the "Amendment") is to amend your existing Amended and Restated Employment Agreement, dated as of February 1, 2001 (the "Employment Agreement"), with RPM, Inc., an Ohio corporation (the "Company"), and your existing letter agreement, dated as of April 12, 2002, with the Company relating to succession and post-retirement consulting (the "Consulting Agreement"), and to provide for the assumption of the Employment Agreement and Consulting Agreement by New Parent.
BACKGROUND. As you know, the Company will be reincorporating in Delaware pursuant to an Agreement and Plan of Merger, dated as of August 29, 2002, among the Company, New Parent and RPM Merger Company, an Ohio corporation (the "Merger Subsidiary"), pursuant to which, effective as of 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (i) the Merger Subsidiary will merge with and into the Company, (ii) each common share, without par value, of the Company issued and outstanding immediately prior to the Effective Time will be converted into one share of Common Stock, par value $.01 per share, of New Parent, and (iii) New Parent will become the ultimate parent company of the Company and of all of the Company's direct and indirect subsidiaries existing as of immediately prior to the Effective Time (the "Reincorporation"). As part of such Reincorporation, the Company will be assigning, and New Parent will be assuming, certain contracts, rights, obligations and responsibilities of the Company existing immediately prior to the Effective Time, including the Employment Agreement and Consulting Agreement, as amended by this Amendment.
In addition, immediately following the Effective Time, the Company and New Parent will enter into a Reorganization Agreement, pursuant to which the Company will
transfer the stock ownership of certain of its subsidiary operating companies to New Parent and New Parent, in turn, will transfer the stock ownership of certain of these operating companies to intermediate holding companies that are subsidiaries of New Parent, and will retain the stock ownership of certain other of these operating companies.
AMENDMENTS AND CHANGES TO EMPLOYMENT AGREEMENT. The following amendments and changes are hereby made to the Employment Agreement, each of which shall become effective as of the date hereof:
(1) Successors; Novation. Section 8 of the Employment Agreement is hereby amended by adding the following at the end thereof:
"As used in this Agreement (including Schedule A attached hereto), from and after 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (a) the term "Company" shall be deemed to mean RPM International Inc., a Delaware corporation ("New Parent"), and shall no longer mean RPM, Inc., an Ohio corporation, and (b) each reference to "RPM, Inc." (other than references to "RPM, Inc., an Ohio corporation") shall be changed to and mean "RPM International Inc." Executive, RPM, Inc., an Ohio corporation, and New Parent expressly agree that from and after the Effective Time, (x) New Parent shall be substituted as the "Company" under this Agreement and shall be entitled to all rights and interests of the Company under this Agreement as if New Parent were the original party to this Agreement, (y) New Parent shall assume and perform all the duties and obligations of the Company under this Agreement as if New Parent were the original party to this Agreement, and (z) RPM, Inc., an Ohio corporation, shall be released from all duties and obligations and have no further rights, duties or obligations under this Agreement, and the parties to this Agreement shall consist solely of Executive and New Parent, but this Agreement shall otherwise continue in full force and effect without modification as a result thereof."
(2) Definition of Change in Control. The definition of "Change in Control" in Schedule A to the Employment Agreement is hereby amended by adding the following new paragraph at the end thereof:
"Notwithstanding the foregoing definition or anything contained in this Agreement, a "Change in Control" shall not be deemed to have occurred as a result of (i) RPM, Inc., an Ohio corporation, or New Parent entering into the Merger Agreement or the Reorganization Agreement or (ii) the consummation by RPM, Inc., an Ohio corporation, or New Parent of any of the transactions contemplated by the Merger Agreement or the Reorganization Agreement. As used herein, "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of August 29, 2002, among RPM, Inc., an Ohio corporation, New Parent, and RPM Merger Company, an Ohio corporation and wholly-owned subsidiary of New
Parent, and "Reorganization Agreement" shall mean the Reorganization Agreement, dated as of October 15, 2002, by and between RPM, Inc., an Ohio corporation, and New Parent."
(3) Other Amendments.
(a) Subsection 7(b) of the Employment Agreement is hereby amended by deleting all the text in the first sentence of such Subsection from the phrase "(ii) if PricewaterhouseCoopers (or its successor) is serving" until the end of such sentence and replacing such deleted text with the following:
"(ii) if PricewaterhouseCoopers (or its successor) is serving as
accountant or auditor for the individual, entity or group effecting a
Change in Control, or cannot (because of limitations under applicable
law or otherwise) make the determinations required to be made under this
Section 7, then by another nationally recognized accounting firm
selected by Executive and reasonably acceptable to the Company (which
accounting firm shall then be the "Accounting Firm" hereunder)."
(b) The following sentence is hereby added at the end of Section 20 of the Employment Agreement:
"Notwithstanding the foregoing, this Section 20 shall not apply at any time unless a Change in Control has occurred."
(c) The definition of "Average Incentive Compensation" appearing in Schedule A to the Employment Agreement is hereby amended by deleting the phrase "salary reduction arrangement" appearing in such definition and replacing such deleted phrase with the phrase "compensation reduction arrangement".
(d) The definition of "Deferred Compensation Plan" appearing in Schedule A to the Employment Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following:
""Deferred Compensation Plan" means the RPM International Inc. Deferred Compensation Plan, as amended from time to time, in which executive officers of the Company are eligible to participate and any such successor plan or arrangement."
(e) The definition of "Earned Incentive Compensation" appearing in Schedule A to the Employment Agreement is hereby amended by adding the following immediately before the semicolon appearing at the end of paragraph (a) of such definition:
". For purposes of this paragraph (a), any Incentive Compensation deferred by Executive pursuant to any qualified or non-qualified
compensation reduction arrangement maintained by the Company, including, without limitation, the Deferred Compensation Plan, shall be deemed to have been paid on the date of deferral"
(f) The definition of "Release and Waiver of Claims" appearing in Schedule A to the Employment Agreement is hereby amended by deleting the phase "Articles of Incorporation, Code of Regulations or by statute" appearing in such definition and replacing such deleted phrase with the phrase "Certificate of Incorporation or By-laws (or comparable charter document) or by statute".
(g) The definition of "Restricted Stock Plan" appearing in Schedule A to the Employment Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following:
""Restricted Stock Plan" means the RPM International Inc. 1997 Restricted Stock Plan and any successor plan or arrangement thereto, but shall not be deemed to mean or include the RPM International Inc. 2002 Performance Accelerated Restricted Stock Plan."
AMENDMENTS AND CHANGES TO CONSULTING AGREEMENT. The following amendments and changes are hereby made to the Consulting Agreement, each of which shall become effective as of the date hereof:
(1) The Consulting Agreement is hereby amended by adding the following at the end of Clause 1) of the first paragraph of the Consulting Agreement:
"You acknowledge and agree that after you step down as CEO you will cease to be an executive officer of RPM and you will not be expected to have or perform any policy making functions for RPM after that time or at any time while serving as a consultant."
(2) The Consulting Agreement is hereby amended by adding the following new Section 3 immediately before the final paragraph of the Consulting Agreement:
"3. Successors; Novation - As used in this letter agreement, from and after 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), the terms "Company" and "RPM" will mean RPM International Inc., a Delaware corporation ("New Parent"), and will no longer mean RPM, Inc., an Ohio corporation. You, RPM, Inc. and New Parent expressly agree that from and after the Effective Time, (x) New Parent will be substituted as "RPM" and the "Company" under this agreement and will be entitled to all rights and interests of RPM and the Company under this agreement as if New Parent were the original party to this agreement, (y) New Parent will assume and perform all the duties and obligations of
RPM and the Company under this agreement as if New Parent were the original party to this agreement, and (z) RPM, Inc. will be released from all duties and obligations and have no further rights, duties or obligations under this agreement, and the parties to this agreement will consist solely of you and New Parent, but this agreement will otherwise continue in full force and effect without modification as a result thereof."
GENERAL. Except as expressly provided herein, the Employment Agreement and Consulting Agreement shall remain in full force and effect and be unaffected hereby. This Amendment constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Amendment and supersedes all prior agreements and understandings with respect to such subject matter. This Amendment shall be governed by the laws of the State of Ohio, without giving effect to the conflict of law principles of such State. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same document.
Please acknowledge your acceptance of this Amendment and the assumption of the Employment Agreement and Consulting Agreement by New Parent on the terms set forth herein by signing below.
Very truly yours,
RPM, INC., AN OHIO CORPORATION
By:/s/ P. KELLY TOMPKINS --------------------------------- P. Kelly Tompkins, Secretary |
Agreed and accepted as of this 14th day of October, 2002 by Executive.
EXECUTIVE
/s/ THOMAS C. SULLIVAN ----------------------- Thomas C. Sullivan |
New Parent agrees to all of the terms and conditions of this Amendment and agrees to assume and perform the Employment Agreement and Consulting Agreement on the terms and conditions set forth herein, all effective as of the Effective Time.
RPM INTERNATIONAL INC.
By: /s/ RONALD A. RICE
----------------------------------
Ronald A. Rice,
Senior Vice President - Administration
|
EXHIBIT 10.2
RPM, INC.
2628 PEARL ROAD, P.O. BOX 777
MEDINA, OHIO 44258
October 14, 2002
Mr. James A. Karman
RPM, Inc.
P.O. Box 777
Medina, Ohio 44258
RE: AMENDMENT TO EMPLOYMENT AGREEMENT AND CONSULTING
AGREEMENT AND ASSUMPTION BY RPM INTERNATIONAL INC., A
DELAWARE CORPORATION ("NEW PARENT")
Dear Jim:
The purpose of this letter (the "Amendment") is to amend your existing Amended and Restated Employment Agreement, dated as of February 1, 2001 (the "Employment Agreement"), with RPM, Inc., an Ohio corporation (the "Company"), and your existing letter agreement, dated as of April 12, 2002, with the Company relating to succession and post-retirement consulting (the "Consulting Agreement"), and to provide for the assumption of the Employment Agreement and Consulting Agreement by New Parent.
BACKGROUND. As you know, the Company will be reincorporating in Delaware pursuant to an Agreement and Plan of Merger, dated as of August 29, 2002, among the Company, New Parent and RPM Merger Company, an Ohio corporation (the "Merger Subsidiary"), pursuant to which, effective as of 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (i) the Merger Subsidiary will merge with and into the Company, (ii) each common share, without par value, of the Company issued and outstanding immediately prior to the Effective Time will be converted into one share of Common Stock, par value $.01 per share, of New Parent, and (iii) New Parent will become the ultimate parent company of the Company and of all of the Company's direct and indirect subsidiaries existing as of immediately prior to the Effective Time (the "Reincorporation"). As part of such Reincorporation, the Company will be assigning, and New Parent will be assuming, certain contracts, rights, obligations and responsibilities of the Company existing immediately prior to the Effective Time, including the Employment Agreement and Consulting Agreement, as amended by this Amendment.
In addition, immediately following the Effective Time, the Company and New Parent will enter into a Reorganization Agreement, pursuant to which the Company will
transfer the stock ownership of certain of its subsidiary operating companies to New Parent and New Parent, in turn, will transfer the stock ownership of certain of these operating companies to intermediate holding companies that are subsidiaries of New Parent, and will retain the stock ownership of certain other of these operating companies.
AMENDMENTS AND CHANGES TO EMPLOYMENT AGREEMENT. The following amendments and changes are hereby made to the Employment Agreement, each of which shall become effective as of the date hereof:
(1) Successors; Novation. Section 8 of the Employment Agreement is hereby amended by adding the following at the end thereof:
"As used in this Agreement (including Schedule A attached hereto), from and after 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (a) the term "Company" shall be deemed to mean RPM International Inc., a Delaware corporation ("New Parent"), and shall no longer mean RPM, Inc., an Ohio corporation, and (b) each reference to "RPM, Inc." (other than references to "RPM, Inc., an Ohio corporation") shall be changed to and mean "RPM International Inc." Executive, RPM, Inc., an Ohio corporation, and New Parent expressly agree that from and after the Effective Time, (x) New Parent shall be substituted as the "Company" under this Agreement and shall be entitled to all rights and interests of the Company under this Agreement as if New Parent were the original party to this Agreement, (y) New Parent shall assume and perform all the duties and obligations of the Company under this Agreement as if New Parent were the original party to this Agreement, and (z) RPM, Inc., an Ohio corporation, shall be released from all duties and obligations and have no further rights, duties or obligations under this Agreement, and the parties to this Agreement shall consist solely of Executive and New Parent, but this Agreement shall otherwise continue in full force and effect without modification as a result thereof."
(2) Definition of Change in Control. The definition of "Change in Control" in Schedule A to the Employment Agreement is hereby amended by adding the following new paragraph at the end thereof:
"Notwithstanding the foregoing definition or anything contained in this Agreement, a "Change in Control" shall not be deemed to have occurred as a result of (i) RPM, Inc., an Ohio corporation, or New Parent entering into the Merger Agreement or the Reorganization Agreement or (ii) the consummation by RPM, Inc., an Ohio corporation, or New Parent of any of the transactions contemplated by the Merger Agreement or the Reorganization Agreement. As used herein, "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of August 29, 2002, among RPM, Inc., an Ohio corporation, New Parent, and RPM Merger Company, an Ohio corporation and wholly-owned subsidiary of New
Parent, and "Reorganization Agreement" shall mean the Reorganization Agreement, dated as of October 15, 2002, by and between RPM, Inc., an Ohio corporation, and New Parent."
(3) Other Amendments.
(a) Subsection 7(b) of the Employment Agreement is hereby amended by deleting all the text in the first sentence of such Subsection from the phrase "(ii) if PricewaterhouseCoopers (or its successor) is serving" until the end of such sentence and replacing such deleted text with the following:
"(ii) if PricewaterhouseCoopers (or its successor) is serving as
accountant or auditor for the individual, entity or group effecting a
Change in Control, or cannot (because of limitations under applicable
law or otherwise) make the determinations required to be made under this
Section 7, then by another nationally recognized accounting firm
selected by Executive and reasonably acceptable to the Company (which
accounting firm shall then be the "Accounting Firm" hereunder)."
(b) The following sentence is hereby added at the end of Section 20 of the Employment Agreement:
"Notwithstanding the foregoing, this Section 20 shall not apply at any time unless a Change in Control has occurred."
(c) The definition of "Average Incentive Compensation" appearing in Schedule A to the Employment Agreement is hereby amended by deleting the phrase "salary reduction arrangement" appearing in such definition and replacing such deleted phrase with the phrase "compensation reduction arrangement".
(d) The definition of "Deferred Compensation Plan" appearing in Schedule A to the Employment Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following:
""Deferred Compensation Plan" means the RPM International Inc. Deferred Compensation Plan, as amended from time to time, in which executive officers of the Company are eligible to participate and any such successor plan or arrangement."
(e) The definition of "Earned Incentive Compensation" appearing in Schedule A to the Employment Agreement is hereby amended by adding the following immediately before the semicolon appearing at the end of paragraph (a) of such definition:
". For purposes of this paragraph (a), any Incentive Compensation deferred by Executive pursuant to any qualified or non-qualified
compensation reduction arrangement maintained by the Company, including, without limitation, the Deferred Compensation Plan, shall be deemed to have been paid on the date of deferral"
(f) The definition of "Release and Waiver of Claims" appearing in Schedule A to the Employment Agreement is hereby amended by deleting the phase "Articles of Incorporation, Code of Regulations or by statute" appearing in such definition and replacing such deleted phrase with the phrase "Certificate of Incorporation or By-laws (or comparable charter document) or by statute".
(g) The definition of "Restricted Stock Plan" appearing in Schedule A to the Employment Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following:
""Restricted Stock Plan" means the RPM International Inc. 1997 Restricted Stock Plan and any successor plan or arrangement thereto, but shall not be deemed to mean or include the RPM International Inc. 2002 Performance Accelerated Restricted Stock Plan."
AMENDMENTS AND CHANGES TO CONSULTING AGREEMENT. The following amendments and changes are hereby made to the Consulting Agreement, each of which shall become effective as of the date hereof:
(1) The Consulting Agreement is hereby amended by adding the following at the end of Clause 1) of the first paragraph of the Consulting Agreement:
"You acknowledge and agree that after you step down as Vice Chairman you will cease to be an executive officer of RPM and you will not be expected to have or perform any policy making functions for RPM after that time or at any time while serving as a consultant."
(2) The Consulting Agreement is hereby amended by adding the following new Section 3 immediately before the final paragraph of the Consulting Agreement:
"3. Successors; Novation - As used in this letter agreement, from and after 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), the terms "Company" and "RPM" will mean RPM International Inc., a Delaware corporation ("New Parent"), and will no longer mean RPM, Inc., an Ohio corporation. You, RPM, Inc. and New Parent expressly agree that from and after the Effective Time, (x) New Parent will be substituted as "RPM" and the "Company" under this agreement and will be entitled to all rights and interests of RPM and the Company under this agreement as if New Parent were the original party to this agreement, (y) New Parent will assume and perform all the duties and obligations of
RPM and the Company under this agreement as if New Parent were the original party to this agreement, and (z) RPM, Inc. will be released from all duties and obligations and have no further rights, duties or obligations under this agreement, and the parties to this agreement will consist solely of you and New Parent, but this agreement will otherwise continue in full force and effect without modification as a result thereof."
GENERAL. Except as expressly provided herein, the Employment Agreement and Consulting Agreement shall remain in full force and effect and be unaffected hereby. This Amendment constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Amendment and supersedes all prior agreements and understandings with respect to such subject matter. This Amendment shall be governed by the laws of the State of Ohio, without giving effect to the conflict of law principles of such State. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same document.
Please acknowledge your acceptance of this Amendment and the assumption of the Employment Agreement and Consulting Agreement by New Parent on the terms set forth herein by signing below.
Very truly yours,
RPM, INC., AN OHIO CORPORATION
By:/s/ P. KELLY TOMPKINS ------------------------------ P. Kelly Tompkins, Secretary |
Agreed and accepted as of this 14th day of October, 2002 by Executive.
EXECUTIVE
/s/ JAMES A. KARMAN ----------------------- James A. Karman |
New Parent agrees to all of the terms and conditions of this Amendment and agrees to assume and perform the Employment Agreement and Consulting Agreement on the terms and conditions set forth herein, all effective as of the Effective Time.
RPM INTERNATIONAL INC.
By: /s/ RONALD A. RICE ------------------------------ Ronald A. Rice, Senior Vice President - Administration |
EXHIBIT 10.3
FORM
RPM, INC.
2628 PEARL ROAD, P.O. BOX 777
MEDINA, OHIO 44258
October 14, 2002
[EXECUTIVE'S NAME]
RPM, Inc.
P.O. Box 777
Medina, Ohio 44258
RE: AMENDMENT TO EMPLOYMENT AGREEMENT AND ASSUMPTION
BY RPM INTERNATIONAL INC., A DELAWARE CORPORATION
("NEW PARENT")
Dear _________________:
The purpose of this letter (the "Amendment") is to amend your existing Amended and Restated Employment Agreement, dated as of February 1, 2001 (the "Agreement"), with RPM, Inc., an Ohio corporation (the "Company"), and to provide for the assumption of the Agreement by New Parent.
BACKGROUND. As you know, the Company will be reincorporating in Delaware pursuant to an Agreement and Plan of Merger, dated as of August 29, 2002, among the Company, New Parent and RPM Merger Company, an Ohio corporation (the "Merger Subsidiary"), pursuant to which, effective as of 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (i) the Merger Subsidiary will merge with and into the Company, (ii) each common share, without par value, of the Company issued and outstanding immediately prior to the Effective Time will be converted into one share of Common Stock, par value $.01 per share, of New Parent, and (iii) New Parent will become the ultimate parent company of the Company and of all of the Company's direct and indirect subsidiaries existing as of immediately prior to the Effective Time (the "Reincorporation"). As part of such Reincorporation, the Company will be assigning, and New Parent will be assuming, certain contracts, rights, obligations and responsibilities of the Company existing immediately prior to the Effective Time, including the Agreement, as amended by this Amendment.
In addition, immediately following the Effective Time, the Company and New Parent will enter into a Reorganization Agreement, pursuant to which the Company will transfer the stock ownership of certain of its subsidiary operating companies to New Parent and New Parent, in turn, will transfer the stock ownership of certain of these operating companies to intermediate holding companies that are subsidiaries of New Parent, and will retain the stock ownership of certain other of these operating companies.
AMENDMENTS AND CHANGES. The following amendments and changes are hereby made to the Agreement, each of which shall become effective as of the date hereof:
(1) Successors; Novation. Section 8 is hereby amended by adding the following at the end thereof:
"As used in this Agreement (including Schedule A attached hereto), from and after 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (a) the term "Company" shall be deemed to mean RPM International Inc., a Delaware corporation ("New Parent"), and shall no longer mean RPM, Inc., an Ohio corporation, and (b) each reference to "RPM, Inc." (other than references to "RPM, Inc., an Ohio corporation") shall be changed to and mean "RPM International Inc." Executive, RPM, Inc., an Ohio corporation, and New Parent expressly agree that from and after the Effective Time, (x) New Parent shall be substituted as the "Company" under this Agreement and shall be entitled to all rights and interests of the Company under this Agreement as if New Parent were the original party to this Agreement, (y) New Parent shall assume and perform all the duties and obligations of the Company under this Agreement as if New Parent were the original party to this Agreement, and (z) RPM, Inc., an Ohio corporation, shall be released from all duties and obligations and have no further rights, duties or obligations under this Agreement, and the parties to this Agreement shall consist solely of Executive and New Parent, but this Agreement shall otherwise continue in full force and effect without modification as a result thereof."
(2) Definition of Change in Control. The definition of "Change in Control" in Schedule A to the Agreement is hereby amended by adding the following new paragraph at the end thereof:
"Notwithstanding the foregoing definition or anything contained in this Agreement, a "Change in Control" shall not be deemed to have occurred as a result of (i) RPM, Inc., an Ohio corporation, or New Parent entering into the Merger Agreement or the Reorganization Agreement or (ii) the consummation by RPM, Inc., an Ohio corporation, or New Parent of any of the transactions contemplated by the Merger Agreement or the Reorganization Agreement. As used herein, "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of August 29, 2002, among RPM, Inc., an Ohio corporation, New Parent, and RPM Merger Company, an Ohio corporation and wholly-owned subsidiary of New Parent, and "Reorganization Agreement" shall mean the Reorganization Agreement, dated as of October 15, 2002, by and between RPM, Inc., an Ohio corporation, and New Parent."
(3) Other Amendments.
(a) The first sentence of Section 2 is hereby deleted and the following sentence is substituted in its place:
"Executive shall serve as ___________________________________ reporting to the Chief Executive Officer of the Company (or his designee) and shall have responsibility for matters relating to the legal affairs, regulatory affairs and external communications of the Company and shall have such other titles, powers and duties as may from time to time be assigned by the Chief Executive Officer (or his designee) or the Board of Directors of the Company; provided, however, that such duties are consistent with his present duties and his position with the Company."
(b) The following sentence is hereby added at the end of Subsection 4(d):
"Executive's right to participate in any Benefit Plan shall be subject to the applicable eligibility criteria for participation and Executive shall not be entitled to any benefits under, or based on, any Benefit Plan for any purposes of this Agreement if Executive does not during the Employment Period satisfy the eligibility criteria for participation in such plan."
(c) The phrase "after consultation with the _____________________ (or their designees)" appearing in Subsection 4(e) is hereby deleted and replaced by the phrase "after consultation with Executive's direct report (or the designated vacation coordinator)".
(d) The following new Subsection 6(j) is hereby added immediately after Subsection 6(i):
"(j) PARS Plan. If Executive participates in the PARS Plan and a Change in Control occurs as determined under the PARS Plan, then Executive shall be entitled to the lapse of transfer restrictions imposed on any grant of restricted stock to Executive under the PARS Plan, all as determined under and subject to the terms of the PARS Plan."
(e) Subsection 7(b) is hereby amended by deleting all the text in the first sentence of such Subsection from the phrase "(ii) if PricewaterhouseCoopers (or its successor) is serving" until the end of such sentence and replacing such deleted text with the following:
"(ii) if PricewaterhouseCoopers (or its successor) is serving as
accountant or auditor for the individual, entity or group effecting a
Change in Control, or cannot (because of limitations under applicable
law or otherwise) make the determinations required to be made under this
Section 7, then by
another nationally recognized accounting firm selected by Executive and reasonably acceptable to the Company (which accounting firm shall then be the "Accounting Firm" hereunder)."
(f) The following sentence is hereby added at the end of Section 20:
"Notwithstanding the foregoing, this Section 20 shall not apply at any time unless a Change in Control has occurred."
(g) The definition of "Average Incentive Compensation" appearing in Schedule A is hereby amended by deleting the phrase "salary reduction arrangement" appearing in such definition and replacing such deleted phrase with the phrase "compensation reduction arrangement".
(h) The definition of "Deferred Compensation Plan" appearing in Schedule A is hereby amended by deleting such definition in its entirety and replacing it with the following:
""Deferred Compensation Plan" means the RPM International Inc. Deferred Compensation Plan, as amended from time to time, in which executive officers of the Company are eligible to participate and any such successor plan or arrangement."
(i) The definition of "Earned Incentive Compensation" appearing in Schedule A is hereby amended by adding the following immediately before the semicolon appearing at the end of paragraph (a) of such definition:
". For purposes of this paragraph (a), any Incentive Compensation deferred by Executive pursuant to any qualified or non-qualified compensation reduction arrangement maintained by the Company, including, without limitation, the Deferred Compensation Plan, shall be deemed to have been paid on the date of deferral"
(j) The following new definition is added to Schedule A immediately after the definition of "Notice of Termination for Good Reason" appearing in such schedule:
""PARS Plan" means the RPM International Inc. 2002 Performance Accelerated Restricted Stock Plan and any successor plan or arrangement thereto."
(k) The definition of "Release and Waiver of Claims" appearing in Schedule A is hereby amended by deleting the phase "Articles of Incorporation, Code of Regulations or by statute" appearing in such definition and replacing such deleted phrase with the phrase "Certificate of Incorporation or By-laws (or comparable charter document) or by statute".
(l) The definition of "Restricted Stock Plan" appearing in Schedule A is hereby amended by deleting such definition in its entirety and replacing it with the following:
""Restricted Stock Plan" means the RPM International Inc. 1997 Restricted Stock Plan and any successor plan or arrangement thereto, but shall not be deemed to mean or include the PARS Plan."
GENERAL. Except as expressly provided herein, the Agreement shall remain in full force and effect and be unaffected hereby. This Amendment constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Amendment and supersedes all prior agreements and understandings with respect to such subject matter. This Amendment shall be governed by the laws of the State of Ohio, without giving effect to the conflict of law principles of such State. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same document.
Please acknowledge your acceptance of this Amendment and the assumption of the Agreement by New Parent on the terms set forth herein by signing below.
Very truly yours,
RPM, INC., AN OHIO CORPORATION
Agreed and accepted as of this 14th day of October, 2002 by Executive.
EXECUTIVE
New Parent agrees to all of the terms and conditions of this Amendment and agrees to assume and perform the Agreement on the terms and conditions set forth herein, all effective as of the Effective Time.
RPM INTERNATIONAL INC.
EXHIBIT 10.4
EXECUTION COPY
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") is made as of the 11th day of October, 2002, between RPM, INC., an Ohio corporation (the "Company"), RPM International Inc., a Delaware corporation, and Frank C. Sullivan ("Executive").
WHEREAS, Executive previously has served as President and Chief Operating Officer of the Company; and
WHEREAS, Executive and the Company entered into the Amended and Restated Employment Agreement, dated as of February 1, 2001 (the "Existing Agreement"), to ensure Executive's continued employment with the Company; and
WHEREAS, the Board of Directors of the Company recognizes the importance of Executive's continuing contribution to the future growth and success of the Company and desires to assure the Company and its shareholders of Executive's continued employment in an executive capacity and to compensate him therefor; and
WHEREAS, Executive is desirous of committing himself to continue to serve the Company on the terms herein provided; and
WHEREAS, RPM International Inc. is a party hereto for purposes of assuming this Agreement, on the terms set forth in Section 8, in connection with the reincorporation of the Company in Delaware.
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:
1. Term of Employment. The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to continue to serve the Company, on the terms and conditions set forth herein for the period commencing as of the date hereof and expiring on May 31, 2003 (the "Employment Period"). The Employment Period shall automatically be extended on May 31 of each year for a period of one year from such date unless, not later than March 31 of such year, the Company or Executive has given notice to the other party that it or he, as the case may be, does not wish to have the Employment Period extended. In addition, in the event of a Change in Control, the Employment Period shall automatically be extended for a period of three years beginning on the date of the Change in Control and ending on the third anniversary of the date of such Change in Control (unless further extended under the immediately preceding sentence). In any case, the Employment Period may be terminated earlier under the terms and conditions set forth herein.
2. Position and Duties. Executive shall serve as President and Chief Executive Officer reporting to the Board of Directors of the Company and shall have responsibility for the general management and operation of the Company and shall have such other powers and duties as may from time to time be assigned by the Board of Directors of the Company; provided, however, that such duties are consistent with his present duties and his position with the Company. Executive
shall devote substantially all his working time and efforts to the continued success of the business and affairs of the Company.
3. Place of Employment. In connection with his employment by the Company, Executive shall not be required to relocate or move from his existing principal residence in Bay Village, Ohio, and shall not be required to perform services which would make the continuance of his principal residence in Bay Village, Ohio, unreasonably difficult or inconvenient for him. The Company shall give Executive at least six months' advance notice of any proposed relocation of its Medina, Ohio offices to a location more than 50 miles from Medina, Ohio and, if Executive in his sole discretion chooses to relocate his principal residence, the Company shall promptly pay (or reimburse him for) all reasonable relocation expenses (consistent with the Company's past practice for similarly situated senior executive officers) incurred by him relating to a change of his principal residence in connection with any such relocation of the Company's offices from Medina, Ohio.
4. Compensation.
(a) Base Salary. During the Employment Period, Executive shall receive a base salary at the rate of not less than Six Hundred Thousand Dollars ($600,000) per annum ("Base Salary"), payable in substantially equal monthly installments at the end of each month during the Employment Period hereunder. It is contemplated that annually in the first quarter of each fiscal year of the Company the Compensation Committee of the Board of Directors (the "Compensation Committee") will review Executive's Base Salary and other compensation during the Employment Period and, at the discretion of the Compensation Committee, it may increase his Base Salary and other compensation, effective as of June 1 of such fiscal year, based upon his performance, then generally prevailing industry salary scales, the Company's results of operations, and other relevant factors. Any increase in Base Salary or other compensation shall in no way limit or reduce any other obligation of the Company hereunder and, once established at an increased specified rate, Executive's Base Salary hereunder shall not be reduced without his written consent.
(b) Incentive Compensation. In addition to his Base Salary, Executive shall be entitled to receive such annual cash incentive compensation ("Incentive Compensation") during the Employment Period as the Compensation Committee may determine in its sole discretion based upon the Company's results of operation and other relevant factors. At the election of Executive, such annual Incentive Compensation may be received by Executive as soon as possible, but no later than 90 days after the close of the Company's fiscal year for which such Incentive Compensation is granted, or the payment may be deferred provided Executive gives written notice no later than May 31 of the current fiscal year to the Chairman of the Compensation Committee that he elects to defer payment, which notice shall also state the date(s) on which he desires to be paid.
(c) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by him (in accordance with Company practice) in performing services hereunder, provided that Executive properly accounts therefor in accordance with either Company policies or guidelines established by the Internal Revenue Service if such are less burdensome.
(d) Participation in Benefit Plans. During the Employment Period, Executive shall be entitled to continue to participate in or receive benefits under the Benefit Plans, subject to and on a basis consistent with the terms, conditions and overall administration of the Benefit Plans. Except with respect to any benefits related to salary reductions authorized by Executive, nothing paid or awarded to Executive under any Benefit Plan presently in effect or made available in the future shall reduce or be deemed to be in lieu of compensation to Executive pursuant to any other provision of this Section 4. Executive's right to participate in any Benefit Plan shall be subject to the applicable eligibility criteria for participation and Executive shall not be entitled to any benefits under, or based on, any Benefit Plan for any purposes of this Agreement if Executive does not during the Employment Period satisfy the eligibility criteria for participation in such plan.
(e) Vacations. During the Employment Period, Executive shall be entitled to the same number of paid vacation days in each fiscal year determined by the Company from time to time for its other senior executive officers, but not less than four weeks in any fiscal year, to be taken at such time or times as is desired by Executive after consultation with the Board of Directors (or its designee) to avoid scheduling conflicts (prorated in any fiscal year during which Executive is employed hereunder for less than the entire such year in accordance with the number of days in such fiscal year during which he is so employed). Executive also shall be entitled to all paid holidays given by the Company to its other salaried employees.
(f) Other Benefits. During the Employment Period, Executive shall be entitled to continue to receive the fringe benefits appertaining to his position with the Company in accordance with present practice, including the use of the most recent model of a full-sized automobile. During the Employment Period, Executive shall be entitled to the full-time use of an office and furniture at the Company's offices in Medina, Ohio, and shall be entitled to the full-time use of a secretary paid by the Company.
5. Termination Outside of Protected Period.
(a) Events of Termination. At any time other than during the Protected Period, the Employment Period shall terminate immediately upon the occurrence of any of the following events: (i) expiration of the Employment Period; (ii) the death of Executive; (iii) the expiration of 30 days after the Company gives Executive written notice of its election to terminate the Employment Period upon the Disability of Executive, if before the expiration of such 30-day period Executive has not returned to the performance of his duties hereunder on a full-time basis; (iv) the resignation of Executive; (v) the Company's termination of the Employment Period for Cause; or (vi) the Company's termination of the Employment Period at any time, without Cause, for any reason or no reason. For purposes of Subsections 5(b) and 5(c), expiration of the Employment Period upon a notice of the Company under Section 1 that it does not wish to have the Employment Period extended shall be deemed a termination without Cause pursuant to Subsection 5(a)(vi) and expiration of the Employment Period upon a notice of Executive under Section 1 that he does not wish to have the Employment Period extended shall be deemed a resignation of Executive pursuant to Subsection 5(a)(iv).
(b) Compensation Upon Termination. This Subsection 5(b) sets forth the payments and benefits to which Executive is entitled under any termination of employment pursuant to Subsection 5(a).
(i) Death; Disability. During any period in which
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness, Executive shall continue to receive his full Base
Salary only until his employment is terminated pursuant to Subsection 5(a)(ii)
or (iii). Upon termination of the Employment Period under Subsection 5(a)(ii) or
(iii), Executive shall no longer be entitled to participate in the Benefit
Plans, except as required by applicable law or as governed by the Benefit Plans
including the Group Long Term Disability Insurance in which Executive
participates immediately prior to such termination, but Executive shall be
entitled to receive his Earned Incentive Compensation, if any, promptly after
the Termination Date.
(ii) Resignation or Cause. If Executive's employment is terminated pursuant to Subsection 5(a)(iv) or (v), the Company shall pay Executive his full Base Salary through the Termination Date at the rate in effect at such time. The Company shall then have no further obligations to Executive under this Agreement and Executive shall no longer be entitled to participate in the Benefit Plans, except as required by applicable law.
(iii) Termination Without Cause. If Executive's employment is terminated without Cause pursuant to Subsection 5(a)(vi), then in lieu of any further salary payments to Executive for periods subsequent to the Termination Date, the Company shall pay to Executive no later than 30 calendar days following such date, a lump sum amount equal to (A) the amount of Executive's Unpaid Incentive Compensation, if any, plus (B) 300% of the sum of (I) Executive's Base Salary in effect as of such date and (II) the amount of Executive's Average Incentive Compensation. Executive also shall be entitled to certain continuing benefits under the terms of Subsection 5(c). Notwithstanding any other provision of this Subsection 5(b)(iii), Subsection 5(c) or this Agreement, the Company shall have no obligation to make the lump-sum payment referred to in this Subsection 5(b)(iii) or provide any continuing benefits or payment referred to in Subsection 5(c) unless (X) Executive executes and delivers to the Company a Release and Waiver of Claims and (Y) Executive refrains from revoking, rescinding or otherwise repudiating such Release and Waiver of Claims for all applicable periods during which Executive may revoke it.
(c) Additional Benefits Following Termination under Subsection
5(a)(vi). This Subsection 5(c) sets forth the benefits to which Executive shall
be entitled, in addition to those set forth in Subsection 5(b)(iii), following a
termination of the Employment Period under Subsection 5(a)(vi). Executive shall
not be entitled to the benefit of any provision of this Subsection 5(c)
following a termination of the Employment Period under any other provision
hereof.
(i) Continuing Benefit Plans. For a period of three years following such a Termination Date, Executive shall also be entitled to continue to participate, on the same terms and conditions as active employees, in the Continuing Benefit Plans in which Executive participated immediately prior to the Termination Date, except that (A) Executive shall be
entitled to Estate/Financial Planning Benefits for a period of only six months following the Termination Date and (B) if Executive's continued participation is not possible and Executive does not continue to participate under the terms of any such Continuing Benefit Plan, the Company shall instead pay to Executive, promptly upon presentation to the Company of an invoice or receipt for payment, the amount Executive spends to receive comparable coverage under such a comparable plan for such three-year period. Notwithstanding the foregoing sentence, the Company's obligations to Executive with respect to continued benefits under the Continuing Benefit Plans shall be deemed satisfied to the extent of any such comparable benefits which are provided to Executive by another employer. During such continuation period, Executive shall be responsible for paying the normal employee share of the applicable premiums for coverage under the Continuing Benefit Plans. The Company shall have the right to modify, amend or terminate the Continuing Benefit Plans (other than the Estate/Financial Planning Benefits) following the Termination Date and Executive's continued participation therein shall be subject to such modification, amendment or termination if such modification, amendment or termination applies generally to the then-current participants in such plan. Upon completion of the three-year period following such a Termination Date, the Company shall afford Executive the opportunity to continue Executive's coverage under the Continuing Benefit Plans (other than the Estate/Financial Planning Benefits), at Executive's expense, for an additional period under COBRA Continuation Coverage, so long as Executive timely elects to receive COBRA Continuation Coverage under the terms thereof and otherwise complies with the conditions of continuation of benefits under COBRA Continuation Coverage.
(ii) Limited Benefit Plans. After such a Termination Date, Executive shall no longer be entitled to participate as an active employee in, or receive any additional or new benefits under, the Limited Benefit Plans, except as set forth in this Subsection 5(c)(ii) and except for such benefits, if any, available under such plans to former employees. After such a Termination Date, Executive shall be entitled to the following additional benefits:
(A) Continued coverage, for a period of three years after the Termination Date, under the Split Dollar Life Insurance, with the Company paying such expenses as it otherwise would have paid thereunder if Executive had continued to be employed, all on the terms of the Split Dollar Life Insurance;
(B) A lump-sum payment to be paid under the Restricted Stock Plan equal to the cash value of the benefits Executive would have received had he continued to participate in and receive annual awards under the Restricted Stock Plan on a basis consistent with his past practice for a period of three years after the Termination Date, determined and payable in accordance with the terms of the Restricted Stock Plan and the Company's past practice; and
(C) The lapse of all restrictions on transfer and forfeiture provisions to which Executive's awards under the Restricted Stock Plan are subject, so that any restricted shares previously awarded to Executive under such plan shall be nonforfeitable and freely transferable thereafter, all on the terms of the Restricted Stock Plan or the agreements thereunder.
(d) Notice of Termination. Any termination by the Company pursuant to Subsection 5(a)(iii), (v) or (vi) or by Executive pursuant to Subsection 5(a)(iv) shall be communicated to the other party hereto by written notice of termination, which shall state in reasonable detail the facts upon which the termination has occurred.
6. Termination During Protected Period.
(a) Events of Termination. During the Protected Period, the Employment Period shall terminate immediately upon the occurrence of any of the following events: (i) the death of Executive; (ii) the expiration of 30 days after the Company gives Executive written notice of its election to terminate the Employment Period upon the Disability of Executive, if before the expiration of such 30-day period Executive has not returned to the performance of his duties hereunder on a full-time basis; (iii) the resignation of Executive without delivering Notice of Termination for Good Reason; (iv) the Company's termination of the Employment Period for Cause; (v) the Company's termination of the Employment Period at any time, without Cause, for any reason or no reason; or (vi) Executive's termination of the Employment Period for Good Reason by delivery of Notice of Termination for Good Reason to the Company during the Protected Period indicating that an event constituting Good Reason has occurred, provided that Executive's failure to object in writing to an event alleged to constitute Good Reason within six months of the date of occurrence of such event shall be deemed a waiver of such event by Executive and Executive thereafter may not terminate the Employment Period under this Subsection 6(a)(vi) based on such event.
(b) Compensation Upon Termination. This Subsection 6(b) sets forth the payments and benefits to which Executive is entitled under any termination of employment pursuant to Subsection 6(a).
(i) Death; Disability. During any period in which
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness, Executive shall continue to receive his full Base
Salary only until his employment is terminated pursuant to Subsection 6(a)(i) or
(ii). Upon termination of the Employment Period under Subsection 6(a)(i) or
(ii), Executive shall no longer be entitled to participate in the Benefit Plans,
except as required by applicable law or as governed by the Benefit Plans
including the Group Long Term Disability Insurance in which Executive
participates immediately prior to such termination, but Executive shall be
entitled to receive his Earned Incentive Compensation, if any, promptly after
the Termination Date.
(ii) Resignation or Cause. If Executive's employment is terminated pursuant to Subsection 6(a)(iii) or (iv), the Company shall pay Executive his full Base Salary through the Termination Date at the rate in effect at such time. The Company shall then have no further obligations to Executive under this Agreement and Executive shall no longer be entitled to participate in the Benefit Plans, except as required by applicable law.
(iii) Termination Without Cause or for Good Reason. If
Executive's employment is terminated by the Company without Cause pursuant to
Subsection 6(a)(v) or by Executive for Good Reason pursuant to Subsection
6(a)(vi), then in lieu of any further salary
payments to Executive for periods subsequent to the Termination Date, the Company shall pay to Executive no later than 30 calendar days following such date, a lump sum amount equal to (A) the amount of Executive's Unpaid Incentive Compensation, if any, plus (B) 300% of the sum of (I) Executive's Base Salary in effect as of such date and (II) the amount of Executive's Average Incentive Compensation. Executive also shall be entitled to certain continuing benefits under the terms of Subsection 6(c). Notwithstanding any other provision of this Subsection 6(b)(iii), Subsection 6(c), Section 7 or this Agreement, the Company shall have no obligation to make the lump-sum payment referred to in this Subsection 6(b)(iii), to provide any continuing benefits or payment referred to in Subsection 6(c), or to make any Gross-Up Payment unless (X) Executive executes and delivers to the Company a Release and Waiver of Claims and (Y) Executive refrains from revoking, rescinding or otherwise repudiating such Release and Waiver of Claims for all applicable periods during which Executive may revoke it.
(c) Additional Benefits Following Termination under Subsections
6(a)(v) or (vi). This Subsection 6(c) sets forth the benefits to which Executive
shall be entitled, in addition to those set forth in Subsection 6(b)(iii),
following a termination of the Employment Period under Subsection 6(a)(v) or
(vi). Executive shall not be entitled to the benefit of any provision of this
Subsection 6(c) following a termination of the Employment Period under any other
provision hereof.
(i) Continuing Benefit Plans. For a period of three years following such a Termination Date, Executive shall also be entitled to continue to participate, on the same terms and conditions as active employees, in the Continuing Benefit Plans in which Executive participated immediately prior to the Termination Date, except that (A) Executive shall be entitled to Estate/Financial Planning Benefits for a period of only one year following the Termination Date and (B) if Executive's continued participation is not possible and Executive does not continue to participate under the terms of any such Continuing Benefit Plan, the Company shall instead pay to Executive, promptly upon presentation to the Company of an invoice or receipt for payment, the amount Executive spends to receive comparable coverage under such a comparable plan for such three-year period. Notwithstanding the foregoing sentence, the Company's obligations to Executive with respect to continued benefits under the Continuing Benefit Plans shall be deemed satisfied to the extent of any such comparable benefits which are provided to Executive by another employer. During such continuation period, Executive shall be responsible for paying the normal employee share of the applicable premiums for coverage under the Continuing Benefit Plans. The Company shall have the right to modify, amend or terminate the Continuing Benefit Plans (other than the Estate/Financial Planning Benefits) following the Termination Date and Executive's continued participation therein shall be subject to such modification, amendment or termination if such modification, amendment or termination applies generally to the then-current participants in such plan. Upon completion of the three-year period following such a Termination Date, the Company shall afford Executive the opportunity to continue Executive's coverage under the Continuing Benefit Plans (other than the Estate/Financial Planning Benefits), at Executive's expense, for an additional period under COBRA Continuation Coverage, so long as Executive timely elects to receive COBRA Continuation Coverage under the terms thereof and otherwise complies with the conditions of continuation of benefits under COBRA Continuation Coverage.
(ii) Limited Benefit Plans. After such a Termination Date, Executive shall no longer be entitled to participate as an active employee in, or receive any additional or new benefits under, the Limited Benefit Plans, except as set forth in this Subsection 6(c)(ii) and except for such benefits, if any, available under such plans to former employees. After such a Termination Date, Executive shall be entitled to the following additional benefits:
(A) The Company shall make a lump sum three-year premium payment to the carrier equal to the premiums that the Company would have paid under the Split Dollar Life Insurance if Executive had continued to be employed for three years following the Termination Date, all on the terms of the Split Dollar Life Insurance. In addition, immediately following such premium payment, the Company shall execute such documents as necessary to cause the full ownership of the Split Dollar Life Insurance policy related to Executive and all of its values to transfer to Executive. The Company shall be responsible for the payment of all costs imposed by the carrier to carry out such transfer;
(B) A lump-sum payment to be paid under the Restricted Stock Plan equal to the cash value of the benefits Executive would have received had he continued to participate in and receive annual awards under the Restricted Stock Plan on a basis consistent with his past practice for a period of three years after the Termination Date, determined and payable in accordance with the terms of the Restricted Stock Plan and the Company's past practice; and
(C) The lapse of all restrictions on transfer and forfeiture provisions to which Executive's awards under the Restricted Stock Plan are subject, so that any restricted shares previously awarded to Executive under such plan shall be nonforfeitable and freely transferable thereafter, all on the terms of the Restricted Stock Plan or the agreements thereunder.
(d) Notice of Termination. Any termination by the Company pursuant to Subsection 6(a)(ii), (iv) or (v) or by Executive pursuant to Subsection 6(a)(iii) shall be communicated to the other party hereto by written notice of termination, which shall state in reasonable detail the facts upon which the termination has occurred. A termination pursuant to Subsection 6(a)(vi) shall be communicated by Notice of Termination for Good Reason.
(e) Notice of Change in Control. The Company shall give Executive written notice of the occurrence of any event constituting a Change in Control as promptly as practical, and in no case later than 10 calendar days, after the occurrence of such event.
(f) Deemed Termination After Change in Control. Any termination of the employment of Executive by the Company without Cause or the removal of Executive as an elected officer or Director of the Company or a Subsidiary following the commencement of any discussion with or communication from a third party that ultimately results in a Change in Control shall be deemed to be a termination or removal, respectively, of Executive after a Change in Control for purposes of this Agreement. In the event Executive is entitled to the benefits under this Agreement as contemplated by the preceding sentence, then for purposes of Subsections 6(b)(iii) and 6(c) and
Section 7, the Termination Date shall be deemed to be the date of the Change in Control if the employment of Executive was terminated before such date.
(g) Set-Off. There shall be no right of set-off or counterclaim against, or delay in, any payment by the Company to Executive of the Lump-Sum Payment or any Gross-Up Payment in respect of any claim against or debt or obligation of Executive, whether arising hereunder or otherwise.
(h) Interest on Overdue Payments. Without limiting the rights of Executive at law or in equity, if the Company fails to make the Lump-Sum Payment or any Gross-Up Payment on a timely basis, the Company shall pay interest on the amount thereof at an annualized rate equal to the rate in effect, at the time such payment should have been made, under the 401(k) Plan for loans to participants in such plan.
(i) Outplacement Assistance. Promptly after a request in writing from Executive following a termination of the Employment Period under Subsection 6(a)(v) or (vi), the Company shall retain a professional outplacement assistance service firm reasonably acceptable to Executive, at the Company's expense, to provide outplacement assistance to Executive during the Protected Period. Such services shall be appropriate to Executive's position with the Company. Executive shall not be entitled to such services, however, following a termination of the Employment Period under Subsection 6(a)(i), (ii), (iii) or (iv).
(j) PARS Plan. If Executive participates in the PARS Plan and a Change in Control occurs as determined under the PARS Plan, then Executive shall be entitled to the lapse of transfer restrictions imposed on any grant of restricted stock to Executive under the PARS Plan, all as determined under and subject to the terms of the PARS Plan.
7. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined (as hereafter provided) that any payment or distribution by the Company or any of its Affiliates to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, performance share, performance unit, restricted stock, stock appreciation right or similar right, or the lapse or termination of any restriction on, or the vesting or exercisability of, any of the foregoing (individually and collectively, a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto), or to any similar tax imposed by state or local law, or to any interest or penalties with respect to such taxes (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment or payments (individually and collectively, a "Gross-Up Payment"). The Gross-Up Payment shall be in an amount such that, after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Subsection 7(f), all determinations required to be made under this Section 7, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to Executive and the amount of such Gross-Up Payment, if any, shall be made (i) by PricewaterhouseCoopers (or its successor) (the "Accounting Firm"), regardless of any services that PricewaterhouseCoopers (or its successor) has performed or may be performing for the Company, or (ii) if PricewaterhouseCoopers (or its successor) is serving as accountant or auditor for the individual, entity or group effecting a Change in Control, or cannot (because of limitations under applicable law or otherwise) make the determinations required to be made under this Section 7, then by another nationally recognized accounting firm selected by Executive and reasonably acceptable to the Company (which accounting firm shall then be the "Accounting Firm" hereunder). The Company, or Executive if he selects the Accounting Firm, shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or Executive. If the Accounting Firm determines that any Excise Tax is payable by Executive, the Company shall pay the required Gross-Up Payment to Executive within five business days after the Company's receipt of such determination and calculations with respect to any Payment to Executive. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall, at the same time as it makes such determination, furnish the Company and Executive an opinion that Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Subsection 7(f) and Executive thereafter is required to make a payment of any Excise Tax, Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, Executive as a Gross-Up Payment within five business days after the Company's receipt of such determination and calculations.
(c) The Company and Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Subsection 7(b). Any determination by the Accounting Firm as to the amount of any Gross-Up Payment or Underpayment shall be binding upon the Company and Executive.
(d) The federal, state and local income or other tax returns filed by Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive. Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Executive shall within five business days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Subsection 7(b) shall be borne by the Company.
(f) Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after Executive actually receives notice of such claim and
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by Executive). Executive shall not pay such claim prior to the earlier of
(x) the expiration of the 30-calendar-day period following the date on which he
gives such notice to the Company and (y) the date that any payment of an amount
with respect to such claim is due. If the Company notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive shall:
(i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation
and payment of costs and expenses. Without limiting the foregoing provisions of this Subsection 7(f), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Subsection 7(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that Executive may participate therein at his own cost and expense) and may, at its option, either direct Executive to pay the tax claimed and file for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay the tax claimed and file for a refund, the Company shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by Executive of an amount advanced by the Company pursuant to Subsection 7(f), Executive receives any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Subsection 7(f)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Subsection 7(f), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 calendar days after the Company is notified of such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to Executive pursuant to this Section 7.
8. Binding Agreement; Successors; Novation. This Agreement shall inure to the benefit of and be binding upon Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be no such designee, to Executive's estate. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company, including, without limitation, any person acquiring directly or indirectly all or substantially all of the assets of the Company, whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement). The Company shall require any such successor to assume and agree to perform this Agreement. As used in this Agreement (including Schedule A attached hereto), from and after 9:00 a.m. Eastern Time on October 15, 2002 (the "Effective Time"), (a) the term "Company" shall be deemed to
mean RPM International Inc., a Delaware corporation ("New Parent"), and shall no longer mean RPM, Inc., an Ohio corporation, and (b) each reference to "RPM, Inc." (other than references to "RPM, Inc., an Ohio corporation") shall be changed to and mean "RPM International Inc." Executive, RPM, Inc., an Ohio corporation, and New Parent expressly agree that from and after the Effective Time, (x) New Parent shall be substituted as the "Company" under this Agreement and shall be entitled to all rights and interests of the Company under this Agreement as if New Parent had always been the Company under this Agreement, (y) New Parent shall assume and perform all the duties and obligations of the Company under this Agreement as if New Parent had always been the Company under this Agreement, and (z) RPM, Inc., an Ohio corporation, shall be released from all duties and obligations and have no further rights, duties or obligations under this Agreement, and the parties to this Agreement shall consist solely of Executive and New Parent, but this Agreement shall otherwise continue in full force and effect without modification as a result thereof.
9. Restrictive Covenants.
(a) Non-Competition. During the Employment Period and for a period of two years following the Termination Date, Executive shall not, directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner or director with, or have any financial interest in, any business which is in substantial competition with any business conducted by the Company or by any group, division or Subsidiary of the Company, in any area where such business is being conducted at the time of such termination. Ownership of 5% or less of the voting stock of any corporation which is required to file periodic reports with the Securities and Exchange Commission under the Exchange Act shall not constitute a violation hereof.
(b) Non-Solicitation. Executive shall not directly or indirectly, at any time during the Employment Period and for two years thereafter, solicit or induce or attempt to solicit or induce any employee, sales representative or other representative, agent or consultant of the Company or any group, division or Subsidiary of the Company (collectively, the "RPM Group") to terminate his, her or its employment, representation or other relationship with the RPM Group or in any way directly or indirectly interfere with such a relationship.
(c) Confidentiality.
(i) Executive shall keep in strict confidence, and shall not, directly or indirectly, at any time during or after the Employment Period, disclose, furnish, publish, disseminate, make available or, except in the course of performing his duties of employment hereunder, use any Confidential Information. Executive specifically acknowledges that all Confidential Information, whether reduced to writing, maintained on any form of electronic media, or maintained in the mind or memory of Executive and whether compiled by the RPM Group, and/or Executive, derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from its disclosure or use, that reasonable efforts have been made by the RPM Group to maintain the secrecy of such information, that such information is the sole property of the RPM Group and that any disclosure or use of such information by Executive during the Employment Period (except in the course of
performing his duties and obligations hereunder) or after the termination of the Employment Period shall constitute a misappropriation of the RPM Group's trade secrets.
(ii) Executive agrees that upon termination of the Employment Period, for any reason, Executive shall return to the Company, in good condition, all property of the RPM Group, including, without limitation, the originals and all copies of any materials, whether in paper, electronic or other media, that contain, reflect, summarize, describe, analyze or refer or relate to any items of Confidential Information.
10. Notice. All notices, requests and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(a) when hand delivered, (b) when dispatched by electronic facsimile
transmission (with receipt electronically confirmed), (c) one business day after
being sent by recognized overnight delivery service, or (d) three business days
after being sent by registered or certified mail, return receipt requested,
postage prepaid, and in each case addressed as follows (or addressed as
otherwise specified by notice under this Section):
If to Executive:
Frank C. Sullivan
31177 Huntington Woods Parkway
Bay Village, Ohio 44140
Facsimile: Not applicable
If to the Company:
RPM, Inc.
2628 Pearl Road
P.O. Box 777
Medina, Ohio 44258
Facsimile: 330-225-6574
Attn: Secretary
11. Withholding. The Company may withhold from any amounts payable under or in connection with this Agreement all federal, state, local and other taxes as may be required to be withheld by the Company under applicable law or governmental regulation or ruling.
12. Amendments; Waivers. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, and is signed by Executive and by another executive officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
13. Jurisdiction. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio, without giving effect to the conflict of law principles of such State. Executive and the Company each agree that the state and federal courts located in the State of Ohio shall have jurisdiction in any action, suit or proceeding against Executive or the Company based on or arising out of this Agreement and each of Executive and the Company hereby (a) submits to the personal jurisdiction of such courts, (b) consents to service of process in connection with any such action, suit or proceeding and (c) waives any other requirement (whether imposed by statute, rule of court or otherwise) with respect to personal jurisdiction, venue or service of process.
14. Equitable Relief. Executive and the Company acknowledge and agree that the covenants contained in Section 9 are of a special nature and that any breach, violation or evasion by Executive of the terms of Section 9 will result in immediate and irreparable injury and harm to the Company, for which there is no adequate remedy at law, and will cause damage to the Company in amounts difficult to ascertain. Accordingly, the Company shall be entitled to the remedy of injunction, as well as to all other legal or equitable remedies to which the Company may be entitled (including, without limitation, the right to seek monetary damages), for any breach, violation or evasion by Executive of the terms of Section 9.
15. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In the event that any provision of Section 9 is found by a court of competent jurisdiction to be invalid or unenforceable as against public policy, such court shall exercise its discretion in reforming such provision to the end that Executive shall be subject to such restrictions and obligations as are reasonable under the circumstances and enforceable by the Company.
16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
17. Headings; Definitions. The headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. Certain capitalized terms used in this Agreement are defined on Schedule A attached hereto.
18. No Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party, except as provided in Section 8.
19. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of Executive and supersedes any and all other agreements (including the Existing Agreement), either oral or in writing, with respect to the employment of Executive.
20. Enforcement Costs. The Company is aware that upon the occurrence of a Change in Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or
may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if, following a Change in Control, it should appear to Executive that the Company has failed to comply with any of its obligations under this Agreement or the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or recover from Executive the benefits intended to be provided to Executive hereunder, and Executive has complied with all of his obligations under Section 9, then the Company irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of the Company as provided in this Section 20 to represent Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. The Company's obligations under this Section 20 shall not be conditioned on Executive's success in the prosecution or defense of any such litigation or other legal action. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection the Company and Executive agree that a confidential relationship shall exist between Executive and such counsel. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid or reimbursed to Executive by the Company on a regular, periodic basis upon presentation by Executive of a statement or statements prepared by such counsel in accordance with its customary practices, up to a maximum aggregate amount of $500,000. Notwithstanding the foregoing, this Section 20 shall not apply at any time unless a Change in Control has occurred.
[Remainder of page intentionally blank]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.
IN THE PRESENCE OF: RPM, INC.
/s/ Dorothy Dudas By: /s/ Ronald A. Rice
---------------------------- ------------------------------------
Ronald A. Rice,
Vice President - Administration
/s/ Dorothy Dudas And: /s/ P. Kelly Tompkins
---------------------------- ------------------------------------
P. Kelly Tompkins, Secretary
The "Company"
/s/ Janet L. Corrigan /s/ Frank C. Sullivan
---------------------------- -------------------------------------------
Frank C. Sullivan
"Executive"
|
New Parent agrees to all of the terms and conditions of this Agreement and agrees to assume and perform this Agreement on the terms and conditions set forth herein, all effective as of the Effective Time, as defined in Section 8.
IN THE PRESENCE OF: RPM INTERNATIONAL INC.
/s/ Dorothy Dudas By: /s/ Ronald A. Rice
---------------------------- --------------------------------------
Ronald A. Rice,
Senior Vice President - Administration
/s/ Dorothy Dudas And: /s/ P. Kelly Tompkins
---------------------------- --------------------------------------
P. Kelly Tompkins, Secretary
"New Parent"
|
Schedule A
Certain Definitions
As used in this Agreement, the following capitalized terms shall have the following meanings:
"401(k) Plan" means the RPM, Inc. 401(k) Plan and any successor plan or arrangement.
"Affiliate" of a specified entity means an entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the entity specified.
"Average Incentive Compensation" means an amount equal to the average amount of the annual Incentive Compensation payable to Executive (without regard to any reduction thereof elected by Executive pursuant to any qualified or non-qualified compensation reduction arrangement maintained by the Company, including, without limitation, the Deferred Compensation Plan) for the three most recent completed fiscal years (or for such shorter period during which Executive has been employed by the Company) preceding the Termination Date in which the Company paid Incentive Compensation to executive officers of the Company or in which the Company considered and declined to pay Incentive Compensation to executive officers of the Company.
"Benefit Plans" means the Continuing Benefit Plans and the Limited Benefit Plans.
"Cause" means a determination of the Board of Directors (without the
participation of Executive) of the Company pursuant to the exercise of
its business judgment, that either of the following events has occurred:
(a) Executive has engaged in willful and intentional acts of dishonesty
or gross neglect of duty or (b) Executive has breached Section 9.
"Change in Control" shall mean the occurrence at any time of any of the following events:
(a) The Company is merged or consolidated or reorganized into or with another corporation or other legal person or entity, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation, person or entity immediately after such transaction are held in the aggregate by the holders of Voting Stock immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person or entity, and less than a majority of the combined voting power of the then-outstanding securities of such corporation, person or entity immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule TO (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule l3d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the Voting Power;
(d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or
(e) If during any period of two consecutive years, individuals, who at the beginning of any such period, constitute the Directors cease for any reason to constitute at least a majority thereof, unless the nomination for election by the Company's shareholders of each new Director was approved by a vote of at least two-thirds of the Directors then in office who were Directors at the beginning of any such period.
Notwithstanding the foregoing provisions of paragraphs (c) and (d) of this definition, a "Change in Control" shall not be deemed to have occurred for purposes of this Agreement (i) solely because (A) the Company, (B) a Subsidiary, or (C) any Company-sponsored employee stock ownership plan or other employee benefit plan of the Company or any Subsidiary, or any entity holding shares of Voting Stock for or pursuant to the terms of any such plan, either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership, (ii) solely because any other person or entity either files or becomes obligated to file a report on Schedule 13D or Schedule TO (or any successor schedule, form or report) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, but only if both (A) the transaction giving rise to such filing or obligation is approved in advance of consummation thereof by the Company's Board of Directors and (B) at least a majority of the Voting Power immediately after such transaction is held in the aggregate by the holders of Voting Stock immediately prior to such transaction, or (iii) solely because of a change in control of any Subsidiary.
Notwithstanding the foregoing definition or anything contained in this Agreement, a "Change in Control" shall not be deemed to have occurred as a result of (i) RPM, Inc., an Ohio corporation, or New Parent entering into the Merger Agreement or the Reorganization Agreement or (ii) the consummation by RPM, Inc., an Ohio corporation, or New Parent of any of the transactions contemplated by the Merger Agreement or the Reorganization Agreement. As used herein, "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of August 29, 2002, among RPM, Inc.,
an Ohio corporation, New Parent, and RPM Merger Company, an Ohio corporation and wholly-owned subsidiary of New Parent, and "Reorganization Agreement" shall mean the Reorganization Agreement, dated as of October 15, 2002, by and between RPM, Inc., an Ohio corporation, and New Parent.
"COBRA Continuation Coverage" means the health care continuation
requirements under the federal Consolidated Omnibus Budget
Reconciliation Act, as amended, Part VI of Subtitle B of Title I of the
Employee Retirement Income Security Act of 1974, as amended, and Code
Section 4980B(f), or any successor provisions thereto.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Confidential Information" means trade secrets and confidential business and technical information of the RPM Group and its customers and vendors, without limitation as to when or how Executive may have acquired such information. Such Confidential Information shall include, without limitation, the RPM Group's manufacturing, selling and servicing methods and business techniques, training, service and business manuals, promotional materials, vendor and product information, product development plans, internal financial statements, sales and distribution information, business plans, marketing strategies, pricing policies, corporate alliances, business opportunities, the lists of actual and potential customers as well as other customer information, technology, know-how, processes, data, ideas, techniques, inventions (whether patentable or not), formulas, terms of compensation and performance levels of RPM Group employees, and other information concerning the RPM Group's actual or anticipated business, research or development, or which is received in confidence by or for the RPM Group from any other person and all other confidential information to the extent that such information is not intended by the RPM Group for public dissemination.
"Continuing Benefit Plans" means only the following employee benefit plans and arrangements of the Company in effect on the date hereof, or any successor plan or arrangement in which Executive is eligible to participate immediately before the Termination Date:
(a) The RPM, Inc. Health and Welfare Plan (including medical, dental and prescription drug benefits); and
(b) Estate/Financial Planning Benefits.
"Deferred Compensation Plan" means the RPM, Inc. Deferred Compensation Plan, as amended from time to time, in which executive officers of the Company are eligible to participate and any such successor plan or arrangement.
"Director" means a member of the Board of Directors of the Company.
"Disability," when determined at any time other than during the Protected Period, means the inability of Executive for a continuous period in excess of 150 days to perform the
essential functions of his position on an active full-time basis with or without reasonable accommodations by reason of a disability condition; a certificate from a physician acceptable to both the Company and Executive to the effect that Executive is or has been disabled and incapable of performing the essential functions of his position with or without reasonable accommodations as previously performed shall be conclusive of the fact that Executive is incapable of performing such services and is, or has been, disabled for the purposes of this Agreement. "Disability," when determined at any time during the Protected Period, means a "Total Disability" (as defined and determined under the Group Long Term Disability Insurance) that entitles Executive to receive the "Total Disability Benefit" under the Group Long Term Disability Insurance. Whether determined during or outside of the Protected Period, the Company and Executive acknowledge and agree that the essential functions of Executive's position are unique and critical to the Company and that a disability condition that causes Executive to be unable to perform the essential functions of his position under the circumstances described above will constitute an undue hardship on the Company.
"Earned Incentive Compensation" means the sum of:
(a) The Unpaid Incentive Compensation; and
(b) An amount equal to the Average Incentive Compensation multiplied by a fraction, the numerator of which is the number of days in the current fiscal year of the Company that have expired before the Termination Date and the denominator of which is 365.
"Estate/Financial Planning Benefits" means those estate and financial planning services (a) in effect on the date hereof in which Executive is eligible to participate or (b) that the Company makes available at any time before the Termination Date to the executives and key management employees of the Company and in which Executive is then eligible to participate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.
"Good Reason" means a determination by Executive made in good faith
that, upon or after the occurrence of a Change in Control, any of the
following events has occurred without Executive's express written
consent: (a) a significant reduction in the nature or scope of the
title, authority or responsibilities of Executive from those held by
Executive immediately prior to the Change in Control; (b) a reduction in
Executive's Base Salary from the amount in effect on the date of the
Change in Control; (c) a reduction in Executive's Incentive Compensation
from the amount of Executive's Average Incentive Compensation, unless
such reduction results solely from the Company's results of operations;
(d) the failure by the Company to offer to Executive an economic value
of benefits reasonably comparable to the economic value of benefits
under the Benefit Plans
in which Executive participates at the time of the Change in Control; or
(e) a material breach by the Company of the terms of Section 3.
"Gross-Up Payment" shall have the meaning given such term in Section 7.
"Group Long Term Disability Insurance" means the Group Long Term Disability Insurance sponsored by the Company and provided by the Continental Casualty Company, Chicago, Illinois, as currently in effect and as the same may be amended from time to time, and any successor long-term disability insurance sponsored by the Company in which the executives and key management employees of the Company are eligible to participate.
"Limited Benefit Plans" means all the Company's employee benefit plans and arrangements in effect at any time and in which the executives and key management employees of the Company are eligible to participate, excluding the Continuing Benefit Plans, but including, without limitation, the following employee benefit plans and arrangements or any successor or new plan or arrangement made available in the future to the executives and key management employees of the Company and in which Executive is eligible to participate before the Termination Date:
(a) The 401(k) Plan;
(b) The RPM, Inc. Retirement Plan;
(c) The Supplemental Executive Retirement Plan;
(d) Stock option plans and other equity-based incentive plans, including the RPM, Inc. 1996 Stock Option Plan and the Restricted Stock Plan;
(e) The Split Dollar Life Insurance;
(f) The RPM, Inc. Incentive Compensation Plan;
(g) The Deferred Compensation Plan;
(h) The RPM, Inc. Employee Stock Purchase Plan;
(i) The Group Long Term Disability Insurance;
(j) RPM, Inc. Group Life Insurance;
(k) RPM, Inc. Group Accidental Death & Dismemberment Insurance;
(l) The RPM, Inc. Group Carve Out Plan (also known as GRIP);
(m) The RPM, Inc. Business Travel Insurance Plan;
(n) The fringe benefits appertaining to Executive's position with the Company referred to in Subsection 4(f), including the use of an automobile;
(o) Health Care Reimbursement Account; and
(p) Dependent Care Reimbursement Account.
"Lump-Sum Payment" means, collectively, the lump-sum payments that may be payable to Executive pursuant to the first sentence of Subsection 6(b)(iii) and pursuant to Subsection 6(c)(ii)(B).
"Notice of Termination for Good Reason" means a written notice delivered by Executive in good faith to the Company under Subsection 6(a)(vi) setting forth in reasonable detail the facts and circumstances that have occurred and that Executive claims in good faith to be an event constituting Good Reason.
"PARS Plan" means the RPM, Inc. 2002 Performance Accelerated Restricted Stock Plan and any successor plan or arrangement thereto.
"Protected Period" means that period of time commencing on the date of a Change in Control and ending two years after such date.
"Release and Waiver of Claims" means a written release and waiver by Executive, to the fullest extent allowable under applicable law and in form reasonably acceptable to the Company, of all claims, demands, suits, actions, causes of action, damages and rights against the Company and its Affiliates whatsoever which he may have had on account of the termination of his employment, including, without limitation, claims of discrimination, including on the basis of sex, race, age, national origin, religion, or handicapped status, and any and all claims, demands and causes of action for severance or other termination pay. Such Release and Waiver of Claims shall not, however, apply to the obligations of the Company arising under this Agreement, any indemnification agreement between Executive and the Company, any retirement plans, any stock option agreements, COBRA Continuation Coverage or rights of indemnification Executive may have under the Company's Certificate of Incorporation or By-laws (or comparable charter document) or by statute.
"Restricted Stock Plan" means the RPM, Inc. 1997 Restricted Stock Plan and any successor plan or arrangement thereto, but shall not be deemed to mean or include the PARS Plan.
"Split Dollar Life Insurance" means the Company's Split Dollar Life Insurance arrangements in effect on the date hereof or any successor arrangement that the Company makes available at any time before the Termination Date to the executives and key management employees of the Company and in which Executive is then eligible to participate.
"Subsidiary" means a corporation, company or other entity (a) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (b) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.
"Supplemental Executive Retirement Plan" means the RPM, Inc. Benefit Restoration Plan in effect on the date hereof or any successor plan that the Company makes available at any time before the Termination Date to the executives and key management employees of the Company and in which Executive is then eligible to participate.
"Termination Date" means the effective date of the termination of the Employment Period.
"Unpaid Incentive Compensation" means an amount equal to the amount of any Incentive Compensation payable but not yet paid for the fiscal year preceding the fiscal year in which the Termination Date occurs. If the Compensation Committee has determined such amount prior to the Termination Date, then such amount shall be the amount so determined by the Compensation Committee. If the Compensation Committee has not determined such amount prior to the Termination Date, then such amount shall equal the amount of the Average Incentive Compensation. For purposes of this definition, any Incentive Compensation deferred by Executive pursuant to any qualified or non-qualified compensation reduction arrangement maintained by the Company, including, without limitation, the Deferred Compensation Plan, shall be deemed to have been paid on the date of deferral.
"Voting Power" means, at any time, the total votes relating to the then-outstanding securities entitled to vote generally in the election of Directors.
"Voting Stock" means, at any time, the then-outstanding securities entitled to vote generally in the election of Directors.
Exhibit 10.6.1
1996 - OPTION NO. [OPTION_NO.]
RPM INTERNATIONAL INC.
1996 KEY EMPLOYEES STOCK OPTION PLAN
STOCK OPTION AGREEMENT*
THIS STOCK OPTION AGREEMENT, entered into as of this ____ day of ____________ , 20__, by and between RPM International Inc. (the "Company"), a Delaware corporation and successor to RPM, Inc. under the RPM International Inc. 1996 Key Employees Stock Option Plan (the "Plan"), and [Name] (the "Optionee").
WITNESSETH:
WHEREAS, the Board of Directors of the Company has designated the Compensation Committee of the Board of Directors (the "Committee") to serve as the Committee to administer the RPM International Inc. 1996 Key Employees Stock Option Plan (the "Plan"); and
WHEREAS, the Committee has determined that the Optionee, as a Key Employee, should be granted a stock option under the Plan upon the terms and conditions set forth in this Agreement, and for the number of shares of Common Stock, par value $0.01 per share (the "Shares"), of the Company set forth hereinafter;
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
1. Definitions. Capitalized terms shall have the meanings set forth in the Plan (as defined below) unless otherwise specifically set forth below or elsewhere herein:
(a) The word "Agreement" shall mean this instrument.
(b) The word "Code" shall mean the United States Internal Revenue Code of 1986, as amended, or successor provisions of future United States revenue laws (Title 26 of the United States Code).
(c) The words "Incentive Stock Option" shall mean any Option which qualifies as an Incentive Stock Option under terms of Section 422 of the Code.
* PARAGRAPH 5 OF THIS AGREEMENT CONTAINS INFORMATION REGARDING THE EXERCISE PERIOD FOR INCENTIVE STOCK OPTION GRANTS UPON CESSATION OF EMPLOYMENT WITH THE COMPANY BY REASON OF NORMAL RETIREMENT (AS DEFINED HEREIN). FAILURE TO COMPLY WITH THE EXERCISE PERIOD LIMITATION DESCRIBED THEREIN WILL HAVE THE EFFECT OF DISQUALIFYING ANY SUCH OPTION AS AN INCENTIVE STOCK OPTION.
(d) The word "Option" shall mean the right and option of the Optionee to purchase Shares pursuant to the terms of this Agreement.
(e) The words "Option Price" shall mean the price at which Shares may be acquired upon the exercise of any Option.
(f) The words "Personal Representative" shall mean, following the Optionee's death, such person or persons who shall have acquired, by Will or by the laws of descent and distribution, the right to exercise any Option.
(g) The word "Plan" shall mean the RPM International Inc. 1996 Key Employees Stock Option Plan, as amended from time to time, and in effect on the date of this Agreement (a copy of which is attached as Exhibit A).
2. Grant of Option. Effective as of the date of this Agreement, the Company grants to the Optionee, upon the terms and conditions set forth hereinafter, the right and option to purchase all or any number of an aggregate of [Total] ([Total_No]) Shares. The number of Shares subject to an Incentive Stock Option, the number of Shares subject to a non-qualified stock option, and the respective Option Prices are as set forth below:
(a) [ISO_Total] ([ISO_No]) Shares shall be subject to an Incentive Stock Option at an Option Price of $16.125 per share; and
(b) [NQ_Total] ([NQ_NO]) Shares shall be subject to a non-qualified stock option at an Option Price of $16.125 per share.
3. Term of Option. The term of the Option shall be for a period of ten
(10) years from the date hereof, and the Option shall expire at the close of
regular business hours at the Company's principal office in Medina, Ohio, on the
last day of the term of the Option, or, if earlier, on the applicable expiration
date provided for in Sections 5 and 6 hereof.
4. Exercise Dates. Except as provided in Sections 5, 6 and 8 hereof, the Option shall not be exercisable to any extent until one (1) year from the date hereof. The Optionee shall be entitled to exercise the Option with respect to the number of Shares indicated below on or after the date indicated opposite such number below:
(a) Number of Shares as to Date as of
Which Incentive Stock Which Option
Option May Be Exercised May Be Exercised
----------------------- ----------------
[ISO1999] July 15, 1999
[ISO2000] July 15, 2000
[ISO2001] July 15, 2001
[ISO2002] July 15, 2002
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(b) Number of Shares as to Date as of
Which Non-Qualified Stock Which Option
Option May Be Exercised May Be Exercised
----------------------- ----------------
[NQ1999] July 15, 1999
[NQ2000] July 15, 2000
[NQ2001] July 15, 2001
[NQ2002] July 15, 2002
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To the extent that the Option becomes exercisable with respect to any Shares, as provided above, the Option may thereafter be exercised by the Optionee either as to all or any number of such Shares at any time or from time to time prior to the expiration of the Option pursuant to Section 3 hereof. Except as provided in Sections 5 and 6 hereof, the Option may not be exercised at any time unless the Optionee shall be an employee at such time.
5. Termination of Employment, Etc. So long as the Optionee shall continue to be an employee of the Company or one of its subsidiaries, the Option shall not be affected by (a) any temporary leave of absence approved in writing by the Company or one of its subsidiaries, or (b) any change of duties or position (including transfer to or from a subsidiary). If the Optionee ceases to be an employee of the Company or one of its subsidiaries for any reason other than death or Normal Retirement (as defined below), the Option may be exercised only to the extent of the purchase rights, if any, which had accrued as of the date of such cessation pursuant to Section 4 hereof and which have not theretofore been exercised; provided, however, that upon written request to the Committee it may in its absolute discretion determine (but shall not be under any obligation to determine) that such accrued purchase rights shall be deemed to include additional Shares covered by the Option. Upon any such cessation of employment by reason of discharge, such accrued purchase rights shall in any event terminate upon the earlier of the date thirty (30) days from the date of such cessation of employment or the last day of the term of the Option. Upon any such cessation of employment by reason of a voluntary quit, such accrued purchase rights shall terminate on the date of such cessation of employment. Upon any such cessation of employment by reason of the voluntary retirement of an employee who is at least 55 years of age and who has completed at least five consecutive years of service with the Company and/or its subsidiaries ("Normal Retirement"), the Optionee shall have the immediate right and option (notwithstanding the provisions of Section 4 hereof) to exercise the Option with respect to all of the Shares covered by the Option. Upon any such "Normal Retirement," the purchase rights shall terminate upon the earlier of three (3) years from the date of such cessation of employment or the last day of the term of the Option; provided, however, that, IN THE CASE OF AN INCENTIVE STOCK OPTION, THE OPTION MUST BE EXERCISED IN FULL WITHIN THREE (3) MONTHS AFTER CESSATION OF EMPLOYMENT OR SUCH OPTION WILL NO LONGER QUALIFY AS AN INCENTIVE STOCK OPTION AND SHALL THEREAFTER BE, AND RECEIVE THE TAX TREATMENT APPLICABLE TO, A NON-QUALIFIED STOCK OPTION. In no event shall any employee who is terminated by the Company, with or without cause, qualify for the "Normal Retirement" provisions described in this Section 5. Nothing contained in this Agreement shall confer upon the Optionee any right to continue in the employ of the Company or any of its subsidiaries, or to
limit or interfere in any way with the right of the Company or any such subsidiary to terminate his or her employment at any time, with or without cause.
6. Death of Optionee. If the Optionee dies while an employee or within thirty (30) days of the Optionee's having ceased to be an employee by reason of discharge, the Optionee's Personal Representative shall have the immediate right and option (notwithstanding the provisions of Section 4 hereof) to exercise the Option with respect to all Shares covered by the Option. Such purchase rights shall in any event terminate upon the earlier of the date one (1) year from the date of the Optionee's cessation of employment by reason of discharge or death or the last day of the term of the Option
7. Limitations on Exercise of Incentive Stock Option. Notwithstanding the foregoing, any Incentive Stock Option granted pursuant to this Agreement is exercisable only to the extent that the aggregate fair market value (determined at the time such Incentive Stock Option is granted) of the shares with respect to which such Incentive Stock Options first become exercisable during any calendar year does not exceed $100,000 (the "$100,000 Exercise Limitation"); provided, however, that (a) if the aggregate fair market value of the shares with respect to which such Incentive Stock Options first became exercisable exceeds the $100,000 Exercise Limitation as a result of the accelerated vesting of the Option pursuant to Sections 5 or 6 hereof, the maximum number of whole shares with an aggregate fair market value not in excess of $100,000 shall be treated as shares issued pursuant to an Incentive Stock Option and the remaining aggregate fair market value in excess of such amount shall be treated as shares issued pursuant to a non-qualified stock option and (b) the $100,000 Exercise Limitation shall not apply if the Option no longer qualifies as an Incentive Stock Option as a result of the failure of the Optionee to exercise the Option within the three (3) month period contained in Section 5 hereof.
8. Change of Control. In the event of a "change in control" as defined in the Plan and as determined by the Committee, the Optionee shall have the immediate right and option (notwithstanding the provisions of Section 4 hereof) to exercise the Option with respect to all Shares covered by the Option.
9. Exercise of Option. The Option may be exercised by delivery to the Secretary of the Company at its principal office, 2628 Pearl Road, P.O. Box 777, Medina, Ohio 44258, of a completed Notice of Exercise of Option (obtainable from the Secretary of the Company) setting forth the number of Shares with respect to which the Option is being exercised, together with either a certified or cashier's check payable to the Company or certificates for RPM International Inc. Common Stock, par value $0.01 per share, properly endorsed for transfer, or a combination thereof, in the amount of the total purchase price of such Shares.
10. Issuance of Share Certificates. Upon receipt by the Company prior to expiration of the Option of a duly completed Notice of Exercise of Option accompanied by a certified or cashier's check, or properly endorsed certificates for RPM International Inc. Common Stock, par value $0.01 per share, as provided in Section 9 hereof, in full payment for the Shares being purchased pursuant to such Notice (and, with respect to any Option exercised pursuant to Section 6 hereof by the Personal Representative, accompanied in addition by proof satisfactory to the
Committee of the right of the Personal Representative to exercise the Option), the Company shall cause to be mailed or otherwise delivered to the Optionee or the Personal Representative, as the case may be, within thirty (30) days of such receipt, a certificate or certificates for the number of Shares so purchased. The Optionee or the Personal Representative shall not have any of the rights of a shareholder with respect to the Shares covered by the Option unless and until one or more certificates representing such Shares shall be issued to the Optionee or the Personal Representative.
11. Successors in Interest, Etc. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and the heirs, estate, and Personal Representatives of the Optionee. The Option shall not be transferable other than by Will or the laws of descent and distribution, and the Option may be exercised during the lifetime of the Optionee only by the Optionee or his guardian or legal representative. A deceased Optionee's Personal Representative shall act in the place and stead of the deceased Optionee with respect to exercising an Option or taking any other action pursuant to this Agreement.
12. Provisions of Plan Control. This Agreement is subject to all of the terms, conditions, and provisions of the Plan, as amended from time to time, and to such rules, regulations, and interpretations relating to the Plan as may be adopted by the Committee and in effect from time to time. A copy of the Plan is attached hereto as Exhibit "A" and is incorporated herein by reference. In the event and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions, and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.
13. No Liability Upon Distribution of Shares. The liability of the Company under this Agreement and any distribution of Shares made hereunder is limited to the obligations set forth herein with respect to such distribution and no term or provision of this Agreement shall be construed to impose any liability on the Company or the Committee in favor of any person with respect to any loss, cost or expense which the person may incur in connection with or arising out of any transaction in connection with this Agreement.
14. Withholding. The Optionee agrees that the Company may make appropriate provision for tax withholding with respect to the transactions contemplated by this Agreement including such withholding as may be appropriate with respect to any disqualifying disposition of an Incentive Stock Option.
15. Notice of Disqualifying Disposition. Optionee agrees that if he should dispose of any Shares acquired upon the exercise of an Incentive Stock Option, including a disposition by sale, exchange, gift or transfer of legal title within two (2) years after the date such Option was granted to the Optionee or within one (1) year after the transfer of such Shares to the Optionee upon the exercise of such Option, the Optionee shall notify the Company within three (3) days after such disposition.
16. Captions. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement.
17. Number. The use of the singular or plural herein shall not be restrictive as to number and shall be interpreted in all cases as the context shall require.
18. Gender. The use of the feminine, masculine or neuter pronoun shall not be restrictive as to gender and shall be interpreted in all cases as the context may require.
19. Investment Representation. Optionee hereby represents and warrants that any Shares which he may acquire by virtue of the exercise of the Option shall be acquired for investment purposes only and not with a view to distribution or resale; provided, however, that this restriction shall become inoperative in the event the Shares which are subject to the Option shall be registered under the Securities Act of 1933, as amended, or in the event there is presented to the Company an opinion of counsel satisfactory to the Company to the effect that the offer or sale of the Shares which are subject to the Option may lawfully be made without registration under the Securities Act of 1933, as amended.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer, and the Optionee has hereunto set his hand, all as of the day and year first above written.
RPM INTERNATIONAL INC.
("Company")
[Name]
Exhibit 10.9
AMENDMENT NO. 2
TO THE
RPM, INC. BENEFIT RESTORATION PLAN
THIS AMENDMENT NO. 2 to the RPM, Inc. Benefit Restoration Plan (hereinafter known as the "Plan") is executed by RPM, Inc. (hereinafter known as the "Company") and acknowledged by RPM International Inc. (hereinafter known as the "Successor Company"), as of the dates set forth below.
WITNESSETH:
WHEREAS, the Company maintains the Plan for the benefit of certain of its employees and certain employees of affiliated companies; and
WHEREAS, in connection with the reincorporation of the Company as a Delaware corporation, the Company has agreed to assign, and the Successor Company has agreed to assume, all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan in accordance with an Agreement and Plan of Merger, dated August 29, 2002; and
WHEREAS, it is the desire of the Company to amend the Plan in order to reflect the reincorporation of the Company, the assumption of the Plan by the Successor Company, and the new name of the Plan, all of which will become effective as of the effective time of the reincorporation of the Company, which shall be 9:00 a.m. on October 15, 2002 (the Effective Time"); and
WHEREAS, the Company reserved the right, pursuant to Section 4.5 of the Plan, for the Board of Directors to make certain amendments thereto;
NOW, THEREFORE, pursuant to Section 4.5 of the Plan, the Board of Directors hereby amends the Plan as follows, effective as of the Effective Time:
1. The name of the Plan is hereby changed to the "RPM International Inc. Benefit Restoration Plan."
2. The Plan is hereby amended by the deletion of each reference to the term "RPM, Inc." as a corporate entity, including but not limited to, the definition of the term "Company" in Section 1.8 and the signature block, and the substitution in lieu thereof of the term "RPM International Inc." as the corporate entity.
3. The Plan is hereby amended by the deletion of each reference to the term "RPM, Inc." as the sponsor of certain employee benefit plans, including but not limited to, the definition of the term "Plan" in Section 1.10 and the RPM, Inc. Retirement Plan, and the substitution in lieu thereof of the term "RPM International Inc." as the sponsor of such plans.
4. The Plan is hereby amended by the deletion of each reference to RPM, Inc. as an Ohio corporation in every instance that it appears, including but not limited to, the definition of the term "Company" in Section 1.8, and the substitution in lieu thereof of the reference to RPM International Inc. as a Delaware corporation.
5. Section 1.7A of the Plan is hereby amended by the deletion of
said section in its entirety and the substitution in lieu thereof of a new
Section 1.7A to read as follows:
"1.7A Common Stock. 'Common Stock' means the common stock, par value $.01 per share, of the Company."
6. Section 1.10A of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 1.10A to read as follows:
"1.10A Restricted Stock Plan. 'Restricted Stock Plan' means the RPM International Inc. 1997 Restricted Stock Plan, as the same may be amended from time to time."
7. Section 3.3 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 3.3 to read as follows:
"3.3 Lump Sum Payment. The Supplemental Restoration Benefit shall be paid in a lump sum which shall be determined by using the actuarial assumptions set forth in the Basic Retirement Plan; provided, however, that if the Participant has been issued restricted Common Stock under the Restricted Stock Plan for the purpose of replacing all or a portion of the Supplemental Restoration Benefit which the Participant had accrued hereunder prior to June 1, 1997, the lump sum payable hereunder with respect to such Supplemental Restoration Benefit shall be reduced by the aggregate dollar amount attributable to such shares as set forth in the agreement(s) pursuant to which such Common Stock were acquired by the Participant."
[Signature Page Follows]
IN WITNESS WHEREOF, RPM, Inc., by officers duly authorized by its Board of Directors, has caused this Amendment No. 2 to the RPM, Inc. Benefit Restoration Plan to be signed this 14th day of October, 2002.
RPM, INC.
By: /s/ P. Kelly Tompkins
-----------------------------
P. Kelly Tompkins, Secretary
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The Successor Company hereby expressly acknowledges its assumption of all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan as of the Effective Time.
RPM INTERNATIONAL INC.
By: /s/ Keith R. Smiley
-------------------------------
Keith R. Smiley, Treasurer and
Assistant Secretary
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Exhibit 10.11
AMENDMENT NO. 1
TO THE
RPM, INC. INCENTIVE COMPENSATION PLAN
THIS AMENDMENT NO. 1 to the RPM, Inc. Incentive Compensation Plan (hereinafter known as the "Plan") is executed by RPM, Inc. (hereinafter known as the "Company") and acknowledged by RPM International Inc. (hereinafter known as the "Successor Company"), as of the dates set forth below.
WITNESSETH:
WHEREAS, the Company maintains the Plan for the benefit of certain of its employees and certain employees of affiliated companies; and
WHEREAS, in connection with the reincorporation of the Company as a Delaware corporation, the Company has agreed to assign, and the Successor Company has agreed to assume, all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan in accordance with an Agreement and Plan of Merger, dated August 29, 2002; and
WHEREAS, it is the desire of the Company to amend the Plan in order to reflect the reincorporation of the Company, the assumption of the Plan by the Successor Company, and the new name of the Plan, all of which will become effective as of the effective time of the reincorporation of the Company, which shall be 9:00 a.m. on October 15, 2002 (the "Effective Time"); and
WHEREAS, the Company reserved the right, pursuant to Section 7 of the Plan, for the Board of Directors to make certain amendments thereto;
NOW, THEREFORE, pursuant to Section 7 of the Plan, the Board of Directors hereby amends the Plan as follows, effective as of the Effective Time:
1. The name of the Plan is hereby amended to the "RPM International Inc. Incentive Compensation Plan."
2. The Plan is hereby amended by the deletion of each reference to the term "RPM, Inc." as a corporate entity, including but not limited to, the definition of the term "Company" in Section 1, and the substitution in lieu thereof of the term "RPM International Inc." as the corporate entity.
3. The Plan is hereby amended by the deletion of each reference to the term "RPM, Inc." as the sponsor of the Plan, including but not limited to, the name of the Plan as defined in Section 2(k), and the substitution in lieu thereof of the term "RPM International Inc." as the sponsor of the Plan.
[Signature Page Follows]
IN WITNESS WHEREOF, RPM., Inc., by officers duly authorized by its Board of Directors, has caused this Amendment No. 1 to the RPM, Inc. Incentive Compensation Plan to be signed this 14th day of October, 2002.
RPM, INC.
By: /s/ P. Kelly Tompkins
--------------------------------
P. Kelly Tompkins, Secretary
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The Successor Company hereby expressly acknowledges its assumption of all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan as of the Effective Time.
RPM INTERNATIONAL INC.
By: /s/ Keith R. Smiley
--------------------------------
Keith R. Smiley, Treasurer and
Assistant Secretary
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Exhibit 10.12
RPM, INC. 1997 RESTRICTED STOCK PLAN
1. NAME AND PURPOSE.
The name of this plan is the RPM, Inc. 1997 Restricted Stock Plan. The Plan will be maintained by RPM, Inc. (herein referred to as the "Company") to further the growth, success and interest of the Company and its subsidiaries and the Shareholders of the Company by requiring certain employees of the Company and its subsidiaries to own Common Shares, without par value, of the Company ("Shares") under the terms and conditions of and in accordance with this Plan, thereby increasing their direct involvement in the success of the Company.
2. ADMINISTRATION OF THE PLAN.
2.1 This Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company ("Board of Directors") which shall consist of at least three Directors, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 and any successor to such rule ("Rule 16b-3"). The Committee may, from time to time, designate one or more persons or agents to carry out any or all of its administrative duties hereunder; provided that none of the duties required to be performed by the Committee under Rule 16b-3 or Section 2.3 of the Plan may be delegated to any other person.
2.2 The Plan shall be administered and operated on the same annual accounting period as the Company (herein referred to as the "Plan Year"), which presently is the twelve (12) month period ending on May 31. The first Plan Year will be deemed to have commenced June 1, 1997 and will end May 31, 1998. In the event that the Company changes its annual accounting period, the Plan Year shall automatically change and the Committee may
make such adjustments to the operation of the Plan as appropriate to reflect any short Plan Years, adjustments to the dates that Shares are awarded or that restrictions lapse hereunder or any other adjustments that may be appropriate to reflect the change in the Plan Year.
2.3 The Committee shall interpret the Plan, and to the extent and in the manner contemplated herein, it shall exercise the discretion granted to it. The Committee may issue from time to time such rules and interpretations as in its judgment are necessary in order to administer the Plan effectively. The Committee shall have the exclusive right in its sole discretion to determine the number of Shares awarded to each participant, to determine the price or prices at which Shares shall be awarded to each participant, to determine the time or times when Shares may be awarded and to prescribe the form, which shall be consistent with this Plan, of the instruments evidencing any award and issuance under this Plan and the legend, if any, to be affixed to the certificates representing Shares issued under this Plan.
3. ELIGIBLE EMPLOYEES AND PARTICIPATION.
3.1 The Committee shall, from time to time, determine those employees of the Company and its subsidiaries who are eligible to receive awards of Shares hereunder.
3.2 No member of the Board of Directors, unless he is also an employee of the Company, and no member of the Committee, shall be eligible to participate in the Plan.
4. AWARDS OF SHARES.
4.1 The Committee shall, from time to time, determine the number of Shares that shall be awarded to an eligible employee hereunder. The Committee shall use the closing price of one (1) Share on the day of the Board of Directors meeting held next preceding each May 31 fiscal year end in determining the number of Shares awarded to an eligible employee for a Plan Year.
4.2 The Shares which may be awarded and issued to employees under this Plan shall be made available from authorized and unissued Shares of the Company.
4.3 Subject to the provisions of the succeeding paragraphs of this Section 4, the aggregate number of Shares which may be issued under this Plan shall not exceed one million two hundred fifty thousand (1,250,000) Shares.
4.4 In the event that the outstanding Shares shall be changed by reason of share splits or combinations, recapitalization or reorganizations, or share dividends, the number of Shares and the class or classes of securities which may thereafter be issued under this Plan may be appropriately adjusted as determined by the Committee so as to reflect such change.
5. TRANSFER RESTRICTIONS.
5.1 The Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated (and any such sale, transfer or other disposition, pledge or other hypothecation being hereinafter referred to as "to dispose of" or a "disposition") until the earliest of (a) the later of either the employee's termination of employment with the Company and any of its subsidiaries or the lapse of the right of the Company to a return of such Shares pursuant to Section 5.2 below; (b) a change in control that occurs with respect to the Company; or (c) the termination of the Plan. Notwithstanding the foregoing, the Company may direct that a specified number of Shares may be sold by an employee after the date that any Shares become nonforfeitable under Section 5.2 below to enable such employee to pay any applicable taxes incurred as a result of such Shares becoming nonforfeitable.
5.2 Any Shares awarded hereunder shall be subject to complete forfeiture and return to the Company of such Shares if the employee terminates employment for any reason with the Company and any of its subsidiaries before the earliest to occur of the following: (a) the
later of either the attainment of age fifty-five (55) by the employee or the fifth (5th) anniversary of the May 31 immediately preceding the date on which such Shares are awarded; (b) the retirement of the participant from employment with the Company and any of its subsidiaries on or after attainment of age 65; and (c) a change in control that occurs with respect to the Company.
5.3 In the event that an employee's employment with the Company and any of its subsidiaries shall terminate by reason of death or total disability prior to the earliest of (a) the lapse of the right of the Company to a return of such Shares pursuant to Section 5.2 above; (b) a change in control that occurs with respect to the Company; or (c) the termination of the Plan, then the restrictions imposed on such Shares by this Section 5 shall lapse and be of no further force and effect.
5.4 The Board of Directors, in its sole discretion, shall decide whether a change in control has occurred. If the Board of Directors shall decide that a change in control has occurred it shall cause to be issued a written notice to the participants of such fact and shall issue all Shares which have become unrestricted to participants as soon as possible after such notice. In determining whether a change in control has occurred, the Board of Directors shall consider, but shall not be limited to, the occurrence of the following events: (i) the first purchase of Shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for all or part of the Company's Common Shares or any class or any securities convertible into such Common Shares; (ii) the receipt by the Company of a Schedule 13D or other advice indicating that a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty percent (20%) or more of the Company's Common Shares calculated as provided in paragraph (d) of said Rule 13d-3; (iii) the
date of approval by Shareholders of the Company of an agreement providing for any consolidation or merger of the Company in which the Company will not be the continuing or surviving corporation or pursuant to which Common Shares of the Company, or any class or any securities convertible into such Common Shares of the Company, would be converted into cash, securities, or other property, other than a merger of the Company in which the holders of shares of all classes of the Company's capital stock immediately prior to the merger would have the same proportion of ownership of capital stock of the surviving corporation immediately after the merger; (iv) the date of the approval by Shareholders of the Company of any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (v) the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company.
5.5 The Committee may require any participant to execute and deliver to the Company a stock power in blank with respect to the Shares issued subject to the restrictions in Section 5.2 above and may require that the Company retain possession of the certificates for Shares with respect to which all of the restrictions have not lapsed. Notwithstanding retention of certificates by the Company or an escrow agent, the participant in whose name certificates are issued shall have all rights (including dividend and voting rights) with respect to the Shares represented by such certificates, subject to the terms, conditions and restrictions specified under this Plan, and the Shares represented by such certificates shall be considered as issued and outstanding and fully paid and non-assessable for all purposes.
6. OTHER RESTRICTIONS.
Notwithstanding anything in this Plan to the contrary, in lieu of the restrictions set forth in Article 5 above, the Committee may impose other restrictions as it deems appropriate on
any Shares awarded hereunder which lapse at an earlier date than set forth herein or accelerate the lapse of restrictions imposed on a prior award of Shares hereunder. Awards of Shares under the Plan are not required to be made on the same terms and conditions even though the Shares are awarded at the same time. The terms of awards of Shares hereunder may vary from time to time and from employee to employee.
7. ESCROW AGREEMENT AND LEGENDS.
In order to enforce the restrictions imposed upon Shares issued hereunder, the Committee also may require any participant to enter into an Escrow Agreement providing that the certificates representing Shares issued pursuant to this Plan shall remain in the physical custody of an escrow agent until any or all of the restrictions imposed pursuant to this Plan have terminated. The Committee may impose such additional restrictions on any Shares awarded pursuant to the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of NASDAQ or any other stock exchange upon which such Shares are then listed and under any state blue sky or securities laws applicable to such Shares. In addition, the Committee may cause a legend or legends to be placed on any certificates representing Shares issued pursuant to this Plan, which legend or legends shall make appropriate reference to the various restrictions imposed hereunder.
8. AMENDMENTS.
This Plan may be amended at any time by the Board of Directors, provided, that if this Plan shall have been approved by the Shareholders of the Company no such amendment shall increase the maximum number of Shares that may be issued pursuant to this Plan, except pursuant to Section 4 hereof, without the further approval of such Shareholders; and provided further, that no amendment to this Plan shall modify or impair the rights of participants who have
been awarded Shares, or who have been granted the right to an award of Shares hereunder prior to any such amendment.
9. DURATION.
This Plan became effective upon its adoption by the Board of Directors for the Plan Year ending May 31, 1998 and shall terminate on May 31, 2007 or such earlier date as may be determined by the Board of Directors; provided, however, that the Plan shall terminate and all awards of Shares under the Plan shall be revoked if, within 12 months of the date of its adoption by the Board of Directors, the Plan does not receive the approval of a majority of the outstanding Shares present in person or by proxy and entitled to vote at a meeting of Shareholders of the Company.
10. BENEFICIARY DESIGNATION.
Unless a participant has designated a beneficiary in accordance with the provisions of the following sentence, any Shares that become unrestricted and payable on account of the death of an employee shall be paid to the person or persons in the first of the following classes in which there are any survivors of such participant:
(a) his or her spouse at the time of death;
(b) his or her issue per stirpes;
(c) his or her parents; and
(d) the executor or administrator of his or her estate.
Instead of having any Shares that become payable on account of a participant's death paid to a beneficiary as determined above, a participant may sign a document designating a beneficiary or beneficiaries to receive such Shares and filing such designation with the Company.
11. COORDINATION WITH DEFERRED COMPENSATION PLAN.
In the event that an employee has previously received an award
of Shares that are subject to the restrictions set forth in Section 5.2 above,
such an employee has not made an election under Section 83(b) of the Internal
Revenue Code, and the lapse of such restrictions will result in the receipt of
an amount of compensation in excess of the amount that may be deducted under
Section 162(m) of the Internal Revenue Code, the Committee shall have the right
and authority to cancel such number of Shares as is necessary so that the
compensation amount attributable to the remaining Shares that will become
unrestricted on the next immediate May 31 will be deductible by the Company
after taking into account Section 162(m) of the Internal Revenue Code, and the
employee shall automatically receive as a credit to his account under the RPM,
Inc. Deferred Compensation Plan an amount equal to (i) multiplied by (ii) where:
(i) equals the average closing price of one Share for the five (5) trading day period ending on such May 31; and
(ii) equals the number of Shares that the employee has elected to forfeit as set forth above in this Article 11.
The Committee may determine to make such a cancellation only during the period commencing May 1 and ending May 21 which immediately precedes the May 31 on which the restrictions for such Shares lapse pursuant to Section 5.2 above. The Employee shall be notified of any such cancellation which shall be in writing and shall be subject to such further requirements as determined by the Committee in its sole discretion.
IN WITNESS WHEREOF, RPM, Inc., by its Chairman of the Board
duly authorized, has caused this Plan to be executed as of this 16th day of
July, 1997.
RPM, Inc.
By: /s/ Thomas C. Sullivan
----------------------------
Thomas C. Sullivan, Chairman
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EXHIBIT 10.12.1
THIRD AMENDMENT
TO THE
1997 RPM, INC. RESTRICTED STOCK PLAN
THIS THIRD AMENDMENT (the "Amendment") to the 1997 RPM, Inc. Restricted Stock Plan (hereinafter known as the "Plan") is executed by RPM, Inc. (hereinafter known as the "Company") and acknowledged by RPM International Inc. (hereinafter known as the "Successor Company"), as of the dates set forth below.
WITNESSETH:
WHEREAS, the Company maintains the Plan for the benefit of certain of its employees and certain employees of affiliated companies; and
WHEREAS, in connection with the reincorporation of the Company as a Delaware corporation, the Company has agreed to assign, and the Successor Company has agreed to assume, all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan in accordance with an Agreement and Plan of Merger, dated August 29, 2002 (the "Merger Agreement"); and
WHEREAS, it is the desire of the Company to amend the Plan in order to reflect the reincorporation of the Company, the assumption of the Plan by the Successor Company, and the new name of the Plan, all of which will become effective, unless otherwise indicated, as of the effective time of the reincorporation of the Company, which shall be 9:00 a.m. on October 15, 2002 (the "Effective Time"); and
WHEREAS, immediately following the Effective Time, the Successor Company and the Company will enter into an agreement (the "Reorganization Agreement"), pursuant to
which agreement the Company will transfer the stock ownership of various of its operating companies to Successor Company; and
WHEREAS, the Board of Directors reserved the right, pursuant to Section 8 of the Plan, to make certain amendments thereto;
NOW, THEREFORE, pursuant to Section 8 of the Plan, the Board of Directors hereby amends the Plan, effective as of the Effective Time, unless indicated otherwise, as follows:
1. The name of the Plan is hereby changed to the "1997 RPM International Inc. Restricted Stock Plan."
2. With the exception of any references specifically set forth in this
Amendment, including, without limitation, the definition of "Merger Agreement"
and "Reorganization Agreement" in Section 5.4 of the Plan, the Plan is hereby
amended by the deletion of each reference to the term "RPM, Inc." as a corporate
entity, including but not limited to, the "Name and Purpose" provisions in
Section 1 and the signature block, and the substitution in lieu thereof of the
term "RPM International Inc." as the corporate entity.
3. The Plan is hereby amended by the deletion of each reference to the term "RPM, Inc." as the sponsor of certain employee benefit plans, including but not limited to, the RPM, Inc. Deferred Compensation Plan, as well as the reference to RPM, Inc. in the name of the Plan, and the substitution in lieu thereof of the term "RPM International Inc." as the sponsor of such plans.
4. Section 1 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 1 to read as follows:
"1. NAME AND PURPOSE.
The name of this plan is the RPM International Inc. 1997 Restricted Stock Plan. The Plan will be maintained by RPM International Inc. (herein referred to as the "Company") to further the growth, success and interest of the Company and its subsidiaries and the Stockholders of the Company by requiring certain employees of the Company and its subsidiaries to own shares of Common Stock, par value $.01 per share, of the Company ("Shares") under the terms and conditions of and in accordance with this Plan, thereby increasing their direct involvement in the success of the Company."
5. Effective immediately prior to the Effective Time, Section 5.4 of the Plan is hereby amended by the addition of a new sentence to the end of said section to read as follows:
"Notwithstanding the foregoing provisions of this Section, a change in control shall not be deemed to have occurred as a result of (i) the execution of the 'Merger Agreement' or the 'Reorganization Agreement'; (ii) the assignment by the Company to the Successor Company and the assumption by the Successor Company of all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan; or (iii) the consummation of any other transaction contemplated in the Merger Agreement or the Reorganization Agreement. For purposes of this Section, 'Merger Agreement' shall mean the Agreement and Plan of Merger, dated as of August 29, 2002, by and among RPM International Inc., RPM, Inc. and RPM Merger Company, an Ohio corporation, as it may be amended, supplemented or replaced from time to time. For purposes of this Section, 'Reorganization Agreement' shall mean the Reorganization Agreement, effective as of October 15, 2002, by and between RPM International Inc. and RPM, Inc., as it may be amended, supplemented or replaced from time to time."
[Signature Page Follows]
IN WITNESS WHEREOF, RPM, Inc., by officers duly authorized by its Board of Directors, has caused this Amendment to the 1997 RPM, Inc. Restricted Stock Plan to be signed this 14th day of October, 2002.
RPM, INC.
By: /s/ P. Kelly Tompkins
-----------------------------
P. Kelly Tompkins, Secretary
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The Successor Company hereby expressly acknowledges its assumption of all of the powers, authorities, duties, responsibilities and obligations of the Company with respect to the Plan as of the Effective Time.
RPM INTERNATIONAL INC.
By: /s/ Keith R. Smiley
-----------------------------
Keith R. Smiley, Treasurer and
Assistant Secretary
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EXHIBIT 10.13
RPM, INC.
2002 PERFORMANCE ACCELERATED
RESTRICTED STOCK PLAN
Effective Date: June 1, 2002
TABLE OF CONTENTS
ARTICLE I -- NAME AND PURPOSE......................................1
1.1 Name........................................................1
1.2 Purpose.....................................................1
ARTICLE II -- DEFINITIONS..........................................1
2.1 Beneficiary.................................................1
2.2 Board of Directors..........................................1
2.3 Code........................................................1
2.4 Committee...................................................1
2.5 Common Shares...............................................2
2.6 Company.....................................................2
2.7 Continuous Employment.......................................2
2.8 Deferred Compensation Plan..................................2
2.11 Eligible Employee...........................................2
2.12 Fair Market Value...........................................2
2.13 Grant.......................................................3
2.14 Grantee.....................................................3
2.15 Parent......................................................3
2.16 Plan........................................................3
2.17 Plan Year...................................................3
2.18 Restricted Stock............................................3
2.19 Restricted Stock Agreement..................................4
2.20 Rule 16b-3..................................................4
2.21 Shareholders................................................4
2.22 Stock Power.................................................4
2.23 Subsidiary..................................................4
(ii)
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2.24 Termination of Employment...................................4
ARTICLE III -- ADMINISTRATION......................................5
3.1 Plan Administration.........................................5
3.2 Powers and Duties of the Committee..........................5
3.3 Governance of the Committee.................................6
3.4 Limitation of Liability.....................................6
3.5 Administrative Plan Years...................................6
ARTICLE IV -- ELIGIBILITY AND PARTICIPATION........................6
4.1 Eligible Employees..........................................6
4.2 Prohibition on Participation................................6
4.3 Entry Date..................................................6
ARTICLE V -- STOCK AVAILABLE FOR GRANTS............................7
5.1 Available Shares............................................7
5.2 Source of Shares............................................7
ARTICLE VI -- RESTRICTED STOCK AGREEMENTS..........................7
6.1 Granting of Restricted Stock................................8
6.2 Restricted Stock Agreements.................................8
6.3 Stock Power.................................................8
6.4 Rights of Grantees..........................................8
ARTICLE VII -- STOCK RESTRICTIONS..................................9
7.1 Transfer Restrictions.......................................9
7.2 Other Restrictions..........................................9
ARTICLE VIII -- LAPSE OF RESTRICTIONS..............................10
8.1 Lapse of Restrictions After Ten Years of Continuous
Employment..................................................10
8.2 Performance Accelerated Lapse of Restrictions...............10
(iii)
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8.3 Determination of Achievement of Performance Goals...........10
8.4 Delivery of Restricted Stock Upon Lapse of Restrictions.....11
ARTICLE IX -- TERMINATION OF EMPLOYMENT............................11
9.1 Termination of Employment for Reasons Other Than Change of
Control, Death or Disability................................11
9.2 Termination of Employment Due to Death or Disability........11
9.3 Termination of Employment Due to Change in Control..........11
9.4 Definition of "Change in Control"...........................12
9.5 Delivery of Restricted Stock................................14
ARTICLE X -- ESCROW AGREEMENT AND LEGENDS..........................14
10.1 Escrow Agreements...........................................14
10.2 Legends.....................................................14
ARTICLE XI -- BENEFICIARY DESIGNATION..............................15
11.1 Procedures for Beneficiary Designation......................15
11.2 Default Beneficiaries.......................................15
ARTICLE XII -- AMENDMENTS..........................................15
12.1 Plan May Be Amended.........................................15
12.2 Limitations on Plan Amendment...............................15
ARTICLE XIII -- EFFECTIVE DATE AND TERMINATION.....................16
13.1 Effective Date..............................................16
13.2 Plan May Be Terminated......................................16
13.3 Termination.................................................16
ARTICLE XIV -- COORDINATION WITH DEFERRED COMPENSATION PLAN........16
14.1. Credit to Deferred Compensation Plan Determined by
Committee...................................................16
14.2. Credit to Deferred Compensation Plan Determined by
Grantee.....................................................17
14.3 Vesting of Canceled or Surrendered Restricted Stock.........18
(iv)
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ARTICLE XV -- MISCELLANEOUS........................................18
15.1 Consents....................................................18
15.2 Right of Discharge Reserved.................................19
15.3 Nature of Grants............................................19
15.4 Non-Uniform Determinations and Restricted Stock
Agreements..................................................19
15.5 Other Payments or Awards....................................19
15.6 Section Headings............................................20
15.7 Number......................................................20
15.8 Gender......................................................20
15.9 Withholding.................................................20
15.10 Waiver......................................................20
15.11 Governing Law...............................................20
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ARTICLE I
NAME AND PURPOSE
1.1 Name. The name of this Plan shall be: RPM, Inc. 2002 Performance Accelerated Restricted Stock Plan.
1.2 Purpose. The Plan will be maintained to provide certain key executive employees with (i) an incentive to remain in the service of RPM, Inc., Parent and their Subsidiaries, (ii) an incentive to exert their best efforts on behalf of RPM, Inc., Parent and their Subsidiaries and to maintain and enhance the long-term performance and profitability of RPM, Inc., Parent and their Subsidiaries and (iii) an opportunity to acquire a proprietary interest in the success of RPM, Inc., Parent and their Subsidiaries.
ARTICLE II
DEFINITIONS
2.1 Beneficiary. The word "Beneficiary" shall mean the person, persons, entity or entities so designated, or deemed to be designated, by a Grantee pursuant to Article XI.
2.2 Board of Directors. The words "Board of Directors" shall mean the Board of Directors of the Company, as constituted from time to time.
2.3 Code. The word "Code" shall mean the Internal Revenue Code of 1986, as amended, and any lawful regulations or pronouncements thereunder. Whenever reference is made to a specific Code Section, such reference shall be deemed to be a reference to any successor Code Sections with the same or similar purpose.
2.4 Committee. The word "Committee" shall mean the Compensation Committee of the Board of Directors, as constituted from time to time, which shall:
(a) consist of at least three Directors, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3; and
(b) be authorized by the Board to exercise all authority granted to it under this Plan and any Board actions.
2.5 Common Shares. The words "Common Shares" shall mean common shares of RPM, Inc., without par value. Once applicable, the words "Common Shares" shall mean common stock of the Parent, with par value of one cent ($.01) per share.
2.6 Company. The word "Company" shall mean RPM, Inc., an Ohio corporation, or any corporation or other entity which assumes the obligations of RPM, Inc. by operation of law or otherwise under the Plan. Once applicable, the word "Company" shall mean Parent or any other corporation or entity which assumes the obligations of Parent by operation of law or otherwise under the Plan.
2.7 Continuous Employment. The words "Continuous Employment" shall mean employment for an uninterrupted period during which a Grantee is an employee of the Company and/or any Subsidiary, and shall include any authorized leaves of absence.
2.8 Deferred Compensation Plan. The words "Deferred Compensation Plan" shall mean the RPM, Inc. Deferred Compensation Plan, any similar deferred compensation plan of Parent, or their successors.
2.9 Eligible Employee. The words "Eligible Employee" shall mean an officer of the Company or a Subsidiary entitled to participate in the Plan pursuant to Section 4.1.
2.10 Fair Market Value. The words "Fair Market Value" shall mean the fair market value of a Common Share or share of Restricted Stock (for purposes of this Section, "Share"), as the context may require, as of the date it is determined, and shall be deemed to be the closing price of such Share on such date on the Nasdaq or New York Stock Exchange; or if the
Share is not listed on the Nasdaq or New York Stock Exchange as of such date, the closing price of the Share on such date on such national securities exchange or transaction reporting system on which the Share is then listed or quoted; or if the Share is not then so listed or quoted, the fair market value of the Share on such date as determined in good faith by the Board of Directors.
2.11 Grant. The word "Grant" shall mean a grant of Restricted Stock subject to the terms and conditions of this Plan and any related Restricted Stock Agreement.
2.12 Grantee. The word "Grantee" shall mean an Eligible Employee to whom a Grant has been made in accordance with Article VI of this Plan.
2.13 Parent. The word "Parent" means any publicly-held corporation, limited
liability company or partnership that (a) is formed for the sole purpose of
acquiring, directly or indirectly (whether by distribution or otherwise),
substantially all of the outstanding voting stock of all classes of RPM, Inc.,
(b) is owned immediately after the acquisition described in clause (a) of this
definition by the same shareholders as were shareholders of RPM, Inc.
immediately prior to the acquisition described in clause (a) of this definition,
and (c) hereafter owns, directly or indirectly, all of the outstanding voting
stock of all classes of RPM, Inc.
2.14 Plan. The word "Plan" shall mean the RPM, Inc. 2002 Performance Accelerated Restricted Stock Plan, as originally executed and as it may be amended.
2.15 Plan Year. The words "Plan Year" shall mean the Company's annual accounting period, which is presently the twelve (12) month period ending on May 31.
2.16 Restricted Stock. The words "Restricted Stock" shall mean Common Shares which have been granted to a Grantee in accordance with, and subject to, the terms and conditions of this Plan.
2.17 Restricted Stock Agreement. The words "Restricted Stock Agreement" shall mean a written agreement executed by the Company and a Grantee containing the terms and conditions of the granting of Restricted Stock to such Grantee under this Plan.
2.18 Rule 16b-3. The term "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Securities Exchange Act of 1934 and any successor to such rule with the same or similar purpose.
2.19 Shareholders. The word "Shareholders" shall mean the individuals or entities that own one or more Common Shares.
2.20 Stock Power. The words "Stock Power" shall mean a power of attorney executed by an Eligible Employee and delivered to the Company which authorizes the Company to transfer ownership of such Restricted Stock from the Grantee to the Company in the event of forfeiture.
2.21 Subsidiary. The word "Subsidiary" shall mean any corporation in which the Company owns, directly or indirectly, stock possessing at least eighty percent (80%) or more of the total combined voting power of all classes of stock entitled to vote or at least eighty percent (80%) of the total value of shares of all classes of stock of such corporation as determined pursuant to Section 1563(a)(1) of the Code, but only during the period any such corporation would be so defined.
2.22 Termination of Employment. The words "Termination of Employment" shall mean the severance of an individual's employment relationship with the Company or a Subsidiary for any reason whatsoever, whether voluntarily or involuntarily, including by reason of retirement, death or disability.
ARTICLE III
ADMINISTRATION
3.1 Plan Administration. Unless otherwise specified by the Board, this Plan shall be administered by the Committee. The Board may, in its sole discretion, at any time and from time to time, by an official action, resolve to administer the Plan effective as of a date specified in such action. In the event that the Board exercises its discretion to administer the Plan, all references to the "Committee" herein shall be deemed to be references to the "Board."
3.2 Powers and Duties of the Committee. The Committee shall have the sole
and exclusive authority to: (i) exercise all powers granted to it under the Plan
and any Board actions; (ii) construe, interpret, and implement the Plan and any
Restricted Stock Agreements executed pursuant to Article VI; (iii) cause the
Company to enter into Restricted Stock Agreements with Eligible Employees
(including, but not limited to, the authority to determine the number of shares
of Restricted Stock awarded to each Eligible Employee, the price or prices at
which shares shall be awarded to each Eligible Employee, the time or times when
such shares may be awarded and to prescribe the form of such Restricted Stock
Agreements and the legend, if any, to be affixed to the certificates
representing such shares issued under this Plan); (iv) prescribe, amend and
rescind rules and interpretations relating to the Plan; (v) make all
determinations necessary or advisable in administering the Plan; (vi) correct
any defect, supply any omission and reconcile any inconsistency in the Plan; and
(vii) designate one or more persons or agents to carry out any or all of its
administrative duties hereunder (provided that none of the duties required to be
performed by the Committee under Rule 16b-3 or Article VI of the Plan may be
delegated to any other person).
3.3 Governance of the Committee. All actions of the Committee shall require the affirmative vote of a majority of its members present at a meeting at which a quorum is present (in person, telephonically, electronically, by proxy or its equivalent or as otherwise permitted by the Company's governing documents). The determination of the Committee on all matters relating to the Plan or any Restricted Stock Agreement shall be conclusive.
3.4 Limitation of Liability. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Restricted Stock Agreement.
3.5 Administrative Plan Years. The Plan shall be administered and operated on the basis of the Plan Year. In the event that the Company changes its annual accounting period, the Plan Year shall automatically change and the Committee may make such adjustments to the operation of the Plan as appropriate to reflect any short Plan Years, adjustments to the dates that shares of Restricted Stock are awarded or that restrictions lapse hereunder or any other adjustments that may be appropriate to reflect the change in the Plan Year.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
4.1 Eligible Employees. The Committee shall determine, from time to time and in its sole and exclusive discretion, which officers of the Company or its Subsidiaries shall be Eligible Employees hereunder.
4.2 Prohibition on Participation. Non-employee members of the Board of Directors and members of the Committee shall not be eligible to participate in the Plan.
4.3 Entry Date. An Eligible Employee designated pursuant to Section 4.1 shall be deemed to be a "Grantee" upon execution of a Restricted Stock Agreement between
such Eligible Employee and the Company in accordance with Article VI. An Eligible Employee shall remain a "Grantee" until such time as he no longer has any Restricted Stock subject to the terms of this Plan or any Restricted Stock Agreement, including, but not limited to, the terms of Articles VIII or IX which result in either the lapse of restrictions on Restricted Stock or the forfeiture of Restricted Stock.
ARTICLE V
STOCK AVAILABLE FOR GRANTS
5.1 Available Shares. The total number of Common Shares with respect to which Grants may be made under this Plan shall be equal to one million (1,000,000). In the event that the number or kind of outstanding Common Shares of the Company shall be changed by reason of recapitalization, reorganization, redesignation, merger, consolidation, stock split, stock dividend, combination or exchange of shares, exchange for other securities, or the like, the number and kind of Common Shares which may thereafter be issued under this Plan may be appropriately adjusted as determined by the Committee so as to reflect such change. In accordance with (and without limitation upon) the foregoing, Common Shares available under this Plan and covered by Grants which expire, terminate, are forfeited or are canceled for any reason whatsoever shall again become available for Grants under this Plan.
5.2 Source of Shares. The Restricted Stock which may be granted under this Plan shall be made available from authorized and unissued or treasury Common Shares of the Company.
ARTICLE VI
RESTRICTED STOCK AGREEMENTS
6.1 Granting of Restricted Stock. The Committee is authorized to make Grants of Restricted Stock to Eligible Employees in such amounts, and subject to such terms and conditions, as the Committee shall from time to time determine in its sole discretion, subject to the terms of this Plan.
6.2 Restricted Stock Agreements. The granting of Restricted Stock to an Eligible Employee under this Plan shall be contingent on such Eligible Employee executing a Restricted Stock Agreement in the form prescribed by the Committee. Each Restricted Stock Agreement shall: (i) indicate the number of shares of Restricted Stock which will be granted to the Eligible Employee; (ii) include provisions reflecting the transfer restrictions imposed upon Restricted Stock under this Plan and the provisions for lapse of those restrictions under this Plan; and (iii) include any other terms, conditions or restrictions the Committee deems necessary or appropriate. The Committee may solicit the recommendation of the Company's Chief Executive Officer in determining the number of shares of Restricted Stock which shall be allocated to an Eligible Employee.
6.3 Stock Power. The Committee shall require Eligible Employees to execute and deliver to the Company a Stock Power in blank with respect to Restricted Stock granted to such Eligible Employees. The Committee may, in its sole discretion, deposit Restricted Stock certificates with an escrow agent in accordance with Article X. Alternatively, the Company may retain possession of the Restricted Stock certificates.
6.4 Rights of Grantees. Subject to the terms, conditions and restrictions specified under this Plan and applicable Restricted Stock Agreements, the Restricted Stock granted under this Plan shall be considered as issued and outstanding and fully paid and non-assessable for all purposes. Notwithstanding retention of Restricted Stock certificates by the
Company or an escrow agent, Grantees shall have all rights with respect to their Restricted Stock (subject to the terms, conditions and restrictions specified under this Plan and any applicable Restricted Stock Agreement) including:
(a) Title. Subject to the Grantee's execution of a Stock Power, any Restricted Stock granted under this Plan shall be held by the Company or in escrow under the Grantee's name.
(b) Voting Rights. Subject to the Grantee's execution of a Stock Power, a Grantee shall be entitled to vote any Restricted Stock granted to him under this Plan.
(c) Dividends. As of the date any dividend is paid on any Restricted Shares under this Plan, the Grantee having title to such Restricted Stock shall be credited with a dividend equivalent credit under the Deferred Compensation Plan in such manner, and in such amount, as is provided in the Deferred Compensation Plan for dividends paid on Restricted Shares thereunder.
ARTICLE VII
STOCK RESTRICTIONS
7.1 Transfer Restrictions. Restricted Stock shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated (and any such sale, transfer or other disposition, pledge or other hypothecation being hereinafter referred to as "to dispose of" or a "disposition") until the earliest of: (i) a Change in Control (as described in Sections 9.3 & 9.4); (ii) a Grantee experiencing a Termination of Employment due to death or total disability (as described in Section 9.2); (iii) the restrictions on such Restricted Stock lapse in accordance with Article VIII; or (iv) termination of the Plan.
7.2 Other Restrictions. The Committee may impose restrictions on Restricted Stock in addition to, or different from, those described in this Plan, as it deems necessary or appropriate. Grants are not required to be made with the same terms, conditions or restrictions. Grants may vary from time to time and from Grantee to Grantee.
ARTICLE VIII
LAPSE OF RESTRICTIONS
8.1 Lapse of Restrictions After Ten Years of Continuous Employment. If a Grantee remains in Continuous Employment from June 1, 2002 until May 31, 2012, subject to all of the other provisions of this Plan, all restrictions imposed upon Restricted Stock awarded to him pursuant to this Plan shall lapse and be of no further force and effect. In the event of Termination of Employment prior to May 31, 2012, the status of the restrictions imposed upon such Grantee's Restricted Stock upon Termination of Employment shall be governed by Article IX.
8.2 Performance Accelerated Lapse of Restrictions. All restrictions on the Restricted Stock granted pursuant to this Plan, whether contained in this Plan or a Restricted Stock Agreement, shall lapse upon attainment of all Performance Goals during any Plan Year beginning prior to June 1, 2011, as determined in accordance with Section 8.3. The term "Performance Goals" shall mean such financial or other goals as determined by the Committee and set forth in a Restricted Stock Agreement.
8.3 Determination of Achievement of Performance Goals. Notwithstanding anything contained in this Plan to the contrary, the Committee shall have sole and exclusive authority to determine whether Performance Goals have been satisfied. The Committee may, in its sole and exclusive discretion, adjust any criteria or measure used to determine satisfaction of Performance Goals for any Plan Year, solely for purposes of this Plan, to account for the effect of acquisitions, divestitures, substantial asset sales, the payment of debt, the classification of normal operating expenses as "unusual charges" for accounting purposes, the use of non-standard accounting methodologies, changes in accounting principles, or other extraordinary or
non-recurring events. In making any such adjustment, the Committee may rely upon the opinion of outside service providers to the extent it deems necessary or appropriate.
8.4 Delivery of Restricted Stock Upon Lapse of Restrictions. As promptly as practicable following a determination by the Committee that Performance Goals have been satisfied, the Committee shall cause certificates for all Restricted Stock, which certificates have been in the physical custody of the Company or an escrow agent, to be issued to the appropriate Grantees, with any legend making reference to the various restrictions imposed hereunder removed.
ARTICLE IX
TERMINATION OF EMPLOYMENT
9.1 Termination of Employment for Reasons Other Than Change of Control, Death or Disability. Except as otherwise provided in Sections 9.2 through 9.4, in the event a Grantee experiences a Termination of Employment, any Restricted Stock granted hereunder which is not unrestricted upon Termination of Employment shall be forfeited and returned to the Company pursuant to a Stock Power.
9.2 Termination of Employment Due to Death or Disability. Notwithstanding
Section 9.1 to the contrary, in the event a Grantee experiences a Termination of
Employment by reason of death or total disability (as defined under the
Company's group long-term disability plan), any Restricted Stock granted
hereunder shall be deemed to be unrestricted, meaning that all restrictions
imposed on such Restricted Stock shall lapse and be of no further force and
effect. The Committee has the authority to determine whether a Grantee is
totally disabled.
9.3 Termination of Employment Due to Change in Control. Notwithstanding
Section 9.1 to the contrary, in the event of a Change in Control as described in
Sections 9.3 and
9.4, any Restricted Stock granted hereunder shall be deemed to be unrestricted, meaning that all restrictions imposed on such Restricted Stock shall lapse and be of no further force and effect. The Committee has the authority to determine whether a Change in Control has occurred.
9.4 Definition of "Change in Control". A "Change in Control" shall be deemed to have occurred upon the occurrence of any of the following events:
(a) The Company is merged or consolidated or reorganized into or with another corporation or other legal person or entity (other than Parent or any Subsidiary of Parent), and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation, person or entity immediately after such transaction are held in the aggregate by the holders of the then-outstanding securities entitled to vote generally in the election of Directors (the "Voting Stock") immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person or entity (other than Parent or any Subsidiary of Parent), and less than a majority of the combined voting power of the then-outstanding securities of such corporation, person or entity immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule TO (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act but excluding Parent and any Subsidiary of Parent) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 15% or more of the total votes relating to the then-outstanding securities entitled to vote generally in the election of Directors (the "Voting Power");
(d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then- existing contract or transaction (excluding any change in control in favor of Parent or any Subsidiary of Parent);
(e) During any period of two consecutive years, individuals, who at the beginning of any such period, constitute the Directors cease for any reason to constitute at least a majority thereof, unless the nomination for election by the Company's Shareholders of each new Director was approved by a vote of at least two-thirds of the Directors then in office who were Directors at the beginning of any such period; or
(f) Such event as the Board of Directors, in the good faith exercise of its discretion, shall determine to be a "Change in Control."
Notwithstanding the foregoing provisions of paragraphs (c) and (d) of this definition, a "Change in Control" shall not be deemed to have occurred for purposes of this Plan (i) solely because (A) the Company, (B) a Subsidiary of the Company, or (C) any Company-sponsored employee stock ownership plan or other employee benefit plan of the Company or any Subsidiary, or any entity holding shares of Voting Stock for or pursuant to the terms of any such plan, either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership, (ii) solely because any other person or entity either files or becomes obligated to file a report on Schedule 13D or Schedule TO (or any successor schedule, form or report) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, but only if both (A) the transaction giving rise to such filing or obligation is approved in advance of consummation thereof by the Company's Board of Directors and (B) at least a majority of the Voting Power immediately after such transaction is held in the aggregate by the holders of Voting Stock immediately prior to such transaction, or (iii) solely because of a change in control of any Subsidiary of the Company.
9.5 Delivery of Restricted Stock. As promptly as practicable following the occurrence of any of the events described in Sections 9.2 through 9.4, the Committee shall cause certificates for all Restricted Stock which has become unrestricted as a result of such events, which certificates have been in the physical custody of the Company or an escrow agent, to be issued to the appropriate Grantees, with any legend making reference to the various restrictions imposed hereunder removed. In the event of a Grantee's Termination of Employment by reason of death, certificates shall be delivered to the Grantee's Beneficiary, determined in accordance with Article XI.
ARTICLE X
ESCROW AGREEMENT AND LEGENDS
10.1 Escrow Agreements. In order to enforce the restrictions imposed upon Restricted Stock issued hereunder, the Committee may require any Grantee to enter into an escrow agreement providing that the certificates representing Restricted Stock issued pursuant to this Plan shall remain in the physical custody of an escrow agent until any or all of the restrictions imposed upon such Restricted Stock pursuant to this Plan have terminated. The Committee may impose such additional restrictions on any Restricted Stock awarded pursuant to the Plan as it may deem necessary or appropriate including, without limitation, restrictions under the Securities Act of 1933, as amended, or other securities the requirements of Nasdaq, the New York Stock Exchange or any other stock exchange or transaction reporting system upon which such Restricted Stock is then listed or quoted and any state blue sky laws applicable to such Restricted Stock.
10.2 Legends. The Committee may cause a legend or legends to be placed on any certificates representing Restricted Stock issued pursuant to this Plan, which legend or
legends shall make appropriate reference to the various restrictions imposed hereunder and any other limitations or restrictions deemed necessary or advisable by the Committee.
ARTICLE XI
BENEFICIARY DESIGNATION
11.1 Procedures for Beneficiary Designation. A Grantee may designate a Beneficiary or Beneficiaries to receive Restricted Stock that becomes payable on account of the Grantee's death, in such manner as the Committee may require.
11.2 Default Beneficiaries. If a Grantee has not designated a Beneficiary or Beneficiaries in accordance with Section 11.1, any shares of Restricted Stock that become unrestricted on account of the death of the Grantee shall be distributed to the person or persons in the first of the following classes in which there are any survivors of such Grantee, which person or persons shall be deemed to have been designated a Beneficiary or Beneficiaries by the Grantee:
(a) his spouse at the time of death;
(b) his issue per stirpes;
(c) his parents; and
(d) the executor or administrator of his estate.
ARTICLE XII
AMENDMENTS
12.1 Plan May Be Amended. Subject to Section 12.2, this Plan may be amended at any time by the Board of Directors.
12.2 Limitations on Plan Amendment. If this Plan shall have been approved by the Shareholders of the Company, no amendment shall increase the maximum number of Common Shares that may be issued pursuant to this Plan, except pursuant to Section 5.1, without
the further approval of such Shareholders. No amendment to this Plan shall materially modify or impair the rights of Eligible Employees who have been granted Restricted Stock, or who have the right to a grant of Restricted Stock hereunder prior to any such amendment
ARTICLE XIII
EFFECTIVE DATE AND TERMINATION
13.1 Effective Date. This Plan became effective upon its adoption by the Board of Directors for the Plan Year beginning June 1, 2002.
13.2 Plan May Be Terminated. This Plan may be terminated at any time by the Board of Directors.
13.3 Termination. This Plan shall terminate on the earliest of:
(a) May 31, 2012;
(b) such other date indicated in a resolution of the Board of Directors; or
(c) anytime within twelve (12) months of the date of the Plan's adoption by the Board of Directors, if the Plan does not receive the approval of a majority of the outstanding Common Shares present (in person, telephonically, electronically, by proxy or its equivalent or as otherwise permitted by the Company's governing documents) and entitled to vote at a meeting of Shareholders of the Company.
In the event the Plan is terminated pursuant to Section 13.2(c), all Grants of Restricted Stock under the Plan shall be revoked and the Company and its Subsidiaries shall not be liable for any such Grants under this Plan, notwithstanding any other provision in the Plan to the contrary.
ARTICLE XIV
COORDINATION WITH DEFERRED COMPENSATION PLAN
14.1. Credit to Deferred Compensation Plan Determined by Committee. In the event that an Eligible Employee receives a Grant of Restricted Stock, has not made an election under Section 83(b) of the Code and will be in receipt of an amount of compensation in excess of
the amount that may be deducted under Section 162(m) of the Code upon lapse of the restrictions, the Committee shall have the right and authority to cancel such number of shares of Restricted Stock as is necessary so that the compensation amount attributable to the remaining Restricted Stock that will become unrestricted on or before the next immediate May 31 will be deductible by the Company after taking into account Section 162(m) of the Code, and the Eligible Employee shall automatically have the same number of shares of Restricted Stock credited to his Restricted Stock Account under the Deferred Compensation Plan. The Committee may determine to make such a cancellation at any time, but not later than ten (10) days prior to the date the restrictions for such Restricted Stock lapse. The Eligible Employee shall be notified in writing of any such cancellation and shall be subject to such further requirements as determined by the Committee in its sole discretion.
14.2. Credit to Deferred Compensation Plan Determined by Grantee. In the event that an Eligible Employee receives a Grant of Restricted Stock, has not made an election under Section 83(b) of the Code and will be in receipt of an amount of compensation upon lapse of such restrictions, the Grantee may elect to surrender, as of a date specified in his election, any of the Restricted Stock awarded under this Plan and the Grantee shall automatically have the same number of shares of Restricted Stock credited to his Restricted Stock Account under the Deferred Compensation Plan. For an election to be valid, it must be made in accordance with the terms and conditions imposed by the Committee and the requirements of the Deferred Compensation Plan. The surrender election with respect to the Restricted Stock must be delivered to and accepted by the Committee at least six (6) months prior to the date all restrictions with respect to the Restricted Stock lapse.
14.3 Vesting of Canceled or Surrendered Restricted Stock. An employee shall be vested in shares of Restricted Stock or amounts credited to his Account Balance under the Deferred Compensation Plan as a result of cancellation or surrender of Restricted Stock under this Plan when restrictions on the cancelled or surrendered Restricted Stock would have lapsed under this Plan.
ARTICLE XV
MISCELLANEOUS
15.1 Consents. If the Committee shall at any time determine that any Consent (as defined below) is necessary or desirable as a condition to, or in connection with, any Grant under the Plan, the issuance of Common Shares or other rights thereunder or the taking of any other action thereunder (each such action being hereinafter referred to as a "Plan Action"), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Committee, or the Committee may require that such Plan Action be taken only in such manner as to make such Consent unnecessary.
The term "Consent" as used herein with respect to any Plan Action means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (ii) any and all written agreements and representations by the Grantee with respect to the acquisition or disposition of Common Shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (iii) any and all consents, clearances and approvals by any governmental or other regulatory bodies.
15.2 Right of Discharge Reserved. Nothing in the Plan or in any Restricted Stock Agreement shall be construed to confer upon any Eligible Employee the right to continue in the employment or service of the Company or any Subsidiary, or to be employed or serve in any particular position therewith, or affect any right which the Company or any Subsidiary may have to terminate the employment or service of such Eligible Employee.
15.3 Nature of Grants.
(a) Any and all Grants and issuances of Restricted Stock hereunder shall be in consideration of services performed for the Company or for a Subsidiary by the Grantee.
(b) All Grants hereunder shall constitute a special incentive to the Grantee and shall not be taken into account in computing the amount of salary or compensation of the Grantee for purposes of determining any pension, retirement, death or other benefits under (i) any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or any Subsidiary or (ii) any agreement between the Company or any Subsidiary, on the one hand, and the Grantee, on the other hand, except as such plan or agreement shall otherwise expressly provide.
15.4 Non-Uniform Determinations and Restricted Stock Agreements. The Company's, Board's or Committee's determinations under the Plan need not be uniform and may be made selectively among Eligible Employees who receive, or are eligible to receive, Grants under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Company, Board and Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Restricted Stock Agreements as to (i) the persons to receive Grants under the Plan, and (ii) the terms, conditions and restrictions of Grants under the Plan.
15.5 Other Payments or Awards. Nothing contained in the Plan shall be deemed to in any way limit or restrict the Company, any Subsidiary, the Board or the Committee
from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
15.6 Section Headings. The section headings contained herein are for purposes of convenience only and are not intended to define or limit the contents of said sections.
15.7 Number. The singular herein shall include the plural, or vice versa, wherever the context so requires.
15.8 Gender. A pronoun in the masculine, feminine, or neuter gender shall be deemed, where appropriate, to include also the masculine, feminine or neuter gender.
15.9 Withholding. The Company may withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy any applicable federal, state or local withholding tax requirement.
15.10 Waiver. No waiver of any term or provision of this Plan by the Company, any Subsidiary, Board or Committee will constitute a waiver of the same term or provision in any subsequent case.
15.11 Governing Law. This Plan shall be governed by, construed and enforced in accordance with the internal laws of the State of Ohio, without reference to principles of conflict of laws.
EXHIBIT 10.14
FORM OF
RPM INTERNATIONAL INC.
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the 15th day of October, 2002, by and between RPM International Inc., a Delaware corporation (the "Corporation"), and ________________ (Indemnitee"), an Officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as Directors and/or Officers the most capable persons available, such as Indemnitee; and
WHEREAS, the prevalence of corporate litigation subjects directors and officers to expensive litigation risks and it is the policy of the Corporation to indemnify its Directors and/or Officers so as to provide them with the maximum possible protection permitted by law; and
WHEREAS, in addition, because the statutory indemnification provisions of the Delaware General Corporation Law (the "DGCL") expressly provide that they are non-exclusive, it is the policy of the Corporation to indemnify directors and officers of the Corporation who have, on behalf of the Corporation, entered into settlements of derivative suits provided they have not breached the applicable statutory standard of conduct; and
WHEREAS, Indemnitee does not regard the protection available under the Corporation's Amended and Restated By-laws (the "By-laws") and insurance, if any, as adequate in the present circumstances, and considers it necessary and desirable to his or her service as a Director and/or Officer to have adequate protection, and the Corporation desires to provide such protection to induce Indemnitee to serve in such capacity;
WHEREAS, the Corporation became a publicly traded corporation and the parent company of RPM, Inc., an Ohio corporation ("RPM"), and of RPM's direct and indirect subsidiaries existing immediately prior to the Effective Time (as hereinafter defined), pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 29, 2002, by and among the Corporation, RPM, and RPM Merger Company (the "Merger Subsidiary"), an Ohio corporation and a wholly-owned subsidiary of the Corporation;
WHEREAS, under the Merger Agreement, at 9:00 a.m. on October 15, 2002, the effective time of the Certificate of Merger filed with the Secretary of State of the State of Ohio (the "Effective Time"), (i) the Merger Subsidiary merged with and into RPM and RPM became a wholly-owned subsidiary of the Corporation and (ii) each outstanding common share, without par value, of RPM issued and outstanding immediately prior to the Effective Time was converted into the right to receive one share of the Corporation's common stock, par value $.01 per share (the transactions described in this paragraph will collectively be referred to hereinafter as the "Reincorporation");
WHEREAS, from July 29, 2002 (the date of the incorporation of
the Corporation), until the Effective Time (the "Pre-Reincorporation Period"),
the members of the Corporation's Board of Directors were serving in such
capacity at the request of the Board of Directors of RPM and the Corporation
desires to protect Indemnitee for any and all service on (i) the Board of
Directors of the Corporation during and after the Pre-Reincorporation Period and
(ii) the Board of Directors of RPM at any time prior to the Reincorporation; and
WHEREAS, the DGCL provides that indemnification of directors and officers of a corporation may be authorized by agreement, and thereby contemplates that contracts of this nature may be entered into between the Corporation and Indemnitee;
NOW, THEREFORE, for good and valuable consideration, the adequacy of which is hereby acknowledged, the Corporation and Indemnitee do hereby agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as a Director and/or Officer of the Corporation for so long as he or she is duly elected or appointed or until such time as he or she tenders his or her resignation in writing or is otherwise terminated or properly removed from office.
The Corporation expressly confirms and agrees that (i) it has entered into this agreement and assumed the obligations imposed on the Corporation hereby in order to induce Indemnitee to continue to serve as a Director and/or Officer of the Corporation and (ii) the obligations imposed on the Corporation hereby cover service by the Indemnitee (A) during and after the Pre-Reincorporation Period with respect to the Indemnitee's service on the Board of Directors of the Corporation and (B) during the period prior to the Reincorporation with respect to the Indemnitee's service on the Board of Directors of RPM; and the Corporation acknowledges that Indemnitee is relying upon this agreement in continuing in his or her capacity as a Director and/or Officer of the Corporation. The Corporation's obligations under this Agreement are in addition to any protection Indemnitee may be entitled to pursuant to any Indemnification Agreement between Indemnitee and RPM.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending, or completed action, suit, arbitration or proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, in which Indemnitee may be or may have been involved as a party or otherwise, by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation, any subsidiary of the Corporation, or RPM (in connection with any service by Indemnitee on the Board of Directors of RPM prior to the Reincorporation), by reason of any action taken by Indemnitee or of any inaction on his or her part while acting as such a Director and/or Officer, or by reason of the fact that he or she is or was serving at the request of the Corporation or RPM (in connection with any service by Indemnitee on the Board of
Directors of RPM prior to the Reincorporation) as a director, officer, member or manager, partner, trustee, employee, agent, or fiduciary of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company or a partnership, joint venture, trust or other enterprise; in each case whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement.
(b) The term "Expenses" shall include, without limitation, expenses of investigations, judicial or administrative proceedings or appeals, attorneys' fees and disbursements and any expenses of establishing a right to indemnification under Paragraph 8 of this Agreement, but shall not include the amount of judgments, fines or penalties against or settlements paid by Indemnitee.
(c) References to "other enterprise" shall include, without limitation, employee benefit plans; references to "fines" shall include, without limitation, any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Corporation" shall include, without limitation, any service as a Director and/or Officer of the Corporation which imposes duties on, or involves services by, such Director and/or Officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Agreement.
3. Indemnity in Third-Party Proceedings. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 3 if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Corporation to procure a judgment in its favor) by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, employee, agent, or fiduciary of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all Expenses, judgments, settlements, fines and penalties, actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding, but only if Indemnitee acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any such Proceeding by judgment, order of court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful.
4. Indemnity for Expenses in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 4 if Indemnitee is a party to or threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, employee, agent, or fiduciary of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all Expenses actually and reasonably incurred by Indemnitee in connection with the defense of such Proceeding, but only if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification for Expenses shall be made under this Paragraph 4 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by court order or judgment to be liable to the Corporation, unless and only to the extent that any court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper.
5. Indemnity for Amounts Paid in Settlement in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 5 if Indemnitee is a party to or threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, employee, agent, or fiduciary of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all amounts actually and reasonably paid in settlement by Indemnitee in connection with any such Proceeding, but only if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation.
6. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.
7. Advances of Expenses. Any Expenses incurred by or on behalf of Indemnitee pursuant to Paragraphs 3 or 4 in any Proceeding shall be paid by the Corporation in advance upon the written request of Indemnitee if Indemnitee shall undertake to (a) repay such amount to the extent that it is ultimately determined that Indemnitee is not entitled to indemnification hereunder, and (b) reasonably cooperate with the Corporation concerning the action, suit or proceeding giving rise to the Expenses. Any advances to be made under this
Paragraph 7 shall be paid by the Corporation to Indemnitee within 30 days following delivery of a written request therefor by Indemnitee to the Corporation.
8. Procedure. Any indemnification and advances provided for in Paragraph 3, 4, 5 and 6 shall be made no later than 30 days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Corporation's Amended and Restated Certificate of Incorporation (the "Certificate") or Amended and Restated By-laws (the "By-laws") providing for indemnification, is not paid in full by the Corporation within 30 days after a written request for payment thereof has first been received by the Corporation, Indemnitee may, but need not, at any time thereafter bring an action against the Corporation to recover the unpaid amount of the claim and, subject to the other provisions of this Agreement, Indemnitee shall also be entitled to be paid for the Expenses of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Corporation to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Corporation and Indemnitee shall be entitled to receive advance payments of expenses pursuant to Paragraph 7 hereof unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties' intention that if the Corporation contests Indemnitee's right to indemnification, the question of Indemnitee's right to indemnification shall be for the court or arbitrator, as applicable, to decide, and neither the failure of the Corporation (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Corporation (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.
9. Allowance for Compliance with SEC Requirements. Indemnitee acknowledges that the Securities and Exchange Commission ("SEC") has expressed the opinion that indemnification of directors and officers from liabilities under the Securities Act of 1933 ("Act"), as amended, is against public policy as expressed in the Act and, is therefore, unenforceable. Indemnitee hereby agrees that it will not be a breach of this Agreement for the Corporation to undertake with the SEC in connection with the registration for sale of any stock or other securities of the Corporation from time to time that, in the event a claim for indemnification against such liabilities (other than the payment by the Corporation of expenses incurred or paid by a director or officer of the Corporation in the successful defense of any action, suit or proceeding) is asserted in connection with such stock or other securities being registered, the Corporation will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of competent jurisdiction on the question of whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such
issue. Indemnitee further agrees that such submission to a court of competent jurisdiction shall not be a breach of this Agreement.
10. Indemnification Hereunder Not Exclusive. The indemnification provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under the Certificate or the By-laws of the Corporation, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.
The indemnification under this Agreement for any action taken or not taken while serving in an indemnified capacity shall continue as to Indemnitee even though he or she may have ceased to be a Director and/or Officer and shall inure to the benefit of the heirs, executors and personal representatives of Indemnitee.
11. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some claims, issues or matters, but not as to other claims, issues or matters, or for some or a portion of the Expenses, judgments, fines or penalties actually and reasonably incurred by Indemnitee or amounts actually and reasonably paid in settlement by Indemnitee in the investigation, defense, appeal or settlement of any Proceeding, but not for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such claims, issues or matters or Expenses, judgments, fines, penalties or amounts paid in settlement to which Indemnitee is entitled.
12. No Rights of Continued Employment. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.
13. Reimbursement to Corporation by Indemnitee; Limitation on Amounts Paid by Corporation. To the extent Indemnitee has been indemnified by the Corporation hereunder and later receives payments from any insurance carrier covering the same Expenses, judgments, fines, penalties or amounts paid in settlement so indemnified by the Corporation hereunder, Indemnitee shall immediately reimburse the Corporation hereunder for all such amounts received from the insurer.
Notwithstanding anything contained herein to the contrary, Indemnitee shall not be entitled to recover amounts under this Agreement which, when added to the amount of indemnification payments made to, or on behalf of, Indemnitee, under the Certificate or By-laws of the Corporation, in the aggregate exceed the Expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Indemnitee ("Excess Amounts"). To the extent the Corporation has paid Excess Amounts to Indemnitee, Indemnitee shall be obligated to reimburse the Corporation for such Excess Amounts.
Notwithstanding anything contained herein to the contrary, the Corporation shall
not be obligated under the terms of this Agreement, to indemnify Indemnitee:
(a) or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the DGCL, but such indemnification or advancement of expenses may be provided by the Corporation in specific cases if the Board of Directors finds it appropriate;
(b) if it is proved by final judgment in a court of law or other final adjudication to have been based upon or attributable to the Indemnitee's in fact having gained any personal profit or advantage to which he or she was not legally entitled;
(c) for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous;
(d) for a disgorgement of profits made from the purchase and sale by the Indemnitee of securities pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any state statutory law or common law; or
(e) for any judgment, fine or penalty which the Corporation is prohibited by applicable law from paying as indemnity or for any other reason.
14. Scope. Notwithstanding any other provision of this Agreement, the Corporation hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Corporation's Certificate, the By-laws, or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such change shall be deemed to be within the purview of the Indemnitee's rights and the Corporation's obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder.
15. Notice to Insurers. If, at the time of the receipt of a written request of Indemnitee pursuant to Paragraph 8 hereof, the Corporation has director and officer liability insurance in effect, the Corporation shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
16. Selection of Counsel. In the event the Corporation shall be obligated under Paragraphs 3, 4, 5, or 6 hereof to pay the expenses of any Proceeding against Indemnitee, the Corporation, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld or delayed, upon delivery to Indemnitee of written notice of the Corporation's election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Corporation, the Corporation will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that: (a) Indemnitee shall have the right to employ his or own her counsel in any such proceeding at Indemnitee's expense; and (b) if (i) the employment of counsel by Indemnitee has been previously authorized by the Corporation, or (ii) the Corporation shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee's counsel shall be at the expense of the Corporation.
17. Arbitration. With the exception of the provisions of Paragraph 9 hereof, any dispute, controversy or claim between Indemnitee and the Corporation arising out of or relating to or concerning the provisions of this Agreement, shall be finally settled by arbitration in the City of Cleveland, State of Ohio, before a single arbitrator agreeable to both parties. If the parties cannot agree on a designated arbitrator, arbitration shall proceed in the City of Cleveland, State of Ohio, before an arbitrator appointed by the American Arbitration Association (the "AAA"). In either case, the arbitration proceeding shall commence promptly in accordance with the commercial arbitration rules of the AAA then in effect and the arbitrator shall be an attorney other than an attorney who has, or is associated with a firm having associated with it an attorney who has been retained by or performed services for the Corporation or Indemnitee at any time during the five years preceding the commencement of the arbitration. The award shall be rendered in such form that judgment may be entered thereon in any court having jurisdiction thereof.
18. Continuation of Rights and Obligations. All rights and obligations of the Corporation and Indemnitee hereunder shall continue in full force and effect despite the subsequent amendment or modification of the Corporation's Certificate or By-Laws, as such are in effect on the date hereof, and such rights and obligations shall not be affected by any such amendment or modification, any resolution of directors or stockholders of the Corporation, or by any other corporate action which conflicts with or purports to amend, modify, limit or eliminate any of the rights or obligations of the Corporation and/or Indemnitee hereunder.
19. Amendment and Modification. This Agreement may only be amended, modified or supplemented by the written agreement of the Corporation and Indemnitee.
20. Assignment. This Agreement shall not be assigned by the Corporation or Indemnitee without the prior written consent of the other party thereto, except that the Corporation
may freely assign its rights and obligations under this Agreement to any subsidiary for whom Indemnitee is serving as a director and/or officer thereof; provided, however, that no permitted assignment shall release the assignor from its obligations hereunder. Subject to the foregoing, this Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including, without limitation, any successor to the Corporation by way of merger, consolidation and/or sale or disposition of all or substantially all of the capital stock of the Corporation.
21. Saving Clause. If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments, fines, penalties and amounts paid in settlement with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated or by any other applicable law.
22. Counterparts. This Agreement may be executed in two or more fully or partially executed counterparts each of which shall be deemed an original binding the signer thereof against the other signing parties, but all counterparts together shall constitute one and the same instrument. Executed signature pages may be removed from counterpart agreements and attached to one or more fully executed copies of this Agreement. The parties may execute and deliver this Agreement by facsimile signature, which shall have the same binding effect as an original ink signature.
23. Notice. Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give to the Corporation notice in writing as soon as practicable of any claim made against him or her for which indemnity will or could be sought under this Agreement. Notice to the Corporation shall be directed to the Corporation at P.O. Box 777, 2628 Pearl Road, Medina, Ohio 44258, Attention: General Counsel (or such other address as the Corporation shall designate in writing to Indemnitee). Notice shall be deemed received three days after the date postmarked if sent by prepaid mail, properly addressed. In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require within Indemnitee's power.
24. Applicable Law. All matters with respect to this Agreement, including, without limitation, matters of validity, construction, effect and performance shall be governed by the internal laws of the State of Delaware applicable to contracts made and to be performed therein between the residents thereof (regardless of the laws that might otherwise be applicable under principles of conflicts of law).
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly executed and signed as of the day and year first above written.
RPM INTERNATIONAL INC.
THE "CORPORATION"
By_________________________________
Frank C. Sullivan, President and Chief
Executive Officer
"INDEMNITEE"
EXHIBIT 10.15
ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT
THIS ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT, dated as of October 15, 2002 (this "Assignment Agreement"), by and among RPM, INC., a corporation duly organized and existing under the laws of the State of Ohio, and having its principal business office in Medina, Ohio ("RPM") and RPM INTERNATIONAL INC., a corporation duly organized and existing under the laws of the State of Delaware, and having its principal business office in Medina, Ohio ("RPM International").
WITNESSETH:
WHEREAS, pursuant to an Agreement and Plan of Merger by and among RPM, RPM International, and a newly formed merger subsidiary of RPM International ("Newco"), Newco will merge into RPM on and as of the date hereof and each of the common shares of RPM will be converted into the right to receive one share of the RPM International (the "Merger Transaction");
WHEREAS, in connection with the Merger Transaction, RPM will also on and as of the date hereof transfer the stock of certain of its operating subsidiaries to RPM International (which will in turn transfer such stock ownership to new intermediate holding companies wholly-owned by RPM International) and retain the stock of certain other operating companies (the "Asset Transfer" and, together with the Merger Transaction, the "Transaction");
WHEREAS, RPM entered into that certain Five Year Credit Agreement, dated as of July 14, 2000, as amended (the "Credit Agreement"), among RPM, the Lenders party thereto and JPMorgan Chase Bank (unless otherwise specifically defined herein, each term used herein with respect to the Credit Agreement which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement); and
WHEREAS, RPM and RPM International desire that RPM hereby assign to RPM International all of the rights and obligations of RPM under the Credit Agreement, and that RPM International hereby assume all of RPM's obligations thereunder and that RPM be released from all of its obligations thereunder;
NOW, THEREFORE, for and in consideration of the premises and other consideration the receipt of which is hereby acknowledged, it is mutually agreed as follows:
SECTION 1. ASSIGNMENT TO, AND ASSUMPTION BY, RPM INTERNATIONAL.
Upon the consummation of the Transaction, RPM hereby conveys, transfers and assigns to RPM International on and as of the date hereof all of its right, title and interest in and to the Credit Agreement and the Notes. RPM International hereby agrees on and after the date hereof to be bound, as successor by assignment to RPM, by all of the terms and conditions applicable to, and covenants of RPM under the Credit Agreement and the Notes. Upon the consummation of the Transaction, RPM International hereby: (x) assumes on and after the date hereof, for the benefit of RPM and the Lenders and Administrative Agent, all of the obligations of RPM under (i) the Credit Agreement and (ii) the Notes.
SECTION 2. RELEASE OF RPM.
RPM International hereby acknowledges and agrees that, as of the date hereof, upon the consummation of the Transaction and RPM International's assuming all of the obligations of RPM under the Credit Agreement, RPM International will succeed to, and be substituted for, and may exercise every right and power of, RPM under the Credit Agreement with the same force and effect as if RPM International had been named as the Company therein. RPM International hereby acknowledges and agrees that on and after the date hereof and upon the consummation of the Transaction, RPM will be released from all obligations and covenants applicable to RPM under the Credit Agreement and under the Notes.
SECTION 3. EXECUTION OF NEW NOTES.
RPM International shall, on or before the date hereof, deliver to JPMorgan Chase Bank new Notes executed by RPM International in substantially the same form of the Notes originally issued by RPM, payable to the same holders (or their nominees). The new Notes shall be dated the date hereof. The Notes originally issued by RPM shall be deemed cancelled on the date hereof.
SECTION 4. EFFECTIVE DATE. This Assignment Agreement shall become effective on the date hereof.
SECTION 5. COUNTERPARTS. This Assignment Agreement may be executed in multiple counterparts, each of which shall be regarded for all purposes as an original and all of which shall constitute but one and the same instrument.
SECTION 6. EFFECT OF ASSIGNMENT AGREEMENT ON CREDIT AGREEMENT. Upon and after the execution of this Assignment Agreement by the parties hereto, the Credit Agreement shall remain in full force and effect. The Credit Agreement is in all respects ratified and confirmed.
SECTION 7. GOVERNING LAW. This Assignment Agreement shall be governed by the laws of the State of Ohio, without giving effect to the conflict of law principles thereof.
[balance of page left blank intentionally]
IN WITNESS WHEREOF, the parties hereto have caused this Assignment, Assumption and Release Agreement to be duly executed, as of the day and year first above written.
RPM, INC.
By: /s/ P. Kelly Tompkins
---------------------------------
Title: Senior Vice President,
General Counsel and Secretary
-----------------------------
|
RPM INTERNATIONAL INC.
By: /s/ Keith R. Smiley
-------------------------------
Title: Vice President, Treasurer
and Assistant Secretary
--------------------------
|
EXHIBIT 10.16
OMNIBUS AMENDMENT NO. 1
THIS OMNIBUS AMENDMENT NO. 1 (this "AMENDMENT") is entered into as of October 15, 2002 by and among:
(a) Weatherproofing Technologies, Inc., a Delaware corporation, DAP Products Inc., a Delaware corporation, The Testor Corporation, an Ohio corporation, Zinsser Co., Inc., a New Jersey corporation, Tremco Incorporated, an Ohio corporation, Rust-Oleum Corporation, an Illinois corporation, The Euclid Chemical Company, an Ohio corporation, and Republic Powdered Metals, Inc., an Ohio corporation, individually and as successor by merger to Consolidated Coatings Corporation, an Ohio corporation (each of the foregoing, an "ORIGINATOR" and collectively, the "ORIGINATORS"),
(b) RPM Funding Corporation, a Delaware corporation ("SPV"),
(c) RPM, Inc., an Ohio corporation ("RPM"),
(d) Jupiter Securitization Corporation, a Delaware corporation ("JUPITER" or a "CONDUIT"), and Blue Ridge Asset Funding Corporation, a Delaware corporation ("BLUE RIDGE" or a "CONDUIT"),
(e) Bank One, NA (Main Office Chicago), a national banking association ("BANK ONE"), and its assigns (collectively, the "JUPITER LIQUIDITY BANKS" and, together with Jupiter, the "JUPITER GROUP"), and Wachovia Bank, National Association, a national banking association ("Wachovia"), and its assigns (collectively, the "BLUE RIDGE LIQUIDITY BANKS" and, together with Blue Ridge, the "BLUE RIDGE GROUP"),
(f) Bank One, NA (Main Office Chicago), a national banking association, in its capacity as agent for the Jupiter Group (the "JUPITER AGENT" or a "CO-AGENT"), and Wachovia Bank, National Association, a national banking association, in its capacity as agent for the Blue Ridge Group (the "BLUE RIDGE AGENT" or a "CO-AGENT"),
(g) Bank One, NA (Main Office Chicago), a national banking association, in its capacity as administrative agent for the Jupiter Group, the Blue Ridge Group and each Co-Agent (in such capacity, together with its successors and assigns, the "ADMINISTRATIVE AGENT" and, together with each of the Co-Agents, the "AGENTS"), and
(h) RPM International Inc., a Delaware corporation ("RPM-DELAWARE"),
with respect to (i) the Receivables Sale Agreement dated as of June 6, 2002 by and between the Originators and the SPV (the "RSA"), and (ii) the Receivables Purchase Agreement dated as of
June 6, 2002 by and among the SPV, the Jupiter Group, the Blue Ridge Group, and the Agents (the "RPA" and, together with the RSA, the "AGREEMENTS").
UNLESS DEFINED ELSEWHERE HEREIN, CAPITALIZED TERMS USED IN THIS AMENDMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE AGREEMENTS.
PRELIMINARY STATEMENTS
RPM desires to reincorporate in Delaware via a merger of RPM with and into a newly formed Ohio merger subsidiary of RPM-Delaware (the "REINCORPORATION").
Immediately after the Reincorporation, RPM-Delaware desires to unconditionally assume RPM's obligations as Servicer and Performance Guarantor under the Agreements and the other Transaction Documents referenced therein (the "ASSUMPTION").
The parties are willing to permit the assumption by RPM-Delaware of RPM's obligations under the Transaction Documents, and to release RPM from further liability for such obligations, on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the other mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Assumption and Release. By its signature below, effective as of the Effective Time (hereinafter defined), RPM-Delaware hereby absolutely and unconditionally assumes and agrees to become primarily liable for all of RPM's representations, covenants, promises, indemnities and other obligations under the Transaction Documents as initial Servicer and/or as the Performance Guarantor, whether now existing, hereafter arising, absolute or contingent, and each of the other parties hereto hereby releases RPM from further liability therefor.
2. Amendments. From and after the Effective Time, all references in the Agreements and other Transaction Documents to "RPM, Inc." or "RPM" are hereby replaced with "RPM International Inc." and "RPM-Delaware," respectively, and all references to the Performance Guarantor shall be deemed to be references to RPM-Delaware.
3. Representations. In order to induce the other parties hereto to agree to the assumption, release and amendments set forth above, RPM-Delaware hereby represents and warrants to the other parties hereto as follows:
(a) Existence and Power. RPM-Delaware is duly organized, validly existing and in good standing under the laws of Delaware. RPM-Delaware is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted except where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect.
(b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by RPM-Delaware of this Amendment, and the performance of its obligations hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Amendment has been duly executed and delivered by RPM-Delaware.
(c) No Conflict. The execution and delivery by RPM-Delaware of
this Amendment, and the performance of the obligations assumed by it hereunder
do not contravene or violate (i) its certificate of incorporation or by-laws,
(ii) any law, rule or regulation applicable to it, (iii) any restrictions under
any agreement, contract or instrument to which it is a party or by which it or
any of its property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, and do not
result in the creation or imposition of any Adverse Claim on assets of
RPM-Delaware or its Subsidiaries (except as created under the Transaction
Documents) except, in any case, where such contravention or violation could not
reasonably be expected to have a Material Adverse Effect.
4. Conditions Precedent; Effective Time. The assumption and amendments will become effective immediately after the latest to occur of the following (the "EFFECTIVE TIME"):
(a) Consummation of the Reincorporation;
(b) Receipt by the Agent of executed copies of this Amendment, duly executed by each of the parties hereto;
(c) Receipt by the Agent of a Performance Undertaking in the form of Annex A hereto duly executed by RPM-Delaware;
(d) Receipt by the Agent of a copy of RPM-Delaware's certificate of incorporation certified by the Delaware Secretary of State;
(e) Receipt by the Agent of a good standing certificate for RPM-Delaware issued by the Secretary of State of Delaware;
(f) Receipt by the Agent of a certificate of the Secretary or
Assistant Secretary of RPM-Delaware certifying: (i) a copy of the
resolutions of the Board of Directors of RPM-Delaware, authorizing
RPM-Delaware's execution, delivery and performance of this Amendment and
the other documents to be delivered by it hereunder; (ii) the names and
signatures of the officers authorized on its behalf to execute this
Amendment and the other documents to be delivered by it hereunder and
(iii) a copy of RPM-Delaware's by-laws; and
(g) Receipt by the Agent of a favorable opinion of legal counsel for RPM-Delaware, reasonably acceptable to the Agents, in substantially the form of the opinion given with respect to RPM at the time of the initial purchase under the
RPA, which addresses the following matters with respect to RPM-Delaware:
(i) due incorporation, valid existence and good standing, (ii) requisite
corporate authority to conduct its business, (iii) due authorization,
execution and delivery of this Amendment, the RPA as amended hereby and
the Performance Undertaking described in clause (b) above, (iv) no
requirement for governmental action or filings, (v) non-contravention of
laws, regulations, Organic Documents or material agreements, (vi) no
creation or imposition of any Adverse Claim on its assets, (vii)
enforceability of the RPA as amended hereby and the Performance
Undertaking described in clause (c) above, and (viii) absence of
material adverse litigation or proceedings.
5.1. Bankruptcy Petition. With respect to each Conduit, each of the other parties hereto hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of such Conduit, it will not institute against, or join any other Person in instituting against, such Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.
5.2. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
5.3. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT OR ANY OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
5.4. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).
5.5. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers or signatories as of the date hereof.
DAP PRODUCTS INC.,
THE TESTOR CORPORATION,
ZINSSER CO., INC.,
TREMCO INCORPORATED,
RUST-OLEUM CORPORATION,
THE EUCLID CHEMICAL COMPANY AND
REPUBLIC POWDERED METALS, INC.
By: /s/ P. Kelly Tompkins
------------------------------------
Name:
Title:
|
WEATHERPROOFING TECHNOLOGIES, INC.
By: /s/ Jeffrey L. Korach
------------------------------------
Name:
Title:
|
RPM FUNDING CORPORATION
By: /s/ Keith R. Smiley ----------------------------------------- Name: Title: |
RPM, INC.
By: /s/ Keith R. Smiley ----------------------------------------- Name: Title: |
RPM INTERNATIONAL INC.
By: /s/ P. Kelly Tompkins ----------------------------------------- Name: Title: |
ADDRESS:
RPM International Inc.
2628 Pearl Road
P.O. Box 777
Medina, Ohio 44258
Attention: Treasurer
Phone: (330) 273-8837
Fax: (330) 225-6574
JUPITER SECURITIZATION CORPORATION
By: /s/ Sherri Gerner ----------------------------------------- Name: Sherri Gerner Title: Authorized Signer |
BANK ONE, NA (MAIN OFFICE CHICAGO), INDIVIDUALLY, AS JUPITER AGENT AND AS ADMINISTRATIVE AGENT
By: /s/ Sherri Gerner ----------------------------------------- Name: Sherri Gerner Title: Director, Capital Markets |
BLUE RIDGE ASSET FUNDING CORPORATION
BY: WACHOVIA BANK, NATIONAL ASSOCIATION, ATTORNEY-IN FACT
By: /s/ Darrell R. Baber
-----------------------------------------
Name: Darrell R. Baber
-------------------------------------
Title: Managing Director
------------------------------------
|
WACHOVIA BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AND AS BLUE RIDGE AGENT
By: /s/ Kenny Karpowicz
-----------------------------------------
Name: Kenny Karpowicz
-------------------------------------
Title: Vice President
------------------------------------
|
EXHIBIT 10.16.1
PERFORMANCE UNDERTAKING
THIS PERFORMANCE UNDERTAKING (this "UNDERTAKING"), dated as of October 15, 2002, is executed by RPM International, Inc., a Delaware corporation ("RPM" or the "PERFORMANCE GUARANTOR") in favor of RPM Funding Corporation, a Delaware corporation (together with its successors and assigns, "RECIPIENT").
RECITALS
Weatherproofing Technologies, Inc., a Delaware corporation, DAP Products Inc., a Delaware corporation, The Testor Corporation, an Ohio corporation, Zinsser Co., Inc., a New Jersey corporation, Tremco Incorporated, an Ohio corporation, Rust-Oleum Corporation, an Illinois corporation, The Euclid Chemical Company, an Ohio corporation, Republic Powdered Metals, Inc., an Ohio corporation , individually and as successor by merger to Consolidated Coatings Corporation, an Ohio corporation (all of the foregoing, collectively, the "ORIGINATORS"), and Recipient have entered into a Receivables Sale Agreement, dated as of June 6, 2002 (as amended, restated or otherwise modified from time to time, the "SALE AGREEMENT"), pursuant to which the Originators are selling and contributing to Recipient their respective right, title and interest in their accounts receivable and certain related rights subject to the terms and conditions contained therein.
Recipient, RPM, as Servicer, Jupiter Securitization Corporation, Blue Ridge Asset Funding Corporation, Bank One, NA (Main Office Chicago), individually, as Jupiter Agent and as Administrative Agent, and Wachovia Bank, National Association, individually and as Blue Ridge Agent, have entered into a Receivables Purchase Agreement, dated as of June 6, 2002 (as amended, restated or otherwise modified from time to time, the "PURCHASE AGREEMENT"), pursuant to which Recipient is selling undivided interests in its assets to the Administrative Agent for the benefit of the Purchasers subject to the terms and conditions contained therein.
Performance Guarantor owns, directly or indirectly, one hundred percent (100%) of the Equity Interests of each of the Originators, and Performance Guarantor and the Originators, collectively, own, directly or indirectly, 100% of the Equity Interests of Recipient. As a result, each of the Originators (and, accordingly, Performance Guarantor) is expected to receive substantial direct or indirect benefits from the Originators' sale and contribution of accounts receivable to Recipient pursuant to the Sale Agreement (which benefits are hereby acknowledged).
As an inducement for Recipient to acquire and to continue to acquire the Originators' accounts receivable pursuant to the Sale Agreement, Performance Guarantor has agreed to guarantee the due and punctual performance by each of the Originators of its respective obligations under the Sale Agreement.
AGREEMENT
NOW, THEREFORE, Performance Guarantor hereby agrees as follows:
Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings attributed thereto in the Sale Agreement or the Purchase Agreement, and "GUARANTEED OBLIGATIONS" means, collectively, all covenants, agreements, terms, conditions and indemnities to be performed and observed by any of the Originators under and pursuant to the Sale Agreement and each other document executed and delivered by any of them pursuant to the Sale Agreement, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by any of the Originators under the Sale Agreement, whether for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason.
Section 2. Guaranty of Performance of Guaranteed Obligations. Performance Guarantor hereby guarantees to Recipient, the full and punctual payment and performance by each of the Originators of its Guaranteed Obligations. This Undertaking is an absolute, unconditional and continuing guaranty of the full and punctual performance of all Guaranteed Obligations under the Sale Agreement, and each other document executed and delivered by any of the Originators pursuant to the Sale Agreement and is in no way conditioned upon any requirement that Recipient first attempt to collect any amounts owing by the Originators to Recipient, any Agent or any Purchaser from any other Person or resort to any collateral security, any balance of any deposit account or credit on the books of Recipient, any Agent or any Purchaser in favor of any of the Originators or any other Person or other means of obtaining payment. Should any of the Originators default in the payment or performance of any of its Guaranteed Obligations, Recipient (or its assigns) may cause the immediate performance by Performance Guarantor of such Guaranteed Obligations and cause any payment of Guaranteed Obligations to become forthwith due and payable to Recipient (or its assigns) by Performance Guarantor, without demand or notice of any nature (other than as expressly provided herein), all of which are hereby expressly waived by Performance Guarantor.
Section 3. Performance Guarantor's Further Agreements to Pay. Performance Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to Recipient (and its assigns), forthwith upon demand in funds immediately available to Recipient, all reasonable costs and expenses (including court costs and reasonable legal expenses) incurred or expended by Recipient in connection with the Guaranteed Obligations, this Undertaking and the enforcement thereof, together with interest on amounts recoverable under this Undertaking from the time when such amounts become due until payment, at a rate of interest (computed for the actual number of days elapsed based on a 360-day year) equal to the Prime Rate plus 2% per annum, such rate of interest changing when and as the Prime Rate changes.
Section 4. Waivers by Performance Guarantor. Performance Guarantor waives notice of acceptance of this Undertaking, notice of any action taken or omitted by Recipient (or its assigns) in reliance on this Undertaking, and any requirement that Recipient (or its assigns) be diligent or prompt in making demands under this Undertaking, giving notice of any Termination Event, Amortization Event, other default or omission by any of the Originators or asserting any other rights of Recipient under this Undertaking. Performance Guarantor warrants that it has
adequate means to obtain from the Originators, on a continuing basis,
information concerning their financial condition, and that it is not relying on
Recipient to provide such information, now or in the future. Performance
Guarantor also irrevocably waives all defenses (i) that at any time may be
available in respect of the Guaranteed Obligations by virtue of any statute of
limitations, valuation, stay, moratorium law or other similar law now or
hereafter in effect or (ii) that arise under the law of suretyship, including
impairment of collateral. Recipient (and its assigns) shall be at liberty,
without giving notice to or obtaining the assent of Performance Guarantor and
without relieving Performance Guarantor of any liability under this Undertaking,
to deal with each of the Originators and with each other party who now is or
after the date hereof becomes liable in any manner for any of the Guaranteed
Obligations, in such manner as Recipient in its sole discretion deems fit, and
to this end Performance Guarantor agrees that the validity and enforceability of
this Undertaking, including without limitation, the provisions of Section 7
hereof, shall not be impaired or affected by any of the following: (a) any
extension, modification or renewal of, or indulgence with respect to, or
substitutions for, the Guaranteed Obligations or any part thereof or any
agreement relating thereto at any time; (b) any failure or omission to enforce
any right, power or remedy with respect to the Guaranteed Obligations or any
part thereof or any agreement relating thereto, or any collateral securing the
Guaranteed Obligations or any part thereof; (c) any waiver of any right, power
or remedy or of any Termination Event, Amortization Event, or default with
respect to the Guaranteed Obligations or any part thereof or any agreement
relating thereto; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any other
obligation of any Person or entity with respect to the Guaranteed Obligations or
any part thereof; (e) the enforceability or validity of the Guaranteed
Obligations or any part thereof or the genuineness, enforceability or validity
of any agreement relating thereto or with respect to the Guaranteed Obligations
or any part thereof; (f) the application of payments received from any source to
the payment of any payment obligations of any Originator or any part thereof or
amounts which are not covered by this Undertaking even though Recipient (or its
assigns) might lawfully have elected to apply such payments to any part or all
of the payment obligations of Originators or to amounts which are not covered by
this Undertaking; (g) the existence of any claim, setoff or other rights which
Performance Guarantor may have at any time against Originators in connection
herewith or any unrelated transaction; (h) any assignment or transfer of the
Guaranteed Obligations or any part thereof; or (i) any failure on the part of
Originators to perform or comply with any term of the Sale Agreement or any
other document executed in connection therewith or delivered thereunder, all
whether or not Performance Guarantor shall have had notice or knowledge of any
act or omission referred to in the foregoing clauses (a) through (i) of this
Section 4.
Section 5. Unenforceability of Guaranteed Obligations Against
Originators. Notwithstanding (a) any change of ownership of Originators or the
insolvency, bankruptcy or any other change in the legal status of Originators;
(b) any change in or the imposition of any law, decree, regulation or other
governmental act which does or might impair, delay or in any way affect the
validity, enforceability or the payment when due of the Guaranteed Obligations;
(c) the failure of any of the Originators or Performance Guarantor to maintain
in full force, validity or effect or to obtain or renew when required all
governmental and other approvals, licenses or consents required in connection
with the Guaranteed Obligations or this Undertaking, or to take any other action
required in connection with the performance of all obligations pursuant to the
Guaranteed Obligations or this Undertaking; or (d) if any of the moneys included
in the Guaranteed Obligations have become irrecoverable from any of the Originators for any other reason other than final payment in full of the payment Guaranteed Obligations in accordance with their terms, this Undertaking shall nevertheless be binding on Performance Guarantor. This Undertaking shall be in addition to any other guaranty or other security for the Guaranteed Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of any of the Originators or for any other reason with respect to any of the Originators, all such amounts then due and owing with respect to the Guaranteed Obligations under the terms of the Sale Agreement, or any other agreement evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, shall be immediately due and payable by Performance Guarantor.
Section 6. Representations; Warranties and Covenants.
6.1. Representations and Warranties. Performance Guarantor hereby represents and warrants to Recipient that:
(a) Existence and Power. Performance Guarantor is duly organized, validly existing and in good standing under the laws of its state of organization. Performance Guarantor is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect.
(b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by Performance Guarantor of this Undertaking, and the performance of its obligations hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Undertaking has been duly executed and delivered by Performance Guarantor.
(c) No Conflict. The execution and delivery by Performance
Guarantor of this Undertaking, and the performance of its obligations hereunder
do not contravene or violate (i) its certificate of incorporation or by-laws,
(ii) any law, rule or regulation applicable to it, (iii) any restrictions under
any agreement, contract or instrument to which it is a party or by which it or
any of its property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, and do not
result in the creation or imposition of any Adverse Claim on assets of
Performance Guarantor or its Subsidiaries (except as created under the
Transaction Documents) except, in any case, where such contravention or
violation could not reasonably be expected to have a Material Adverse Effect;
and no transaction contemplated hereby requires compliance with any bulk sales
act or similar law.
(d) Governmental Authorization. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by Performance Guarantor of this Undertaking and the performance of its obligations hereunder.
(e) Binding Effect. This Undertaking constitutes the legal, valid and binding obligation of Performance Guarantor, enforceable against Performance Guarantor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(f) No Actions; Suits. There are no actions, suits or proceedings pending, or to the best of Performance Guarantor's knowledge, threatened, against or affecting Performance Guarantor, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Performance Guarantor is not in default with respect to any order of any court, arbitrator or governmental body.
(g) Material Adverse Effect. Since May 31, 2001, no event has occurred that would have a Material Adverse Effect.
6.2. Financial Reporting Covenant. Performance Guarantor hereby covenants and agrees with Recipient that Performance Guarantor will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Recipient and the Agents:
(a) Annual Reporting. As soon as available and in any event within 90 days after the end of each fiscal year of the Performance Guarantor, consolidated statements of income, shareholders' equity and cash flows of the Performance Guarantor and its Subsidiaries for such year and the related consolidated balance sheet as at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of the Performance Guarantor and its Subsidiaries as at the end of, and for, such fiscal year;
(b) Quarterly Reporting. As soon as available and in any event within 60 days after the end of each fiscal quarter of the Performance Guarantor other than the last fiscal quarter in each fiscal year, consolidated statements of income, shareholders' equity and cash flows of the Performance Guarantor and its Subsidiaries for such fiscal quarter and for the portion of the fiscal year ended at the end of such fiscal quarter, and the related consolidated balance sheet as at the end of such fiscal quarter.
(c) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit IV to the Sale Agreement (replacing references therein to "Originator" with references to "Performance Guarantor") signed by Performance Guarantor's Authorized Officer and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.
(d) Shareholders Statements and Reports. Promptly upon the mailing thereof to the shareholders of the Performance Guarantor generally, copies of all financial statements, reports and proxy statements so mailed.
Section 7. Subrogation; Subordination. Notwithstanding anything
to the contrary contained herein, until the Guaranteed Obligations are paid in
full, Performance Guarantor: (a) will not enforce or otherwise exercise any
right of subrogation to any of the rights of Recipient, any Agent or any
Purchaser against any of the Originators, (b) hereby waives all rights of
subrogation (whether contractual, under Section 509 of the United States
Bankruptcy Code, at law or in equity or otherwise) to the claims of Recipient,
the Agents and the Purchasers against any of the Originators and all
contractual, statutory or legal or equitable rights of contribution,
reimbursement, indemnification and similar rights and "claims" (as such term is
defined in the United States Bankruptcy Code) which Performance Guarantor might
now have or hereafter acquire against any of the Originators that arise from the
existence or performance of Performance Guarantor's obligations hereunder, (c)
will not claim any setoff, recoupment or counterclaim against any of the
Originators in respect of any liability of Performance Guarantor to any of the
Originators and (d) waives any benefit of and any right to participate in any
collateral security which may be held by any Agent or any Purchaser. The payment
of any amounts due with respect to any indebtedness of any of the Originators
now or hereafter owed to Performance Guarantor is hereby subordinated to the
prior payment in full of all of the Guaranteed Obligations. Performance
Guarantor agrees that, after the occurrence of any default in the payment or
performance of any of the Guaranteed Obligations, Performance Guarantor will not
demand, sue for or otherwise attempt to collect any such indebtedness of any of
the Originators to Performance Guarantor until all of the Guaranteed Obligations
shall have been paid and performed in full. If, notwithstanding the foregoing
sentence, Performance Guarantor shall collect, enforce or receive any amounts in
respect of such indebtedness while any Guaranteed Obligations are still
unperformed or outstanding, such amounts shall be collected, enforced and
received by Performance Guarantor as trustee for Recipient (and its assigns) and
be paid over to Recipient (or its assigns) on account of the Guaranteed
Obligations without affecting in any manner the liability of Performance
Guarantor under the other provisions of this Undertaking. The provisions of this
Section 7 shall be supplemental to and not in derogation of any rights and
remedies of Recipient under any separate subordination agreement which Recipient
may at any time and from time to time enter into with Performance Guarantor.
Section 8. Termination of Performance Undertaking. Performance Guarantor's obligations hereunder shall continue in full force and effect until all Aggregate Unpaids (as defined in the Purchase Agreement) are finally paid and satisfied in full and the Purchase Agreement is terminated, PROVIDED THAT this Undertaking shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of any of the Originators or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not Recipient (or its assigns) is in possession of this Undertaking. No invalidity, irregularity or unenforceability by reason of the federal bankruptcy code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall impair, affect, be a defense to or claim against the obligations of Performance Guarantor under this Undertaking.
Section 9. Effect of Bankruptcy. This Performance Undertaking shall survive the insolvency of any of the Originators and the commencement of any case or proceeding by or against any of the Originators under the federal bankruptcy code or other federal, state or other
applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal bankruptcy code with respect to any of the Originators or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which any of the Originators is subject shall postpone the obligations of Performance Guarantor under this Undertaking.
Section 10. Setoff. Regardless of the other means of obtaining payment of any of the Guaranteed Obligations, Recipient is (and from and after the occurrence of an Amortization Event under and as defined in the Purchase Agreement which is not waived in writing by the Agents, the Administrative Agent is) hereby authorized at any time and from time to time, without notice to Performance Guarantor (any such notice being expressly waived by Performance Guarantor) and to the fullest extent permitted by law, to set off and apply any deposits and other sums against the obligations of Performance Guarantor under this Undertaking, whether or not Recipient (or, if applicable, the Administrative Agent) shall have made any demand under this Undertaking and although such obligations may be contingent or unmatured.
Section 11. Taxes. All payments to be made by Performance Guarantor hereunder shall be made free and clear of any deduction or withholding. If Performance Guarantor is required by law to make any deduction or withholding on account of tax or otherwise from any such payment, the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Recipient receive a net sum equal to the sum which they would have received had no deduction or withholding been made.
Section 12. Further Assurances. Performance Guarantor agrees that it will from time to time, at the request of Recipient (or its assigns), provide information relating to the business and affairs of Performance Guarantor as Recipient may reasonably request. Performance Guarantor also agrees to do all such things and execute all such documents as Recipient (or its assigns) may reasonably consider necessary or desirable to give full effect to this Undertaking and to perfect and preserve the rights and powers of Recipient hereunder.
Section 13. Successors and Assigns. This Performance Undertaking shall be binding upon Performance Guarantor, its successors and permitted assigns, and shall inure to the benefit of and be enforceable by Recipient and its successors and assigns. Performance Guarantor may not assign or transfer any of its obligations hereunder. Recipient may not assign or transfer any of its rights hereunder except that Recipient may pledge (and hereby notifies the Performance Guarantor that it has pledged) Recipient's right, title and interest hereunder to the Administrative Agent, for the benefit of the Purchasers, under the Purchase Agreement.
Section 14. Amendments and Waivers. No amendment or waiver of any provision of this Undertaking nor consent to any departure by Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by Recipient, the Agents and Performance Guarantor. No failure on the part of Recipient to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
Section 15. Notices. All notices and other communications
provided for hereunder shall be made in writing and shall be addressed as
follows: if to Performance Guarantor, at the address set forth beneath its
signature hereto, and if to Recipient, at the addresses set forth beneath its
signature hereto, or at such other addresses as each of Performance Guarantor or
any Recipient may designate in writing to the other. Each such notice or other
communication shall be effective (a) if given by telecopy, upon the receipt
thereof, (b) if given by mail, three (3) Business Days after the time such
communication is deposited in the mail with first class postage prepaid or (c)
if given by any other means, when received at the address specified in this
Section 15.
Section 16. GOVERNING LAW. THIS UNDERTAKING SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
Section 17. CONSENT TO JURISDICTION. EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN COOK COUNTY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS UNDERTAKING, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER AND EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
Section 18. Bankruptcy Petition. Performance Guarantor hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior Indebtedness of Recipient, it will not institute against, or join any other Person in instituting against, Recipient any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.
Section 19. Miscellaneous. This Undertaking constitutes the entire agreement of Performance Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Undertaking shall be in addition to any other guaranty of or collateral security for any of the Guaranteed Obligations. The provisions of this Undertaking are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Performance Guarantor's liability under this Undertaking, then, notwithstanding any other provision of this Undertaking to the contrary, the amount of such liability shall, without any further action by Performance Guarantor or Recipient, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. Any provisions of this
Undertaking which are 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise specified, references herein to "SECTION" shall mean a reference to sections of this Undertaking.
{signature page follows}
IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be executed and delivered as of the date first above written.
RPM INTERNATIONAL, INC.
By: /s/ Keith R. Smiley
-------------------------------------------
Name: Keith R. Smiley
-----------------------------------------
Title: Vice President, Treasurer and Assistant
----------------------------------------
Secretary
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ADDRESS FOR NOTICES:
RPM International, Inc.
2628 Pearl Road
P.O. Box 777
Medina, Ohio 44258
Attention: Treasurer
Phone: (330) 273-8837
Fax: (330) 225-6574
ACKNOWLEDGED AND AGREED:
RPM FUNDING CORPORATION
By: /s/ P. Kelly Tompkins
---------------------------------------
Name: P. Kelly Tompkins
-------------------------------------
Title: Secretary
------------------------------------
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BANK ONE, NA (MAIN OFFICE CHICAGO), AS ADMINISTRATIVE AGENT
By: /s/ Sherri Gerner
-----------------------------------------------
Name: Sherri Gerner
-------------------------------------
Title: Director, Capital Markets
------------------------------------
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RPM INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS
PER SHARE AND SHARE EQUIVALENTS
(Unaudited)
Exhibit 11.1
(In thousands, except per share amounts)
Six Months Ended Three Months Ended
November 30, November 30,
------------ ------------
2002 2001 2002 2001
---- ---- ---- ----
Shares Outstanding
For computation of basic earnings per
share of Common Stock
Weighted average shares 115,001 102,266 115,240 102,321
-------- -------- -------- --------
Total shares for basic earnings
per share 115,001 102,266 115,240 102,321
For computation of diluted earnings
per share of common stock
Net issuable share equivalents 980 246 961 507
-------- -------- -------- --------
Total shares for diluted
earnings per share 115,981 102,512 116,201 102,828
======== ======== ======== ========
Net Income
Net income applicable to
shares of common stock for basic earnings
per share $ 73,813 $ 61,059 $ 29,640 $ 24,490
-------- -------- -------- --------
Net income applicable to shares of common
stock for diluted earnings per share $ 73,813 $ 61,059 $ 29,640 $ 24,490
======== ======== ======== ========
Basic Earnings Per Share $ 0.64 $ 0.60 $ 0.26 $ 0.24
======== ======== ======== ========
Diluted Earnings Per Share $ 0.64 $ 0.60 $ 0.26 $ 0.24
======== ======== ======== ========
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The accompanying notes to consolidated financial statements are an integral part of these statements.