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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>/in/edgar/work/20000828/0000950152-00-006308/0000950152-00-006308.txt : 20000922
<SEC-HEADER>0000950152-00-006308.hdr.sgml : 20000922
ACCESSION NUMBER: 0000950152-00-006308
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 20000531
FILED AS OF DATE: 20000828
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: RPM INC/OH/
CENTRAL INDEX KEY: 0000110621
STANDARD INDUSTRIAL CLASSIFICATION: [2851
] IRS NUMBER: 346550857
STATE OF INCORPORATION: OH
FISCAL YEAR END: 0531
</COMPANY-DATA>
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-14187
FILM NUMBER: 711053
</FILING-VALUES>
BUSINESS ADDRESS:
STREET 1: 2628 PEARL RD
STREET 2: P O BOX 777
CITY: MEDINA
STATE: OH
ZIP: 44258
BUSINESS PHONE: 3302735090
</BUSINESS-ADDRESS>
MAIL ADDRESS:
STREET 1: 2628 PEARL RD
STREET 2: P O BOX 777
CITY: MEDINA
STATE: OH
ZIP: 44258
</MAIL-ADDRESS>
FORMER COMPANY:
FORMER CONFORMED NAME: REPUBLIC POWDERED METALS INC
DATE OF NAME CHANGE: 19711027
</FORMER-COMPANY>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>e10-k.txt
<DESCRIPTION>RPM, INC. FORM 10-K
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended May 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from __________ to ___________
Commission File No. 1-14187
RPM, INC.
(Exact Name of Registrant as Specified in its Charter)
OHIO 34-6550857
- ---------------------------------------- ----------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
P.O. BOX 777, 2628 PEARL ROAD, MEDINA, OHIO 44258
- ----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (330) 273-5090
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
- ------------------- ------------------------------------
Common Shares, Without Par Value New York Stock Exchange
Rights to Purchase Common Shares New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to the filing requirements for the past 90 days. Yes X No ___
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of August 18, 2000, 102,015,030 Common Shares were
outstanding, and the aggregate market value of the Common Shares of the
Registrant held by non-affiliates (based upon the closing price of the Common
Shares as reported on the New York Stock Exchange on August 18, 2000) was
approximately $913,867,737. For purposes of this information, the 1,865,141
outstanding Common Shares which were owned beneficially as of August 18, 2000 by
executive officers and Directors of the Registrant were deemed to be the Common
Shares held by affiliates.
Documents Incorporated by Reference
Portions of the following documents are incorporated by
reference to Parts II, III and IV of this Annual Report on Form 10-K: (i)
definitive Proxy Statement to be used in connection with the Registrant's Annual
Meeting of Shareholders to be held on October 12, 2000 (the "2000 Proxy
Statement") and (ii) the Registrant's 2000 Annual Report to Shareholders for the
fiscal year ended May 31, 2000 (the "2000 Annual Report to Shareholders").
Except as otherwise stated, the information contained in this
Annual Report on Form 10-K is as of May 31, 2000.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS.
THE COMPANY
RPM, Inc. ("RPM" or the "Company") was organized in 1947 as an
Ohio corporation under the name Republic Powdered Metals, Inc. On November 9,
1971, the Company's name was changed to RPM, Inc. As used herein, the terms
"RPM" and the "Company" refer to RPM, Inc. and its subsidiaries, unless the
context indicates otherwise. The Company has its principal executive offices at
2628 Pearl Road, P.O. Box 777, Medina, Ohio 44258, and its telephone number is
(330) 273-5090.
RECENT DEVELOPMENTS
On August 9, 1999, the Company announced the implementation of
a restructuring and consolidation program. Under the program, certain operating
companies in the Company's Industrial and Consumer Divisions are being or have
been realigned to foster synergies with respect to technology, manufacturing
needs, channels of distribution and customer bases, and to generate
manufacturing and distribution efficiencies. As of August 1, 2000, the Company
has closed 12 facilities and has reduced its workforce approximately 5%
pursuant to the restructuring program. The Company expects to close an
additional 6 facilities by January 1, 2001. The program resulted in a total
pre-tax restructuring and asset impairment charge of $51.97 million and
additional related costs of sales of $7.88 million for a total charge to
earnings of $59.85 million, principally during the Company's first and fourth
quarters of fiscal 2000.
BUSINESS
RPM manufactures and markets protective coatings for use in
both industrial and consumer applications. As of May 31, 2000, RPM markets its
products in approximately 130 countries and operates manufacturing facilities in
68 locations in the United States, Argentina, Belgium, Brazil, Canada, China,
Colombia, Germany, Italy, Malaysia, Mexico, New Zealand, The Netherlands,
Poland, South Africa, the United Arab Emirates and the United Kingdom.
OPERATING SEGMENT INFORMATION
The Company is organized into two operating segments according
to the primary markets served by RPM: the Industrial Division and the Consumer
Division. Reference is made to "Industry Segment and Geographic Area
Information" on pages 12 through 13 of the Annual Report to Shareholders, which
is incorporated herein by reference, for financial information relating to
operating segments.
INDUSTRIAL PRODUCTS
RPM's operating companies manufacture and market coatings for
various industrial applications including waterproofing, general maintenance,
flooring systems and coatings, corrosion control, and other specialty chemical
applications. RPM's industrial products represented approximately 55% of the
Company's sales for the fiscal year ended May 31, 2000. The
3
<PAGE> 4
Company's Industrial Division is aligned into three product line groups: StonCor
Group, Tremco Group and RPM II Group.
The Company's Tremco Group manufactures a number of products
designed for waterproofing and general maintenance applications. These
waterproofing products include sealants, deck coatings, membranes and
water-based coatings for commercial and industrial maintenance marketed under
the Company's Tremco, Vulkem and DYmeric brands. The Tremco Group also
manufactures a variety of products used for general commercial and industrial
maintenance. These products include roofing products, such as asphaltic aluminum
roof deck coating produced by RPM's original business unit, Republic Powdered
Metals, Geoflex and Hy-Shield premium single-ply roofing materials and Tremco
roofing systems, as well as the Euco line of concrete and masonry additives,
coatings and repair products manufactured by The Euclid Chemical Company.
The Company's StonCor Group combines the Company's expertise
in corrosion control coatings and industrial polymer flooring in order to
capitalize on the fact that these product lines are sold to similar specifying
customers. The group's product lines include high-performance polymer floors,
linings and wall systems produced by Stonhard and molded and pultruded
fiberglass reinforced plastic grating products manufactured by the Company's
Fibergrate Composite Structures unit under the brand names of Chemgrate and
Fibergrate. The StonCor industrial product line also includes a broad-line of
high-performance corrosion control coatings marketed primarily under the
Carboline and Plasite brands. Carboline manufactures high-performance
corrosion-resistant protective coatings, fireproofing, tank linings and floor
coatings, and markets these products to industrial, architectural and applicator
companies throughout the world.
The Company's RPM II Group consists of the remaining
industrial product lines and is also the entity that will specialize in the
evaluation and acquisition of smaller entrepreneurial industrial coatings
companies. Product lines currently contained in RPM II include Dryvit coatings
and adhesives for exterior insulating finishing systems and TCI powder coatings
for exterior and interior operations. RPM II also produces a variety of
specialty chemical products within selected niche markets. Products manufactured
for specialty chemical applications include: Day-Glo Color and Radiant Color
fluorescent colorants and pigments; Kop-Coat manufactured compounds and wood
treatment products including Wolman industrial lumber treatments and pleasure
marine coatings marketed under the Pettit, Woolsey and Z-Spar brand names;
American Emulsions dye additives for textile dyeing and finishing; and Chemspec
commercial carpet cleaning solutions.
CONSUMER PRODUCTS
For consumer applications, RPM manufactures do-it-yourself
products for home maintenance, automotive repair, marine applications and hobby
and leisure items. RPM's consumer do-it-yourself products are marketed through
thousands of mass merchandise, home center and hardware stores throughout North
America. RPM's consumer products represented approximately 45% of the Company's
sales for the fiscal year ended May 31, 2000. The major product line groupings
comprising RPM's Consumer Division include: the Rust-Oleum Group, Zinsser Group,
Wood Finishes Group, DAP/Bondex Group and Testor Hobby and Leisure Group.
4
<PAGE> 5
Rust-Oleum manufactures high quality corrosion-resistant,
general purpose, decorative coatings and assorted specialty products for the
household maintenance and light industrial markets. In addition to Rust-Oleum's
original rust preventative coatings, Rust-Oleum markets a full line of
small-package general purpose coatings under the "Painter's Touch by Rust-Oleum"
brand name as well as "American Accents by Rust-Oleum" decorative coatings.
The Company's Zinsser Group manufactures a broad line of
specialty primers and sealants marketed under the B-I-N, Bulls Eye 1-2-3 and
Cover Stain brand names, as well as wallcovering removal and preparation
coatings under the principal brands of DIF, Paper Tiger and Shieldz. Zinsser is
also a leader in mildew removal and resistance, and its Mantrose-Hauser group is
the nation's leading producer of shellac items used as pharmaceutical glazes,
confectioner's glazes, citrus fruit coatings and wood coatings. The Zinsser
Group also includes RPM's Wolman deck coatings, sealants and brighteners and the
Richard E. Thibaut line of do-it-yourself wallcoverings.
The Company's DAP/Bondex Group markets a nationwide line of
do-it-yourself household patch and repair products, including latex and silicone
caulks and sealants, spackling compounds, putty, glazing compounds, textured
ceiling paints, adhesives, basement waterproofing products, wood repair products
and other specialized materials for the home improvement market. In addition to
the DAP and Bondex brands, other leading brands within the group include Alex
Plus, Kwik Seal, Durabond, Weldwood, Woodlife and Plastic Wood.
The Company's Wood Finishes Group includes Mohawk, Star,
Chemical Coatings, Guardian Products and Westfield Coatings furniture finishes
and repair and restoration coatings, as well as Flecto interior stains and
finishes, marketed under the Varathane and Watco labels.
The Company manufactures products for the hobby and leisure
markets including Testor's model kits and accessory products, Aztek brand model
kits and airbrushes and Floquil/Polly S Color hobby, art and craft coatings.
RPM's consumer hobby and leisure products are marketed through thousands of mass
merchandise, toy and hobby stores throughout North America.
In addition, the Company manufactures a variety of auto body
paints and repair products for the automotive aftermarket under the Bondo brand
name, including spray paints, body fillers, vinyl colors and bumper repair
products.
FOREIGN OPERATIONS
The Company's foreign manufacturing operations for the fiscal
year ended May 31, 2000 accounted for approximately 22% of its total sales
(which does not include exports directly from the United States), although it
also receives license fees and royalty income from numerous license agreements
and also has joint ventures accounted for under the equity method in various
foreign countries. The Company has manufacturing facilities in Argentina,
Belgium, Brazil, Canada, China, Colombia, Germany, Italy, Malaysia, Mexico, New
Zealand, The Netherlands, Poland, South Africa, the United Arab Emirates and the
United Kingdom, and sales offices or public warehouse facilities in Australia,
Canada, Finland, France, Germany, Hong Kong, Iberia, Mexico, the Philippines,
Russia, Singapore, Sweden the United Kingdom and several other countries.
Information concerning the Company's foreign operations is set forth in
Management's
5
<PAGE> 6
Discussion and Analysis of Results of Operations and Financial Condition, which
appears elsewhere in this Annual Report on Form 10-K.
COMPETITION
The Company is engaged in a highly competitive industry and,
with respect to all of its major products, faces competition from local and
national firms. Several of the companies with which RPM competes have greater
financial resources and sales organizations than the Company. While no accurate
figures are available with respect to the size of or the Company's position in
the market for any particular product, management believes that the Company is a
major producer of aluminum coatings, cement-based paint, hobby paints, pleasure
marine coatings, furniture finishing repair products, automotive repair
products, industrial corrosion control products, consumer rust-preventative
coatings, polymer flooring, fluorescent coatings and pigments, exterior
insulation finish systems, molded and pultruded fiberglass reinforced plastic
grating and shellac-based coatings. However, the Company does not believe that
it has a significant share of the total protective coatings market.
INTELLECTUAL PROPERTY
The intellectual property portfolios of the subsidiaries of
the Company include numerous valuable patents, trade secrets and know-how,
domain names trademarks and trade names. Significant research and technology
development continues to be conducted by the subsidiaries. However, no single
patent, trademark, name or license, or group of these rights, other than the
marks Day-Glo(R), Rust-Oleum(R), Carboline(R) and Tremco(R), are material to the
Company's business.
Day-Glo Color Corp., a subsidiary of the Company, is the owner
of over 50 trademark registrations of the mark and name "DAY-GLO(R)" in numerous
countries and the United States for a variety of fluorescent products. There are
also many other foreign and domestic registrations for other trademarks of the
Day-Glo Color Corp., for a total of over 100 registrations. These registrations
are valid for a variety of terms ranging from one year to 20 years, which terms
are renewable as long as the marks continue to be used. Renewal of these
registrations is done on a regular basis.
Rust-Oleum Corporation, a subsidiary of the Company, is the
owner of over 50 United States trademark registrations for the mark and name
"RUST-OLEUM(R)" and other trademarks covering a variety of rust-preventative
coatings sold by Rust-Oleum Corporation. There are also many foreign
registrations for "RUST-OLEUM(R)" and the other trademarks of Rust-Oleum
Corporation, for a total of nearly 400 registrations. These registrations are
valid for a variety of terms ranging from one year to 20 years, which terms are
renewable for as long as the marks continue to be used. Renewal of these
registrations is done on a regular basis.
Carboline Company, a subsidiary of the Company, is the owner
of a United States trademark registration for the mark and name "CARBOLINE(R)."
Carboline Company is also the owner of several other United States registrations
for other trademarks. Renewal of these registrations is done on a regular basis.
DAP Products Inc., a subsidiary of the Company, is the owner
of over 150 United States and foreign trademark applications and registrations
which include the mark and name
6
<PAGE> 7
"DAP(R)." DAP Products Inc. is also the owner of several other United States and
foreign registrations for other trademarks including "PUTTY KNIFE(R)." Renewal
of these registrations is done on a regular basis.
Tremco Incorporated, a subsidiary of the Company, which was
acquired in February 1997, is the owner of over 100 registrations for the mark
and name "TREMCO(R)" in numerous countries and the United States for a variety
of sealants and coating products. There are also many other foreign and domestic
registrations for other trademarks of Tremco Incorporated, for a total of over
600 registrations and applications. The registrations are valid for a variety of
terms ranging from one year to 20 years, which terms are renewable as long as
the marks continue to be used. Renewal of these registrations is done on a
regular basis.
The Company's other valuable product trademarks also include:
ALUMANATION(R), AVALON(R), B-I-N(R), BITUMASTIC(R), BONDO(R), BONDEX(R), BULLS
EYE(R), CHEMGRATE(R), DRYVIT(R), DYMERIC(R), DYNALITE(R), DYNATRON(R), EASY
FINISH(R), FLECTO(R), EPOXSTEEL(R), FIBERGRATE(R), FLOQUIL(R), GEOFLEX(R),
LUBRASPIN(TM), MAR-HYDE(R), MOHAWK and DESIGN(R), OUTSULATION(R), PARASEAL(R),
PERMAROOF(R), PETTIT(TM), PLASITE(R), SANITILE(R), STONCLAD(R), STONHARD(R),
STONLUX(R), TALSOL(R), TCI(TM), TESTORS(R), ULTRALITE(TM), VARATHANE(R),
VULKEM(R), WOOLSEY(R), ZINSSER(R) and Z-SPAR(R); and, in Europe, NULLIFIRE(R),
RADGLO(R) and MARTIN MATHYS(R).
RAW MATERIALS
The Company does not have any single source suppliers of raw
materials that are material to its business, and the Company believes that
alternate sources of supply of raw materials are available to the Company for
most of its raw materials. Where shortages of raw materials have occurred, the
Company has been able to reformulate products to use more readily available raw
materials. Although the Company has been able to reformulate products to use
more readily available raw materials in the past, there can be no assurance as
to the Company's ability to do so in the future.
SEASONAL FACTORS
The Company's business is seasonal due to outside weather
factors. The Company historically experiences strong sales and income in its
first, second and fourth fiscal quarters comprised of the three month periods
ending August 31, November 30 and May 31, respectively, with weaker performance
in its third fiscal quarter (December through February).
CUSTOMERS
No one customer accounted for 10% or more of the Company's
total sales. Except for the Company's Consumer Division in which approximately
37% of sales are made to a relatively small number of large do-it-yourself home
centers, the Company's business is not dependent upon any one customer or small
group of customers but is rather dispersed over a substantial number of
customers.
7
<PAGE> 8
BACKLOG
The Company historically has not had a significant backlog of
orders, nor was there a significant backlog during the last fiscal year.
RESEARCH
The Company's research and development work is performed in
various laboratory locations throughout the United States. During fiscal years
2000, 1999 and 1998, the Company invested approximately $22.3 million, $18.0
million and $15.8 million, respectively, on research and development activities.
The customer sponsored portion of such expenditures was not significant.
ENVIRONMENTAL MATTERS
Several of the Company's subsidiaries are involved in various
environmental claims or proceedings relating to facilities currently or
previously owned, operated or used by such subsidiaries, or their predecessors.
In addition, the Company or its subsidiaries, together with other parties, have
been designated as potentially responsible parties ("PRPs") under federal and
state environmental laws for the remediation of hazardous waste at certain
disposal sites (see ITEM 3. LEGAL PROCEEDINGS). In connection with its
evaluation of these PRP sites, the Company's management takes into consideration
the input of outside legal counsel, the number of parties involved at the site,
joint and several liability of other PRPs, predecessor indemnities and the level
of volumetric contribution which may be attributed to the Company relative to
that attributable to other parties at such sites. Based on the above analysis,
management then assesses, to the extent possible, the estimated restoration or
other clean-up costs and related claims for each site.
The Company's environmental-related accruals are established
and/or adjusted as information becomes available upon which more accurate costs
can be reasonably estimated. Actual costs may vary from these estimates due to
the inherent uncertainties involved. In management's opinion, based upon
information presently available, the outcome of these environmental matters will
not have a material adverse effect on the Company's financial position, results
of operations or liquidity.
EMPLOYEES
As of May 31, 2000, the Company employed 7,960 persons, of
whom 615 were represented by unions under contracts which expire at varying
times in the future. The Company believes that its relations with its employees
are good.
ITEM 2. PROPERTIES.
The Company's corporate headquarters and a plant and offices
for one subsidiary are located on an 119-acre site in Medina, Ohio, which is
owned by the Company. As of May 31, 2000, the Company's operations occupy a
total of approximately 7.0 million square feet, with the majority, approximately
5.7 million square feet, devoted to manufacturing, assembly and storage. Of the
approximately 7.0 million square feet occupied, 5.8 million square feet are
owned and 1.2 million square feet are occupied under operating leases. In
addition, approximately 1.1 million square feet, 0.8 million square feet owned
and 0.3 million square feet leased, are associated with
8
<PAGE> 9
property intended to be sold or sublet in conjunction with the Company's
restructuring program. The Company's facilities of 200,000 square feet or
larger, as of July 31, 2000, are as set forth below.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
TYPE OF OF LEASED OR
LOCATION FACILITY FLOOR SPACE OWNED
-------- -------- ----------- -----
<S> <C> <C> <C>
Pleasant Prairie, Manufacturing, 250,000 Owned
Wisconsin Warehouse and Laboratory
(Rust- Oleum Corporation)
Toronto, Canada Manufacturing, Warehouse 312,000 Owned
and Laboratory
and Office (Tremco
Incorporated)
</TABLE>
For information concerning the Company's rental obligations,
see Note E (Leases) of Notes to Consolidated Financial Statements, which appear
elsewhere in this Annual Report on Form 10-K. Under all of its leases, the
Company is obligated to pay certain varying insurance costs, utilities, real
property taxes and other costs and expenses.
The Company believes that its manufacturing plants and office
facilities are well maintained and suitable for the operations of the Company.
ITEM 3. LEGAL PROCEEDINGS.
BONDEX.
As previously reported, the Company, its wholly-owned
subsidiaries, Bondex International, Inc. ("Bondex") and Republic Powdered
Metals, Inc. ("Republic"), are each defendants or co-defendants in
asbestos-related bodily injury lawsuits filed on behalf of various individuals
in various jurisdictions including Illinois, Missouri, Texas, New York, Ohio and
Pennsylvania. These cases seek damages for asbestos-related diseases based on
alleged exposures to asbestos-containing products previously manufactured by
either the Company, Bondex or Republic. In many cases, the plaintiffs are unable
to demonstrate that any injuries they have incurred, in fact, resulted from
exposure to Bondex, Republic or Company products. Bondex, Republic or the
Company are generally dismissed from those cases. With respect to those cases
where compensable disease, exposure and causation are established, Bondex,
Republic and the Company generally settle for amounts each considers reasonable
given the facts and circumstances of each case.
9
<PAGE> 10
During the year ended May 31, 2000, there was an increase in
settlement demands for certain specific cases in particular jurisdictions. This
increase was caused by (1) the serious nature of each case, (2) the presence of
only a few co-defendants in each case and (3) the necessity of higher cost
settlements in certain jurisdictions. The amounts paid to defend and settle
these cases were substantially covered by product liability insurance.
As of May 31, 2000, Bondex, Republic and the Company had a
total of 636 active asbestos cases. Between May 31, 1999 and May 31, 2000,
Bondex, Republic and the Company secured dismissals and/or settlements of 110
cases, the total cost of which collectively to Bondex, Republic and the Company,
net of insurer contributions, amounted to $586,000.
Bondex, Republic and the Company continue to vigorously defend
all asbestos-related lawsuits. Under a cost-sharing agreement among the
Company, Bondex, Republic and their insurers, the insurers are responsible for
payment of a substantial portion of defense costs and indemnity payments with
the Company, Bondex and Republic each responsible for the balance. The Company
believes that the ultimate resolution of its asbestos cases will not have a
material adverse effect on the Company's financial position or results of
operations.
DRYVIT.
As previously reported, Dryvit Systems, Inc., a wholly-owned
subsidiary of the Company ("Dryvit"), is a defendant or co-defendant in numerous
lawsuits seeking damages for structures clad with exterior insulated finish
systems ("EIFS") products manufactured by Dryvit and other EIFS manufacturers.
As of May 31, 2000, Dryvit was a defendant or co-defendant in approximately 500
single family residential EIFS cases, the vast majority of which are pending in
North Carolina, South Carolina and Alabama. Dryvit also has several EIFS
lawsuits involving condominium complexes and office buildings. While the vast
majority of Dryvit's EIFS lawsuits claim water intrusion and related property
damages, plaintiffs in a few EIFS lawsuits also claim respiratory-based
personal injuries from alleged exposure to mold. Dryvit is vigorously
challenging these mold allegations and does not believe there is adequate
scientific basis to sustain such a personal injury action against Dryvit.
As previously reported, some of Dryvit's EIFS lawsuits have
sought to certify classes comprised of owners of structures clad with EIFS
products manufactured by Dryvit and other EIFS manufacturers in North Carolina,
Georgia, New Jersey, Texas and Illinois. On May 26, 2000, Dryvit was served in a
state class action filed in Madison County, Illinois styled Osborne, et al. v.
Dryvit Systems, Inc. (Case No. 00L000395) ("Osborne"). The Osborne case seeks
various types of damages on behalf of a class of all persons who owned a Dryvit
EIFS-clad home located in the State of Illinois during the period January 1,
1990 to the date of the complaint.
On July 10, 2000, Dryvit defeated certification of the
attempted class action in Texas. With the exception of the North Carolina Ruff
class action discussed below, none of these attempted class actions have been
certified and Dryvit continues to vigorously oppose class certifications.
Dryvit, the Company's captive insurer, First Colonial Insurance Company, and one
of Dryvit's umbrella carriers, are parties to various cost-sharing agreements
which are currently providing defense and indemnity for these residential,
commercial and class action EIFS lawsuits. Dryvit believes that the damages
sought by the plaintiffs in these cases are
10
<PAGE> 11
covered by its existing insurance, including that provided by First Colonial and
other umbrella and excess carriers, and that such insurance is presently
adequate.
On March 24, 2000, Judge Tennille signed a Final Order and
Judgment Granting Final Approval of Settlement for Dryvit's settlement of the
North Carolina class action styled Ruff et al. v. Parex, Inc. et al. The
approved settlement class includes all persons or entities who as of September
18, 1996, owned or formerly owned a one or two family residential dwelling or
townhouse in the State of North Carolina clad with Dryvit's EIFS. Eligible
claimants must complete and submit to a third party administrator an extensive
claim form; the home must be inspected by a third party inspector to verify that
the structure is clad with Dryvit's EIFS; and that the requisite moisture levels
are present to validate the claim before the claim is paid. Eligible claimants
with valid claims are entitled to recover $6.00 per square foot of EIFS
installed. As of August 1, 2000 a total of 355 claims have been submitted to the
claims administrator for verification and validation. The deadline for filing
claims is January 17, 2003.
Dryvit has secured commitments from one of its third party
insurers and First Colonial to provide funding for the Ruff settlement. Based
upon the terms of the final settlement, attorney fee award to class counsel and
the anticipated number of claims, the Company believes that Dryvit has arranged
adequate financial commitments and other insurance to cover its obligations
under the Ruff settlement. Accordingly, the Company does not believe the Ruff
settlement will have a material adverse effect on the Company's financial
position or results of operations.
CARBOLINE.
As previously reported, Carboline Company, a wholly-owned
subsidiary of the Company ("Carboline") has been named as one of numerous
defendants in three similar toxic tort cases in Texas covering approximately
1,200 worker-plaintiffs (and, where applicable, their spouses and children)
employed at two nuclear power plants in Texas (Comanche Peak and South Texas).
The workers contend they were exposed to various solvents during their
employment at the facilities, allegedly resulting in respiratory and
neurological ailments. The first of these cases, ROC Pretrial, Cause No.
91-CI-02533, in the 224th Judicial District Court of Bexar County, Texas
("ROC"), has been reduced through voluntary dismissals and summary judgments to
approximately 140 worker-plaintiffs. A similar suit, Bernice O. Pierce, et al.
v. Southern Imperial Coatings Corp. et al. ("Pierce"), Case no. 96-CI-12756, in
the Judicial District Court of Bexar County, Texas, involves approximately 75
worker-plaintiffs. The third case, Mary M. Gunn, et al. v. Carboline Company,
et al. ("Gunn"), Case No. 93-470, in the 4th Judicial District Court of Rusk
County, Texas, involves approximately 200 plaintiffs. All three cases are in
the discovery phase and, as noted above, ROC and Pierce have been the subject
of several recent motions for summary judgment which have decreased
significantly the number of plaintiffs involved. None of the cases are set for
trial at this time. Carboline has denied all liability in these cases and is
conducting a vigorous defense. Several of Carboline's insurance carriers, and
Carboline, are defending the lawsuits under a cost-sharing agreement. The
Company believes that the ultimate resolution of ROC, Gunn and Pierce will not
have a material adverse effect on the Company's financial position or results
of operations.
As previously reported, Carboline is a defendant in La Gloria
Oil & Gas Company vs. Carboline Company, et al., Cause No. 95-959-C, in the
241st Judicial District Court of Smith County, Texas. The suit involves
allegations by LaGloria Oil and Gas Company
11
<PAGE> 12
("LaGloria"), the owner/operator of a refinery in Tyler, Texas, that a Carboline
product as applied to LaGloria's structural steel and vessel skirts is defective
and has caused substantial damages to the refinery. The court previously granted
Carboline a summary judgment, based upon the applicable statutes of limitation,
on several causes of action. On August 21, 1999, a jury returned a defense
verdict in favor of Carboline dismissing LaGloria's remaining claims for fraud
and violation of the Texas Deceptive Trade Practices Act. La Gloria has appealed
the jury verdict and Carboline intends to vigorously challenge the appeal.
Although there has been diminishment of insurance policy limits available to
Carboline as a result of a prior settlement, the Company believes that the
ultimate resolution of the LaGloria case will not have a material adverse effect
on the Company's financial position or results of operations.
MAC-O-LAC.
As previously reported, the Company has been identified as a
Potentially Responsible Party ("PRP") under CERCLA in connection with the Rose
Township Dump Site, Rose Township, Michigan (the "Rose Township Site") and the
Springfield Township Dump Site, Springfield Township, Michigan (the "Springfield
Site") as a consequence of the disposal of waste originating at Mac-O-Lac
Paints, Inc., a former subsidiary of the Company whose assets were sold in
February 1982. With respect to the Rose Township Site, the Company and eleven
other PRPs signed a Consent Decree on July 18, 1989, pursuant to which the PRPs
established a $9 million fund to cover costs of remediation. The Company's
share, $300,000, has been paid.
With respect to the Springfield Site, the Company and other
PRPs executed in 1992 with the EPA and the Michigan Department of Natural
Resources Administrative Orders on Consent Regarding Selected Response
Activities and for Cost Recovery Settlement, In the Matter of: Springfield
Township Site, No. V-W-92-L-160 + V-W-92-C-146. The Company withdrew from
participation in the Springfield Township PRP Group in 1995. In January 1999,
the remaining members of the Springfield Township PRP Group demanded that the
Company reconsider its decision to withdraw from the PRP Group and requested
$158,000 in past remediation expenses from the Company. The Company rejected the
$158,000 demand, and is not currently participating with the remaining
Springfield Township PRPs. The Company does not believe either of these sites
will have a material adverse effect on the Company's financial position or
results of operations.
MOHAWK AND WESTFIELD.
As previously reported, Mohawk Finishing Products, Inc.
("Mohawk") and Westfield Coatings Corporation ("Westfield"), both wholly-owned
subsidiaries of the Company, were notified by the EPA, together with over a
thousand other parties, of their status as PRPs under CERCLA with respect to
environmental contamination at the Solvents Recovery of New England Site (the
"SRS Site") located in Southington, Connecticut. To date, the EPA and the State
of Connecticut have expended in excess of $5 million in connection with the SRS
Site. Several hundred of the PRPs, including Mohawk and Westfield, have recently
completed the Remedial Investigation and Feasibility Study for the SRS Site and
are performing two non-time critical removal actions to contain contaminated
groundwater at the SRS Site. EPA has not yet selected the remedial action for
the Site.
In January 1994, the EPA notified Westfield of its status as a
PRP at the Old Southington Landfill Superfund Site in Southington, Connecticut
(the "Landfill") on the basis
12
<PAGE> 13
that process wastes from the SRS Site were sent to the Landfill prior to October
1967. In September 1994, the EPA issued a Record of Decision which selected a
source control remedy that consisted of installation of a cap on the Landfill
together with a gas collection system at an estimated cost of $16.1 million. EPA
deferred to a second operable unit the issue of whether to actively remediate
groundwater at the Landfill, but is insisting that certain groundwater studies
be performed which will cost several millions of dollars. Westfield has entered
into a settlement resolving its liability for the source control remedy in
return for a payment of $16,476.21. It is expected that at some point in the
near future the government will commence settlement discussions with respect to
the second operable unit.
SOUTHDOWN SITE.
The Company's Carboline Company has been identified as a PRP
under CERCLA in connection with a former solvent recycling facility in Tarrant
City, Alabama, Southdown v. Carboline Company, et al.; United States District
Court for the Northern District of Alabama, Southern Division, Civil No.
CV96-J-3300-S ("Southdown Site"). Between 1978 and 1990, the Southdown Site was
operated by All-Worth Enterprises pursuant to a Part B Permit under the Recourse
Conservation and Recovery Act. In 1990, Southdown, Inc. and Southdown
Environmental Treatment Systems, Inc. operated the site until 1995 when the site
was sold to Nortru, Inc., a wholly-owned subsidiary of Philip Services, Inc. In
November 1996, the Alabama Department of Environmental Management approved an
RCRA facility investigation work plan. This work plan discovered solvent
contamination at the facility.
Southdown and Southdown Environmental Systems filed a
Complaint under Sections 113 and 107 of CERCLA against the former owner of the
Tarrant City facility. In turn, the former owner filed a second amended
complaint which added 42 of the current and former customers of the Southdown
Site who allegedly arranged for the treatment or disposal of hazardous
substances at the site. In March 2000, members of the joint defense group filed
an amended complaint which added several additional customer defendants
including Carboline Company. The complaint alleged that Carboline, through the
former Admiral Paint operation in Lake Charles, Louisiana, sent hazardous
substances to the Southdown Site for solvent reclamation. All of the parties
have provided initial discovery responses, and the joint defense group is
analyzing these responses to establish the volumetric schedule for potential
allocation. The CERCLA litigation is currently stayed pending resolution of an
indemnity claim between former owners and operators of the Southdown facility.
Without a credible volumetric analysis and review of the waste-in list, the
Company is unable to estimate Carboline's potential liability at the Southdown
Site. The Company believes that the ultimate resolution of this matter will not
have a material adverse effect on the Company's financial position or results
of operations.
RUST-OLEUM.
As previously reported in November 1979, the EPA commenced an
action captioned United States of America v. Midwest Solvent Recovery, Inc., et
al.; United States District Court for the Northern District of Indiana, Eastern
Division; Civil No. H-79-556, pertaining to pollution allegedly occurring at and
around real property located at 7400 West Fifteenth Street, Gary, Indiana
("MIDCO I") and 5900 Industrial Highway, Gary, Indiana ("MIDCO II")
(collectively, the "MIDCO Sites"). The Complaint was subsequently amended in
January 1984 to join Rust-Oleum Corporation, a wholly-owned subsidiary of the
Company ("Rust-Oleum"), and other entities as additional defendants. Rust-Oleum
is alleged to be
13
<PAGE> 14
associated with the MIDCO Sites as a consequence of disposal waste originating
at its former Evanston, Illinois plant in the mid-1970s. The Court approved a
Consent Decree in June 1992 under which Rust-Oleum entered into a Settlement
Agreement with the other settling PRPs for the voluntary cleanup of the MIDCO
Sites consistent with the EPA Record of Decision. All surface hazardous wastes
have been removed from the MIDCO Sites and cleanup is now in the groundwater
remediation stage. Remediation should be completed by the year 2002, with
monitoring continuing for an undetermined period. Total remediation and
monitoring costs are currently estimated to be $35 million. Included in the
Consent Decree is an Agreement between the settling PRPs, including Rust-Oleum,
and third parties of their fair share of the MIDCO Sites remedial and response
costs. Third party funds have been placed into the MIDCO Trust Fund, which has
been created to fund the MIDCO Site remedial actions. Rust-Oleum, as a settling
PRP, has provided financial assurance for its share of the cleanup costs in the
form of a Letter of Credit. Based upon prior settlement agreements with
insurance carriers for potential costs and remediation liabilities in connection
with the MIDOC Sites, Rust-Oleum has established appropriate reserves to cover
such costs and liabilities. Accordingly, the Company believes that ultimate
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT*.
The name, age and positions of each executive officer of the Company as
of August 1, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position and Offices With the Company
- ---- --- -------------------------------------
<S> <C> <C>
Thomas C. Sullivan 63 Chairman of the Board and Chief Executive Officer
James A. Karman 63 Vice Chairman
Frank C. Sullivan 39 President
P. Kelly Tompkins 43 Vice President, General Counsel and Secretary
Charles P. Brush 64 Vice President - Environmental and Regulatory Affairs
Glenn R. Hasman 46 Vice President - Finance and Communications
Gordon M. Hyde 46 Vice President - Operations
Stephen J. Knoop 35 Vice President - Corporate Development
Robert Matejka 57 Vice President - Controller
Ronald A. Rice 37 Vice President - Risk Management and Benefits and Assistant
Secretary
Keith R. Smiley 38 Vice President, Treasurer and Assistant Secretary
</TABLE>
- -----------------------
* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
14
<PAGE> 15
Thomas C. Sullivan has been Chairman of the Board and Chief Executive
Officer of the Company since October 1971. From June 1971 through September
1978, Mr. Sullivan served as President and, prior thereto, as Executive Vice
President of the Company. Mr. Sullivan's employment with the Company commenced
in 1961, and he has been a Director since 1963. Mr. Sullivan is employed as
Chairman and Chief Executive Officer under an employment agreement for a period
ending December 31, 2002. Mr. Sullivan is the father of Frank C. Sullivan,
President of the Company.
James A. Karman was elected Vice Chairman on August 5, 1999. From
September 1978 to August 1999, he served as President and Chief Operating
Officer. From October 1982 to October 1993, Mr. Karman also was the Chief
Financial Officer of the Company. From October 1973 through September 1978, Mr.
Karman served as Executive Vice President, Secretary and Treasurer, and, prior
thereto, as Vice President-Finance and Treasurer of the Company. Mr. Karman's
employment with the Company commenced in 1963, and he has been a Director since
1963. Mr. Karman is employed as Vice Chairman under an employment agreement for
a period ending December 31, 2002.
Frank C. Sullivan was elected President on August 5, 1999. From October
1995 to August 1999 he served as Executive Vice President, and was Chief
Financial Officer from October 1993 to August 1999. Mr. Sullivan served as a
Vice President from October 1991 to October 1995. Prior thereto, he served as
Director of Corporate Development of the Company from February 1989 to October
1991. Mr. Sullivan served as Regional Sales Manager, from February 1988 to
February 1989, and as a Technical Service Representative, from February 1987 to
February 1988, of AGR Company, an Ohio General Partnership formerly owned by the
Company which was merged into Tremco. Prior thereto, Mr. Sullivan was employed
by First Union National Bank from 1985 to 1986 and Harris Bank from 1983 to
1985. Mr. Sullivan is employed as President under an employment agreement for a
period ending May 31, 2001. Mr. Sullivan is the son of Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer of the Company.
P. Kelly Tompkins has served as Vice President, General Counsel and
Secretary since June 1998. From June 1996 to June 1998, Mr. Tompkins served as
Assistant General Counsel. From 1987 to 1995, Mr. Tompkins was employed by
Reliance Electric Company in various positions including Senior Corporate
Counsel, Director of Corporate Development and Director of Investor Relations.
From 1985 to 1987, Mr. Tompkins was employed by Exxon Corporation. Mr. Tompkins
is employed as Vice President, General Counsel and Secretary under an employment
agreement for a period ending May 31, 2001.
Charles P. Brush has served as Vice President-Environmental and
Regulatory Affairs of the Company since October 1993. From June 1991 to October
1993, he served as the Company's Director of Environmental & Regulatory
Affairs. Prior thereto, from 1988 to June 1991, he served as Vice
President-Environmental & Risk Management of Kop-Coat, Inc., a wholly-owned
subsidiary of the Company. Prior thereto, he served as Vice President and
Manager of Koppers Company, Inc.'s international environmental consulting
business. Mr. Brush is employed as Vice President-Environmental and Regulatory
Affairs under an employment agreement for a period ending May 31, 2001.
Glenn R. Hasman was elected Vice President-Finance and Communications
on August 1, 2000. Mr. Hasman served as Vice President-Controller from August
1999 to August
15
<PAGE> 16
2000 and served as Vice President-Financial Operations from October 1993 to
August 1999. From July 1990 to October 1993, Mr. Hasman served as Controller.
From September 1982 through July 1990, Mr. Hasman served in a variety of
management capacities, most recently Vice President-Operations and Finance,
Chief Financial Officer and Treasurer, of Proko Industries, Inc., a former
wholly-owned subsidiary of the Company. From 1979 to 1982, Mr. Hasman served as
RPM's Director of Internal Audit and from 1976 to 1979 he was associated with
Ciulla, Smith & Dale, LLP, independent accountants. Mr. Hasman is employed as
Vice President-Finance and Communications under an employment agreement for a
period ending May 31, 2001.
Gordon M. Hyde has served as Vice President-Operations of the Company
since April 1999. From August 1998 to April 1999, he served as Vice President -
Operations of the Company's Consumer Group. From October 1997 to August 1998,
Mr. Hyde was a self-employed management consultant. From July 1996 to October
1997, Mr. Hyde was Vice President of Operations for Armor All Products, Inc.
From October 1990 to July 1997, Mr. Hyde served as Vice President of Operations
of Hi-Port, Inc. Mr. Hyde also served as Plant Manager of Hi-Port, Inc. from
January 1989 to October 1996. Prior thereto, Mr. Hyde served in various
capacities with Airco, Kinark Corporation and Ford Motor Company. Mr. Hyde is
employed as Vice President-Operations under an employment agreement for a period
ending May 31, 2001.
Stephen J. Knoop was elected Vice President-Corporate Development on
August 5, 1999. From June 1996 to August 1999, Mr. Knoop served as Director of
Corporate Development of the Company. From 1990 to May 1996, Mr. Knoop was an
associate at Calfee, Halter & Griswold LLP. Mr. Knoop is employed as Vice
President-Corporate Development under an employment agreement for a period
ending May 31, 2001.
Robert Matejka was appointed Vice President-Controller on August 1,
2000. From 1995 to 1999, he served as Vice President-Finance of the motor and
drive systems businesses of Rockwell International Corporation. From 1973 to
1995, Mr. Matejka served in various capacities with Reliance Electric Company,
most recently as its Assistant Controller. From 1965 to 1973, he was an Audit
Supervisor with Ernst & Young. Mr. Matejka is employed as Vice
President-Controller under an employment agreement for a period ending May 31,
2001.
Ronald A. Rice was elected Vice President-Risk Management and Benefits
and Assistant Secretary on August 5, 1999. From 1997 to August 1999, he served
as Director of Risk Management and Employee Benefits, and from 1995 to 1997 he
served as Director of Benefits. From 1985 to 1995, Mr. Rice served in various
capacities with the Wyatt Company, most recently he served as Senior Account
Manager from 1992 to 1995. Mr. Rice is employed as Vice President-Risk
Management and Benefits and Assistant Secretary under an employment agreement
for a period ending May 31, 2001.
Keith R. Smiley was elected Vice President and Assistant Secretary on
August 5, 1999, and has served as Treasurer of the Company since February 1997.
From October 1993 to February 1997, he served as Controller of the Company.
From January 1992 until February 1997, Mr. Smiley also served as the Company's
Internal Auditor. Prior thereto, he was associated with Ciulla, Smith & Dale,
LLP. Mr. Smiley is employed as Vice President, Treasurer and Assistant
Secretary under an employment agreement for a period ending May 31, 2001.
16
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
RPM Common Shares are traded on the New York Stock Exchange
under the symbol RPM. The high and low sales prices for the Common Shares, and
the cash and stock dividends paid on the Common Shares, for each quarter of the
two most recent fiscal years is set forth in the table below.
RANGE OF SALES PRICES AND DIVIDENDS PAID
<TABLE>
<CAPTION>
Dividends Paid
Fiscal 2000 High Low Per Share
------------- ---- --- ---------
<S> <C> <C> <C>
1st Quarter $ 15-1/16 $ 13-1/8 $ 0.1175
2nd Quarter 13-1/2 11-1/8 0.1225
3rd Quarter 11-7/8 9-1/2 0.1225
4th Quarter 11-5/16 9-11/16 0.1225
Dividends Paid
Fiscal 1999 High Low Per Share
----------- ---- --- ---------
1st Quarter $ 17-5/8 $ 12-3/4 $ 0.1120
2nd Quarter 17 12-7/8 0.1175
3rd Quarter 16-1/2 12-7/8 0.1175
4th Quarter 14-15/16 12-5/8 0.1175
</TABLE>
- --------------------
Source: The Wall Street Journal
Cash dividends are payable quarterly, upon authorization of the Board
of Directors. Regular payment dates are approximately the 30th day of July,
October, January and April. RPM maintains a Dividend Reinvestment Plan whereby
cash dividends, and a maximum of an additional $5,000 per month, may be invested
in RPM Common Shares purchased in the open market at no commission cost to the
participant.
The number of holders of record of RPM Common Shares as of August 18,
2000 was approximately 44,163.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial
data of the Company for each of the five years during the period ended May 31,
2000. The data was derived from the
17
<PAGE> 18
annual Consolidated Financial Statements of the Company which have been audited
by Ciulla, Smith & Dale, LLP, independent accountants.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
--------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Amounts in thousands, except per share
and percentage data)
<S> <C> <C> <C> <C> <C>
Net sales $1,954,131 $1,712,154 $1,615,274 $1,350,537 $1,136,396
Income before income taxes 71,761 159,597 149,556 135,728 119,886
Net income 40,992 94,546 87,837 78,315 68,929
Return on sales % 2.1% 5.5% 5.4% 5.8% 6.1%
Basic earnings per share 0.38 0.87 0.89 0.81 0.72
Diluted earnings per share 0.38 0.86 0.84 0.76 0.69
Shareholders' equity 645,724 742,876 567,337 493,398 445,915
Shareholders' equity per share 6.02 6.83 5.75 5.07 4.68
Return on shareholders' equity % 5.9% 14.4% 16.6% 16.7% 17.3%
Average shares outstanding 107,221 108,731 98,527 97,285 95,208
Cash dividends paid 51,901 50,446 43,474 39,746 35,597
Cash dividends per share 0.485 0.465 0.440 0.408 0.378
Retained earnings 348,102 359,011 314,911 270,465 231,896
Working capital 408,890 402,870 387,284 478,535 275,722
Total assets 2,099,203 1,737,236 1,685,917 1,633,228 1,155,076
Long-term debt 959,330 582,109 716,989 784,439 447,654
Depreciation and amortization 79,150 62,135 57,009 51,145 42,562
</TABLE>
- ---------------
Note: Acquisitions made by the Company during the periods presented may impact
comparability from year to year. See Note A(2) of Notes to Consolidated
Financial Statements, which appear elsewhere in this Annual Report on Form 10-K,
for information concerning acquisitions for fiscal years 2000 and 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is set forth at pages 12
through 18 of the 2000 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest
rates and foreign currency exchange rates since it funds its operations through
long-and short-term borrowings and denominates its business transactions in a
variety of foreign currencies. A summary of the Company's primary market risk
exposures is presented below.
Interest Rate Risk
The Company's primary interest rate risk exposure results from
floating rate debt including various revolving credit and other lines of credit.
At May 31, 2000, approximately 72% of the Company's total long-term debt
consisted of floating rate debt. If interest rates were to increase 100 basis
points (1%) from May 31, 2000 rates, and assuming no changes in long-
18
<PAGE> 19
term debt from the May 31, 2000 levels, the additional annual expense would be
approximately $7.0 million on a pre-tax basis. The Company currently does not
hedge its exposure to this floating rate interest rate risk.
Foreign Currency Risk
The Company's foreign sales and results of operations are
subject to the impact of foreign currency fluctuations. As most of the Company's
foreign operations are in countries with fairly stable currencies, such as the
United Kingdom, Belgium and Canada, this effect has not been material. In
addition, foreign debt is denominated in the respective foreign currency,
thereby eliminating any related translation impact on earnings. If the dollar
continues to strengthen, the Company's foreign results of operations will be
negatively impacted, but the effect is not expected to be material. A 10%
adverse change in foreign currency exchange rates would not have resulted in a
material impact on the Company's net income for the fiscal year ended May 31,
2000. The Company does not currently hedge against the risk of exchange rate
fluctuations.
Euro Currency Conversion
On January 1, 1999, eleven of the fifteen members of the
European Union adopted a new European currency unit (the "euro") as their common
legal currency. The participating countries' national currencies will remain
legal tender as denominations of the euro from January 1, 1999 through January
1, 2002, and the exchange rates between the euro and such national currency
units will be fixed. The Company has assessed the potential impact of the euro
currency conversion on its operating results and financial condition. The impact
of pricing differences on country-to-country indebtedness is not expected to be
material. The Company converted its European operations to the euro currency
basis effective June 1, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is set forth at pages 19
through 37 of the 2000 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item as to the Directors of the
Company appearing under the caption "Election of Directors" in the Company's
2000 Proxy Statement is incorporated herein by reference. Information required
by this item as to the Executive Officers of the Company is included as Item 4A
of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to
Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation
S-K is set forth in
19
<PAGE> 20
the 2000 Proxy Statement under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance," which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is set forth in the 2000
Proxy Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is set forth in the 2000
Proxy Statement under the heading "Share Ownership of Principal Holders and
Management," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth in the 2000
Proxy Statement under the heading "Election of Directors," which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this 2000 Annual Report on Form
10-K:
1. FINANCIAL STATEMENTS. The following consolidated financial
statements of the Company and its subsidiaries and the report of independent
auditors thereon, included in the 2000 Annual Report to Shareholders on pages 19
through 37, are incorporated by reference in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets -
May 31, 2000 and 1999
Consolidated Statements of Income -
years ended May 31, 2000, 1999 and 1998
Consolidated Statements of Shareholders'
Equity - years ended May 31, 2000, 1999
and 1998
Consolidated Statements of Cash Flows -
years ended May 31, 2000, 1999 and 1998
Notes to Consolidated Financial
Statements (including Unaudited Quarterly
Financial Information)
20
<PAGE> 21
2. FINANCIAL STATEMENT SCHEDULES. The following consolidated financial
statement schedule of the Company and its subsidiaries and the report of
independent auditors thereon are filed as part of this Annual Report on Form
10-K and should be read in conjunction with the consolidated financial
statements of the Company and its subsidiaries included in the 2000 Annual
Report to Shareholders:
Schedule Page No.
-------- --------
Independent Auditors' Report S-1
Schedule II - Valuation and Qualifying S-2
Accounts and Reserves
All other schedules have been omitted because they are not applicable
or not required, or because the required information is included in the
consolidated financial statements or notes thereto.
3. EXHIBITS.
See the Index to Exhibits at page E-1 of this Annual Report on
Form 10-K.
(b) REPORTS ON FORM 8-K.
The Company did not file a Current Report on Form 8-K during
the fourth fiscal quarter.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
RPM, INC.
Date: August 28, 2000 By: /s/ Thomas C. Sullivan
----------------------------------
Thomas C. Sullivan
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature and Title
- --------------------
<TABLE>
<S> <C>
Chairman of the Board of
/s/ Thomas C. Sullivan Directors and Chief Executive
- ------------------------------------ Officer (Principal Executive Officer)
Thomas C. Sullivan
/s/ James A. Karman Vice Chairman and a Director
- ------------------------------------ (Principal Financial Officer)
James A. Karman
/s/ Frank C. Sullivan President and a Director
- ------------------------------------
Frank C. Sullivan
/s/ Glenn R. Hasman Vice President-Finance and Communications
- ------------------------------------ (Principal Accounting Officer)
Glenn R. Hasman
/s/ Max D. Amstutz Director
- ------------------------------------
Max D. Amstutz
/s/ Edward B. Brandon Director
- ------------------------------------
Edward B. Brandon
/s/ Lorrie Gustin Director
- ------------------------------------
Lorrie Gustin
</TABLE>
22
<PAGE> 23
/s/ E. Bradley Jones Director
- ------------------------------------
E. Bradley Jones
/s/ Donald K. Miller Director
- ------------------------------------
Donald K. Miller
/s/ Kevin O'Donnell Director
- ------------------------------------
Kevin O'Donnell
/s/ William A. Papenbrock Director
- ------------------------------------
William A. Papenbrock
/s/ Albert B. Ratner Director
- ------------------------------------
Albert B. Ratner
/s/ Jerry Sue Thornton Director
- ------------------------------------
Jerry Sue Thornton
Date: August 28, 2000
23
<PAGE> 24
RPM, INC.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement dated as of July 9, 1999, by and
among the Company, Wassall DAP Holdings B.V. and Wassall PLC,
which is incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K, dated August 4, 1999.
3.1 Amended Articles of Incorporation, as amended, which is
incorporated herein by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.
3.2 Amended Code of Regulations, which is incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1996.
4.1 Specimen Certificate of Common Shares, without par value, of
RPM, Inc., which is incorporated herein by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1998.
4.2 Specimen Note Certificate for 7.0% Senior Notes Due 2005,
which is incorporated herein by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-4 as filed with
the Commission on August 3, 1995.
4.3 Specimen Note Certificate of Liquid Asset Notes With Coupon
Exchange ("LANCEs(SM)") Due 2008, which is incorporated herein
by reference to Exhibit 4.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1998.
4.4 Rights Agreement by and between RPM, Inc. and Harris Trust and
Savings Bank dated as of April 28, 1999, which is incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A as filed with the
Commission on May 11, 1999.
4.5 Indenture, dated as of June 1, 1995, between RPM, Inc. and The
First National Bank of Chicago, as trustee, with respect to
the 7.0% Senior Notes Due 2005, which is incorporated herein
by reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-4 as filed with the Commission on August
3, 1995.
4.6 First Supplemental Indenture, dated as of March 5, 1998 to the
Indenture dated as of June 1, 1995, between RPM, Inc. and The
First National Bank of Chicago, as trustee, with respect to
the Liquid Asset Notes with Coupon Exchange ("LANCEs(SM)") due
2008, which is incorporated herein by reference to Exhibit 4.6
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1998.
E-1
<PAGE> 25
Exhibit No. Description
----------- -----------
*10.1 Amended and Restated Employment Agreement, dated as of June 1,
2000, by and between RPM, Inc. and Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer.
*10.2 Amended and Restated Employment Agreement, dated as of June 1,
2000, by and between RPM, Inc. and James A. Karman, Vice
Chairman.
*10.3 Form of Employment Agreement entered into by and between RPM,
Inc. and each of Frank C. Sullivan, President, P. Kelly
Tompkins, Vice President, General Counsel and Secretary,
Charles P. Brush, Vice President - Environmental and
Regulatory Affairs, Gordon M. Hyde, Vice President -
Operations, Glenn R. Hasman, Vice President - Finance and
Communications, Stephen J. Knoop, Vice President - Corporate
Development, Robert Matejka, Vice President-Controller,
Ronald A. Rice, Vice President - Risk Management and Benefits
and Assistant Secretary and Keith R. Smiley, Vice President,
Treasurer and Assistant Secretary.
*10.4 RPM, Inc. 1979 Stock Option Plan, as amended, and form of
Stock Option Agreements used in connection therewith, which is
incorporated herein by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.
*10.5 RPM, Inc. 1989 Stock Option Plan, as amended, and form of
Stock Option Agreements to be used in connection therewith,
which is incorporated herein by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1996.
*10.6 RPM, Inc. 1996 Stock Option Plan, and form of Stock Option
Agreement to be used in connection therewith, which is
incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1997.
*10.6.1 Amendment No. 1 to RPM, Inc. 1996 Stock Option Plan, which is
incorporated herein by reference to Exhibit 10.7.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1998.
*10.7 RPM, Inc. Retirement Savings Trust and Plan, as amended, which
is incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.
*10.8 RPM, Inc. Benefit Restoration Plan, which is incorporated
herein by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1996.
*10.9 RPM, Inc. Board of Directors' Deferred Compensation Agreement,
as amended and restated, which is incorporated herein by
reference to Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1999.
*10.10 RPM, Inc. Deferred Compensation Plan for Key Employees, which
is incorporated herein by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1999.
E-2
<PAGE> 26
Exhibit No. Description
----------- -----------
*10.11 RPM, Inc. Incentive Compensation Plan, which is incorporated
herein by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1996.
*10.12 RPM, Inc. 1997 Restricted Stock Plan, and Form of Acceptance
and Escrow Agreement to be used in connection therewith, which
is incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
November 30, 1997.
*10.13 Form of Indemnification Agreement entered into by and between
the Company and each of its Directors and Executive Officers,
which is incorporated herein by reference to Exhibit 10.12 to
the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1996.
*10.14 Retirement Letter Agreement, dated August 23, 1999, between
John H. Morris and the Company incorporated herein by
reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended August 31, 1999.
10.15 364-Day $200,000,000 Credit Agreement, dated as of July 14,
2000, among the Company, The Chase Manhattan Bank as
Administrative Agent and Chase Securities Inc.
10.16 Five-Year $500,000,000 Credit Agreement, dated as of July 14,
2000, among the Company, The Chase Manhattan Bank as
Administrative Agent and Chase Securities Inc.
10.17 Multicurrency Credit Agreement, dated as of August 24, 1999,
among the Company, certain foreign subsidiaries of the
Company, and Deutsche Bank AG London incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended August 31, 1999.
10.18 Commercial Paper Placement Agency Agreement, dated as of
August 10, 1999, between the Company and Chase Securities,
Inc. (similar forms of agreement were also executed with Banc
One Capital Markets, Inc. and Banc of America Securities LLC)
incorporated herein by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended August 31, 1999.
11.1 Computation of Net Income per Common Share.
13.1 Financial Statements contained in 2000 Annual Report to
Shareholders.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.
- ------------------------------
*Management contract or compensatory plan or arrangement identified
pursuant to Item 14(c) of this Form 10-K.
E-3
<PAGE> 27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To The Board of Directors and
Shareholders
RPM, Inc. and Subsidiaries
Medina, Ohio
The audits referred to in our report to the Board of Directors and Shareholders
of RPM, Inc. and Subsidiaries dated July 7, 2000, relating to the consolidated
financial statements of RPM, Inc. and Subsidiaries included the audit of the
schedule listed under Item 14 of Form 10-K for each of the three years in the
period ended May 31, 2000. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based upon our audits.
In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ Ciulla Smith & Dale LLP
Ciulla, Smith & Dale, LLP
AUGUST 28, 2000
S-1
<PAGE> 28
RPM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Schedule II
----------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Additions Selling, Additions
Beginning Charged to General and Charged to
Of Period Cost of Sales Administrative Restructuring Acquisitions
----------- ------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MAY 31, 2000
Allowance for doubtful accounts $ 14,248 $ $ 9,794 $ $ 644
=========== ============= =============== =============== =============
Accrued loss reserves - Current $ 49,296 $ $ 28,241 $ $ 9,119
=========== ============= =============== =============== =============
Accrued warranty reserves - Long-term $ 18,816 $ $ (2,836) $ $
=========== ============= =============== =============== =============
Accrued restructuring reserves $ 1,638 $ 7,876 $ $ 51,970 $
=========== ============= =============== =============== =============
YEAR ENDED MAY 31, 1999
Allowance for doubtful accounts $ 12,718 $ $ 6,205 $ $ 584
=========== ============= =============== =============== =============
Accrued loss reserves - Current $ 43,332 $ $ 10,248 $ $ 363
=========== ============= =============== =============== =============
Accrued warranty reserves - Long-term $ 23,496 $ $ (1,204) $ $
=========== ============= =============== =============== =============
Accrued restructuring reserves $ 5,719 $ $ $ $
=========== ============= =============== =============== =============
YEAR ENDED MAY 31, 1998
Allowance for doubtful accounts $ 12,006 $ $ 5,930 $ $ 642
=========== ============= =============== =============== =============
Accrued loss reserves - Current $ 37,699 $ $ 14,545 $ $
=========== ============= =============== =============== =============
Accrued warranty reserves - Long-term $ 14,885 $ $ 2,741 $ $ 8,654
=========== ============= =============== =============== =============
Accrued restructuring reserves $ 648 $ $ $ $ 6,841
=========== ============= =============== =============== =============
<CAPTION>
Balance at
End
Deductions Of Period
---------------- ---------------
<S> <C> <C>
YEAR ENDED MAY 31, 2000
Allowance for doubtful accounts $ 8,438 (1) $ 16,248
============ ===============
Accrued loss reserves - Current $ 21,891 (2) $ 64,765
============ ===============
Accrued warranty reserves - Long-term $ 2,240 (2) $ 13,740
============ ===============
Accrued restructuring reserves $ 47,944 (3) $ 13,540
============ ===============
YEAR ENDED MAY 31, 1999
Allowance for doubtful accounts $ 5,259 (1) $ 14,248
============ ===============
Accrued loss reserves - Current $ 4,647 (2) $ 49,296
============ ===============
Accrued warranty reserves - Long-term $ 3,476 (2) $ 18,816
============ ===============
Accrued restructuring reserves $ 4,081 (3) $ 1,638
============ ===============
YEAR ENDED MAY 31, 1998
Allowance for doubtful accounts $ 5,860 (1) $ 12,718
============ ===============
Accrued loss reserves - Current $ 8,912 (2) $ 43,332
============ ===============
Accrued warranty reserves - Long-term $ 2,784 (2) $ 23,496
============ ===============
Accrued restructuring reserves $ 1,770 (3) $ 5,719
============ ===============
</TABLE>
(1) Uncollectible accounts written off, net of recoveries
(2) Primarily claims paid during the year
(3) Restructuring initiatives completed during the year
S-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>ex10-1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<PAGE> 1
Exhibit 10.1
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
This Amended and Restated Employment Agreement (this
"Agreement") is made as of the 1st day of June, 2000, between RPM, INC., an
Ohio corporation (the "Company"), and Thomas C. Sullivan ("Executive"). WHEREAS,
Executive is currently Chairman of the Board and Chief Executive Officer of the
Company; and WHEREAS, Executive and the Company entered into a certain
Employment Agreement, originally dated as of July 22, 1981, as amended (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.
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 December 31, 2002 (the "Employment
Period"). In the event of a Change in Control, the Employment Period shall
automatically be extended for a period of three years beginning on the
<PAGE> 2
date of the Change in Control and ending on the third anniversary of the
date of such Change in Control. 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 Chairman of
the Board 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 Eight Hundred Seventy
Thousand Dollars ($870,000) per annum
2
<PAGE> 3
("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 his past practice) in performing services
hereunder, provided that Executive properly accounts
3
<PAGE> 4
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.
(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 his present 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.
4
<PAGE> 5
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.
(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) EXPIRATION OF EMPLOYMENT PERIOD. If Executive's
employment is terminated pursuant to Subsection 5(a)(i) upon expiration of
the Employment Period, Executive shall be entitled to no further payment of Base
Salary and shall no longer be entitled to participate in the Benefit Plans,
except as required by applicable law or as governed by the Benefit Plans in
which Executive participates immediately prior to such termination, but
Executive shall be entitled to receive any Incentive Compensation payable but
not yet paid under the terms of Section 4(b) for the period from June 1, 2002
through the Termination Date.
(ii) 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
5
<PAGE> 6
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.
(iii) 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.
(iv) 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 the sum of (A)
500% of Executive's Base Salary in effect as of such date and (B) the amount of
Executive's Earned 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)(iv), 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)(iv) 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
6
<PAGE> 7
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)(iv), 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 five 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 five-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,
7
<PAGE> 8
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 five-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 five 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
Supplemental Executive Retirement 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 five years after the Termination Date,
8
<PAGE> 9
determined and payable in accordance with the terms of the Supplemental
Executive Retirement 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
9
<PAGE> 10
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
10
<PAGE> 11
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 (subject to delay pursuant to Subsection 6(d)(ii)), a
lump sum amount (subject to reduction pursuant to Subsection 6(d)) equal to the
sum of (A) 500% of Executive's Base Salary in effect as of such date and (B) the
amount of Executive's Earned 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) or this Agreement, the Company shall have no obligation to make the
lump-sum payment referred to in this Subsection 6(b)(iii) or provide any
continuing benefits or payment referred to in Subsection 6(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
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 five 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
11
<PAGE> 12
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 five-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 five-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
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<PAGE> 13
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 five-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 five 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 Supplemental
Executive Retirement 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 five years after the Termination Date, determined and payable in
accordance with the terms of the Supplemental Executive Retirement Plan and the
Company's past practice but subject to reduction pursuant to Subsection 6(d);
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.
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<PAGE> 14
(d) REDUCTION OF PAYMENT.
(i) CONDITIONAL REDUCTION. Notwithstanding Subsections 6(b)(iii)
and 6(c)(ii)(B), if Executive is a Disqualified Individual and if any
portion of the Special Payment would be an Excess Parachute Payment but for the
application of this Subsection 6(d), then:
(A) if the After-Tax Payment Amount would be greater by
reducing the amount of the Lump-Sum Payment otherwise payable to Executive
to the minimum extent necessary (but in no event to less than zero) so that no
portion of the Special Payment, after such reduction, constitutes an Excess
Parachute Payment, then the Lump-Sum Payment shall be so reduced; and
(B) if the After-Tax Payment Amount would be greater without
the reduction referred to in Subsection 6(d)(i)(A), then there shall be no
reduction in the Lump-Sum Payment by application of this Subsection 6(d).
(ii) METHOD OF DETERMINATION. If requested by Executive or the
Company, an accounting firm selected by Executive and reasonably acceptable
to the Company (the "Accounting Firm") shall determine whether any reduction in
the amount of the Lump-Sum Payment is required pursuant to this Subsection 6(d).
Executive 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. 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
determination and calculations. Any determination by the Accounting Firm as to
whether any reduction in the amount of the Lump-Sum Payment is required pursuant
to this Subsection 6(d) shall be binding upon the Company and Executive. The
fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated this Subsection 6(d) shall be borne
by the Company. The federal, state and local income or other tax returns filed
by Executive and the Company shall be prepared and filed on a basis consistent
with such determinations and calculations. The Company shall pay the Lump-
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<PAGE> 15
Sum Payment, as reduced or not reduced pursuant to the final determination
of the Accounting Firm, to Executive no later than the later of (A) the time
otherwise required hereunder or (B) five business days after receipt of such
determination.
(e) 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.
(f) 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.
(g) 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
15
<PAGE> 16
as contemplated by the preceding sentence, then for purposes of Subsections
6(b)(iii), 6(c) and 6(d), 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.
(h) 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 in respect of any claim against or debt or obligation of
Executive, whether arising hereunder or otherwise.
(i) 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 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.
(j) 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).
7. BINDING AGREEMENT; SUCCESSORS. 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
16
<PAGE> 17
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.
8. 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.
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<PAGE> 18
(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.
9. 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
18
<PAGE> 19
(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:
Thomas C. Sullivan
30946 Lake Road
Bay Village, Ohio 44140
Facsimile: Not applicable
If to the Company:
RPM, Inc.
P.O. Box 777
2628 Pearl Road
Medina, Ohio 44256
Facsimile: 330-225-6574
Attn: Secretary
10. 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.
11. 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.
12. 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
19
<PAGE> 20
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.
13. EQUITABLE RELIEF. Executive and the Company acknowledge
and agree that the covenants contained in Section 8 are of a special nature and
that any breach, violation or evasion by Executive of the terms of Section 8
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 8.
14. 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 8 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.
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15. 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.
16. 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.
17. 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 7.
18. 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.
19. 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
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<PAGE> 22
in Control it should appear to Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the event that 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 that Executive has complied with all of his obligations
under Section 8, 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 19 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
19 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
IN THE PRESENCE OF: RPM, INC.
By: /s/ James A. Karman
- ---------------------------- ---------------------------------
James A. Karman, Vice Chairman
And: /s/ P. Kelly Tompkins
- ---------------------------- ---------------------------------
P. Kelly Tompkins, Secertary
The "Company"
/s/ Thomas C. Sullivan
- ---------------------------- ---------------------------------
Thomas C. Sullivan
"Executive"
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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.
"After-Tax Payment Amount" means the difference of (a) the amount of the
Special Payment, less (b) the amount of the Excise Tax, if any, imposed
upon the Special Payment.
"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 salary 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 8.
"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
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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.
"COBRA Continuation Coverage" means the health care continuation
requirements under the federal Consolidated Omnibus Budget
Reconciliation Act, as amended, Part VI of
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<PAGE> 26
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 for Key Employees 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
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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.
"Disqualified Individual" has the meaning set forth in Section 280G(c)
of the Code (or any successor provision thereto).
"Earned Incentive Compensation" means the sum of:
(a) 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; 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.
"Excess Parachute Payment" has the meaning set forth in Section
280G(b)(1) of the Code (or any successor provision thereto).
"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.
"Excise Tax" means the excise tax imposed by Section 4999 of the Code
(or any successor provision thereto) on the Special Payment by reason
of such Special Payment being considered "contingent on a change in
ownership or control" of the Company within the meaning of Section
280G(b)(2) of the Code (or any successor provision thereto).
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<PAGE> 28
"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.
"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;
A-5
<PAGE> 29
(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.
"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 Articles of Incorporation, Code of Regulations or by statute.
"Restricted Stock Plan" means the RPM, Inc. 1997 Restricted Stock Plan and
any successor plan or arrangement thereto.
"Special Payment" means, collectively, payments and distributions by
the Company to or for the benefit of Executive, whether paid under
Subsection 6(b)(iii), Subsection
A-6
<PAGE> 30
6(c)(ii)(B) or another provision hereof or paid or payable or distributed
or distributable pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, stock appreciation right, restricted stock or similar right, or the
lapse or termination of restrictions on any of the foregoing.
"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.
"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.
A-7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex10-2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<PAGE> 1
Exhibit 10.2
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
This Amended and Restated Employment Agreement (this
"Agreement") is made as of the 1st day of June, 2000, between RPM, INC., an Ohio
corporation (the "Company"), and James A. Karman ("Executive").
WHEREAS, Executive is currently Vice Chairman of the Company;
and
WHEREAS, Executive and the Company entered into a certain
Employment Agreement, originally dated as of July 22, 1981, as amended (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.
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 December 31, 2002 (the "Employment
Period"). 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
<PAGE> 2
Control. 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 Vice Chairman
reporting to the Chairman of the Board of the Company and shall have such powers
and duties as may from time to time be assigned by the Chairman of the Board 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. 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 Cleveland, Ohio, and shall not be required to
perform services which would make the continuance of his principal residence in
Cleveland, 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 Eighty-Five
Thousand Dollars ($685,000) 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
2
<PAGE> 3
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 his past 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.
3
<PAGE> 4
(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.
(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 Chairman of
the Board (or his 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 his present 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.
4
<PAGE> 5
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.
(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) EXPIRATION OF EMPLOYMENT PERIOD. If
Executive's employment is terminated pursuant to Subsection 5(a)(i) upon
expiration of the Employment Period, Executive shall be entitled to no further
payment of Base Salary and shall no longer be entitled to participate in the
Benefit Plans, except as required by applicable law or as governed by the
Benefit Plans in which Executive participates immediately prior to such
termination, but Executive shall be entitled to receive any Incentive
Compensation payable but not yet paid under the terms of Section 4(b) for the
period from June 1, 2002 through the Termination Date.
(ii) 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
5
<PAGE> 6
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.
(iii) 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.
(iv) 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 the sum of (A) 500% of
Executive's Base Salary in effect as of such date and (B) the amount of
Executive's Earned 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)(iv), 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)(iv) 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
6
<PAGE> 7
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)(iv), 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
five 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 five-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,
7
<PAGE> 8
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 five-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
five 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
Supplemental Executive Retirement 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 five years after the Termination Date,
8
<PAGE> 9
determined and payable in accordance with the terms of the Supplemental
Executive Retirement 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
9
<PAGE> 10
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
10
<PAGE> 11
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 (subject to delay pursuant to Subsection 6(d)(ii)), a lump
sum amount (subject to reduction pursuant to Subsection 6(d)) equal to the sum
of (A) 500% of Executive's Base Salary in effect as of such date and (B) the
amount of Executive's Earned 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) or this Agreement, the Company shall have no obligation to make the
lump-sum payment referred to in this Subsection 6(b)(iii) or provide any
continuing benefits or payment referred to in Subsection 6(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
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 five 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
11
<PAGE> 12
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 five-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 five-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
12
<PAGE> 13
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
five-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 five 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
Supplemental Executive Retirement 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 five years after the Termination Date, determined
and payable in accordance with the terms of the Supplemental Executive
Retirement Plan and the Company's past practice but subject to reduction
pursuant to Subsection 6(d); 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.
13
<PAGE> 14
(d) REDUCTION OF PAYMENT.
(i) CONDITIONAL REDUCTION. Notwithstanding
Subsections 6(b)(iii) and 6(c)(ii)(B), if Executive is a Disqualified Individual
and if any portion of the Special Payment would be an Excess Parachute Payment
but for the application of this Subsection 6(d), then:
(A) if the After-Tax Payment Amount would
be greater by reducing the amount of the Lump-Sum Payment otherwise payable to
Executive to the minimum extent necessary (but in no event to less than zero) so
that no portion of the Special Payment, after such reduction, constitutes an
Excess Parachute Payment, then the Lump-Sum Payment shall be so reduced; and
(B) if the After-Tax Payment Amount would
be greater without the reduction referred to in Subsection 6(d)(i)(A), then
there shall be no reduction in the Lump-Sum Payment by application of this
Subsection 6(d).
(ii) METHOD OF DETERMINATION. If requested by
Executive or the Company, an accounting firm selected by Executive and
reasonably acceptable to the Company (the "Accounting Firm") shall determine
whether any reduction in the amount of the Lump-Sum Payment is required pursuant
to this Subsection 6(d). Executive 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. 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 determination and calculations. Any determination by the
Accounting Firm as to whether any reduction in the amount of the Lump-
14
<PAGE> 15
Sum Payment is required pursuant to this Subsection 6(d) shall be binding upon
the Company and Executive. The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated
this Subsection 6(d) shall be borne by the Company. The federal, state and local
income or other tax returns filed by Executive and the Company shall be prepared
and filed on a basis consistent with such determinations and calculations. The
Company shall pay the Lump-Sum Payment, as reduced or not reduced pursuant to
the final determination of the Accounting Firm, to Executive no later than the
later of (A) the time otherwise required hereunder or (B) five business days
after receipt of such determination.
(e) 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.
(f) 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.
(g) 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
15
<PAGE> 16
as contemplated by the preceding sentence, then for purposes of Subsections
6(b)(iii), 6(c) and 6(d), 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.
(h) 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 in respect of any claim against or debt or obligation of
Executive, whether arising hereunder or otherwise.
(i) 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 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.
(j) 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).
7. BINDING AGREEMENT; SUCCESSORS. 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
16
<PAGE> 17
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.
8. 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.
17
<PAGE> 18
(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.
9. 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
18
<PAGE> 19
(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:
James A. Karman
2 Bratenahl Place, Suite 2A
Cleveland, Ohio 44108
Facsimile: Not applicable
If to the Company:
RPM, Inc.
P.O. Box 777
2628 Pearl Road
Medina, Ohio 44256
Facsimile: 330-225-6574
Attn: Secretary
10. 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.
11. 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.
12. 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
19
<PAGE> 20
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.
13. EQUITABLE RELIEF. Executive and the Company acknowledge
and agree that the covenants contained in Section 8 are of a special nature and
that any breach, violation or evasion by Executive of the terms of Section 8
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 8.
14. 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 8 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.
20
<PAGE> 21
15. 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.
16. 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.
17. 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 7.
18. 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.
19. 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
21
<PAGE> 22
in Control it should appear to Executive that the Company has failed to comply
with any of its obligations under this Agreement or in the event that 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 that Executive has complied with all of his obligations
under Section 8, 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 19 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
19 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.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
IN THE PRESENCE OF: RPM, INC.
By: /s/ Thomas C. Sullivan
- --------------------- --------------------------------------------
Thomas C. Sullivan, Chairman of the
Board and Chief Executive Officer
And: /s/ P. Kelly Tompkins
- --------------------- -------------------------------------------
P. Kelly Tompkins, Secretary
The "Company"
/s/ James A. Karman
- --------------------- -------------------------------------
James A. Karman
"Executive"
23
<PAGE> 24
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.
"After-Tax Payment Amount" means the difference of (a) the amount of
the Special Payment, less (b) the amount of the Excise Tax, if any,
imposed upon the Special Payment.
"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 salary 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 8.
"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
A-1
<PAGE> 25
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.
"COBRA Continuation Coverage" means the health care continuation
requirements under the federal Consolidated Omnibus Budget
Reconciliation Act, as amended, Part VI of
A-2
<PAGE> 26
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 for Key Employees 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
A-3
<PAGE> 27
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.
"Disqualified Individual" has the meaning set forth in Section 280G(c)
of the Code (or any successor provision thereto).
"Earned Incentive Compensation" means the sum of:
(a) 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; 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.
"Excess Parachute Payment" has the meaning set forth in Section
280G(b)(1) of the Code (or any successor provision thereto).
"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.
"Excise Tax" means the excise tax imposed by Section 4999 of the Code
(or any successor provision thereto) on the Special Payment by reason
of such Special Payment being considered "contingent on a change in
ownership or control" of the Company within the meaning of Section
280G(b)(2) of the Code (or any successor provision thereto).
A-4
<PAGE> 28
"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.
"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;
A-5
<PAGE> 29
(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.
"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 Articles of Incorporation, Code of Regulations or by statute.
"Restricted Stock Plan" means the RPM, Inc. 1997 Restricted Stock Plan
and any successor plan or arrangement thereto.
"Special Payment" means, collectively, payments and distributions by
the Company to or for the benefit of Executive, whether paid under
Subsection 6(b)(iii), Subsection
A-6
<PAGE> 30
6(c)(ii)(B) or another provision hereof or paid or payable or
distributed or distributable pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right, restricted stock
or similar right, or the lapse or termination of restrictions on any of
the foregoing.
"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.
"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.
A-7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>ex10-3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE> 1
Exhibit 10.3
AMENDED AND RESTATED
--------------------
EMPLOYMENT AGREEMENT
--------------------
This Amended and Restated Employment Agreement (this
"Agreement") is made as of the 1st day of June, 2000, between RPM, INC., an Ohio
corporation (the "Company"), and ________________ ("Executive").
WHEREAS, Executive is currently [TITLE] of the Company; and
WHEREAS, Executive and the Company entered into a certain
Employment Agreement, originally dated as of _______ __, 19__, as amended (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.
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, 2001 (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,
<PAGE> 2
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 [TITLE]
reporting to the __________ of the Company and shall have responsibility for
[BRIEF DESCRIPTION OF RESPONSIBILITIES] and shall have such other powers and
duties as may from time to time be assigned by the _________, Chairman of the
Board, 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.
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 ___________, Ohio, and shall not be required to
perform services which would make the continuance of his principal residence in
____________, 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.
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4. COMPENSATION.
(a) BASE SALARY. During the Employment Period, Executive shall
receive a base salary at the rate of not less than _____________________ Dollars
($_____________) 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.
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(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 his past 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.
(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
____________ or Chairman of the Board 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
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automobile. During the Employment Period, Executive shall be entitled to the
full-time use of his present 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
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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 the sum of (A) 200% of
Executive's Base Salary in effect as of such date and (B) the amount of
Executive's Earned 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
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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 two
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 two-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,
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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 two-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
two 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 Supplemental Executive Retirement 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 two years after the Termination Date,
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determined and payable in accordance with the terms of the Supplemental
Executive Retirement 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
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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
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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 (subject to delay pursuant to Subsection 6(d)(ii)), a lump
sum amount (subject to reduction pursuant to Subsection 6(d)) equal to the sum
of (A) 300% of Executive's Base Salary in effect as of such date and (B) the
amount of Executive's Earned 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) or this Agreement, the Company shall have no obligation to make the
lump-sum payment referred to in this Subsection 6(b)(iii) or provide any
continuing benefits or payment referred to in Subsection 6(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
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
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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
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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 Supplemental Executive Retirement 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 Supplemental
Executive Retirement Plan and the Company's past practice but subject to
reduction pursuant to Subsection 6(d); 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.
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(d) REDUCTION OF PAYMENT.
(i) CONDITIONAL REDUCTION. Notwithstanding
Subsections 6(b)(iii) and 6(c)(ii)(B), if Executive is a Disqualified Individual
and if any portion of the Special Payment would be an Excess Parachute Payment
but for the application of this Subsection 6(d), then:
(A) if the After-Tax Payment Amount
would be greater by reducing the amount of the Lump-Sum Payment otherwise
payable to Executive to the minimum extent necessary (but in no event to less
than zero) so that no portion of the Special Payment, after such reduction,
constitutes an Excess Parachute Payment, then the Lump-Sum Payment shall be so
reduced; and
(B) if the After-Tax Payment Amount
would be greater without the reduction referred to in Subsection 6(d)(i)(A),
then there shall be no reduction in the Lump-Sum Payment by application of this
Subsection 6(d).
(ii) METHOD OF DETERMINATION. If requested by
Executive or the Company, an accounting firm selected by Executive and
reasonably acceptable to the Company (the "Accounting Firm") shall determine
whether any reduction in the amount of the Lump-Sum Payment is required pursuant
to this Subsection 6(d). Executive 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. 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 determination and calculations. Any determination by the
Accounting Firm as to whether any reduction in the amount of the Lump-
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Sum Payment is required pursuant to this Subsection 6(d) shall be binding upon
the Company and Executive. The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated
this Subsection 6(d) shall be borne by the Company. The federal, state and local
income or other tax returns filed by Executive and the Company shall be prepared
and filed on a basis consistent with such determinations and calculations. The
Company shall pay the Lump-Sum Payment, as reduced or not reduced pursuant to
the final determination of the Accounting Firm, to Executive no later than the
later of (A) the time otherwise required hereunder or (B) five business days
after receipt of such determination.
(e) 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.
(f) 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.
(g) 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
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as contemplated by the preceding sentence, then for purposes of Subsections
6(b)(iii), 6(c) and 6(d), 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.
(h) 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 in respect of any claim against or debt or obligation of
Executive, whether arising hereunder or otherwise.
(i) 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 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.
(j) 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).
7. BINDING AGREEMENT; SUCCESSORS. 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
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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.
8. 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.
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(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.
9. 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
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(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:
-----------------------------
-----------------------------
-----------------------------
Facsimile: Not applicable
If to the Company:
RPM, Inc.
P.O. Box 777
2628 Pearl Road
Medina, Ohio 44256
Facsimile: 330-225-6574
Attn: Secretary
10. 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.
11. 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.
12. 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
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<PAGE> 20
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.
13. EQUITABLE RELIEF. Executive and the Company acknowledge
and agree that the covenants contained in Section 8 are of a special nature and
that any breach, violation or evasion by Executive of the terms of Section 8
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 8.
14. 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 8 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.
20
<PAGE> 21
15. 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.
16. 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.
17. 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 7.
18. 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.
19. 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
21
<PAGE> 22
in Control it should appear to Executive that the Company has failed to comply
with any of its obligations under this Agreement or in the event that 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 that Executive has complied with all of his obligations
under Section 8, 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 19 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
19 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.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
IN THE PRESENCE OF: RPM, INC.
____________________________ By: ________________________________
___________________, ________
____________________________ And: ________________________________
___________________, ________
The "Company"
____________________________ _______________________________________
___________________, ________
"Executive"
23
<PAGE> 24
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.
"After-Tax Payment Amount" means the difference of (a) the amount of
the Special Payment, less (b) the amount of the Excise Tax, if any,
imposed upon the Special Payment.
"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 salary 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 8.
"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
A-1
<PAGE> 25
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.
"COBRA Continuation Coverage" means the health care continuation
requirements under the federal Consolidated Omnibus Budget
Reconciliation Act, as amended, Part VI of
A-2
<PAGE> 26
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 for Key Employees 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
A-3
<PAGE> 27
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.
"Disqualified Individual" has the meaning set forth in Section 280G(c)
of the Code (or any successor provision thereto).
"Earned Incentive Compensation" means the sum of:
(a) 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; 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.
"Excess Parachute Payment" has the meaning set forth in Section
280G(b)(1) of the Code (or any successor provision thereto).
"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.
"Excise Tax" means the excise tax imposed by Section 4999 of the Code
(or any successor provision thereto) on the Special Payment by reason
of such Special Payment being considered "contingent on a change in
ownership or control" of the Company within the meaning of Section
280G(b)(2) of the Code (or any successor provision thereto).
A-4
<PAGE> 28
"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.
"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;
A-5
<PAGE> 29
(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.
"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 Articles of Incorporation, Code of Regulations or by statute.
"Restricted Stock Plan" means the RPM, Inc. 1997 Restricted Stock Plan
and any successor plan or arrangement thereto.
"Special Payment" means, collectively, payments and distributions by
the Company to or for the benefit of Executive, whether paid under
Subsection 6(b)(iii), Subsection
A-6
<PAGE> 30
6(c)(ii)(B) or another provision hereof or paid or payable or
distributed or distributable pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right, restricted stock
or similar right, or the lapse or termination of restrictions on any of
the foregoing.
"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.
"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.
A-7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>5
<FILENAME>ex10-15.txt
<DESCRIPTION>EXHIBIT 10.15
<TEXT>
<PAGE> 1
Exhibit 10.15
CONFORMED COPY
************************************************************
RPM, INC.
364-DAY
CREDIT AGREEMENT
Dated as of July 14, 2000
$200,000,000
THE CHASE MANHATTAN BANK
as Administrative Agent
************************************************************
CHASE SECURITIES INC.
Book Manager and Lead Arranger
<PAGE> 2
TABLE OF CONTENTS
----------------------
PAGE
----
SECTION 1. Definitions and Accounting Matters
- ---------------------------------------------
1.01 Certain Defined Terms..............................................1
1.02 Accounting Terms and Determinations...............................12
1.03 Class and Types of Loans..........................................12
SECTION 2. Commitments
- ----------------------
2.01 Loans.............................................................13
2.02 Reductions of Commitments.........................................14
2.03 Fees..............................................................15
2.04 Lending Offices...................................................16
2.05 Several Obligations...............................................16
2.06 Notes.............................................................16
2.07 Use of Proceeds...................................................16
SECTION 3. Borrowings, Conversions and Prepayments
- --------------------------------------------------
3.01 Borrowings........................................................17
3.02 Prepayments and Conversions.......................................17
3.03 Competitive Bid Procedure.........................................17
SECTION 4. Payments of Principal and Interest
- ---------------------------------------------
4.01 Repayment of Loans................................................20
4.02 Interest..........................................................20
SECTION 5. Payments; Pro Rata Treatment; Computations; Etc
- ----------------------------------------------------------
5.01 Payments..........................................................22
5.02 Pro Rata Treatment................................................23
5.03 Computations......................................................23
5.04 Minimum and Maximum Amounts; Types................................23
5.05 Certain Notices...................................................23
5.06 Non-Receipt of Funds by the Administrative Agent..................24
5.07 Sharing of Payments, Etc..........................................25
5.08 Taxes.............................................................25
SECTION 6. Yield Protection and Illegality
- ------------------------------------------
6.01 Additional Costs..................................................28
6.02 Limitation on Types of Loans......................................29
6.03 Illegality........................................................30
6.04 Substitute Base Rate Loans........................................30
<PAGE> 3
PAGE
----
6.05 Compensation......................................................31
6.06 Capital Adequacy..................................................31
6.07 Substitution of Lender............................................32
SECTION 7. Conditions Precedent
- -------------------------------
7.01 Initial Loans.....................................................32
7.02 Initial and Subsequent Loans......................................33
SECTION 8. Representations and Warranties
- -----------------------------------------
8.01 Corporate Existence...............................................34
8.02 Information.......................................................34
8.03 Litigation........................................................35
8.04 No Breach.........................................................35
8.05 Corporate Action..................................................36
8.06 Approvals.........................................................36
8.07 Regulations U and X...............................................36
8.08 ERISA.............................................................36
8.09 Taxes.............................................................37
8.10 Subsidiaries......................................................37
8.11 Investment Company Act............................................37
8.12 Public Utility Holding Company Act................................37
8.13 Ownership and Use of Properties...................................37
8.14 Environmental Matters.............................................37
SECTION 9. Covenants
- --------------------
9.01 Information.......................................................38
9.02 Taxes and Claims..................................................40
9.03 Insurance.........................................................40
9.04 Maintenance of Existence; Conduct of Business.....................40
9.05 Maintenance of and Access to Properties...........................40
9.06 Compliance with Applicable Laws...................................41
9.07 Litigation........................................................41
9.08 Leverage Ratio....................................................41
9.09 Interest Coverage Ratio...........................................41
9.10 Mergers, Asset Dispositions, Etc..................................41
9.11 Liens.............................................................41
9.12 Investments.......................................................42
9.13 Transactions with Affiliates......................................43
9.14 Lines of Business.................................................43
9.15 Environmental Matters.............................................43
9.16 Lease Payments....................................................44
ii
<PAGE> 4
PAGE
----
SECTION 10. Defaults
- --------------------
10.01 Events of Default.................................................44
SECTION 11. The Administrative Agent
- ------------------------------------
11.01 Appointment, Powers and Immunities................................47
11.02 Reliance by Administrative Agent..................................48
11.03 Defaults..........................................................48
11.04 Rights as a Lender................................................48
11.05 Indemnification...................................................49
11.06 Non-Reliance on Administrative Agent and Other Lenders............49
11.07 Failure to Act....................................................49
11.08 Resignation or Removal of Administrative Agent....................50
SECTION 12. Miscellaneous
- -------------------------
12.01 Waiver............................................................50
12.02 Notices...........................................................51
12.03 Expenses, Etc.....................................................51
12.04 Indemnification...................................................51
12.05 Amendments, Etc...................................................51
12.06 Successors and Assigns............................................52
12.07 Confidentiality...................................................53
12.08 Survival..........................................................54
12.09 Captions..........................................................54
12.10 Counterparts; Integration.........................................54
12.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL........................................................54
12.12 Waiver and Termination of Existing Credit Agreements..............55
iii
<PAGE> 5
SCHEDULES
---------
SCHEDULE I - Subsidiaries and Joint Ventures
EXHIBITS
--------
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Opinion of Counsel to
the Company
EXHIBIT B-2 - Form of Opinion of General Counsel
of the Company
EXHIBIT C - Form of Opinion of Special Counsel to
the Administrative Agent
iv
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of July 14, 2000 among: RPM, INC., a corporation
duly organized and validly existing under the laws of the State of Ohio
(together with its successors, the "COMPANY"); each of the lenders which is or
which may from time to time become a signatory hereto (individually, together
with its successors, a "LENDER" and, collectively, together with their
respective successors, the "LENDERS"); and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "ADMINISTRATIVE AGENT").
The parties hereto agree as follows:
SECTION 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"ABSOLUTE RATE" shall mean, with respect to any Competitive Loan (other
than a Eurodollar Competitive Loan), the fixed rate of interest per annum
specified by the Lender making such Competitive Loan in its related Competitive
Bid.
"ACCEPTABLE INSURER" means an insurance company (i) having an A.M. Best
rating of "A-" or better and being in a financial size category of X or larger
(as such category is defined as of the date hereof) or (ii) otherwise acceptable
to the Majority Lenders. First Colonial Insurance Company, a wholly-owned
Subsidiary of the Company, is deemed to be acceptable with respect to the dollar
amount of insurance it is providing on the date of this Agreement.
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
stepchildren, nephews, nieces and grandchildren) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "CONTROL" (including, with correlative
meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or
<PAGE> 7
otherwise), provided that, in any event, any Person which owns directly or
indirectly more than 5% of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or more than 5%
of the partnership or other ownership interests of any other Person (other than
as a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the Lending Office of such Lender (or of an affiliate of such
Lender) specified by such Lender from time to time to the Administrative Agent
and the Company as the office by which its Loans of such Type are to be made
and/or issued and maintained.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as now
or hereafter in effect, or any successor statute.
"BASE RATE" shall mean, with respect to any Base Rate Loan for any day,
the rate per annum equal to the higher as of such day of (i) the Federal Funds
Rate plus 1/2 of 1% or (ii) the Prime Rate.
"BASE RATE LOANS" shall mean Loans which bear interest at a rate based
upon the Base Rate.
"BASIC DOCUMENTS" shall mean this Agreement and the Notes.
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York City and, where such term
is used in the definition of "Quarterly Date" in this Section 1.01 or if such
day relates to a borrowing of, a payment or prepayment of principal of or
interest on, a conversion of or into, or an Interest Period for, a Eurodollar
Loan or a notice by the Company with respect to any such borrowing, payment,
prepayment, conversion or Interest Period, which is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
"CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property to the
extent such obligations are required to be classified and accounted for as a
capital lease on a balance sheet of such Person under GAAP (including Statement
of Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board) and, for purposes of this Agreement, the amount of such obligations shall
be the capitalized amount thereof, determined in accordance with GAAP (including
such Statement No. 13).
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"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder.
"CHASE" shall mean The Chase Manhattan Bank and its successors.
"CLASS" shall have the meaning assigned to such term in Section 1.03
hereof.
"CLOSING DATE" shall mean the date of the initial Loans hereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute.
"COMMITMENT" shall mean, as to any Lender, the obligation of such
Lender to make Loans in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set forth opposite such Lender's
name on the signature pages hereof under the caption "Commitment" (as the same
may be increased or reduced from time to time pursuant to Section 2.01(d) or
2.02 hereof).
"COMMITMENT TERMINATION DATE" shall mean July 13, 2001 or, if such day
is not a Business Day, the next preceding Business Day.
"COMMITTED LOAN" shall mean a Revolving Loan or a Term Loan.
"COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive
Loan in accordance with Section 3.03 hereof.
"COMPETITIVE BID RATE" shall mean, with respect to any Competitive Bid,
the Competitive Margin or the Absolute Rate, as applicable, offered by the
Lender making such Competitive Bid.
"COMPETITIVE BID REQUEST" shall mean a request by the Company for
Competitive Bids in accordance with Section 3.03 hereof.
"COMPETITIVE LOAN" shall mean a loan made pursuant to Section 3.03
hereof.
"COMPETITIVE MARGIN" shall mean, with respect to any Eurodollar
Competitive Loan, the marginal rate of interest, if any, to be added to or
subtracted from the Eurodollar Rate to determine the rate of interest applicable
to
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<PAGE> 9
such Loan, as specified by the Lender making such Loan in its related
Competitive Bid.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
"DISCLOSURE DOCUMENTS" shall mean the Company's annual report on Form
10-K for 1999 and quarterly report on Form 10-Q for the quarterly period ended
February 29, 2000, in each case as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, determined on a consolidated
basis for the Company and its Subsidiaries, net operating income of the Company
and its Subsidiaries (calculated before provision for income taxes, interest
expense, extraordinary items, income attributable to equity in affiliates and
all amounts attributable to depreciation and amortization) for such period.
EBITDA for any period ending on or before May 31, 2001 which would otherwise
reflect them shall be calculated without reflecting the 2000 Restructuring
Charges. For purposes of this definition, "2000 RESTRUCTURING CHARGES" shall
mean special restructuring charges of $45,000,000 taken in the fiscal quarter
ended August 31, 1999 and of $15,000,000 taken in the fiscal quarter ending May
31, 2000.
"ENVIRONMENTAL LAWS" shall mean any and all applicable federal, state,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions, permits, concessions,
grants, franchises, licenses, agreements and other governmental restrictions
relating to the environment or the effect of the environment on human health or
to emissions, discharges or release of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
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<PAGE> 10
"ENVIRONMENTAL LIABILITIES" shall mean all liabilities in connection
with or relating to the business, assets, presently or previously owned or
leased property, activities (including, without limitation, off-site disposal)
or operations of the Company and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar
Loans, the rate per annum appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the first day
of the Interest Period for such Eurodollar Loans, as the rate for Dollar
deposits for a period comparable to such Interest Period. In the event that such
rate is not available at such time for any reason, then the "Eurodollar Base
Rate" with respect to such Eurodollar Loans for such Interest Period shall be
the arithmetic mean, as calculated by the Administrative Agent, of the
respective rates per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) quoted by the Reference Lenders at approximately 11:00 a.m. London time
by the principal London branch of each of the Reference Lenders on the day two
Business Days prior to the first day of the Interest Period for such Loans for
the offering to leading banks in the London interbank market of Dollar deposits
in immediately available funds, for a period, and in an amount, comparable to
such Interest Period and the principal amount of the Eurodollar Loan which shall
be made by such Reference Lender and outstanding during such Interest Period. If
any Reference Lender is not participating in any Eurodollar Loans during the
Interest Period therefor (pursuant to Section 3.03 or 6.04 hereof or for any
other reason), the Eurodollar Base Rate for such Loans for such Interest Period
shall be determined by reference to the amount of the Loan which such Reference
Lender would have made had such Loans been Committed Loans in which it was
participating. If any Reference Lender does not furnish a timely quotation, the
Administrative Agent shall determine the relevant interest rate on the basis of
the quotation or quotations furnished by the remaining Reference Lender or
Lenders or, if none of such quotations is available on a timely basis, the
provisions of Section 6.02 shall apply.
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"EURODOLLAR LOANS" shall mean Loans the interest on which is determined
on the basis of rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.01.
"EURODOLLAR RATE" shall mean, for any Eurodollar Loans, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
the Administrative Agent to be equal to (i) the Eurodollar Base Rate for such
Loans for the Interest Period for such Loans divided by (ii) 1 minus the
Eurodollar Reserve Requirement for such Loans for such Interest Period.
"EURODOLLAR RESERVE REQUIREMENT" shall mean, for any Eurodollar Loans
for any Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Eurodollar Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks by reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which the Eurodollar Rate is
to be determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets which
include Eurodollar Loans.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 10.01 hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate charged to
Chase on such day on such transactions as determined by the Administrative
Agent.
"FIXED RATE LOANS" shall mean Eurodollar Committed Loans and, for
purposes of Section 6 hereof only, shall also mean Eurodollar Competitive Loans.
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"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States consistently applied.
"GUARANTY" by any Person shall mean any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise, other
than agreements to purchase goods at an arm's length price in the ordinary
course of business) or (ii) entered into for the purpose of assuring in any
other manner the holder of such Indebtedness of the payment thereof or to
protect such holder against loss in respect thereof (in whole or in part),
provided that the term Guaranty shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"HAZARDOUS SUBSTANCES" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having constituent elements displaying
any of the foregoing characteristics, regulated under Environmental Laws.
"INDEBTEDNESS" shall mean, as to any Person (determined without
duplication): (i) indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
or acquisition price of property or services, other than accounts payable (other
than for borrowed money) incurred in the ordinary course of business; (ii)
obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person (whether or not such obligations are contingent); (iii)
Capital Lease Obligations of such Person; (iv) obligations of such Person to
redeem or otherwise retire shares of capital stock of such Person; (v)
indebtedness of others of the type described in clause (i), (ii), (iii) or (iv)
above secured by a Lien on the property of such Person, whether or not the
respective obligation so secured has been assumed by such Person; and (vi)
indebtedness of others of the type described in clause (i), (ii), (iii) or (iv)
above Guaranteed by such Person.
"INTEREST EXPENSE" shall mean, for any period, the sum (determined
without duplication) of the aggregate amount of interest accruing during such
period on Indebtedness of the Company and its Subsidiaries (on a consolidated
basis), including the interest portion of payments under Capital Lease
Obligations
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<PAGE> 13
and any capitalized interest, and excluding amortization of debt discount and
expense.
"INTEREST PERIOD" shall mean,
(1) with respect to any Eurodollar Loans, the period commencing on the
date such Loans are made or converted from other types of Loans or the last day
of the next preceding Interest Period with respect to such Loans and ending on
the numerically corresponding day in the first, second (subject to the
availability of deposits of the corresponding maturity to each of the Lenders in
the London interbank market), third or sixth calendar month thereafter, as the
Company may select as provided in Section 5.05 hereof, except that each such
Interest Period which commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month; and
(2) with respect to any Absolute Rate Competitive Loans, the period
(which shall not be less than seven days or more than 360 days) commencing on
the date such Loans are made and ending on the date specified in the applicable
Competitive Bid Request.
Notwithstanding the foregoing: (i) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for Eurodollar
Loans, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (ii) each Interest Period
which begins before the Commitment Termination Date and would otherwise end
after the Commitment Termination Date shall end on the Commitment Termination
Date, and each Interest Period which would otherwise end after the first
anniversary of the Commitment Termination Date shall end on the first
anniversary of the Commitment Termination Date; and (iii) no Interest Period for
any Fixed Rate Loans shall have a duration of less than one month and, if the
Interest Period for any Fixed Rate Loan would otherwise be a shorter period,
such Loans shall not be available hereunder.
"INVESTMENTS" shall have the meaning assigned to such term in Section
9.12 hereof.
"LIEN" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Company and each of its
Subsidiaries shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject
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<PAGE> 14
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"LIQUID INVESTMENTS" shall mean (i) certificates of deposit maturing
within 90 days of the acquisition thereof denominated in Dollars and issued by
(X) a Lender or (Y) a bank or trust company having combined capital and surplus
of at least $500,000,000 and which has (or which is a Subsidiary of a bank
holding company which has) publicly traded debt securities rated A- or higher by
Standard & Poor's Ratings Services or A-3 or higher by Moody's Investors
Service, Inc.; (ii) obligations issued or guaranteed by the United States of
America, with maturities not more than one year after the date of issue; and
(iii) commercial paper with maturities of not more than 90 days and a published
rating of not less than A-1 from Standard & Poor's Ratings Services or P-1 from
Moody's Investors Service, Inc.
"LOANS" shall mean the loans made by the Lenders to the Company
pursuant to this Agreement.
"MAJORITY LENDERS" shall mean, at any time while no Committed Loans are
outstanding, Lenders having at least 51% of the aggregate amount of the
Commitments and, at any time while Committed Loans are outstanding, Lenders
holding at least 51% of the outstanding aggregate principal amount of the
Committed Loans; provided that for purposes of declaring the Loans to be due and
payable pursuant to Section 10.01 and for all purposes after the Loans become
due and payable pursuant to Section 10.01 hereof or the Commitments terminate,
the outstanding principal amount of the Competitive Loans shall be added to the
outstanding principal amount of the Committed Loans in determining the Majority
Lenders.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the
condition (financial or otherwise), results of operations, properties, assets,
liabilities (including, without limitation, tax and ERISA liabilities and
Environmental Liabilities), business, operations, capitalization, shareholders'
equity, franchises or prospects of the Company and its Subsidiaries, taken as a
whole; or (ii) a material adverse effect on the ability of the Company to
perform its obligations under the Credit Agreement or the Notes.
"MULTIEMPLOYER PLAN" shall mean at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which the Company or
any member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the Controlled Group during such five year period.
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<PAGE> 15
"NOTES" shall have the meaning assigned to such term in Section 2.06
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision thereof.
"PLAN" shall mean an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained or contributed to, by the Company or any member of the Controlled
Group for employees of the Company or any member of the Controlled Group or (ii)
has at any time within the preceding five years been maintained, or contributed
to, by the Company or any Person which was at such time a member of the
Controlled Group for employees of any Person which was at such time a member of
the Controlled Group.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan
or any other amount payable by the Company under this Agreement, a rate per
annum equal to the sum of 2% plus the higher of (i) the Base Rate as in effect
from time to time and (ii) in the case of any Loan, the rate of interest (if
any) otherwise applicable to such Loan.
"PRIME RATE" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
Each change in the interest rate provided for herein resulting from a change in
the Prime Rate shall take effect at the time of such change in the Prime Rate.
"PRINCIPAL OFFICE" shall mean the principal office of Chase, presently
located at 270 Park Avenue, New York, New York 10017.
"QUARTERLY DATES" shall mean the last Business Day of each March, June,
September and December.
"REFERENCE LENDERS" shall mean each of National City Bank, KeyBank
National Association and Chase.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
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<PAGE> 16
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
on or after the date of this Agreement in United States federal, state or
foreign laws or regulations (including Regulation D) or the adoption or making
on or after such date of any interpretations, directives or requests applying to
a class of lenders including such Lender of or under any United States federal
or state, or any foreign, laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"RELEASE" shall mean any discharge, emission or release, including a
"RELEASE" as defined in CERCLA at 42 U.S.C. Section 9601(22). The term
"Released" shall have a corresponding meaning.
"REVOLVING CREDIT PERIOD" shall mean the period from and including the
date hereof to but not including the Commitment Termination Date.
"REVOLVING LOAN" shall mean a Loan made pursuant to Section 2.01(a)
hereof.
"SENIOR OFFICER" shall mean the chief executive officer, president,
chief financial officer or vice president-treasurer of the Company.
"SIGNIFICANT SUBSIDIARY" shall mean at any time any Subsidiary of the
Company, except Subsidiaries of the Company which, if aggregated and considered
as a single Subsidiary at the time of occurrence with respect to such
Subsidiaries of any event or condition of the kind described in clause (e), (f)
or (g) of Section 10.01, would not meet the definition of a "significant
subsidiary" contained as of the date hereof in Regulation S-X of the Securities
and Exchange Commission; provided that for purposes of Section 9.04 only,
"Significant Subsidiary" shall mean at any time any Subsidiary which would meet
the definition of a "significant subsidiary" contained as of the date hereof in
Regulation S-X of the Securities and Exchange Commission.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation of
which at least a majority of the outstanding shares of stock having by the terms
thereof ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more of the Subsidiaries
of such Person or by such Person and one or more of the Subsidiaries of such
Person.
"TERM LOAN" shall mean a Loan made pursuant to Section 2.01(c) hereof.
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<PAGE> 17
"TYPE" shall have the meaning assigned to such term in Section 1.03
hereof.
"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (i) the value of all benefits liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such benefits under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of the Company or any member of the
Controlled Group to the PBGC or any other Person under Title IV of ERISA.
1.02 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP;
provided that if any change in GAAP in itself materially affects the calculation
of any financial covenant in Section 9, the Company may by notice to the
Administrative Agent, or the Administrative Agent (at the request of the
Majority Lenders) may by notice to the Company, require that such covenant
thereafter be calculated in accordance with GAAP as in effect, and applied by
the Company, immediately before such change in GAAP occurs. If such notice is
given, the compliance certificates delivered pursuant to Section 9.01 after such
change occurs shall be accompanied by reconciliations of the difference between
the calculation set forth therein and a calculation made in accordance with GAAP
as in effect from time to time after such change occurs. To enable the ready
determination of compliance with the covenants set forth in Section 9 hereof,
the Company will not change from May 31 in each year the date on which its
fiscal year ends, nor from August 31, November 30 and February 28 (or 29) the
dates on which the first three fiscal quarters in each fiscal year end.
1.03 Class and Types of Loans. Loans hereunder are distinguished by
"CLASS" and "TYPE". The "CLASS" of a Loan refers to whether such Loan is a
Revolving Loan, a Term Loan or a Competitive Loan. The "TYPE" of a Loan refers
to whether such Loan is a Eurodollar Loan or a Base Rate Loan or, in the case of
a Competitive Loan, a Eurodollar Loan or an Absolute Rate Loan. Thus, for
example, a "Eurodollar Competitive Loan" is a Competitive Loan which is also a
Eurodollar Loan.
SECTION 2. Commitments.
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2.01 Loans.
(a) Revolving Loans. Each Lender severally agrees, on the terms and
subject to the conditions of this Agreement, to make Revolving Loans from time
to time during the Revolving Credit Period to the Company in an aggregate
principal amount at any one time outstanding which shall not (i) exceed its
Commitment, as reduced from time to time pursuant to Section 2.02 hereof or (ii)
result in the aggregate principal amount of Loans exceeding the aggregate amount
of the Commitments, as so reduced from time to time.
(b) Competitive Loans. In addition to Revolving Loans, the Company may
from time to time during the Revolving Credit Period request the Lenders to make
offers to make Competitive Loans to the Company as set forth in Section 3.03.
The Lenders may, but shall have no obligation to, make such offers and the
Company may, but shall have no obligation to, accept any such offers; provided
that the aggregate principal amount of all Loans shall not at any time exceed
the aggregate amount of the Commitments, as reduced from time to time pursuant
to Section 2.02 hereof.
(c) Term Loans. Each Lender severally agrees, on the terms and subject
to the conditions of this Agreement, to make a Term Loan to the Company on the
Commitment Termination Date in an amount up to but not exceeding the amount of
its Commitment, as then in effect.
(d) Additional Commitments. At any time during the Revolving Credit
Period, if no Default shall have occurred and be continuing at such time, the
Company may, if it so elects, increase the aggregate amount of the Commitments,
by agreeing with one or more existing Lenders that such Lenders' Commitments
shall be increased. Upon execution and delivery by the Company and each such
Lender of an instrument of assumption in form and amount satisfactory to the
Administrative Agent, each such Lender shall have a Commitment as therein set
forth; provided that (i) such increase may only occur once, on a single date,
(ii) the Company shall provide prompt notice of such increase to the
Administrative Agent, which shall promptly notify the other Lenders, (iii) the
aggregate amount of such increase shall not exceed $75,000,000, (iv) the
aggregate amount of the Commitments shall at no time exceed $275,000,000 and (v)
the aggregate amount of the sum of the Commitments and the commitments under the
Five-Year Credit Agreement dated as of July 14, 2000 among the Company, the
lenders party thereto and Chase, as administrative agent, shall at no time
exceed $775,000,000. Upon any increase in the aggregate amount of the
Commitments pursuant to this subsection (d), within five Business Days in the
case of all Base Rate Loans outstanding, and at the end of the then current
Interest Period with respect thereto in the case of all Eurodollar Loans then
outstanding, the Company shall prepay
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such Committed Loans in their entirety, and, to the extent the Company elects to
do so and subject to the conditions specified in Article 7, the Company shall
reborrow Committed Loans from the Lenders in proportion to their respective
Commitments after giving effect to such increase, until such time as all
outstanding Committed Loans are held by the Lenders in such proportion.
(e) Funding by SPC. Notwithstanding anything to the contrary contained
herein, all or any part of a Loan that any Lender (a "GRANTING LENDER") may be
obligated to fund pursuant to this Agreement may be funded on such Lender's
behalf by a special purpose funding vehicle (an "SPC"); provided that if an SPC
fails to fund all or any part of such Loan, the Granting Lender shall be
obligated to fund such Loan pursuant to the terms hereof. The funding of a Loan
by an SPC hereunder shall utilize the Commitment of the Granting Lender to the
same extent, and as if, such Loan were funded by such Granting Lender, and for
purposes of this Agreement such Loan shall be deemed to have been made by such
Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable
for any indemnity or payment under this Agreement for which a Lender would
otherwise be liable and (ii) prior to the date that is one year and one day
after the payment in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join any other person
in instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof. Notwithstanding anything to the contrary contained in this
Agreement, any SPC may (x) at any time and without paying any processing fee
therefor, assign or participate all or a portion of its interest in any Loans to
its Granting Lender or to any financial institutions providing liquidity or
credit support to or for the account of such SPC to support the funding of
Loans, and (y) disclose on a confidential basis any non-public information
relating to its funding of Loans to any rating agency, commercial paper dealer
or provider of any surety or guarantee for such SPC's obligations. This
subsection (e) may not be amended without the prior written consent of each
Granting Lender which has notified the Company that all or any part of any of
its Loans is being funded by an SPC at the time of such amendment.
2.02 Reductions of Commitments.
(a) Mandatory. The Commitments shall terminate on the Commitment
Termination Date; provided, that if the Closing Date shall not have occurred by
July 25, 2000, the Commitments shall terminate on such date.
(b) Optional. The Company shall have the right to terminate or reduce
the Commitments at any time or from time to time, provided that: (i) the Company
shall give notice of each such termination or reduction to the
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<PAGE> 20
Administrative Agent as provided in Section 5.05 hereof and (ii) each partial
reduction shall be in an aggregate amount equal to $10,000,000 or any greater
multiple of $5,000,000.
(c) No Reinstatement. Commitments once terminated or reduced may
not be reinstated.
2.03 Fees.
(a) Facility Fees. The Company shall pay to the Administrative Agent
for the account of each Lender facility fees on the daily average amount of such
Lender's Commitment (whether used or unused), for the period from the Closing
Date to but excluding the earlier of the date the Commitments are terminated or
the Commitment Termination Date, at a rate of 0.125% per annum; provided that,
if such Lender continues to have any Committed Loans outstanding after its
Commitment terminates, then such facility fee shall continue to accrue on the
daily outstanding principal amount of such Lender's Committed Loans from and
including the date on which its Commitment terminates to but excluding the date
on which such Lender ceases to have any Committed Loans outstanding. Accrued
facility fees shall be payable on the Quarterly Dates and on the date the
Commitments are terminated (and, if later, on the date the Loans shall be repaid
in their entirety); provided that any facility fees accruing after the first
anniversary of the Commitment Termination Date shall be payable on demand.
(b) Utilization Fees. During any period when the aggregate outstanding
principal amount of the Loans exceeds 33% of the aggregate amount of the
Commitments or the Commitments have been terminated but Loans are outstanding,
the Company shall pay to the Administrative Agent for the account of each Lender
utilization fees at a rate of 0.125% per annum. Such utilization fee shall
accrue on the average daily aggregate outstanding principal amount of such
Lender's Loans and shall be payable on the Quarterly Dates and on the date the
Commitments are terminated (and, if later, on the date the Loans shall be repaid
in their entirety); provided that any utilization fees accruing after the first
anniversary of the Commitment Termination Date shall be payable on demand.
(c) Other Fees. The Company shall pay to the Administrative Agent on
the Closing Date other fees in the amounts heretofore mutually agreed. The
Company shall pay to the Administrative Agent on the Closing Date and on each
anniversary thereof, so long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, all interest thereon and all other
amounts payable hereunder, an annual administrative agency fee in the amount
heretofore mutually agreed.
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2.04 Lending Offices. The Loans of each Type made by each Lender shall
be made and maintained at such Lender's Applicable Lending Office for Loans of
such Type.
2.05 Several Obligations. The failure of any Lender to make any Loan to
be made by it on the date specified therefor shall not relieve any other Lender
of its obligation to make its Loan on such date, but neither the Administrative
Agent nor any Lender shall be responsible for the failure of any other Lender to
make a Loan to be made by such other Lender.
2.06 Notes. The Loans made by each Lender shall be evidenced by a
single Note of the Company (each a "NOTE") in substantially the form of Exhibit
A hereto, dated the Closing Date, payable to the order of such Lender in an
amount equal to the aggregate unpaid principal amount of such Lender's Loans and
otherwise duly completed. Each Lender may, by notice to the Company and the
Administrative Agent, request that its Loans of a particular Class or Type be
evidenced by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Loans. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it evidences solely Loans of the relevant Class or Type. Each reference in this
Agreement to the "Note" of such Lender shall be deemed to refer to and include
any or all of such Notes, as the context may require. Each Lender is hereby
authorized by the Company to endorse on the schedule (or a continuation thereof)
attached to each Note of such Lender, to the extent applicable, the date, amount
and Class or Type of and the Interest Period (if any) for each Loan made by such
Lender to the Company hereunder, and the date and amount of each payment or
prepayment of principal of such Loan received by such Lender, provided that any
failure by such Lender to make any such endorsement or any error in such
endorsement shall not affect the obligations of the Company under such Note or
hereunder in respect of such Loan.
2.07 Use of Proceeds. The proceeds of the Loans shall be used by the
Company to backstop the issuance of commercial paper by the Company, the
proceeds of which shall be used to refinance existing indebtedness for borrowed
money and for working capital and other general corporate purposes. None of such
proceeds shall be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any margin stock
(within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System).
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<PAGE> 22
SECTION 3. Borrowings, Conversions and Prepayments.
3.01 Borrowings.
(a) Committed Loans. The Company shall give the Administrative Agent
notice of each borrowing of Committed Loans to be made hereunder as provided in
Section 5.05 hereof. Not later than 11:00 a.m. (or, in the case of Base Rate
Loans, 1:00 p.m.) New York time on the date specified for each such borrowing
hereunder, each Lender shall make available the amount of the Committed Loan to
be made by it on such date to the Administrative Agent, at the Principal Office,
in immediately available funds, for the account of the Company. The amount so
received by the Administrative Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account designated by the Company maintained
with the Administrative Agent at the Principal Office.
(b) Competitive Loans. Requests by the Company of offers to make
Competitive Loans shall be made as provided in Section 3.03.
3.02 Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The Company shall have the
right to prepay Committed Loans or to convert Committed Loans of one Type into
Committed Loans of another Type, at any time or from time to time, provided
that: (i) the Company shall give the Administrative Agent notice of each such
prepayment or conversion as provided in Section 5.05 hereof, and (ii) except to
the extent required pursuant to Section 6.04 hereof, Fixed Rate Loans may be
prepaid or converted only on the last day of an Interest Period for such Loans.
The Company may not prepay Competitive Loans or convert Competitive Loans from
one Type to a different Type, except that the Company may prepay Competitive
Loans to the extent required pursuant to Section 3.02(b).
(b) Mandatory Prepayments. On the date of each reduction of
Commitments pursuant to Section 2.02(b), the Company shall prepay Loans,
together with accrued interest on the principal amount prepaid, to the extent
(if any) required so that the aggregate principal amount of Loans outstanding
immediately after such prepayment will not exceed the aggregate amount of the
Commitments after giving effect to such reduction. Any prepayment pursuant to
this subsection (b) shall be applied, first, to Revolving Loans and second, to
Competitive Loans, pro rata.
3.03 Competitive Bid Procedure. (a) Subject to the terms and conditions
set forth herein, from time to time during the Revolving Credit Period the
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<PAGE> 23
Company may request Competitive Bids and may (but shall not have any obligation
to) accept Competitive Bids and borrow Competitive Loans; provided that the
aggregate principal amount of outstanding Loans at any time shall not exceed the
total Commitments. To request Competitive Bids, the Company shall notify the
Administrative Agent of such request by telephone, in the case of a Eurodollar
Rate borrowing, not later than 11:00 a.m., New York City time, four Business
Days before the date of the proposed borrowing, and, in the case of an Absolute
Rate borrowing, not later than 10:00 a.m., New York City time, one Business Day
before the date of the proposed borrowing; provided that the Company may submit
up to (but not more than) three Competitive Bid Requests on the same day, but a
Competitive Bid Request shall not be made within five Business Days after the
date of any previous Competitive Bid Request, unless any and all such previous
Competitive Bid Requests shall have been withdrawn or all Competitive Bids
received in response thereto rejected. Each such telephonic Competitive Bid
Request shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Competitive Bid Request in a form approved by
the Administrative Agent and signed by the Company. Each such telephonic and
written Competitive Bid Request shall specify the following information:
(i) the aggregate amount of the requested borrowing;
(ii) the date of such borrowing, which shall be a Business
Day;
(iii) whether such borrowing is to be a Eurodollar Rate
borrowing or a Absolute Rate borrowing; and
(iv) the Interest Period to be applicable to such borrowing,
which shall be a period contemplated by the definition of the term
"Interest Period".
Promptly following receipt of a Competitive Bid Request in accordance
with this Section, the Administrative Agent shall notify the Lenders of the
details thereof by telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make one or
more Competitive Bids to the Company in response to a Competitive Bid Request.
Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Rate borrowing, not later than 10:00 a.m.,
New York City time, three Business Days before the proposed date of such
borrowing, and in the case of an Absolute Rate borrowing, not later than 10:00
a.m., New York City time, on the proposed date of such borrowing.
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<PAGE> 24
Competitive Bids that do not conform substantially to the form approved by the
Administrative Agent may be rejected by the Administrative Agent, and the
Administrative Agent shall notify the applicable Lender as promptly as practi-
cable. Each Competitive Bid shall specify (i) the principal amount (which shall
be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may
equal the entire principal amount of the borrowing requested by the Company) of
the Competitive Loan or Loans that the Lender is willing to make, (ii) the
Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan
or Loans (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) and (iii) the Interest Period applicable to
each such Loan and the last day thereof.
(c) The Administrative Agent shall promptly notify the Company by
telecopy of the Competitive Bid Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that shall have made such
Competitive Bid.
(d) Subject only to the provisions of this paragraph, the Company may
accept or reject any Competitive Bid. The Company shall notify the
Administrative Agent by telephone, confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Bid, in the case of a Eurodollar Rate borrowing, not
later than 11:00 a.m., New York City time, three Business Days before the date
of the proposed borrowing, and in the case of an Absolute Rate borrowing, not
later than 11:00 a.m., New York City time, on the proposed date of the
borrowing; provided that (i) the failure of the Company to give such notice
shall be deemed to be a rejection of each Competitive Bid, (ii) the Company
shall not accept a Competitive Bid made at a particular Competitive Bid Rate if
the Company rejects a Competitive Bid made at a lower Competitive Bid Rate,
(iii) the aggregate amount of the Competitive Bids accepted by the Company
shall not exceed the aggregate amount of the requested Competitive Bid borrowing
specified in the related Competitive Bid Request, (iv) to the extent necessary
to comply with clause (iii) above, the Company may accept Competitive Bids at
the same Competitive Bid Rate in part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such Competitive Bid, and (v) except pursuant
to clause (iv) above, no Competitive Bid shall be accepted for a Competitive
Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000
and an integral multiple of $1,000,000; provided further that if a Competitive
Loan must be in an amount less than $5,000,000 because of the provisions of
clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or
any integral multiple thereof, and in calculating the pro rata allocation of
acceptances of portions of multiple Competitive Bids at a particular
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<PAGE> 25
Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to
integral multiples of $1,000,000 in a manner determined by the Company. A notice
given by the Company pursuant to this paragraph shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender
by telephone (to be followed by telecopy) whether or not its Competitive Bid has
been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and
each successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive
Bid in its capacity as a Lender, it shall submit such Competitive Bid directly
to the Company at least one quarter of an hour earlier than the time by which
the other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to subsection (b) of this Section.
SECTION 4. Payments of Principal and Interest.
4.01 Repayment of Loans. (a) The Revolving Loans shall mature on the
last day of the Revolving Credit Period.
(b) Each Competitive Loan shall mature on the last day of the Interest
Period applicable thereto.
(c) The Term Loans shall mature on the first anniversary of the
Commitment Termination Date.
4.02 Interest. The Company will pay to the Administrative Agent for the
account of each Lender interest on the unpaid principal amount of each Loan made
by such Lender for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) if such Loan is a Base Rate Loan, the Base Rate;
(b) if such Loan is a Eurodollar Revolving Loan or Eurodollar Term
Loan, the Eurodollar Rate PLUS 0.625%;
(c) if such Loan is a Eurodollar Competitive Loan, the Eurodollar Rate
PLUS (or MINUS) the Competitive Margin quoted by the Lender making such Loan in
accordance with Section 3.03 hereof; and
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<PAGE> 26
(d) if such Loan is an Absolute Rate Loan, the Absolute Rate for such
Loan for the Interest Period therefor quoted by the Lender making such Loan in
accordance with Section 3.03 hereof.
Notwithstanding any of the foregoing, the Company will pay to the
Administrative Agent for the account of each Lender interest at the applicable
Post-Default Rate on the principal of any Loan made by such Lender and on any
other amount payable by the Company hereunder to or for the account of such
Lender (but, if such amount is interest, only to the extent legally
enforceable), which shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof until the same is paid in full.
Accrued interest on each Loan shall be payable (i) if such Loan is a
Base Rate Loan, on each Quarterly Date, (ii) if such Loan is a Fixed Rate Loan
or Competitive Loan, on the last day of the Interest Period for such Loan (and,
if such Interest Period exceeds 90 days' (in the case of an Absolute Rate Loan)
or three months' (in the case of a Eurodollar Loan) duration, quarterly,
commencing on the first quarterly anniversary of the first day of such Interest
Period), and (iii) in any event, upon the payment, prepayment or conversion
thereof, but only on the principal so paid or prepaid or converted; provided
that interest payable at the Post-Default Rate shall be payable from time to
time on demand of the Administrative Agent or the Majority Lenders. Promptly
after the determination of any interest rate provided for herein or any change
therein, the Administrative Agent shall notify the Lenders and the Company
thereof.
Notwithstanding the foregoing provisions of this Section 4.02, if at
any time the rate of interest set forth above on any Loan of or other obligation
payable to any Lender (the "STATED RATE") exceeds the maximum non-usurious
interest rate permissible for such Lender to charge commercial borrowers under
applicable law (the "MAXIMUM RATE" for such Lender), the rate of interest
charged on such Loan of or other obligation payable to such Lender hereunder
shall be limited to the Maximum Rate for such Lender.
If the Stated Rate for any Loan of a Lender that has theretofore been
subject to the preceding paragraph at any time is less than the Maximum Rate for
such Lender, the principal amount of such Loan shall bear interest at the
Maximum Rate for such Lender until the total amount of interest paid to such
Lender or accrued on its Loans hereunder equals the amount of interest which
would have been paid to such Lender or accrued on such Lender's Loans hereunder
if the Stated Rate had at all times been in effect.
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If, upon payment in full of all amounts payable hereunder, the total
amount of interest paid to any Lender or accrued on such Lender's Loans under
the terms of this Agreement is less than the total amount of interest which
would have been paid to such Lender or accrued on such Lender's Loans if the
Stated Rate had, at all times, been in effect, then the Company shall, to the
extent permitted by applicable law, pay to the Administrative Agent for the
account of such Lender an amount equal to the difference between (a) the lesser
of (i) the amount of interest which would have accrued on such Lender's Loans if
the Maximum Rate for such Lender had at all times been in effect or (ii) the
amount of interest which would have accrued on such Lender's Loans if the Stated
Rate had at all times been in effect and (b) the amount of interest actually
paid to such Lender or accrued on its Loans under this Agreement.
If any Lender ever receives, collects or applies as interest any sum in
excess of the Maximum Rate for such Lender, such excess amount shall be applied
to the reduction of the principal balance of its Loans or to other amounts
(other than interest) payable hereunder, and if no such principal is then
outstanding, such excess or part thereof remaining shall be paid to the Company.
SECTION 5. Payments; Pro Rata Treatment; Computations; Etc.
5.01 Payments. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
hereunder and under the Notes shall be made in Dollars, in immediately available
funds, to the Administrative Agent at the Principal Office, not later than 11:00
a.m. New York time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). The Administrative Agent, or any Lender for
whose account any such payment is made, may (but shall not be obligated to)
debit the amount of any such payment which is not made by such time to any
ordinary deposit account of the Company with the Administrative Agent or such
Lender, as the case may be. The Company shall, at the time of making each
payment hereunder or under any Note, specify to the Administrative Agent the
Loans or other amounts payable by the Company hereunder to which such payment is
to be applied (and in the event that it fails to so specify, or if an Event of
Default has occurred and is continuing, the Administrative Agent may apply such
payment as it may elect in its sole discretion to amounts then due, but subject
to the other terms and conditions of this Agreement, including, without
limitation, Section 5.02 hereof). Each payment received by the Administrative
Agent hereunder or under any Note for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds, for the account of such
Lender's Applicable Lending Office. If the due date of any payment hereunder or
under any Note would otherwise fall on a day which is not a Business Day such
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<PAGE> 28
date shall be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
5.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing from the Lenders under Section 2.01(a) hereof shall
be made from the Lenders, each payment of facility and utilization fees under
Section 2.03 hereof shall be made for the account of the Lenders, and each
termination or reduction of the Commitments under Section 2.02 hereof shall be
applied to the Commitments of the Lenders, pro rata according to the Lenders'
respective percentages of the Commitments; (b) each payment by the Company of
principal of or interest on Committed Loans of a particular Type (other than
payments in respect of Committed Loans of individual Lenders provided for by
Section 6 hereof) shall be made to the Administrative Agent for the account of
the Lenders pro rata in accordance with the respective unpaid principal amounts
of such Committed Loans held by the Lenders; and (c) each conversion of
Committed Loans of a particular Type (other than conversions of Committed Loans
of individual Lenders pursuant to Section 6.04 hereof) shall be made pro rata
among the Lenders in accordance with the respective principal amounts of such
Committed Loans held by the Lenders.
5.03 Computations. Interest and fees shall be computed on the basis of
a year of 360 days and actual days elapsed, except that interest on Base Rate
Loans when the Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 or 366 days and actual days elapsed (in each case,
including the first day but excluding the last day), in the period for which
payable.
5.04 Minimum and Maximum Amounts; Types. Each borrowing, conversion
and prepayment of principal of Committed Loans shall be in an aggregate
principal amount equal to (a) in the case of Eurodollar Loans, $5,000,000 or any
larger multiple of $1,000,000, and (b) in the case of Base Rate Loans, at least
$5,000,000, except that any borrowing of Committed Loans may be in the aggregate
amount of the unused portion of the Commitments (borrowings, conversions or
prepayments of Committed Loans of different Types or, in the case of Fixed Rate
Loans, having different Interest Periods, at the same time hereunder to be
deemed separate borrowings, conversions and prepayments for purposes of the
foregoing, one for each Type or Interest Period). Notwithstanding anything to
the contrary contained in this Agreement there shall not be, at any one time,
more than ten Interest Periods in effect with respect to Fixed Rate Loans.
5.05 Certain Notices. Except as specified in Section 3.03 with respect
to Competitive Loans, notices to the Administrative Agent of terminations or
reductions of Commitments, of borrowings, conversions and prepayments of
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Loans and of the duration of Interest Periods shall be irrevocable and shall be
effective only if received by the Administrative Agent not later than 12:00 noon
(or, in the case of borrowings or prepayments of Base Rate Loans, 10:30 a.m.)
New York time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, conversion and/or prepayment specified below:
NUMBER OF
BUSINESS DAYS
NOTICE PRIOR
------ --------------
Termination or reduction of Commitments 3
Borrowing or prepayment of Base Rate Loans 0
Borrowing or prepayment of, conversion of, or into, or
duration of Interest Period for, Fixed Rate Loans 3
Each notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each notice of borrowing, conversion or
prepayment shall specify the amount, Class and Type of the Loans to be borrowed,
converted or prepaid (subject to Sections 3.02 and 5.04 hereof), the date of
borrowing, conversion or prepayment (which shall be a Business Day) and, in the
case of Fixed Rate Loans, the duration of the Interest Period therefor (subject
to the definition of Interest Period). Each such notice of duration of an
Interest Period shall specify the Loans to which such Interest Period is to
relate. The Administrative Agent shall promptly notify the affected Lenders of
the contents of each such notice. In the event that the Company fails to select
the duration of any Interest Period for any Fixed Rate Loans within the time
period and otherwise as provided in this Section 5.05, such Loans (if
outstanding as Fixed Rate Loans) will be automatically converted into Base Rate
Loans on the last day of the then current Interest Period for such Loans or (if
outstanding as Base Rate Loans) will remain as, or (if not then outstanding)
will be made as, Base Rate Loans.
5.06 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"PAYOR") prior to the date on (or, in the case of Base Rate Loans, prior to the
time by) which such Lender is to make payment to the Administrative Agent of the
proceeds of a Loan to be made by it hereunder or the Company is to make a
payment to the Administrative Agent for the account of one or more of the
Lenders, as the case may be (such payment being herein called the "REQUIRED
PAYMENT"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date (or at such time)
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and, if the Payor has not in fact made the Required Payment to the
Administrative Agent, the recipient of such payment shall, on demand, pay to the
Administrative Agent the amount made available to it together with interest
thereon in respect of the period commencing on the date such amount was so made
available by the Administrative Agent until the date the Administrative Agent
receives such amount at a rate per annum equal to the Federal Funds Rate for
such period.
5.07 Sharing of Payments, Etc. The Company agrees that, in addition to
(and without limitation of) any right of set-off, bankers' lien or counterclaim
a Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances held by it for the account of the Company at any of its offices,
in Dollars or in any other currency, against any principal of or interest on any
of such Lender's Loans to the Company hereunder which is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Administrative Agent thereof,
provided that such Lender's failure to give such notice shall not affect the
validity thereof. If a Lender shall obtain payment of any principal of or
interest on any Committed Loan made by it under this Agreement, through the
exercise of any right of set-off, banker's lien, counterclaim or similar right,
or otherwise, it shall promptly purchase from the other Lenders participations
in the Committed Loans made by the other Lenders in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
the Lenders shall share the benefit of such payment (net of any expenses which
may be incurred by such Lender in obtaining or preserving such benefit) pro rata
in accordance with the unpaid principal and interest on the Committed Loans then
due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. The Company agrees,
to the fullest extent it may effectively do so under applicable law, that any
Person purchasing a participation in the Loans made by another Person, whether
or not acquired pursuant to the foregoing arrangements, may exercise all rights
of set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or other
obligations in the amount of such participation. Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Company.
5.08 Taxes. (a) Any and all payments by the Company hereunder shall be
made, in accordance with Section 5.01, free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise
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taxes imposed on it, by the jurisdiction under the laws of which such Lender or
the Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"). If the Company shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Agent, (i) except as provided in
subsection (g) below, the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 5.08), such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Company shall
make such deductions and (iii) the Company shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Company agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Notes or any other document referred to herein or therein (hereinafter referred
to as "OTHER TAXES").
(c) The Company will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including related penalties,
interest and expenses) imposed by any jurisdiction on amounts payable under this
Section 5.08 paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor. It is understood that Taxes do not include any
withholdings or other obligations imposed on a Lender with respect to payments
by such Lender to a participant in such Lender's Loans.
(d) Within 30 days after the date of any payment of Taxes, the Company
or a Lender, in the case of any Taxes paid by such Lender, will furnish to the
Administrative Agent, at its address referred to in Section 12.02, the original
or a certified copy of a receipt evidencing payment thereof.
(e) At the reasonable request of the Company, a Lender or the
Administrative Agent shall apply at the Company's expense for a refund in
respect
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of Taxes or Other Taxes previously paid by the Company pursuant to this Section
5.08 if in the opinion of such Lender or Administrative Agent there is a
reasonable basis for such refund. Notwithstanding the foregoing, none of the
Lenders or the Administrative Agent shall be obligated to pursue such refund if,
in its sole good faith judgment, such action would be disadvantageous to it. If
any Lender subsequently receives from a taxing authority a refund of any Tax
previously paid by the Company and for which the Company has indemnified the
Lender pursuant to this Section 5.08, such Lender shall within 30 days after
receipt of such refund, and to the extent permitted by applicable law, pay to
the Company the net amount of any such recovery after deducting taxes and
expenses attributable thereto.
(f) Not later than the Closing Date or, in the case of any bank or
financial institution that becomes a Lender after the Closing Date pursuant to
Section 12.06, the date of the instrument of assignment pursuant to which such
bank or financial institution became a Lender, and annually thereafter or at
such other times as the Administrative Agent or the Company may request, each
Lender organized under the laws of a jurisdiction outside the United States
shall provide the Administrative Agent and the Company with duly completed
copies of Form 1001 or Form 4224 or any successor form prescribed by the
Internal Revenue Service of the United States certifying that such Lender is
exempt from United States withholding taxes with respect to all payments to be
made to such Lender hereunder or other documents satisfactory to the Company and
the Administrative Agent indicating that all payments to be made to such Lender
hereunder are not subject to such taxes (an "EXEMPTION CERTIFICATE"). In the
case of payments to or for any Lender organized under the laws of a jurisdiction
outside the United States, unless the Administrative Agent and the Company have
received an Exemption Certificate from such Lender, the Company, or the
Administrative Agent if the Company has not withheld, may withhold taxes from
such payments at the applicable statutory rate; provided that if the Company has
withheld it shall so notify the Administrative Agent. If the Company is required
to pay additional amounts to any Lender pursuant to this Section 5.08, such
Lender shall use reasonable efforts to designate a different Applicable Lending
Office if such designation will thereafter avoid the need for any additional
payments under this Section 5.08 and will not, in the sole judgment of such
Lender, be otherwise disadvantageous to such Lender. A Lender which ceases to be
exempt from United States withholding taxes shall notify the Administrative
Agent and the Company promptly thereof.
(g) If a Lender organized under the laws of a jurisdiction outside the
United States fails to comply with the provisions of subsection (f) above, then
the Company shall not have any obligation to increase the sum payable to such
Lender pursuant to Section 5.08(a) or to indemnify such Lender pursuant to
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Section 5.08(b) for Taxes (including related penalties, interest and expenses)
imposed by the United States or any political subdivision thereof.
SECTION 6. Yield Protection and Illegality.
6.01 Additional Costs.
(a) The Company shall pay to the Administrative Agent for the account
of each Lender from time to time such amounts as such Lender may determine to be
necessary to compensate it for any costs incurred by such Lender which such
Lender determines are attributable to its making or maintaining of any Fixed
Rate Loans hereunder or its obligation to make any of such Loans hereunder, or
any reduction in any amount receivable by such Lender hereunder in respect of
any of such Loans or such obligation (such increases in costs and reductions in
amounts receivable being herein called "ADDITIONAL COSTS"), in each case
resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
such Lender under this Agreement or its Notes in respect of any of
such Loans (other than changes which affect taxes measured by or
imposed on the overall net income of such Lender or of its Applicable
Lending Office for any of such Loans by the jurisdiction in which such
Lender has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit,
insurance assessment or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including any of such Loans or any
deposits referred to in the definitions of "Eurodollar Base Rate" in
Section 1.01 hereof but excluding, with respect to any such Fixed Rate
Loan, any such requirements included in the applicable Domestic
Reserve Requirement or Eurodollar Reserve Requirement); or
(iii) imposes any other condition affecting this Agreement
(or any of such extensions of credit or liabilities).
Each Lender will notify the Company through the Administrative Agent of
any event occurring after the date of this Agreement which will entitle such
Lender to compensation pursuant to this Section 6.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation, and (if so requested by the Company through the Administrative
Agent) will designate a different Applicable Lending Office for the relevant
Type of Fixed Rate Loans of such Lender if such designation will avoid the need
for, or
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reduce the amount of, such compensation and will not, in the sole opinion of
such Lender, be disadvantageous to such Lender (provided that such Lender shall
have no obligation to so designate an Applicable Lending Office located in the
United States of America). Each Lender will furnish the Company with a statement
setting forth the basis and amount of each request by such Lender for
compensation under this Section 6.01(a). If any Lender requests compensation
from the Company under this Section 6.01(a), the Company may, by notice to such
Lender through the Administrative Agent, suspend the obligation of such Lender
to make additional Fixed Rate Loans of the relevant Type to the Company until
the Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 6.04 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of this
Section 6.01, if, by reason of any Regulatory Change, any Lender either (i)
incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such
Lender which includes deposits by reference to which the interest rate on any
Type of Fixed Rate Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Lender which includes
any Type of Fixed Rate Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, if
such Lender so elects by notice to the Company (with a copy to the
Administrative Agent), the obligation of such Lender to make Fixed Rate Loans of
the relevant Type hereunder shall be suspended until the date such Regulatory
Change ceases to be in effect (in which case the provisions of Section 6.04
hereof shall be applicable).
(c) Determinations and allocations by any Lender for purposes of this
Section 6.01 of the effect of any Regulatory Change on its costs of maintaining
its obligations to make Loans or of making or maintaining Loans or on amounts
receivable by it in respect of Loans, and of the additional amounts required to
compensate such Lender in respect of any Additional Costs, shall be presumed
correct absent manifest error.
(d) Notwithstanding the foregoing, the Company shall not be required
to compensate any Lender for any Additional Costs incurred more than one year
prior to the date that such Lender notifies the Company thereof, unless such
Additional Costs were caused by the retroactive application of a Regulatory
Change to a date more than one year prior to the date of such notice.
6.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, with respect to any Fixed Rate Loans:
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(a) the Administrative Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not
being provided by the Reference Lenders in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or
(b) the Majority Lenders determine (which determination shall be
conclusive) and notify the Administrative Agent that the relevant rates of
interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rates of interest for such Loans are to be
determined do not accurately reflect the cost to such Lenders of making or
maintaining such Loans for Interest Periods therefor;
then the Administrative Agent shall promptly notify the Company and each Lender
thereof, and so long as such condition remains in effect, the Lenders shall be
under no obligation to make Fixed Rate Loans of the relevant Type or to convert
Base Rate Loans into Fixed Rate Loans of the relevant Type and the Company
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Fixed Rate Loans of the relevant Type, either prepay such Loans or
convert such Loans into Base Rate Loans in accordance with Section 3.02 hereof.
6.03 Illegality. Notwithstanding any other provision of this Agreement
to the contrary, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Fixed Rate Loans
of any Type hereunder, or (b) maintain Fixed Rate Loans of any Type hereunder,
then such Lender shall promptly notify the Company thereof through the
Administrative Agent and such Lender's obligation to make Fixed Rate Loans of
such Type hereunder shall be suspended until such time as such Lender may again
make and maintain Fixed Rate Loans of such Type (in which case the provisions of
Section 6.04 hereof shall be applicable).
6.04 Substitute Base Rate Loans. If the obligation of any Lender to
make Fixed Rate Loans of any Type shall be suspended pursuant to Section 6.01,
6.02 or 6.03 hereof, all Loans which would otherwise be made by such Lender as
Fixed Rate Loans of such Type shall be made instead as Base Rate Loans (and, if
an event referred to in Section 6.01(b) or 6.03 hereof has occurred and such
Lender so requests by notice to the Company with a copy to the Administrative
Agent, each Fixed Rate Loan of such Type of such Lender then outstanding shall
be automatically converted into a Base Rate Loan on the date specified by such
Lender in such notice) and, to the extent that Fixed Rate Loans of such Type are
so made as (or converted into) Base Rate Loans, all payments of principal which
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would otherwise be applied to such Fixed Rate Loans of such Type shall be
applied instead to such Base Rate Loans.
6.05 Compensation. The Company shall pay to the Administrative Agent
for the account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Fixed Rate Loan made by
such Lender on a date other than the last day of an Interest Period for such
Loan; or
(b) any failure by the Company to borrow a Fixed Rate Loan to be made
by such Lender on the date for such borrowing specified in the relevant notice
of borrowing under Section 5.05 hereof or Section 3.03 hereof.
Notwithstanding the foregoing, the Company shall not be required to compensate
any Lender for any such loss, cost or expense incurred more than one year prior
to the date that such Lender notifies the Company thereof.
6.06 Capital Adequacy. If any Lender shall determine that the adoption
or implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending Office) with any request or directive
issued after the date hereof regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on capital of such
Lender or any Person controlling such Lender (a "PARENT") as a consequence of
its obligations hereunder to a level below that which such Lender (or its
Parent) could have achieved but for such adoption, change or compliance (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand by such Lender (with a copy to the Administrative Agent), the
Company shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. A statement of any Lender claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be presumed correct absent manifest
error. In determining such amount, such Lender may use any reasonable averaging
and attribution methods.
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6.07 Substitution of Lender. If (i) the Company is required to withhold
with respect to any Lender pursuant to Section 5.08, (ii) any Lender has
demanded compensation under Section 6.01(a) or Section 6.06 or (iii) the
obligation of any Lender to make Fixed Rate Loans has been suspended pursuant to
Section 6.01(b)(ii) or Section 6.03, and so long as no Default shall have
occurred and be continuing, the Company shall have the right to request one or
more substitute banks, financial institutions or funds (which may be one or more
of the Lenders) reasonably satisfactory to the Administrative Agent to purchase
such Lender's Note and assume such Lender's Commitment hereunder by paying to
such Lender an amount equal to all of the obligations of the Company to such
Lender hereunder including, without limitation, principal and accrued interest
and fees. Any costs or expenses incurred by the Administrative Agent in
connection with assisting the Company pursuant hereto shall be paid upon demand
by the Company. The Administrative Agent shall respond promptly to any request
by the Company for its consent to a substitute for a Lender.
SECTION 7. Conditions Precedent.
7.01 Initial Loans. The obligation of each Lender to make the initial
Loans to be made by it hereunder is subject to the following conditions
precedent, each of which shall have been fulfilled to the satisfaction of the
Administrative Agent on or prior to July 25, 2000:
(a) Corporate Action. The Administrative Agent shall have received
certified copies of the Articles of Incorporation and Code of Regulations of the
Company and of all corporate action taken by the Company authorizing the
execution, delivery and performance of this Agreement and the Notes (including,
without limitation, a certificate of the Company setting forth the resolutions
authorizing the transactions contemplated thereby).
(b) Incumbency. The Company shall have delivered to the Administrative
Agent a certificate in respect of the name and signature of each of the officers
(i) who is authorized to sign on its behalf this Agreement and the Notes and
(ii) who will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing documents
and giving notices and other communications in connection with this Agreement
and the Notes. The Administrative Agent and each Lender may conclusively rely on
such certificates until it receives notice in writing from the Company to the
contrary.
(c) Notes. The Administrative Agent shall have received a Note for
each Lender, duly completed and executed.
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(d) Fees and Expenses. The Company shall have paid to the
Administrative Agent for its account fees in the amount previously agreed upon
by the Company.
(e) Opinion of Counsel to the Company. The Administrative Agent shall
have received an opinion of Calfee, Halter & Griswold LLP, counsel to the
Company, and the General Counsel of the Company, substantially in the form of
Exhibit B-1 and B-2 hereto, respectively.
(f) Opinion of Special Counsel to the Administrative Agent. The
Administrative Agent shall have received an opinion of Davis Polk & Wardwell,
special counsel to the Administrative Agent, substantially in the form of
Exhibit C hereto.
(g) Counterparts. The Administrative Agent shall have received
counterparts of this Agreement executed and delivered by or on behalf of each of
the parties hereto (or, in the case of any Lender as to which the Administrative
Agent shall not have received such a counterpart, the Administrative Agent shall
have received evidence satisfactory to it of the execution and delivery by such
Lender of a counterpart hereof).
(h) Commercial Paper Ratings. The Administrative Agent shall have
received evidence that the Company's commercial paper shall have been rated at
least A-2 by Standard & Poor's Ratings Services and P-2 by Moody's Investors
Service, Inc.
(i) Existing Credit Agreements. The Administrative Agent shall have
received evidence that all amounts outstanding under the credit agreements dated
as of February 3, 1997 and July 29, 1999, in each case among the Company, the
lenders party thereto and Chase, as administrative agent, as amended, shall have
been paid in full and all commitments thereunder shall have terminated.
(j) Other Documents. The Administrative Agent shall have received
such other documents relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request.
7.02 Initial and Subsequent Loans. The obligation of each Lender to
make any Loan to be made by it hereunder is subject to the conditions precedent
that, as of the date of such Loan, and before and after giving effect thereto:
(a) no Default shall have occurred and be continuing; and
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(b) the representations and warranties made by the Company in this
Agreement shall be true on and as of the date of the making of such Loan, with
the same force and effect as if made on and as of such date (except, in the case
of the representation and warranty contained in Section 8.02(d), as disclosed by
the Company to the Lenders in writing in the notice of borrowing relating to
such Loan).
Each notice of borrowing by the Company hereunder or Competitive Bid Request
shall constitute a certification by the Company to the effect set forth in the
preceding sentence (both as of the date of such notice or Competitive Bid
Request and as of the date of such borrowing).
SECTION 8. Representations and Warranties. The Company represents and
warrants to the Lenders and the Administrative Agent as follows:
8.01 Corporate Existence. Each of the Company and its Subsidiaries: (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power, and has all governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted, except in the case of such licenses, authorizations,
consents and approvals, where the failure to obtain them would not have a
Material Adverse Effect; and (c) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a Material
Adverse Effect.
8.02 Information. (a) All information heretofore furnished by the
Company to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby did not as
of the date thereof and will not as of the Closing Date contain any untrue
statement of a material fact or assumption or omit to state a material fact or
assumption necessary in order to make the statements contained therein not
misleading;
(b) Without limiting the generality of paragraph (a):
(i) The audited consolidated balance sheet of the Company
and its Subsidiaries as of May 31, 1999 and the audited consolidated
statements of income, shareholders' equity and cash flows for the
fiscal year ended May 31, 1999 (collectively, the "FINANCIAL
STATEMENTS") have been prepared in accordance with generally accepted
accounting principles consistently applied. The Financial Statements
fairly present the financial position of the Company and its
Subsidiaries as of May 31, 1999 and the
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results of their operations and their cash flows for the fiscal year
ended May 31, 1999 in conformity with generally accepted accounting
principles.
(ii) The unaudited consolidated balance sheet of the Company
and its Subsidiaries as of February 29, 2000 and the unaudited
consolidated statements of income, shareholders' equity and cash flows
for the nine months then ended have been prepared in accordance with
generally accepted accounting principles consistently applied, and
fairly present the financial position of the Company and its
Subsidiaries as of February 29, 2000 and the results of their
operations and their cash flows for the nine months then ended in
conformity with generally accepted accounting principles (subject to
normal year-end adjustments).
(iii) The Company and its Subsidiaries did not on the date
of the balance sheet referred to in clause (i) above, and will not on
the Closing Date, have any material contingent liabilities, material
liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or
provided for in said balance sheet.
(c) The Company has disclosed to the Lenders in writing any and all
facts (other than general economic and industry conditions) which have or may
have a Material Adverse Effect.
(d) Since May 31, 1999 no event has occurred and no condition has come
into existence which has had, or is reasonably likely to have, a Material
Adverse Effect.
8.03 Litigation. Except as disclosed in the Disclosure Documents,
there are no legal or arbitral proceedings or any proceedings by or before any
governmental or regulatory authority or agency, now pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which in any manner draw into question the validity of the Credit
Agreement or the Notes. The disclosure of litigation to the Lenders pursuant to
this Section does not necessarily mean that such litigation is of the type
described in this Section or that the Company believes that such litigation has
any merit whatsoever.
8.04 No Breach. None of the execution and delivery of the Basic
Documents, the consummation of the transactions therein contemplated or
compliance with the terms and provisions thereof will conflict with or result in
a breach of, or require any consent under, the Articles of Incorporation or
Codes of
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Regulation or comparable instruments of the Company or any of its Subsidiaries,
or any applicable law or regulation, or any order, writ, injunction or decree of
any court or governmental authority or agency, or any Basic Document or other
material agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which it is bound or to which it is subject, or constitute a
default under any such material agreement or instrument, or result in the
creation or imposition of any Lien upon any of the revenues or assets of the
Company or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument.
8.05 Corporate Action. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under the Basic
Documents to which it is a party; the execution, delivery and performance by the
Company of the Basic Documents to which it is a party have been duly authorized
by all necessary corporate action; and this Agreement has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company and, on the Closing Date, each of the other
Basic Documents to which the Company is to be a party will constitute its legal,
valid and binding obligation, in each case enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general equitable principles.
8.06 Approvals. Each of the Company and its Subsidiaries has obtained
all authorizations, approvals and consents of, and has made all filings and
registrations with, any governmental or regulatory authority or agency and any
third party necessary for the execution, delivery or performance by it of any
Basic Document to which it is a party, or for the validity or enforceability
thereof.
8.07 Regulations U and X. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U or X of the Board of Governors
of the Federal Reserve System) and no part of the proceeds of any Loan hereunder
will be used to purchase or carry any such margin stock.
8.08 ERISA. The Company and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No such Person has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan, or made any
amendment to any Plan, which has resulted or could result in the imposition
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of a Lien or the posting of a bond or other security under ERISA or the Code or
(iii) incurred any liability under Title IV of ERISA (other than a liability to
the PBGC for premiums under Section 4007 of ERISA).
8.09 Taxes. Each of the Company and its Subsidiaries has filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by it and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by it, except to the extent the
same may be contested as permitted by Section 9.02 hereof. There are no material
tax disputes or contests pending as of the Closing Date. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Company,
adequate.
8.10 Subsidiaries. Schedule I hereto is a complete and correct list, as
of the date of this Agreement, of all Subsidiaries of the Company and of all
Investments held by the Company or any of its Subsidiaries in any material joint
venture or other similar Person. The Company owns, free and clear of Liens, all
outstanding shares of its Subsidiaries and all such shares are validly issued,
fully paid and non-assessable and the Company (or the respective Subsidiary of
the Company) also owns, free and clear of Liens, all such Investments.
8.11 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
8.12 Public Utility Holding Company Act. Neither the Company nor any of
its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
8.13 Ownership and Use of Properties. Each of the Company and its
Subsidiaries will have on the Closing Date and at all times thereafter, legal
title or ownership of, or the right to use pursuant to enforceable and valid
agreements or arrangements, all tangible property, both real and personal, and
all franchises, licenses, copyrights, patents and know-how which is material to
the operation of its business as proposed to be conducted.
8.14 Environmental Matters. Except as disclosed in the Disclosure
Documents, neither the Company nor any of its Subsidiaries has (i) failed to
obtain any permits, certificates, licenses, approvals, registrations and other
authorizations which are required under any applicable Environmental Law where
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failure to have any such permit, certificate, license, approval, registration or
authorization would have a Material Adverse Effect; (ii) failed to comply with
the terms and conditions of all such permits, certificates, licenses, approvals,
registrations and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any notice or demand letter from any regulatory authority issued,
entered, promulgated or approved thereunder where failure to comply would have a
Material Adverse Effect; or (iii) failed to conduct its business so as to comply
in all respects with applicable Environmental Laws where failure to so comply
would have a Material Adverse Effect. The disclosure of any failure or alleged
failure to the Lenders pursuant to this Section does not necessarily mean that
such failure is of the type described in this Section or that any such
allegation has any merit whatsoever.
SECTION 9. Covenants. The Company agrees that, so long as any of the
Commitments are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable hereunder, unless the Majority
Lenders shall agree otherwise as contemplated by Section 12.05 hereof:
9.01 Information. The Company shall deliver to each of the Lenders:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, consolidated statements of income,
shareholders' equity and cash flows of the Company 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 Ciulla, Smith &
Dale LLP or other 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 Company and its Subsidiaries as at
the end of, and for, such fiscal year;
(b) as soon as available and in any event within 60 days after the end
of each fiscal quarter of the Company other than the last fiscal quarter in each
fiscal year, consolidated statements of income, shareholders' equity and cash
flows of the Company 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,
accompanied, in each case, by a certificate of a Senior Officer, which
certificate shall state that said consolidated financial statements fairly
present in all material respects the consolidated financial condition and
results of operations of the Company in accordance with GAAP (except for
footnotes of the type required by the Securities and Exchange
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Commission to be included in quarterly reports on Form 10-Q), consistently
applied, as at the end of, and for, such period (subject to normal year-end
audit adjustments);
(c) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed;
(d) promptly upon the filing thereof, copies of all registration
statements (other than any registration statements on Form S-8 or its
equivalent) and any reports which the Company shall have filed with the
Securities and Exchange Commission;
(e) if and when the Company or any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC, (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice; (iv) applies for a waiver of the minimum
funding standard under Section 412 of the Code, a copy of such application; (v)
gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information filed with the PBGC; (vi) gives notice
of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of a Senior Officer setting forth details as to such
occurrence and action, if any, which the Company or member of the Controlled
Group is required or proposes to take;
(f) promptly after management of the Company knows that any Default has
occurred and is continuing, a notice of such Default, describing the same in
reasonable detail; and
(g) from time to time such other information regarding the financial
condition, operations, prospects or business of the Company as the
Administrative Agent or any Lender through the Administrative Agent may
reasonably request.
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The Company will furnish to each Lender, at the time it furnishes each
set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a Senior Officer (i) to the effect that, to the best of his
knowledge after due inquiry, no Default has occurred and is continuing (or, if
any Default has occurred and is continuing, describing the same in reasonable
detail) and (ii) setting forth in reasonable detail the computations necessary
to determine whether it was in compliance with Sections 9.08 to 9.12, inclusive,
and 9.16 hereof as of the end of the respective fiscal quarter or fiscal year.
9.02 Taxes and Claims. The Company will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon the property of the Company or such Subsidiary, provided that
neither the Company nor such Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim the payment of which is being contested in
good faith and by proper proceedings if it maintains adequate reserves with
respect thereto and if such contest, proceedings and reserves have been
described in a certificate of a Senior Officer delivered to the Lenders.
9.03 Insurance. The Company will maintain, and will cause each of its
Subsidiaries to maintain, insurance with responsible companies in such amounts
and against such risks as is usually carried by companies of established repute
engaged in the same or similar businesses, owning similar properties, and
located in the same general areas as the Company and its Subsidiaries.
9.04 Maintenance of Existence; Conduct of Business. The Company will
preserve and maintain, and will cause each of its Subsidiaries to preserve and
maintain, its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business, and
will conduct its business in a regular manner; provided that nothing herein
shall prevent (i) the merger and dissolution of any Subsidiary of the Company
into the Company so long as the Company is the surviving corporation, (ii) the
merger of any Subsidiary of the Company into any other Subsidiary of the
Company, or (iii) the sale of any Subsidiary of the Company which is not a
Significant Subsidiary. It is understood that the preservation and maintenance
of rights, privileges and franchises shall not prevent the Company and its
Subsidiaries from disposing of assets in any transaction not otherwise
prohibited pursuant to this Section 9.04 or Section 9.10 hereof.
9.05 Maintenance of and Access to Properties. The Company will keep, and
will cause each of its Subsidiaries to keep, all of its properties necessary in
its
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business in good working order and condition (having regard to the condition of
such properties at the time such properties were acquired by the Company or such
Subsidiary), ordinary wear and tear excepted, and proper books of record and
account in which full, true and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its business activities,
and will permit representatives of the Lenders to inspect such properties and,
upon reasonable notice and at reasonable times, to examine and make extracts and
copies from the books and records of the Company and any such Subsidiary.
9.06 Compliance with Applicable Laws. The Company will comply, and will
cause each of its Subsidiaries to comply, with the requirements of all
applicable laws, rules, regulations and orders of any governmental body or
regulatory authority (including, without limitation, all Environmental Laws), a
breach of which would have a Material Adverse Effect, except where contested in
good faith and by proper proceedings.
9.07 Litigation. The Company will promptly give to the Administrative
Agent (which shall promptly notify each Lender) notice in writing of all
litigation and of all proceedings of which it is aware before any courts,
arbitrators or governmental or regulatory agencies affecting the Company or any
of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect.
9.08 Leverage Ratio. The Company will not permit Indebtedness of the
Company and its Subsidiaries, determined on a consolidated basis, on any date to
exceed 65% of the sum of such Indebtedness and consolidated shareholders' equity
of the Company and its Subsidiaries on such date.
9.09 Interest Coverage Ratio. The Company will not permit the ratio,
calculated as at the end of each fiscal quarter ending after the Closing Date
for the four fiscal quarters then ended, of EBITDA for such period to Interest
Expense for such period to be less than 3.5:1.
9.10 Mergers, Asset Dispositions, Etc. The Company will not (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, in one transaction or a series of
related transactions, all or substantially all of its business or assets;
provided that the Company may merge with another Person if (A) the Company is
the corporation surviving such merger and (B) immediately after giving effect to
such merger, no Default shall have occurred and be continuing.
9.11 Liens. The Company will not, and will not permit any of its
Subsidiaries to, create or suffer to exist any Lien upon any property or assets,
now
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owned or hereafter acquired, securing any Indebtedness or other obligation,
except:
(i) Liens existing on the Closing Date and securing
Indebtedness in an aggregate principal amount not exceeding $10,000,000;
(ii) Liens existing on other assets at the date of acquisition
thereof or which attach to such assets concurrently with or within 90
days after the acquisition thereof, securing Indebtedness incurred to
finance the acquisition thereof in an aggregate principal amount at any
time outstanding not exceeding $15,000,000;
(iii) any Lien existing on any asset of any corporation at the
time such corporation becomes a Subsidiary of the Company or is merged
or consolidated with or into the Company or one of its Subsidiaries and
not created in contemplation of such event;
(iv) any Lien arising out of the refinancing, extension,
renewal or refunding of any Indebtedness secured by any Lien permitted
by any of the foregoing clauses of this Section 9.11, provided that such
Indebtedness is not increased and is not secured by any additional
assets;
(v) other Liens arising in the ordinary course of the business
of the Company or such Subsidiary which are not incurred in connection
with the borrowing of money or the obtaining of advances or credit, do
not secure any obligation in an amount exceeding $15,000,000 and do not
materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business; and
(vi) Liens not otherwise permitted by the foregoing clauses of
this Section 9.11 securing Indebtedness in an aggregate principal or
face amount at any date not to exceed $15,000,000.
9.12 Investments. The Company will not, and will not permit any of its
Subsidiaries to, make or permit to remain outstanding any advances, loans or
other extensions of credit or capital contributions (other than prepaid expenses
in the ordinary course of business) to (by means of transfers of property or
assets or otherwise), or purchase or own any stocks, bonds, notes, debentures or
other securities of, any Person (all such transactions being herein called
"INVESTMENTS"), except: (i) operating deposit accounts; (ii) Liquid Investments;
(iii) subject to Section 9.13 hereof, Investments in accounts and notes
receivable acquired in the ordinary course of business as presently conducted;
(iv) Investments existing on the Closing Date in Subsidiaries or joint ventures,
and
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Investments after the Closing Date by First Colonial Insurance Company, a
wholly-owned Subsidiary of the Company, in the ordinary course of its business;
(v) Investments not otherwise permitted by the foregoing clauses of this Section
9.12 in Subsidiaries of the Company and in Persons which become Subsidiaries of
the Company as the result of such Investments; (vi) Investments not otherwise
permitted by the foregoing clauses of this Section 9.12 in joint ventures in an
aggregate amount not to exceed $35,000,000; and (vii) Investments not otherwise
permitted by the foregoing clauses of this Section 9.12 in an aggregate amount
not to exceed $5,000,000.
9.13 Transactions with Affiliates. Except as expressly permitted by this
Agreement the Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly: (i) make any Investment in an Affiliate of the Company
(other than a Subsidiary of the Company); (ii) transfer, sell, lease, assign or
otherwise dispose of any assets to an Affiliate of the Company (other than a
Subsidiary of the Company); (iii) merge into or consolidate with or purchase or
acquire assets from an Affiliate of the Company (other than a Subsidiary of the
Company); or (iv) enter into any other transaction directly or indirectly with
or for the benefit of an Affiliate of the Company (other than a Subsidiary of
the Company) (including, without limitation, Guaranties and assumptions of
obligations of an Affiliate of the Company (other than a Subsidiary of the
Company)); provided that (a) any Affiliate of the Company who is an individual
may serve as a director, officer or employee of the Company and receive
reasonable compensation or indemnification in connection with his or her
services in such capacity; and (b) any transaction entered into by the Company
or a Subsidiary of the Company with an Affiliate of the Company which is not a
Subsidiary of the Company providing for the leasing of property, the rendering
or receipt of services or the purchase or sale of inventory and other assets in
the ordinary course of business must be for a monetary or business consideration
which would be substantially as advantageous to the Company or such Subsidiary
as the monetary or business consideration which would obtain in a comparable
arm's length transaction with a Person not an Affiliate of the Company.
9.14 Lines of Business. The Company and its Subsidiaries, taken as a
whole, shall not engage to any substantial extent in any line or lines of
business activity other than present or related product lines.
9.15 Environmental Matters. The Company will promptly give to the
Lenders notice in writing of any complaint, order, citation, notice or other
written communication from any Person with respect to, or if the Company becomes
aware after due inquiry of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law or Environmental Liability at,
upon, under or within any property now or previously owned, leased, operated or
used by the
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Company or any of its Subsidiaries or any part thereof, or due to the operations
or activities of the Company, any Subsidiary on or in connection with such
property or any part thereof (including receipt by the Company or any Subsidiary
of any notice of the happening of any event involving the Release of a
reportable quantity under any applicable Environmental Law or cleanup of any
Hazardous Substance), (ii) any Release on such property or any part thereof in a
quantity that is reportable under any applicable Environmental Law, (iii) the
commencement of any cleanup pursuant to or in accordance with any applicable
Environmental Law of any Hazardous Substances on or about such property or any
part thereof and (iv) any pending or threatened proceeding for the termination,
suspension or non-renewal of any permit required under any applicable
Environmental Law, in each case which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
9.16 Lease Payments. Neither the Company nor any of its Subsidiaries has
incurred or assumed or will incur or assume (whether pursuant to a Guaranty or
otherwise) any liability for rental payments under a lease with a lease term (as
defined in Financial Accounting Standards No. 13 of the Financial Accounting
Standards Board, as in effect on the date hereof) if (i) such lease is of an
asset previously owned by the Company or any of its Subsidiaries and (ii) after
giving effect thereto, the aggregate amount of minimum lease payments that the
Company and its Subsidiaries have so incurred or assumed will exceed, on a
consolidated basis, $15,000,000 for any calendar year under all such leases.
SECTION 10. Defaults.
10.01 Events of Default. If one or more of the following events (herein
called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) default in the payment of (i) any principal of any Loan when due or
of (ii) any interest on any Loan or other amount payable hereunder within five
Business Days after the due date thereof; or
(b) the Company or any of its Subsidiaries shall default in the payment
when due of any principal of or interest on Indebtedness having an aggregate
outstanding principal amount of at least $20,000,000 (other than the Loans); or
any event or condition shall occur which results in the acceleration of the
maturity of any such Indebtedness or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of any such Indebtedness or any
Person acting on such holder's behalf to accelerate the maturity thereof; or
(c) any representation or warranty made or deemed made by the Company or
any Subsidiary herein, or in any certificate furnished to any Lender or
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the Administrative Agent pursuant to the provisions hereof, shall prove to have
been false or misleading in any material respect as of the time made or
furnished; or
(d) (i) the Company shall default in the performance of any of its
obligations under Section 2.07 or Sections 9.08 through 9.13 and 9.16 hereof; or
(ii) the Company or any Subsidiary shall default in the performance of any of
its other obligations hereunder, and such default described in this subclause
(ii) shall continue unremedied for a period of 30 days after notice thereof to
the Company by the Administrative Agent or any Lender (through the
Administrative Agent); or
(e) the Company or any of its Significant Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as such debts
become due; or
(f) the Company or any of its Significant Subsidiaries shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate or partnership action for the
purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application or
consent of the Company or any of its Significant Subsidiaries in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of such
Person or of all or any substantial part of its assets, or (iii) similar relief
in respect of such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 90 days; or an order for relief against
such Person shall be entered in an involuntary case under the Bankruptcy Code;
or
(h) a final judgment or judgments for the payment of money shall be
rendered by a court or courts against the Company or any of its Subsidiaries in
excess of $35,000,000 in the aggregate (excluding any amount of such judgment
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as to which an Acceptable Insurer has acknowledged liability), and the same
shall not be discharged (or provision shall not be made for such discharge), or
a stay of execution thereof shall not be procured, within 10 days from the date
of entry thereof, or the Company or such Subsidiary shall not, within said
period of 10 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(i) the Company or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $20,000,000 for which it
shall have become liable under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans having aggregate Unfunded Liabilities in excess of
$20,000,000 shall be filed under Title IV of ERISA by the Company or any member
of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to administer, any
Plan or Plans having aggregate Unfunded Liabilities in excess of $20,000,000; or
a condition shall exist by reason of which the PBGC would be entitled to obtain
a decree adjudicating that any Plan or Plans having aggregate Unfunded
Liabilities in excess of $20,000,000 must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause the Company or one or more members of the Controlled Group to incur
a current payment obligation in excess of $20,000,000; or
(j) (i) as a result of one or more transactions after the date of this
Agreement, any "person" or "group" of persons shall have "beneficial ownership"
(within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended, and the applicable rules and regulations thereunder) of 30% or
more of the outstanding common stock of the Company; or (ii) without limiting
the generality of the foregoing, during any period of 12 consecutive months,
commencing after the date of this Agreement, individuals who at the beginning of
such 12-month period were directors of the Company shall cease for any reason to
constitute a majority of the board of directors of the Company;
THEREUPON: the Administrative Agent may (and, if directed by the Majority
Lenders, shall) by notice to the Company (a) declare the Commitments terminated
(whereupon the Commitments shall be terminated) and/or (b) declare the principal
amount then outstanding of and the accrued interest on the Loans and fees and
all other amounts payable hereunder and under the Notes to be forthwith due and
payable, whereupon such amounts shall be and become immediately due and payable,
without other notice, presentment, demand, protest or other
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formalities of any kind (all of which are hereby expressly waived by the
Company); provided that in the case of the occurrence of an Event of Default
with respect to the Company referred to in clause (f) or (g) of this Section
10.01, the Commitments shall be automatically terminated and the principal
amount then outstanding of and the accrued interest on the Loans and fees and
all other amounts payable hereunder and under the Notes shall be and become
automatically and immediately due and payable, without notice (including,
without limitation, notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company. Each Lender hereby agrees that, unless so requested by
the Administrative Agent with the consent of the Majority Lenders, it shall not
take or cause to be taken any action to declare the Commitments terminated or to
declare payable or collect the amounts referred to above that is independent
from any action taken or to be taken by the Administrative Agent, unless such
action is taken in connection with an Event of Default described in clause (a),
(e), (f) or (g) of this Section 10.01.
SECTION 11. The Administrative Agent.
11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the Notes with such powers as are specifically delegated to the
Administrative Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto. The Administrative Agent (which
term as used in this Section 11 shall include reference to its affiliates and
its and its affiliates' officers, directors, employees and agents): (a) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the Notes, and shall not by reason of this Agreement or any Note
be a trustee for any Lender; (b) shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement
or the Notes, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement or any the Notes, or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Note or any other document referred to or
provided for herein or therein or for any failure by the Company or any of its
Subsidiaries or any other Person to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any Note except to the extent
requested by the Majority Lenders, and (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any Note or any
other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents and
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attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
11.02 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or the Notes, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with instructions
signed by the Majority Lenders and such instructions of the Majority Lenders and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
11.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or facility or utilization fees) unless the
Administrative Agent has received notice from a Lender or the Company specifying
such Default and stating that such notice is a "NOTICE OF DEFAULT". In the event
that the Administrative Agent receives such a notice of the occurrence of a
Default, the Administrative Agent shall give prompt notice thereof to the
Lenders (and shall give each Lender prompt notice of each such non-payment). The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders.
11.04 Rights as a Lender. With respect to its Commitment and the Loans
made by it, Chase in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with the Company (and any of its Affiliates) as if it were not acting as the
Administrative Agent and the Administrative Agent may accept fees and other
consideration from the Company (in addition to the agency fees and arrangement
fees heretofore agreed to between
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the Company, the Administrative Agent) for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the Administrative
Agent (to the extent not reimbursed under Section 12.03 or 12.04 hereof, but
without limiting the obligations of the Company under said Sections 12.03 and
12.04), ratably in accordance with their respective Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Basic Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which the Company is obligated to pay under Sections 12.03
and 12.04 hereof but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or its Note or Notes. The Administrative
Agent shall not be required to keep itself informed as to the performance or
observance by the Company or any other Person of this Agreement or any of the
other Basic Documents or any other document referred to or provided for herein
or therein or to inspect the properties or books of the Company or any other
Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or under the Notes, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Company or any
other Person (or any of their affiliates) which may come into the possession of
the Administrative Agent.
11.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under any Note, the Administrative Agent
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shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction by
the Lenders of their indemnification obligations under Section 11.05 hereof
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
11.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent reasonably acceptable to the Company. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent (the "NOTICE DATE"), then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent reasonably acceptable to the Company. Any
successor Administrative Agent shall be (i) a Lender or (ii) if no Lender has
accepted such appointment within 40 days after the Notice Date, a bank which has
an office in New York, New York with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 11 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
SECTION 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Administrative Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or the Notes
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in this Agreement and the Notes are cumulative and not exclusive of any
remedies provided by law.
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12.02 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy,
cable or other writing and telexed, telecopied, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof; or, as to any party, at such other
address as shall be designated by such party in a notice to the Company and the
Administrative Agent given in accordance with this Section 12.02. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
12.03 Expenses, Etc. If an Event of Default occurs, the Company agrees
to pay or reimburse each of the Lenders and the Administrative Agent for paying
all costs and expenses of each of the Lenders and the Administrative Agent
(including counsels' fees) incurred as a result of such Event of Default and
collection, enforcement, bankruptcy, insolvency and other proceedings resulting
therefrom.
12.04 Indemnification. The Company shall indemnify the Administrative
Agent, the Lenders and each affiliate thereof and their respective directors,
officers, employees, attorneys and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of them
may become subject, insofar as such losses, liabilities, claims or damages arise
out of or result from (i) any actual or proposed use by the Company of the
proceeds of any extension of credit by any Lender hereunder or breach by the
Company of this Agreement or any other Basic Document, (ii) any Environmental
Liabilities or (iii) any investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to the
foregoing, whether or not the indemnified Person is a party thereto, and the
Company shall reimburse the Administrative Agent and each Lender, and each
affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any expenses (including legal fees and fees of
engineers, environmental consultants and similar technical personnel) incurred
in connection with any such investigation or proceeding; but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
12.05 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or the Notes, nor any consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Majority Lenders and the Company, and each such waiver or
51
<PAGE> 57
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment, waiver or consent shall
(i) increase any Commitment of any Lender or subject any Lender to any
additional obligations, without the written consent of such Lender; (ii) reduce
the principal of, or interest on, any Loan, or any fees hereunder, without the
written consent of each Lender affected thereby; (iii) postpone any date fixed
for any payment of principal of, or interest on, any Loan, or any fee hereunder
pursuant to Sections 2.03, 4.01 or 4.02 hereof, without the written consent of
each Lender affected thereby; (iv) change the percentage of any of the
Commitments or of the aggregate unpaid principal amount of any of the Loans, or
the number of Lenders, which shall be required for the Lenders or any of them to
take any action under this Agreement, without the written consent of each
Lender; or (v) change any provision contained in Sections 2.07, 6, 12.03 or
12.04 hereof or this Section 12.05 or Section 12.08 hereof. Notwithstanding
anything in this Section 12.05 to the contrary, no amendment, waiver or consent
shall be made with respect to Section 11 without the consent of the
Administrative Agent.
12.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that the Company may not assign its rights or obligations
hereunder or under the Notes without the prior written consent of all of the
Lenders. Each Lender may assign any Loan or Loans or all or any part of its
Commitment (i) to any affiliate thereof, (ii) to any other Lender, or (iii) with
the consent of the Company and the Administrative Agent, which consents shall
not be unreasonably withheld, to any other bank or financial institution or
fund; provided that (x) any assignment shall not be less than $5,000,000 or, if
less, shall constitute an assignment of all of such Lender's Commitment and
Loans and (y) the Company shall be deemed to be reasonable in withholding
consent if the assignee is not exempt from United States withholding taxes. Upon
execution by the assignor and the assignee of an instrument pursuant to which
the assignee assumes such rights and obligations, payment by such assignee to
such assignor of an amount equal to the purchase price agreed between such
assignor and such assignee and delivery to the Administrative Agent and the
Company of an executed copy of such instrument together with payment by such
assignee to the Administrative Agent of a processing fee of $2,500, such
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights and benefits as it would have if it were a Lender
hereunder and the assignor shall be, to the extent of such assignment (unless
otherwise provided therein) released from its obligations under this Agreement.
Upon the consummation of such assignment, the Company shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor and the
assignee. If such assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the effectiveness of
the applicable instrument of assumption, deliver to the
52
<PAGE> 58
Company and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 5.08(f). Each Lender may (without the consent of any other party to
this Agreement) sell participations in all or any part of any Loan or Loans made
by it to another bank or other entity, in which event the participant shall not
have any rights under this Agreement (except as provided in the next succeeding
sentence hereof), or in the case of a Loan, such Lender's Note (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto, which agreement shall not give the participant the
right to consent to any modification, amendment or waiver other than one
described in clause (i), (ii) or (iii) of Section 12.05 hereof). The Company
agrees that each participant shall be entitled to the benefits of Sections 5.07
and 6 with respect to its participation; provided that no participant shall be
entitled to receive any greater amount pursuant to such Sections than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such participant
had no such transfer occurred. Each Lender may furnish any information
concerning the Company and its Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective assignees
and participants) which have agreed in writing to be bound by the provisions of
Section 12.07 hereof. The Administrative Agent and the Company may, for all
purposes of this Agreement, treat any Lender as the holder of any Note drawn to
its order (and owner of the Loans evidenced thereby) until written notice of
assignment or other transfer shall have been received by them from such Lender.
Notwithstanding anything to the contrary, any Lender may at any time assign all
or any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank. No such assignment shall release the transferor Lender from its
obligations hereunder.
12.07 Confidentiality. Each Lender agrees to keep confidential any
information delivered or made available by the Company to it prior to the end of
the term of this Agreement which is clearly indicated to be confidential
information; provided that nothing herein shall prevent any Lender from
disclosing such information (i) to any other Lender, (ii) to its officers,
directors, employees, affiliates, agents, attorneys and accountants who have a
need to know such information in accordance with customary banking practices and
who receive such information having been made aware of the restrictions set
forth in this Section, (iii) upon the order (which, for avoidance of doubt,
includes any subpoena) of any court or administrative agency, (iv) upon the
request or demand of any regulatory agency or authority having jurisdiction over
such Lender, (v) which has been publicly disclosed, (vi) to the extent
reasonably required in connection with any litigation to which the
Administrative Agent, any Lender, the Company or their respective affiliates may
be a party, (vii) to the extent
53
<PAGE> 59
reasonably required in connection with the exercise of any remedy hereunder,
(viii) to such Lender's legal counsel and independent auditors, and (ix) to any
actual or proposed participant or assignee of all or part of its rights
hereunder which has agreed in writing to be bound by the provisions of this
Section 12.07.
12.08 Survival. The obligations of the Company under Sections 5.08,
6.01, 6.05, 12.03 and 12.04 hereof and the obligations of the Lenders under
Sections 11.05 and 12.07 shall survive the repayment of the Loans and the
termination of the Commitments.
12.09 Captions. The table of contents and the captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.10 Counterparts; Integration. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral and written, relating to the subject matter
hereof (except to the extent specific reference is made to any such agreement in
Section 2.03 hereof).
12.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. THE COMPANY HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
54
<PAGE> 60
12.12 Waiver and Termination of Existing Credit Agreements. The Company
and each of the Lenders that is also a "Lender" party to the credit agreements
dated as of February 3, 1997 and July 29, 1999, as amended, in each case among
the Company, the lenders party thereto and Chase, as administrative agent
(collectively, the "EXISTING CREDIT AGREEMENTS"), waives compliance with Section
9.09 of the Existing Credit Agreements for the period ended May 31, 2000, and
agrees that the "Commitments" as defined in the Existing Credit Agreements shall
be terminated in their entirety in accordance with the terms thereof on the date
the conditions precedent set forth in Section 7.01 of this Agreement have been
fulfilled (the "NEW AGREEMENTS DATE"), subject only to this Section 12.12. Each
of such Lenders waives any requirement of notice of such termination pursuant to
Section 5.05 of the Existing Credit Agreements and any claim to any facility
fees or other fees under the Existing Credit Agreements for any day on or after
the New Agreements Date. The Company represents and warrants that (x) after
giving effect to the preceding sentences of this Section 12.12, the commitments
under the Existing Credit Agreements will be terminated effective not later than
the New Agreements Date and (y) no loans are, as of the date hereof, or will be,
as of the New Agreements Date, outstanding under the Existing Credit Agreements,
and covenants that all accrued and unpaid facility fees and any other amounts
due and payable under the Existing Credit Agreements shall have been paid on or
prior to the New Agreements Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
RPM, INC.
By /s/ Frank Sullivan
----------------------------
Title: President
Address for Notices:
2628 Pearl Road
P.O. Box 777
Medina, Ohio 44258
Attention: Chief Financial Officer
Telephone Number: 330-273-8833
Telecopy Number: 330-225-6574
55
<PAGE> 61
Commitment: THE CHASE MANHATTAN BANK
$23,714,285.71
By /s/ Peter A. Dedousis
---------------------------------
Title: Managing Director
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue, 38th Floor
New York, New York 10017
Attention: Stacey Haimes
Telecopy Number: (212) 270-1355
56
<PAGE> 62
Commitment: KEYBANK NATIONAL ASSOCIATION
$23,714,285.71
By /s/ Marianne T. Meil
---------------------------------
Title: Vice President
Address for Notices:
127 Public Square
Cleveland, Ohio 44114
Attention: Diane Cox
Telecopy Number: 216-689-4981
57
<PAGE> 63
Commitment: NATIONAL CITY BANK
$23,714,285.71
By /s/ Terri L. Cable
---------------------------------
Title: Senior Vice President
Address for Notices:
National City Bank
1900 E. Ninth Street - Loc. #2077
Cleveland, OH 44114
Attention: Revette Vickerstaff
Telecopy Number: 216-488-7110
58
<PAGE> 64
Commitment: BANK OF AMERICA, N.A.
$18,571,428.57
By /s/ Richard G. Parkhurst, Jr.
------------------------------
Title: Managing Director
Address for Notices:
101 N. Tryon Street
15th Floor
Charlotte, NC 28255
Attention: Sheila Baggarly
Telecopy Number: 704-409-0086
59
<PAGE> 65
Commitment: BANK ONE, MICHIGAN
$18,571,428.57
By /s/ William J. McCaffrey
---------------------------------
Title: First Vice President
Address for Notices:
Bank One, Michigan
611 Woodward Avenue
Mail Suite #8073
Detroit, MI 48226
Attention: Joyce Gardner
Telecopy Number: 313-225-0855
60
<PAGE> 66
Commitment: WACHOVIA BANK, N.A.
$18,571,428.57
By /s/ Bradford L. Watkins
---------------------------------
Title: Vice President
Address for Notices:
Wachovia Bank, N.A.
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: Yvette Epps
Telecopy Number: 404-332-4320
61
<PAGE> 67
Commitment: FIRST UNION NATIONAL BANK
$12,857,142.86
By /s/ Bjarne W. Howatt
---------------------------------
Title: Vice President
Address for Notices:
201 South College Street
Charlotte Plaza 6th Floor
Charlotte, NC 28288
Attention: Ben Howatt
Telecopy Number: 704-715-1117
62
<PAGE> 68
Commitment: MELLON BANK, N.A.
$10,000,000.00
By /s/ Charles E. Frankenberry
---------------------------------
Title: Lending Officer
Address for Notices:
Mellon Bank, N.A.
One Mellon Center, Room 370
Pittsburgh, PA 15258
Attention: Jeffrey R. Dickson
Vice President
Telecopy Number: 412-234-8888
63
<PAGE> 69
Commitment: FIFTH THIRD BANK, NORTHEASTERN
OHIO
$7,142,857.14
By /s/ Roy C. Lanctot
---------------------------------
Title: Vice President
Address for Notices:
1404 East Ninth Street
Cleveland, Ohio 44114
Attention: Roy C. Lanctot
Telecopy Number: 216-274-5510
64
<PAGE> 70
Commitment: THE INDUSTRIAL BANK OF JAPAN,
LIMITED
$7,142,857.14
By /s/ Walter R. Wolff
---------------------------------
Title: Joint General Manager
Address for Notices:
The Industrial Bank of Japan, Ltd.
New York Branch
1251 Avenue of the Americas
New York, NY 10020
Attention: Credit Administration
Department
Telecopy Number: 212-282-4480
65
<PAGE> 71
Commitment: SUNTRUST BANK
$7,142,857.14
By /s/ Stephen L. Leister
---------------------------------
Title: Vice President
Address for Notices:
SunTrust Bank
303 Peachtree Street, N.E., 3rd Floor
Mail Code 1928
Atlanta, GA 30308
Attention: Stephen L. Leister
Telecopy Number: 404-588-8505
66
<PAGE> 72
Commitment: FIRSTAR BANK, N.A.
$6,000,000.00
By /s/ W. Gregory Schmid
---------------------------------
Title: Vice President
Address for Notices:
Firstar Bank, N.A.
1350 Euclid Ave. Suite 800
Cleveland, OH 44115
Attention: John D. Barrett
Senior Vice President
Telecopy Number: 216-623-9208
67
<PAGE> 73
Commitment: THE BANK OF NEW YORK
$5,714,285.71
By /s/ Walter C. Parelli
---------------------------------
Title: Vice President
Address for Notices:
The Bank of New York
One Wall Street, 21 Fl.
New York, NY 10286
Attention: Kenneth R. McDonnell
Telecopy Number: 212-635-7978
68
<PAGE> 74
Commitment: THE FUJI BANK, LIMITED
$4,285,714.29
By /s/ Peter L. Chinnici
---------------------------------
Title: Senior Vice President & Group Head
Address for Notices:
225 West Wacker Drive, Suite 2000
Chicago, IL 60606
Attention: Peter Chinnici
Telecopy Number: 312-621-3386
69
<PAGE> 75
Commitment: KBC BANK N.V.
$4,285,714.29
By /s/ Robert Snauffer
---------------------------------
Title: First Vice President
By /s/ Raymond F. Murray
---------------------------------
Title: First Vice President
Address for Notices:
KBC Bank N.V.
125 West 55th Street
New York, NY 10019
Attention: John Thierfelder
Telecopy Number: 212-541-0793
70
<PAGE> 76
Commitment: THE SANWA BANK, LIMITED
$4,285,714.29
By /s/ Lee E. Prewitt
---------------------------------
Title: Vice President
Address for Notices:
The Sanwa Bank, Limited
10 South Wacker Drive, Suite 1825
Chicago, IL 60606
Attention: Kenneth Eichwald
Telecopy Number: 312-346-6677
71
<PAGE> 77
Commitment: FIRST COMMERCIAL BANK
$4,285,714.29
By /s/ Vincent T. C. Chen
---------------------------------
Title: SVP & GM
Address for Notices:
2 World Trade Center, Suite #7868
New York, NY 10048
Attention: Jeffrey Wang
Telecopy Number: 212-432-7250
Total Commitments:
$200,000,000
72
<PAGE> 78
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Peter A. Dedousis
---------------------------------
Title: Managing Director
Address for Notices:
The Chase Manhattan Bank
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Loan and Agency Services
Lisa Pucciarelli
Telecopy Number: (212) 552-5777
Copy to:
The Chase Manhattan Bank
270 Park Avenue, 38th Floor
New York, New York 10017
Attention: Stacey Haimes
Telecopy Number: (212) 270-1355
73
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>6
<FILENAME>ex10-16.txt
<DESCRIPTION>EXHIBIT 10.16
<TEXT>
<PAGE> 1
Exhibit 10.16
CONFORMED COPY
************************************************************
RPM, INC.
FIVE-YEAR
CREDIT AGREEMENT
Dated as of July 14, 2000
$500,000,000
THE CHASE MANHATTAN BANK
as Administrative Agent
************************************************************
CHASE SECURITIES INC.
Book Manager and Lead Arranger
<PAGE> 2
TABLE OF CONTENTS
----------
PAGE
----
SECTION 1. Definitions and Accounting Matters
- ---------------------------------------------
1.01 Certain Defined Terms................................................1
1.02 Accounting Terms and Determinations.................................12
1.03 Class and Types of Loans............................................12
SECTION 2. Commitments
- ----------------------
2.01 Loans...............................................................13
2.02 Reductions of Commitments...........................................14
2.03 Fees................................................................15
2.04 Lending Offices.....................................................16
2.05 Several Obligations.................................................16
2.06 Notes...............................................................16
2.07 Use of Proceeds.....................................................16
SECTION 3. Borrowings, Conversions and Prepayments
- --------------------------------------------------
3.01 Borrowings..........................................................17
3.02 Prepayments and Conversions.........................................17
3.03 Competitive Bid Procedure...........................................17
SECTION 4. Payments of Principal and Interest
- ---------------------------------------------
4.02 Interest............................................................20
SECTION 5. Payments; Pro Rata Treatment; Computations; Etc
- ----------------------------------------------------------
5.01 Payments............................................................22
5.02 Pro Rata Treatment..................................................23
5.03 Computations........................................................23
5.04 Minimum and Maximum Amounts; Types..................................23
5.05 Certain Notices.....................................................23
5.06 Non-Receipt of Funds by the Administrative Agent....................24
5.07 Sharing of Payments, Etc............................................25
5.08 Taxes...............................................................25
SECTION 6. Yield Protection and Illegality
- ------------------------------------------
6.01 Additional Costs....................................................28
6.02 Limitation on Types of Loans........................................29
6.03 Illegality..........................................................30
6.04 Substitute Base Rate Loans..........................................30
6.05 Compensation........................................................30
<PAGE> 3
PAGE
----
6.06 Capital Adequacy....................................................31
6.07 Substitution of Lender..............................................31
SECTION 7. Conditions Precedent
- -------------------------------
7.01 Initial Loans.......................................................32
7.02 Initial and Subsequent Loans........................................33
SECTION 8. Representations and Warranties
- -----------------------------------------
8.01 Corporate Existence.................................................34
8.02 Information.........................................................34
8.03 Litigation..........................................................35
8.04 No Breach...........................................................35
8.05 Corporate Action....................................................36
8.06 Approvals...........................................................36
8.07 Regulations U and X.................................................36
8.08 ERISA...............................................................36
8.09 Taxes...............................................................36
8.10 Subsidiaries........................................................37
8.11 Investment Company Act..............................................37
8.12 Public Utility Holding Company Act..................................37
8.13 Ownership and Use of Properties.....................................37
8.14 Environmental Matters...............................................37
SECTION 9. Covenants
- --------------------
9.01 Information.........................................................38
9.02 Taxes and Claims....................................................40
9.03 Insurance...........................................................40
9.04 Maintenance of Existence; Conduct of Business.......................40
9.05 Maintenance of and Access to Properties.............................40
9.06 Compliance with Applicable Laws.....................................41
9.07 Litigation..........................................................41
9.08 Leverage Ratio......................................................41
9.09 Interest Coverage Ratio.............................................41
9.10 Mergers, Asset Dispositions, Etc....................................41
9.11 Liens...............................................................41
9.12 Investments.........................................................42
9.13 Transactions with Affiliates........................................43
9.14 Lines of Business...................................................43
9.15 Environmental Matters...............................................43
9.16 Lease Payments......................................................44
SECTION 10. Defaults
- --------------------
ii
<PAGE> 4
PAGE
----
10.01 Events of Default...................................................44
SECTION 11. The Administrative Agent
- ------------------------------------
11.01 Appointment, Powers and Immunities..................................47
11.02 Reliance by Administrative Agent....................................48
11.03 Defaults............................................................48
11.04 Rights as a Lender..................................................48
11.05 Indemnification.....................................................49
11.06 Non-Reliance on Administrative Agent and Other Lenders..............49
11.07 Failure to Act......................................................49
11.08 Resignation or Removal of Administrative Agent......................50
SECTION 12. Miscellaneous
- -------------------------
12.01 Waiver..............................................................50
12.02 Notices.............................................................51
12.03 Expenses, Etc.......................................................51
12.04 Indemnification.....................................................51
12.05 Amendments, Etc.....................................................51
12.06 Successors and Assigns..............................................52
12.07 Confidentiality.....................................................53
12.08 Survival............................................................54
12.09 Captions............................................................54
12.10 Counterparts; Integration...........................................54
12.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL..........................................................54
12.12 Waiver and Termination of Existing Credit Agreements................55
iii
<PAGE> 5
SCHEDULES
---------
PRICING SCHEDULE
SCHEDULE I - Subsidiaries and Joint Ventures
EXHIBITS
--------
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Opinion of Counsel to
the Company
EXHIBIT B-2 - Form of Opinion of General Counsel
of the Company
EXHIBIT C - Form of Opinion of Special Counsel to
the Administrative Agent
iv
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of July 14, 2000 among: RPM, INC., a corporation
duly organized and validly existing under the laws of the State of Ohio
(together with its successors, the "COMPANY"); each of the lenders which is or
which may from time to time become a signatory hereto (individually, together
with its successors, a "LENDER" and, collectively, together with their
respective successors, the "LENDERS"); and THE CHASE MANHATTAN BANK, as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "ADMINISTRATIVE AGENT").
The parties hereto agree as follows:
SECTION 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"ABSOLUTE RATE" shall mean, with respect to any Competitive Loan (other
than a Eurodollar Competitive Loan), the fixed rate of interest per annum
specified by the Lender making such Competitive Loan in its related Competitive
Bid.
"ACCEPTABLE INSURER" means an insurance company (i) having an A.M. Best
rating of "A-" or better and being in a financial size category of X or larger
(as such category is defined as of the date hereof) or (ii) otherwise acceptable
to the Majority Lenders. First Colonial Insurance Company, a wholly-owned
Subsidiary of the Company, is deemed to be acceptable with respect to the dollar
amount of insurance it is providing on the date of this Agreement.
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
stepchildren, nephews, nieces and grandchildren) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "CONTROL" (including, with correlative
meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or
<PAGE> 7
otherwise), provided that, in any event, any Person which owns directly or
indirectly more than 5% of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or more than 5%
of the partnership or other ownership interests of any other Person (other than
as a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the Lending Office of such Lender (or of an affiliate of such
Lender) specified by such Lender from time to time to the Administrative Agent
and the Company as the office by which its Loans of such Type are to be made
and/or issued and maintained.
"APPLICABLE MARGIN" shall mean, with respect to any Eurodollar
Committed Loan, the rate per annum determined in accordance with the Pricing
Schedule.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as now
or hereafter in effect, or any successor statute.
"BASE RATE" shall mean, with respect to any Base Rate Loan for any day,
the rate per annum equal to the higher as of such day of (i) the Federal Funds
Rate plus 1/2 of 1% or (ii) the Prime Rate.
"BASE RATE LOANS" shall mean Loans which bear interest at a rate based
upon the Base Rate.
"BASIC DOCUMENTS" shall mean this Agreement and the Notes.
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York City and, where such term
is used in the definition of "Quarterly Date" in this Section 1.01 or if such
day relates to a borrowing of, a payment or prepayment of principal of or
interest on, a conversion of or into, or an Interest Period for, a Eurodollar
Loan or a notice by the Company with respect to any such borrowing, payment,
prepayment, conversion or Interest Period, which is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
"CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property to the
extent such obligations are required to be classified and accounted for as a
capital lease on a balance sheet of such Person under GAAP (including Statement
of Financial
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Accounting Standards No. 13 of the Financial Accounting Standards Board) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder.
"CHASE" shall mean The Chase Manhattan Bank and its successors.
"CLASS" shall have the meaning assigned to such term in Section 1.03
hereof.
"CLOSING DATE" shall mean the date of the initial Loans hereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute.
"COMMITMENT" shall mean, as to any Lender, the obligation of such
Lender to make Loans in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set forth opposite such Lender's
name on the signature pages hereof under the caption "Commitment" (as the same
may be increased or reduced from time to time pursuant to Section 2.01(c) or
2.02 hereof).
"COMMITMENT TERMINATION DATE" shall mean July 14, 2005 or, if such day
is not a Business Day, the next preceding Business Day.
"COMMITTED LOAN" shall mean a Revolving Loan.
"COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive
Loan in accordance with Section 3.03 hereof.
"COMPETITIVE BID RATE" shall mean, with respect to any Competitive Bid,
the Competitive Margin or the Absolute Rate, as applicable, offered by the
Lender making such Competitive Bid.
"COMPETITIVE BID REQUEST" shall mean a request by the Company for
Competitive Bids in accordance with Section 3.03 hereof.
"COMPETITIVE LOAN" shall mean a loan made pursuant to Section 3.03
hereof.
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"COMPETITIVE MARGIN" shall mean, with respect to any Eurodollar
Competitive Loan, the marginal rate of interest, if any, to be added to or
subtracted from the Eurodollar Rate to determine the rate of interest applicable
to such Loan, as specified by the Lender making such Loan in its related
Competitive Bid.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
"DISCLOSURE DOCUMENTS" shall mean the Company's annual report on Form
10-K for 1999 and quarterly report on Form 10-Q for the quarterly period ended
February 29, 2000, in each case as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, determined on a consolidated basis
for the Company and its Subsidiaries, net operating income of the Company and
its Subsidiaries (calculated before provision for income taxes, interest
expense, extraordinary items, income attributable to equity in affiliates and
all amounts attributable to depreciation and amortization) for such period.
EBITDA for any period ending on or before May 31, 2001 which would otherwise
reflect them shall be calculated without reflecting the 2000 Restructuring
Charges. For purposes of this definition, "2000 RESTRUCTURING CHARGES" shall
mean special restructuring charges of $45,000,000 taken in the fiscal quarter
ended August 31, 1999 and of $15,000,000 taken in the fiscal quarter ending May
31, 2000.
"ENVIRONMENTAL LAWS" shall mean any and all applicable federal, state,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions, permits, concessions,
grants, franchises, licenses, agreements and other governmental restrictions
relating to the environment or the effect of the environment on human health or
to emissions, discharges or release of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including, without limitation,
ambient air, surface water,
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ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
"ENVIRONMENTAL LIABILITIES" shall mean all liabilities in connection
with or relating to the business, assets, presently or previously owned or
leased property, activities (including, without limitation, off-site disposal)
or operations of the Company and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar
Loans, the rate per annum appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the first day
of the Interest Period for such Eurodollar Loans, as the rate for Dollar
deposits for a period comparable to such Interest Period. In the event that such
rate is not available at such time for any reason, then the "Eurodollar Base
Rate" with respect to such Eurodollar Loans for such Interest Period shall be
the arithmetic mean, as calculated by the Administrative Agent, of the
respective rates per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) quoted by the Reference Lenders at approximately 11:00 a.m. London time
by the principal London branch of each of the Reference Lenders on the day two
Business Days prior to the first day of the Interest Period for such Loans for
the offering to leading banks in the London interbank market of Dollar deposits
in immediately available funds, for a period, and in an amount, comparable to
such Interest Period and the principal amount of the Eurodollar Loan which shall
be made by such Reference Lender and outstanding during such Interest Period. If
any Reference Lender is not participating in any Eurodollar Loans during the
Interest Period therefor (pursuant to Section 3.03 or 6.04 hereof or for any
other reason), the Eurodollar Base Rate for such Loans for such Interest Period
shall be determined by reference to the amount of the Loan which such Reference
Lender would have made had such Loans been Committed Loans in which it was
participating. If any Reference Lender does not furnish a timely quotation, the
Administrative Agent shall determine the relevant interest rate on the basis of
the quotation or quotations
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<PAGE> 11
furnished by the remaining Reference Lender or Lenders or, if none of such
quotations is available on a timely basis, the provisions of Section 6.02 shall
apply.
"EURODOLLAR LOANS" shall mean Loans the interest on which is determined
on the basis of rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.01.
"EURODOLLAR RATE" shall mean, for any Eurodollar Loans, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
the Administrative Agent to be equal to (i) the Eurodollar Base Rate for such
Loans for the Interest Period for such Loans divided by (ii) 1 minus the
Eurodollar Reserve Requirement for such Loans for such Interest Period.
"EURODOLLAR RESERVE REQUIREMENT" shall mean, for any Eurodollar Loans
for any Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Eurodollar Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks by reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which the Eurodollar Rate is
to be determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets which
include Eurodollar Loans.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 10.01 hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate charged to
Chase on such day on such transactions as determined by the Administrative
Agent.
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"FIXED RATE LOANS" shall mean Eurodollar Committed Loans and, for
purposes of Section 6 hereof only, shall also mean Eurodollar Competitive Loans.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States consistently applied.
"GUARANTY" by any Person shall mean any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise, other
than agreements to purchase goods at an arm's length price in the ordinary
course of business) or (ii) entered into for the purpose of assuring in any
other manner the holder of such Indebtedness of the payment thereof or to
protect such holder against loss in respect thereof (in whole or in part),
provided that the term Guaranty shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"HAZARDOUS SUBSTANCES" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having constituent elements displaying
any of the foregoing characteristics, regulated under Environmental Laws.
"INDEBTEDNESS" shall mean, as to any Person (determined without
duplication): (i) indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
or acquisition price of property or services, other than accounts payable (other
than for borrowed money) incurred in the ordinary course of business; (ii)
obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person (whether or not such obligations are contingent); (iii)
Capital Lease Obligations of such Person; (iv) obligations of such Person to
redeem or otherwise retire shares of capital stock of such Person; (v)
indebtedness of others of the type described in clause (i), (ii), (iii) or (iv)
above secured by a Lien on the property of such Person, whether or not the
respective obligation so secured has been assumed by such Person; and (vi)
indebtedness of others of the type described in clause (i), (ii), (iii) or (iv)
above Guaranteed by such Person.
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"INTEREST EXPENSE" shall mean, for any period, the sum (determined
without duplication) of the aggregate amount of interest accruing during such
period on Indebtedness of the Company and its Subsidiaries (on a consolidated
basis), including the interest portion of payments under Capital Lease
Obligations and any capitalized interest, and excluding amortization of debt
discount and expense.
"INTEREST PERIOD" shall mean,
(1) with respect to any Eurodollar Loans, the period commencing on the
date such Loans are made or converted from other types of Loans or the last day
of the next preceding Interest Period with respect to such Loans and ending on
the numerically corresponding day in the first, second (subject to the
availability of deposits of the corresponding maturity to each of the Lenders in
the London interbank market), third or sixth calendar month thereafter, as the
Company may select as provided in Section 5.05 hereof, except that each such
Interest Period which commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month; and
(2) with respect to any Absolute Rate Competitive Loans, the period
(which shall not be less than seven days or more than 360 days) commencing on
the date such Loans are made and ending on the date specified in the applicable
Competitive Bid Request.
Notwithstanding the foregoing: (i) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for Eurodollar
Loans, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (ii) each Interest Period
which begins before the Commitment Termination Date and would otherwise end
after the Commitment Termination Date shall end on the Commitment Termination
Date; and (iii) no Interest Period for any Fixed Rate Loans shall have a
duration of less than one month and, if the Interest Period for any Fixed Rate
Loan would otherwise be a shorter period, such Loans shall not be available
hereunder.
"INVESTMENTS" shall have the meaning assigned to such term in Section
9.12 hereof.
"LIEN" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Company and each of its
Subsidiaries shall be
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deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"LIQUID INVESTMENTS" shall mean (i) certificates of deposit maturing
within 90 days of the acquisition thereof denominated in Dollars and issued by
(X) a Lender or (Y) a bank or trust company having combined capital and surplus
of at least $500,000,000 and which has (or which is a Subsidiary of a bank
holding company which has) publicly traded debt securities rated A- or higher by
Standard & Poor's Ratings Services or A-3 or higher by Moody's Investors
Service, Inc.; (ii) obligations issued or guaranteed by the United States of
America, with maturities not more than one year after the date of issue; and
(iii) commercial paper with maturities of not more than 90 days and a published
rating of not less than A-1 from Standard & Poor's Ratings Services or P-1 from
Moody's Investors Service, Inc.
"LOANS" shall mean the loans made by the Lenders to the Company
pursuant to this Agreement.
"MAJORITY LENDERS" shall mean, at any time while no Committed Loans are
outstanding, Lenders having at least 51% of the aggregate amount of the
Commitments and, at any time while Committed Loans are outstanding, Lenders
holding at least 51% of the outstanding aggregate principal amount of the
Committed Loans; provided that for purposes of declaring the Loans to be due and
payable pursuant to Section 10.01 and for all purposes after the Loans become
due and payable pursuant to Section 10.01 hereof or the Commitments terminate,
the outstanding principal amount of the Competitive Loans shall be added to the
outstanding principal amount of the Committed Loans in determining the Majority
Lenders.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the
condition (financial or otherwise), results of operations, properties, assets,
liabilities (including, without limitation, tax and ERISA liabilities and
Environmental Liabilities), business, operations, capitalization, shareholders'
equity, franchises or prospects of the Company and its Subsidiaries, taken as a
whole; or (ii) a material adverse effect on the ability of the Company to
perform its obligations under the Credit Agreement or the Notes.
"MULTIEMPLOYER PLAN" shall mean at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which the Company or
any member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
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<PAGE> 15
contributions, including for these purposes any Person which ceased to be a
member of the Controlled Group during such five year period.
"NOTES" shall have the meaning assigned to such term in Section 2.06
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision thereof.
"PLAN" shall mean an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained or contributed to, by the Company or any member of the Controlled
Group for employees of the Company or any member of the Controlled Group or (ii)
has at any time within the preceding five years been maintained, or contributed
to, by the Company or any Person which was at such time a member of the
Controlled Group for employees of any Person which was at such time a member of
the Controlled Group.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan
or any other amount payable by the Company under this Agreement, a rate per
annum equal to the sum of 2% plus the higher of (i) the Base Rate as in effect
from time to time and (ii) in the case of any Loan, the rate of interest (if
any) otherwise applicable to such Loan.
"PRICING SCHEDULE" shall mean the Pricing Schedule attached hereto.
"PRIME RATE" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
Each change in the interest rate provided for herein resulting from a change in
the Prime Rate shall take effect at the time of such change in the Prime Rate.
"PRINCIPAL OFFICE" shall mean the principal office of Chase, presently
located at 270 Park Avenue, New York, New York 10017.
"QUARTERLY DATES" shall mean the last Business Day of each March, June,
September and December.
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"REFERENCE LENDERS" shall mean each of National City Bank, KeyBank
National Association and Chase.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
on or after the date of this Agreement in United States federal, state or
foreign laws or regulations (including Regulation D) or the adoption or making
on or after such date of any interpretations, directives or requests applying to
a class of lenders including such Lender of or under any United States federal
or state, or any foreign, laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"RELEASE" shall mean any discharge, emission or release, including a
"RELEASE" as defined in CERCLA at 42 U.S.C. Section 9601(22). The term
"Released" shall have a corresponding meaning.
"REVOLVING CREDIT PERIOD" shall mean the period from and including the
date hereof to but not including the Commitment Termination Date.
"REVOLVING LOAN" shall mean a Loan made pursuant to Section 2.01(a)
hereof.
"SENIOR OFFICER" shall mean the chief executive officer, president,
chief financial officer or vice president-treasurer of the Company.
"SIGNIFICANT SUBSIDIARY" shall mean at any time any Subsidiary of the
Company, except Subsidiaries of the Company which, if aggregated and considered
as a single Subsidiary at the time of occurrence with respect to such
Subsidiaries of any event or condition of the kind described in clause (e), (f)
or (g) of Section 10.01, would not meet the definition of a "significant
subsidiary" contained as of the date hereof in Regulation S-X of the Securities
and Exchange Commission; provided that for purposes of Section 9.04 only,
"Significant Subsidiary" shall mean at any time any Subsidiary which would meet
the definition of a "significant subsidiary" contained as of the date hereof in
Regulation S-X of the Securities and Exchange Commission.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation of
which at least a majority of the outstanding shares of stock having by the terms
thereof ordinary voting power to elect a majority of the board of directors of
such
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<PAGE> 17
corporation (irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
or controlled by such Person or one or more of the Subsidiaries of such Person
or by such Person and one or more of the Subsidiaries of such Person.
"TYPE" shall have the meaning assigned to such term in Section 1.03
hereof.
"UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (i) the value of all benefits liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such benefits under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of the Company or any member of the
Controlled Group to the PBGC or any other Person under Title IV of ERISA.
1.02 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP;
provided that if any change in GAAP in itself materially affects the calculation
of any financial covenant in Section 9, the Company may by notice to the
Administrative Agent, or the Administrative Agent (at the request of the
Majority Lenders) may by notice to the Company, require that such covenant
thereafter be calculated in accordance with GAAP as in effect, and applied by
the Company, immediately before such change in GAAP occurs. If such notice is
given, the compliance certificates delivered pursuant to Section 9.01 after such
change occurs shall be accompanied by reconciliations of the difference between
the calculation set forth therein and a calculation made in accordance with GAAP
as in effect from time to time after such change occurs. To enable the ready
determination of compliance with the covenants set forth in Section 9 hereof,
the Company will not change from May 31 in each year the date on which its
fiscal year ends, nor from August 31, November 30 and February 28 (or 29) the
dates on which the first three fiscal quarters in each fiscal year end.
1.03 Class and Types of Loans. Loans hereunder are distinguished by
"CLASS" and "TYPE". The "CLASS" of a Loan refers to whether such Loan is a
Revolving Loan or a Competitive Loan. The "TYPE" of a Loan refers to whether
such Loan is a Eurodollar Loan or a Base Rate Loan or, in the case of a
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Competitive Loan, a Eurodollar Loan or an Absolute Rate Loan. Thus, for example,
a "Eurodollar Competitive Loan" is a Competitive Loan which is also a Eurodollar
Loan.
SECTION 2. Commitments.
2.01 Loans.
(a) Revolving Loans. Each Lender severally agrees, on the terms and
subject to the conditions of this Agreement, to make Revolving Loans from time
to time during the Revolving Credit Period to the Company in an aggregate
principal amount at any one time outstanding which shall not (i) exceed its
Commitment, as reduced from time to time pursuant to Section 2.02 hereof or (ii)
result in the aggregate principal amount of Loans exceeding the aggregate amount
of the Commitments, as so reduced from time to time.
(b) Competitive Loans. In addition to Revolving Loans, the Company may
from time to time during the Revolving Credit Period request the Lenders to make
offers to make Competitive Loans to the Company as set forth in Section 3.03.
The Lenders may, but shall have no obligation to, make such offers and the
Company may, but shall have no obligation to, accept any such offers; provided
that the aggregate principal amount of all Loans shall not at any time exceed
the aggregate amount of the Commitments, as reduced from time to time pursuant
to Section 2.02 hereof.
(c) Additional Commitments. At any time during the Revolving Credit
Period, if no Default shall have occurred and be continuing at such time, the
Company may, if it so elects, increase the aggregate amount of the Commitments,
by agreeing with one or more existing Lenders that such Lenders' Commitments
shall be increased. Upon execution and delivery by the Company and each such
Lender of an instrument of assumption in form and amount satisfactory to the
Administrative Agent, each such Lender shall have a Commitment as therein set
forth; provided that (i) such increase may only occur once, on a single date,
(ii) the Company shall provide prompt notice of such increase to the
Administrative Agent, which shall promptly notify the other Lenders, (iii) the
aggregate amount of such increase shall not exceed $75,000,000, (iv) the
aggregate amount of the Commitments shall at no time exceed $575,000,000 and (v)
the aggregate amount of the sum of the Commitments and the commitments under the
364-Day Credit Agreement dated as of July 14, 2000 among the Company, the
lenders party thereto and Chase, as administrative agent, shall at no time
exceed $775,000,000. Upon any increase in the aggregate amount of the
Commitments pursuant to this subsection (c), within five Business Days in the
case of all Base Rate Loans outstanding, and at the end of the then current
Interest Period with respect thereto
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in the case of all Eurodollar Loans then outstanding, the Company shall prepay
such Committed Loans in their entirety, and, to the extent the Company elects to
do so and subject to the conditions specified in Article 7, the Company shall
reborrow Committed Loans from the Lenders in proportion to their respective
Commitments after giving effect to such increase, until such time as all
outstanding Committed Loans are held by the Lenders in such proportion
(d) Funding by SPC. Notwithstanding anything to the contrary contained
herein, all or any part of a Loan that any Lender (a "GRANTING LENDER") may be
obligated to fund pursuant to this Agreement may be funded on such Lender's
behalf by a special purpose funding vehicle (an "SPC"); provided that if an SPC
fails to fund all or any part of such Loan, the Granting Lender shall be
obligated to fund such Loan pursuant to the terms hereof. The funding of a Loan
by an SPC hereunder shall utilize the Commitment of the Granting Lender to the
same extent, and as if, such Loan were funded by such Granting Lender, and for
purposes of this Agreement such Loan shall be deemed to have been made by such
Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable
for any indemnity or payment under this Agreement for which a Lender would
otherwise be liable and (ii) prior to the date that is one year and one day
after the payment in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join any other person
in instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof. Notwithstanding anything to the contrary contained in this
Agreement, any SPC may (x) at any time and without paying any processing fee
therefor, assign or participate all or a portion of its interest in any Loans to
its Granting Lender or to any financial institutions providing liquidity or
credit support to or for the account of such SPC to support the funding of
Loans, and (y) disclose on a confidential basis any non-public information
relating to its funding of Loans to any rating agency, commercial paper dealer
or provider of any surety or guarantee for such SPC's obligations. This
subsection (d) may not be amended without the prior written consent of each
Granting Lender which has notified the Company that all or any part of any of
its Loans is being funded by an SPC at the time of such amendment.
2.02 Reductions of Commitments.
(a) Mandatory. The Commitments shall terminate on the Commitment
Termination Date; provided, that if the Closing Date shall not have occurred by
July 25, 2000, the Commitments shall terminate on such date.
(b) Optional. The Company shall have the right to terminate or reduce
the Commitments at any time or from time to time, provided that: (i) the
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Company shall give notice of each such termination or reduction to the
Administrative Agent as provided in Section 5.05 hereof and (ii) each partial
reduction shall be in an aggregate amount equal to $10,000,000 or any greater
multiple of $5,000,000.
(c) No Reinstatement. Commitments once terminated or reduced may not
be reinstated.
2.03 Fees.
(a) Facility Fees. The Company shall pay to the Administrative Agent
for the account of each Lender facility fees on the daily average amount of such
Lender's Commitment (whether used or unused), for the period from the Closing
Date to but excluding the earlier of the date the Commitments are terminated or
the Commitment Termination Date, at a facility fee rate per annum determined in
accordance with the Pricing Schedule; provided that, if such Lender continues to
have any Committed Loans outstanding after its Commitment terminates, then such
facility fee shall continue to accrue on the daily outstanding principal amount
of such Lender's Committed Loans from and including the date on which its
Commitment terminates to but excluding the date on which such Lender ceases to
have any Committed Loans outstanding. Accrued facility fees shall be payable on
the Quarterly Dates and on the date the Commitments are terminated (and, if
later, on the date the Loans shall be repaid in their entirety); provided that
any facility fees accruing after the date on which the Commitments terminate
shall be payable on demand.
(b) Utilization Fees. During any period when the aggregate outstanding
principal amount of the Loans exceeds 33% of the aggregate amount of the
Commitments or the Commitments have been terminated but Loans are outstanding,
the Company shall pay to the Administrative Agent for the account of each Lender
utilization fees at a rate of 0.125% per annum. Such utilization fee shall
accrue on the average daily aggregate outstanding principal amount of such
Lender's Loans and shall be payable on the Quarterly Dates and on the date the
Commitments are terminated (and, if later, on the date the Loans shall be repaid
in their entirety); provided that any utilization fees accruing after the date
on which the Commitments terminate shall be payable on demand.
(c) Other Fees. The Company shall pay to the Administrative Agent on
the Closing Date other fees in the amounts heretofore mutually agreed. The
Company shall pay to the Administrative Agent on the Closing Date and on each
anniversary thereof, so long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, all interest thereon and all other
amounts
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payable hereunder, an annual administrative agency fee in the amount heretofore
mutually agreed.
2.04 Lending Offices. The Loans of each Type made by each Lender shall
be made and maintained at such Lender's Applicable Lending Office for Loans of
such Type.
2.05 Several Obligations. The failure of any Lender to make any Loan to
be made by it on the date specified therefor shall not relieve any other Lender
of its obligation to make its Loan on such date, but neither the Administrative
Agent nor any Lender shall be responsible for the failure of any other Lender to
make a Loan to be made by such other Lender.
2.06 Notes. The Loans made by each Lender shall be evidenced by a
single Note of the Company (each a "NOTE") in substantially the form of Exhibit
A hereto, dated the Closing Date, payable to the order of such Lender in an
amount equal to the aggregate unpaid principal amount of such Lender's Loans and
otherwise duly completed. Each Lender may, by notice to the Company and the
Administrative Agent, request that its Loans of a particular Class or Type be
evidenced by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Loans. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it evidences solely Loans of the relevant Class or Type. Each reference in this
Agreement to the "Note" of such Lender shall be deemed to refer to and include
any or all of such Notes, as the context may require. Each Lender is hereby
authorized by the Company to endorse on the schedule (or a continuation thereof)
attached to each Note of such Lender, to the extent applicable, the date, amount
and Class or Type of and the Interest Period (if any) for each Loan made by such
Lender to the Company hereunder, and the date and amount of each payment or
prepayment of principal of such Loan received by such Lender, provided that any
failure by such Lender to make any such endorsement or any error in such
endorsement shall not affect the obligations of the Company under such Note or
hereunder in respect of such Loan.
2.07 Use of Proceeds. The proceeds of the Loans shall be used by the
Company to backstop the issuance of commercial paper by the Company, the
proceeds of which shall be used to refinance existing indebtedness for borrowed
money and for working capital and other general corporate purposes. None of such
proceeds shall be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any margin stock
(within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System).
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SECTION 3. Borrowings, Conversions and Prepayments.
3.01 Borrowings.
(a) Committed Loans. The Company shall give the Administrative Agent
notice of each borrowing of Committed Loans to be made hereunder as provided in
Section 5.05 hereof. Not later than 11:00 a.m. (or, in the case of Base Rate
Loans, 1:00 p.m.) New York time on the date specified for each such borrowing
hereunder, each Lender shall make available the amount of the Committed Loan to
be made by it on such date to the Administrative Agent, at the Principal Office,
in immediately available funds, for the account of the Company. The amount so
received by the Administrative Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account designated by the Company maintained
with the Administrative Agent at the Principal Office.
(b) Competitive Loans. Requests by the Company of offers to make
Competitive Loans shall be made as provided in Section 3.03.
3.02 Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The Company shall have the
right to prepay Committed Loans or to convert Committed Loans of one Type into
Committed Loans of another Type, at any time or from time to time, provided
that: (i) the Company shall give the Administrative Agent notice of each such
prepayment or conversion as provided in Section 5.05 hereof, and (ii) except to
the extent required pursuant to Section 6.04 hereof, Fixed Rate Loans may be
prepaid or converted only on the last day of an Interest Period for such Loans.
The Company may not prepay Competitive Loans or convert Competitive Loans from
one Type to a different Type, except that the Company may prepay Competitive
Loans to the extent required pursuant to Section 3.02(b).
(b) Mandatory Prepayments. On the date of each reduction of
Commitments pursuant to Section 2.02(b), the Company shall prepay Loans,
together with accrued interest on the principal amount prepaid, to the extent
(if any) required so that the aggregate principal amount of Loans outstanding
immediately after such prepayment will not exceed the aggregate amount of the
Commitments after giving effect to such reduction. Any prepayment pursuant to
this subsection (b) shall be applied, first, to Revolving Loans and second, to
Competitive Loans, pro rata.
3.03 Competitive Bid Procedure. (a) Subject to the terms and
conditions set forth herein, from time to time during the Revolving Credit
Period the
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Company may request Competitive Bids and may (but shall not have any obligation
to) accept Competitive Bids and borrow Competitive Loans; provided that the
aggregate principal amount of outstanding Loans at any time shall not exceed the
total Commitments. To request Competitive Bids, the Company shall notify the
Administrative Agent of such request by telephone, in the case of a Eurodollar
Rate borrowing, not later than 11:00 a.m., New York City time, four Business
Days before the date of the proposed borrowing, and, in the case of an Absolute
Rate borrowing, not later than 10:00 a.m., New York City time, one Business Day
before the date of the proposed borrowing; provided that the Company may submit
up to (but not more than) three Competitive Bid Requests on the same day, but a
Competitive Bid Request shall not be made within five Business Days after the
date of any previous Competitive Bid Request, unless any and all such previous
Competitive Bid Requests shall have been withdrawn or all Competitive Bids
received in response thereto rejected. Each such telephonic Competitive Bid
Request shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Competitive Bid Request in a form approved by
the Administrative Agent and signed by the Company. Each such telephonic and
written Competitive Bid Request shall specify the following information:
(i) the aggregate amount of the requested borrowing;
(ii) the date of such borrowing, which shall be a Business Day;
(iii) whether such borrowing is to be a Eurodollar Rate borrowing or a
Absolute Rate borrowing; and
(iv) the Interest Period to be applicable to such borrowing, which
shall be a period contemplated by the definition of the term "Interest
Period".
Promptly following receipt of a Competitive Bid Request in accordance
with this Section, the Administrative Agent shall notify the Lenders of the
details thereof by telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make one or
more Competitive Bids to the Company in response to a Competitive Bid Request.
Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Rate borrowing, not later than 10:00 a.m.,
New York City time, three Business Days before the proposed date of such
borrowing, and in the case of an Absolute Rate borrowing, not later than 10:00
a.m., New York City time, on the proposed date of such borrowing.
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Competitive Bids that do not conform substantially to the form approved by the
Administrative Agent may be rejected by the Administrative Agent, and the
Administrative Agent shall notify the applicable Lender as promptly as
practicable. Each Competitive Bid shall specify (i) the principal amount (which
shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and
which may equal the entire principal amount of the borrowing requested by the
Company) of the Competitive Loan or Loans that the Lender is willing to make,
(ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make
such Loan or Loans (expressed as a percentage rate per annum in the form of a
decimal to no more than four decimal places) and (iii) the Interest Period
applicable to each such Loan and the last day thereof.
(c) The Administrative Agent shall promptly notify the Company by
telecopy of the Competitive Bid Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that shall have made such
Competitive Bid.
(d) Subject only to the provisions of this paragraph, the Company may
accept or reject any Competitive Bid. The Company shall notify the
Administrative Agent by telephone, confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Bid, in the case of a Eurodollar Rate borrowing, not
later than 11:00 a.m., New York City time, three Business Days before the date
of the proposed borrowing, and in the case of an Absolute Rate borrowing, not
later than 11:00 a.m., New York City time, on the proposed date of the
borrowing; provided that (i) the failure of the Company to give such notice
shall be deemed to be a rejection of each Competitive Bid, (ii) the Company
shall not accept a Competitive Bid made at a particular Competitive Bid Rate if
the Company rejects a Competitive Bid made at a lower Competitive Bid Rate,
(iii) the aggregate amount of the Competitive Bids accepted by the Company
shall not exceed the aggregate amount of the requested Competitive Bid borrowing
specified in the related Competitive Bid Request, (iv) to the extent necessary
to comply with clause (iii) above, the Company may accept Competitive Bids at
the same Competitive Bid Rate in part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such Competitive Bid, and (v) except pursuant
to clause (iv) above, no Competitive Bid shall be accepted for a Competitive
Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000
and an integral multiple of $1,000,000; provided further that if a Competitive
Loan must be in an amount less than $5,000,000 because of the provisions of
clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or
any integral multiple thereof, and in calculating the pro rata allocation of
acceptances of portions of multiple Competitive Bids at a particular
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Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to
integral multiples of $1,000,000 in a manner determined by the Company. A notice
given by the Company pursuant to this paragraph shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender
by telephone (to be followed by telecopy) whether or not its Competitive Bid has
been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and
each successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive
Bid in its capacity as a Lender, it shall submit such Competitive Bid directly
to the Company at least one quarter of an hour earlier than the time by which
the other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to subsection (b) of this Section.
SECTION 4. Payments of Principal and Interest.
4.01 Repayment of Loans. (a) The Revolving Loans shall mature on the
last day of the Revolving Credit Period.
(b) Each Competitive Loan shall mature on the last day of the Interest
Period applicable thereto.
4.02 Interest. The Company will pay to the Administrative Agent for the
account of each Lender interest on the unpaid principal amount of each Loan made
by such Lender for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) if such Loan is a Base Rate Loan, the Base Rate;
(b) if such Loan is a Eurodollar Revolving Loan, the Eurodollar Rate
PLUS the Applicable Margin;
(c) if such Loan is a Eurodollar Competitive Loan, the Eurodollar Rate
PLUS (or MINUS) the Competitive Margin quoted by the Lender making such Loan in
accordance with Section 3.03 hereof; and
(d) if such Loan is an Absolute Rate Loan, the Absolute Rate for such
Loan for the Interest Period therefor quoted by the Lender making such Loan in
accordance with Section 3.03 hereof.
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Notwithstanding any of the foregoing, the Company will pay to the
Administrative Agent for the account of each Lender interest at the applicable
Post-Default Rate on the principal of any Loan made by such Lender and on any
other amount payable by the Company hereunder to or for the account of such
Lender (but, if such amount is interest, only to the extent legally
enforceable), which shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof until the same is paid in full.
Accrued interest on each Loan shall be payable (i) if such Loan is a
Base Rate Loan, on each Quarterly Date, (ii) if such Loan is a Fixed Rate Loan
or Competitive Loan, on the last day of the Interest Period for such Loan (and,
if such Interest Period exceeds 90 days' (in the case of an Absolute Rate Loan)
or three months' (in the case of a Eurodollar Loan) duration, quarterly,
commencing on the first quarterly anniversary of the first day of such Interest
Period), and (iii) in any event, upon the payment, prepayment or conversion
thereof, but only on the principal so paid or prepaid or converted; provided
that interest payable at the Post-Default Rate shall be payable from time to
time on demand of the Administrative Agent or the Majority Lenders. Promptly
after the determination of any interest rate provided for herein or any change
therein, the Administrative Agent shall notify the Lenders and the Company
thereof.
Notwithstanding the foregoing provisions of this Section 4.02, if at
any time the rate of interest set forth above on any Loan of or other obligation
payable to any Lender (the "STATED RATE") exceeds the maximum non-usurious
interest rate permissible for such Lender to charge commercial borrowers under
applicable law (the "MAXIMUM RATE" for such Lender), the rate of interest
charged on such Loan of or other obligation payable to such Lender hereunder
shall be limited to the Maximum Rate for such Lender.
If the Stated Rate for any Loan of a Lender that has theretofore been
subject to the preceding paragraph at any time is less than the Maximum Rate for
such Lender, the principal amount of such Loan shall bear interest at the
Maximum Rate for such Lender until the total amount of interest paid to such
Lender or accrued on its Loans hereunder equals the amount of interest which
would have been paid to such Lender or accrued on such Lender's Loans hereunder
if the Stated Rate had at all times been in effect.
If, upon payment in full of all amounts payable hereunder, the total
amount of interest paid to any Lender or accrued on such Lender's Loans under
the terms of this Agreement is less than the total amount of interest which
would have been paid to such Lender or accrued on such Lender's Loans if the
Stated Rate had, at
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all times, been in effect, then the Company shall, to the extent permitted by
applicable law, pay to the Administrative Agent for the account of such Lender
an amount equal to the difference between (a) the lesser of (i) the amount of
interest which would have accrued on such Lender's Loans if the Maximum Rate for
such Lender had at all times been in effect or (ii) the amount of interest which
would have accrued on such Lender's Loans if the Stated Rate had at all times
been in effect and (b) the amount of interest actually paid to such Lender or
accrued on its Loans under this Agreement.
If any Lender ever receives, collects or applies as interest any sum in
excess of the Maximum Rate for such Lender, such excess amount shall be applied
to the reduction of the principal balance of its Loans or to other amounts
(other than interest) payable hereunder, and if no such principal is then
outstanding, such excess or part thereof remaining shall be paid to the Company.
SECTION 5. Payments; Pro Rata Treatment; Computations; Etc.
5.01 Payments. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
hereunder and under the Notes shall be made in Dollars, in immediately available
funds, to the Administrative Agent at the Principal Office, not later than 11:00
a.m. New York time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). The Administrative Agent, or any Lender for
whose account any such payment is made, may (but shall not be obligated to)
debit the amount of any such payment which is not made by such time to any
ordinary deposit account of the Company with the Administrative Agent or such
Lender, as the case may be. The Company shall, at the time of making each
payment hereunder or under any Note, specify to the Administrative Agent the
Loans or other amounts payable by the Company hereunder to which such payment is
to be applied (and in the event that it fails to so specify, or if an Event of
Default has occurred and is continuing, the Administrative Agent may apply such
payment as it may elect in its sole discretion to amounts then due, but subject
to the other terms and conditions of this Agreement, including, without
limitation, Section 5.02 hereof). Each payment received by the Administrative
Agent hereunder or under any Note for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds, for the account of such
Lender's Applicable Lending Office. If the due date of any payment hereunder or
under any Note would otherwise fall on a day which is not a Business Day such
date shall be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
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5.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing from the Lenders under Section 2.01(a) hereof shall
be made from the Lenders, each payment of facility and utilization fees under
Section 2.03 hereof shall be made for the account of the Lenders, and each
termination or reduction of the Commitments under Section 2.02 hereof shall be
applied to the Commitments of the Lenders, pro rata according to the Lenders'
respective percentages of the Commitments; (b) each payment by the Company of
principal of or interest on Committed Loans of a particular Type (other than
payments in respect of Committed Loans of individual Lenders provided for by
Section 6 hereof) shall be made to the Administrative Agent for the account of
the Lenders pro rata in accordance with the respective unpaid principal amounts
of such Committed Loans held by the Lenders; and (c) each conversion of
Committed Loans of a particular Type (other than conversions of Committed Loans
of individual Lenders pursuant to Section 6.04 hereof) shall be made pro rata
among the Lenders in accordance with the respective principal amounts of such
Committed Loans held by the Lenders.
5.03 Computations. Interest and fees shall be computed on the basis of
a year of 360 days and actual days elapsed, except that interest on Base Rate
Loans when the Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 or 366 days and actual days elapsed (in each case,
including the first day but excluding the last day), in the period for which
payable.
5.04 Minimum and Maximum Amounts; Types. Each borrowing, conversion
and prepayment of principal of Committed Loans shall be in an aggregate
principal amount equal to (a) in the case of Eurodollar Loans, $5,000,000 or any
larger multiple of $1,000,000, and (b) in the case of Base Rate Loans, at least
$5,000,000, except that any borrowing of Committed Loans may be in the aggregate
amount of the unused portion of the Commitments (borrowings, conversions or
prepayments of Committed Loans of different Types or, in the case of Fixed Rate
Loans, having different Interest Periods, at the same time hereunder to be
deemed separate borrowings, conversions and prepayments for purposes of the
foregoing, one for each Type or Interest Period). Notwithstanding anything to
the contrary contained in this Agreement there shall not be, at any one time,
more than ten Interest Periods in effect with respect to Fixed Rate Loans.
5.05 Certain Notices. Except as specified in Section 3.03 with respect
to Competitive Loans, notices to the Administrative Agent of terminations or
reductions of Commitments, of borrowings, conversions and prepayments of Loans
and of the duration of Interest Periods shall be irrevocable and shall be
effective only if received by the Administrative Agent not later than 12:00 noon
(or, in the case of borrowings or prepayments of Base Rate Loans, 10:30 a.m.)
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New York time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, conversion and/or prepayment specified below:
NUMBER OF
BUSINESS DAYS
NOTICE PRIOR
------ -------------
Termination or reduction of Commitments 3
Borrowing or prepayment of Base Rate Loans 0
Borrowing or prepayment of, conversion of, or into, or
duration of Interest Period for, Fixed Rate Loans 3
Each notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each notice of borrowing, conversion or
prepayment shall specify the amount and Type of the Loans to be borrowed,
converted or prepaid (subject to Sections 3.02 and 5.04 hereof), the date of
borrowing, conversion or prepayment (which shall be a Business Day) and, in the
case of Fixed Rate Loans, the duration of the Interest Period therefor (subject
to the definition of Interest Period). Each such notice of duration of an
Interest Period shall specify the Loans to which such Interest Period is to
relate. The Administrative Agent shall promptly notify the affected Lenders of
the contents of each such notice. In the event that the Company fails to select
the duration of any Interest Period for any Fixed Rate Loans within the time
period and otherwise as provided in this Section 5.05, such Loans (if
outstanding as Fixed Rate Loans) will be automatically converted into Base Rate
Loans on the last day of the then current Interest Period for such Loans or (if
outstanding as Base Rate Loans) will remain as, or (if not then outstanding)
will be made as, Base Rate Loans.
5.06 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"PAYOR") prior to the date on (or, in the case of Base Rate Loans, prior to the
time by) which such Lender is to make payment to the Administrative Agent of the
proceeds of a Loan to be made by it hereunder or the Company is to make a
payment to the Administrative Agent for the account of one or more of the
Lenders, as the case may be (such payment being herein called the "REQUIRED
PAYMENT"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date (or at such time) and,
if the Payor has not in fact made the Required Payment to the Administrative
Agent, the recipient of such payment shall, on demand, pay to the Administrative
Agent the amount made available to it together with interest thereon in respect
of the period commencing on the date such amount was so made available by the
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Administrative Agent until the date the Administrative Agent receives such
amount at a rate per annum equal to the Federal Funds Rate for such period.
5.07 Sharing of Payments, Etc. The Company agrees that, in addition to
(and without limitation of) any right of set-off, bankers' lien or counterclaim
a Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances held by it for the account of the Company at any of its offices,
in Dollars or in any other currency, against any principal of or interest on any
of such Lender's Loans to the Company hereunder which is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Administrative Agent thereof,
provided that such Lender's failure to give such notice shall not affect the
validity thereof. If a Lender shall obtain payment of any principal of or
interest on any Committed Loan made by it under this Agreement, through the
exercise of any right of set-off, banker's lien, counterclaim or similar right,
or otherwise, it shall promptly purchase from the other Lenders participations
in the Committed Loans made by the other Lenders in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
the Lenders shall share the benefit of such payment (net of any expenses which
may be incurred by such Lender in obtaining or preserving such benefit) pro rata
in accordance with the unpaid principal and interest on the Committed Loans then
due to each of them. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. The Company agrees,
to the fullest extent it may effectively do so under applicable law, that any
Person purchasing a participation in the Loans made by another Person, whether
or not acquired pursuant to the foregoing arrangements, may exercise all rights
of set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or other
obligations in the amount of such participation. Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Company.
5.08 Taxes. (a) Any and all payments by the Company hereunder shall be
made, in accordance with Section 5.01, free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or the Administrative Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of such
Lender's Applicable
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Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If the Company shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or the Administrative Agent, (i) except as provided in subsection (g) below, the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 5.08), such Lender or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions and (iii) the
Company shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.
(b) In addition, the Company agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Notes or any other document referred to herein or therein (hereinafter referred
to as "OTHER TAXES").
(c) The Company will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including related penalties,
interest and expenses) imposed by any jurisdiction on amounts payable under this
Section 5.08 paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor. It is understood that Taxes do not include any
withholdings or other obligations imposed on a Lender with respect to payments
by such Lender to a participant in such Lender's Loans.
(d) Within 30 days after the date of any payment of Taxes, the Company
or a Lender, in the case of any Taxes paid by such Lender, will furnish to the
Administrative Agent, at its address referred to in Section 12.02, the original
or a certified copy of a receipt evidencing payment thereof.
(e) At the reasonable request of the Company, a Lender or the
Administrative Agent shall apply at the Company's expense for a refund in
respect of Taxes or Other Taxes previously paid by the Company pursuant to this
Section 5.08 if in the opinion of such Lender or Administrative Agent there is a
reasonable basis for such refund. Notwithstanding the foregoing, none of the
Lenders or the Administrative Agent shall be obligated to pursue such refund if,
in its sole good
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faith judgment, such action would be disadvantageous to it. If any Lender
subsequently receives from a taxing authority a refund of any Tax previously
paid by the Company and for which the Company has indemnified the Lender
pursuant to this Section 5.08, such Lender shall within 30 days after receipt of
such refund, and to the extent permitted by applicable law, pay to the Company
the net amount of any such recovery after deducting taxes and expenses
attributable thereto.
(f) Not later than the Closing Date or, in the case of any bank or
financial institution that becomes a Lender after the Closing Date pursuant to
Section 12.06, the date of the instrument of assignment pursuant to which such
bank or financial institution became a Lender, and annually thereafter or at
such other times as the Administrative Agent or the Company may request, each
Lender organized under the laws of a jurisdiction outside the United States
shall provide the Administrative Agent and the Company with duly completed
copies of Form 1001 or Form 4224 or any successor form prescribed by the
Internal Revenue Service of the United States certifying that such Lender is
exempt from United States withholding taxes with respect to all payments to be
made to such Lender hereunder or other documents satisfactory to the Company and
the Administrative Agent indicating that all payments to be made to such Lender
hereunder are not subject to such taxes (an "EXEMPTION CERTIFICATE"). In the
case of payments to or for any Lender organized under the laws of a jurisdiction
outside the United States, unless the Administrative Agent and the Company have
received an Exemption Certificate from such Lender, the Company, or the
Administrative Agent if the Company has not withheld, may withhold taxes from
such payments at the applicable statutory rate; provided that if the Company has
withheld it shall so notify the Administrative Agent. If the Company is required
to pay additional amounts to any Lender pursuant to this Section 5.08, such
Lender shall use reasonable efforts to designate a different Applicable Lending
Office if such designation will thereafter avoid the need for any additional
payments under this Section 5.08 and will not, in the sole judgment of such
Lender, be otherwise disadvantageous to such Lender. A Lender which ceases to be
exempt from United States withholding taxes shall notify the Administrative
Agent and the Company promptly thereof.
(g) If a Lender organized under the laws of a jurisdiction outside the
United States fails to comply with the provisions of subsection (f) above, then
the Company shall not have any obligation to increase the sum payable to such
Lender pursuant to Section 5.08(a) or to indemnify such Lender pursuant to
Section 5.08(b) for Taxes (including related penalties, interest and expenses)
imposed by the United States or any political subdivision thereof.
SECTION 6. Yield Protection and Illegality.
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6.01 Additional Costs.
(a) The Company shall pay to the Administrative Agent for the account
of each Lender from time to time such amounts as such Lender may determine to be
necessary to compensate it for any costs incurred by such Lender which such
Lender determines are attributable to its making or maintaining of any Fixed
Rate Loans hereunder or its obligation to make any of such Loans hereunder, or
any reduction in any amount receivable by such Lender hereunder in respect of
any of such Loans or such obligation (such increases in costs and reductions in
amounts receivable being herein called "ADDITIONAL COSTS"), in each case
resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such
Loans (other than changes which affect taxes measured by or imposed on
the overall net income of such Lender or of its Applicable Lending
Office for any of such Loans by the jurisdiction in which such Lender
has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit, insurance
assessment or similar requirements relating to any extensions of credit
or other assets of, or any deposits with or other liabilities of, such
Lender (including any of such Loans or any deposits referred to in the
definitions of "Eurodollar Base Rate" in Section 1.01 hereof but
excluding, with respect to any such Fixed Rate Loan, any such
requirements included in the applicable Domestic Reserve Requirement or
Eurodollar Reserve Requirement); or
(iii) imposes any other condition affecting this Agreement (or any of
such extensions of credit or liabilities).
Each Lender will notify the Company through the Administrative Agent of
any event occurring after the date of this Agreement which will entitle such
Lender to compensation pursuant to this Section 6.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation, and (if so requested by the Company through the Administrative
Agent) will designate a different Applicable Lending Office for the relevant
Type of Fixed Rate Loans of such Lender if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
opinion of such Lender, be disadvantageous to such Lender (provided that such
Lender shall have no obligation to so designate an Applicable Lending Office
located in the United States of America). Each Lender will furnish the Company
with a statement setting forth the basis and amount of each request by such
Lender for
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compensation under this Section 6.01(a). If any Lender requests compensation
from the Company under this Section 6.01(a), the Company may, by notice to such
Lender through the Administrative Agent, suspend the obligation of such Lender
to make additional Fixed Rate Loans of the relevant Type to the Company until
the Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 6.04 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of this
Section 6.01, if, by reason of any Regulatory Change, any Lender either (i)
incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such
Lender which includes deposits by reference to which the interest rate on any
Type of Fixed Rate Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Lender which includes
any Type of Fixed Rate Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, if
such Lender so elects by notice to the Company (with a copy to the
Administrative Agent), the obligation of such Lender to make Fixed Rate Loans of
the relevant Type hereunder shall be suspended until the date such Regulatory
Change ceases to be in effect (in which case the provisions of Section 6.04
hereof shall be applicable).
(c) Determinations and allocations by any Lender for purposes of this
Section 6.01 of the effect of any Regulatory Change on its costs of maintaining
its obligations to make Loans or of making or maintaining Loans or on amounts
receivable by it in respect of Loans, and of the additional amounts required to
compensate such Lender in respect of any Additional Costs, shall be presumed
correct absent manifest error.
(d) Notwithstanding the foregoing, the Company shall not be required
to compensate any Lender for any Additional Costs incurred more than one year
prior to the date that such Lender notifies the Company thereof, unless such
Additional Costs were caused by the retroactive application of a Regulatory
Change to a date more than one year prior to the date of such notice.
6.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, with respect to any Fixed Rate Loans:
(a) the Administrative Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not
being provided by the Reference Lenders in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or
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(b) the Majority Lenders determine (which determination shall be
conclusive) and notify the Administrative Agent that the relevant rates of
interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rates of interest for such Loans are to be
determined do not accurately reflect the cost to such Lenders of making or
maintaining such Loans for Interest Periods therefor;
then the Administrative Agent shall promptly notify the Company and each Lender
thereof, and so long as such condition remains in effect, the Lenders shall be
under no obligation to make Fixed Rate Loans of the relevant Type or to convert
Base Rate Loans into Fixed Rate Loans of the relevant Type and the Company
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Fixed Rate Loans of the relevant Type, either prepay such Loans or
convert such Loans into Base Rate Loans in accordance with Section 3.02 hereof.
6.03 Illegality. Notwithstanding any other provision of this Agreement
to the contrary, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Fixed Rate Loans
of any Type hereunder, or (b) maintain Fixed Rate Loans of any Type hereunder,
then such Lender shall promptly notify the Company thereof through the
Administrative Agent and such Lender's obligation to make Fixed Rate Loans of
such Type hereunder shall be suspended until such time as such Lender may again
make and maintain Fixed Rate Loans of such Type (in which case the provisions of
Section 6.04 hereof shall be applicable).
6.04 Substitute Base Rate Loans. If the obligation of any Lender to
make Fixed Rate Loans of any Type shall be suspended pursuant to Section 6.01,
6.02 or 6.03 hereof, all Loans which would otherwise be made by such Lender as
Fixed Rate Loans of such Type shall be made instead as Base Rate Loans (and, if
an event referred to in Section 6.01(b) or 6.03 hereof has occurred and such
Lender so requests by notice to the Company with a copy to the Administrative
Agent, each Fixed Rate Loan of such Type of such Lender then outstanding shall
be automatically converted into a Base Rate Loan on the date specified by such
Lender in such notice) and, to the extent that Fixed Rate Loans of such Type are
so made as (or converted into) Base Rate Loans, all payments of principal which
would otherwise be applied to such Fixed Rate Loans of such Type shall be
applied instead to such Base Rate Loans.
6.05 Compensation. The Company shall pay to the Administrative Agent
for the account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
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reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Fixed Rate Loan made by
such Lender on a date other than the last day of an Interest Period for such
Loan; or
(b) any failure by the Company to borrow a Fixed Rate Loan to be made
by such Lender on the date for such borrowing specified in the relevant notice
of borrowing under Section 5.05 hereof or Section 3.03 hereof.
Notwithstanding the foregoing, the Company shall not be required to compensate
any Lender for any such loss, cost or expense incurred more than one year prior
to the date that such Lender notifies the Company thereof.
6.06 Capital Adequacy. If any Lender shall determine that the adoption
or implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending Office) with any request or directive
issued after the date hereof regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on capital of such
Lender or any Person controlling such Lender (a "PARENT") as a consequence of
its obligations hereunder to a level below that which such Lender (or its
Parent) could have achieved but for such adoption, change or compliance (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand by such Lender (with a copy to the Administrative Agent), the
Company shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. A statement of any Lender claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be presumed correct absent manifest
error. In determining such amount, such Lender may use any reasonable averaging
and attribution methods.
6.07 Substitution of Lender. If (i) the Company is required to withhold
with respect to any Lender pursuant to Section 5.08, (ii) any Lender has
demanded compensation under Section 6.01(a) or Section 6.06 or (iii) the
obligation of any Lender to make Fixed Rate Loans has been suspended pursuant to
Section 6.01(b)(ii) or Section 6.03, and so long as no Default shall have
occurred and be continuing, the Company shall have the right to request one or
more substitute banks, financial institutions or funds (which may be one or more
of the Lenders)
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reasonably satisfactory to the Administrative Agent to purchase such Lender's
Note and assume such Lender's Commitment hereunder by paying to such Lender an
amount equal to all of the obligations of the Company to such Lender hereunder
including, without limitation, principal and accrued interest and fees. Any
costs or expenses incurred by the Administrative Agent in connection with
assisting the Company pursuant hereto shall be paid upon demand by the Company.
The Administrative Agent shall respond promptly to any request by the Company
for its consent to a substitute for a Lender.
SECTION 7. Conditions Precedent.
7.01 Initial Loans. The obligation of each Lender to make the initial
Loans to be made by it hereunder is subject to the following conditions
precedent, each of which shall have been fulfilled to the satisfaction of the
Administrative Agent on or prior to July 25, 2000:
(a) Corporate Action. The Administrative Agent shall have received
certified copies of the Articles of Incorporation and Code of Regulations of the
Company and of all corporate action taken by the Company authorizing the
execution, delivery and performance of this Agreement and the Notes (including,
without limitation, a certificate of the Company setting forth the resolutions
authorizing the transactions contemplated thereby).
(b) Incumbency. The Company shall have delivered to the Administrative
Agent a certificate in respect of the name and signature of each of the officers
(i) who is authorized to sign on its behalf this Agreement and the Notes and
(ii) who will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing documents
and giving notices and other communications in connection with this Agreement
and the Notes. The Administrative Agent and each Lender may conclusively rely on
such certificates until it receives notice in writing from the Company to the
contrary.
(c) Notes. The Administrative Agent shall have received a Note for
each Lender, duly completed and executed.
(d) Fees and Expenses. The Company shall have paid to the
Administrative Agent for its account fees in the amount previously agreed upon
by the Company.
(e) Opinion of Counsel to the Company. The Administrative Agent shall
have received an opinion of Calfee, Halter & Griswold LLP, counsel to the
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Company, and the General Counsel of the Company, substantially in the form of
Exhibit B-1 and B-2 hereto, respectively.
(f) Opinion of Special Counsel to the Administrative Agent. The
Administrative Agent shall have received an opinion of Davis Polk & Wardwell,
special counsel to the Administrative Agent, substantially in the form of
Exhibit C hereto.
(g) Counterparts. The Administrative Agent shall have received
counterparts of this Agreement executed and delivered by or on behalf of each of
the parties hereto (or, in the case of any Lender as to which the Administrative
Agent shall not have received such a counterpart, the Administrative Agent shall
have received evidence satisfactory to it of the execution and delivery by such
Lender of a counterpart hereof).
(h) Commercial Paper Ratings. The Administrative Agent shall have
received evidence that the Company's commercial paper shall have been rated at
least A-2 by Standard & Poor's Ratings Services and P-2 by Moody's Investors
Service, Inc.
(i) Existing Credit Agreements. The Administrative Agent shall have
received evidence that all amounts outstanding under the credit agreements dated
as of February 3, 1997 and July 29, 1999, in each case among the Company, the
lenders party thereto and Chase, as administrative agent, as amended, shall have
been paid in full and all commitments thereunder shall have terminated.
(j) Other Documents. The Administrative Agent shall have received such
other documents relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request.
7.02 Initial and Subsequent Loans. The obligation of each Lender to
make any Loan to be made by it hereunder is subject to the conditions precedent
that, as of the date of such Loan, and before and after giving effect thereto:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Company in this
Agreement shall be true on and as of the date of the making of such Loan, with
the same force and effect as if made on and as of such date (except, in the case
of the representation and warranty contained in Section 8.02(d), as disclosed by
the Company to the Lenders in writing in the notice of borrowing relating to
such Loan).
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Each notice of borrowing by the Company hereunder or Competitive Bid Request
shall constitute a certification by the Company to the effect set forth in the
preceding sentence (both as of the date of such notice or Competitive Bid
Request and as of the date of such borrowing).
SECTION 8. Representations and Warranties. The Company represents and
warrants to the Lenders and the Administrative Agent as follows:
8.01 Corporate Existence. Each of the Company and its Subsidiaries: (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power, and has all governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted, except in the case of such licenses, authorizations,
consents and approvals, where the failure to obtain them would not have a
Material Adverse Effect; and (c) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a Material
Adverse Effect.
8.02 Information. (a) All information heretofore furnished by the
Company to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby did not as
of the date thereof and will not as of the Closing Date contain any untrue
statement of a material fact or assumption or omit to state a material fact or
assumption necessary in order to make the statements contained therein not
misleading;
(b) Without limiting the generality of paragraph (a):
(i) The audited consolidated balance sheet of the Company and its
Subsidiaries as of May 31, 1999 and the audited consolidated
statements of income, shareholders' equity and cash flows for the
fiscal year ended May 31, 1999 (collectively, the "FINANCIAL
STATEMENTS") have been prepared in accordance with generally accepted
accounting principles consistently applied. The Financial Statements
fairly present the financial position of the Company and its
Subsidiaries as of May 31, 1999 and the results of their operations
and their cash flows for the fiscal year ended May 31, 1999 in
conformity with generally accepted accounting principles.
(ii) The unaudited consolidated balance sheet of the Company and
its Subsidiaries as of February 29, 2000 and the unaudited
consolidated statements of income, shareholders' equity and cash flows
for the nine months then ended have been prepared in accordance with
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generally accepted accounting principles consistently applied, and
fairly present the financial position of the Company and its
Subsidiaries as of February 29, 2000 and the results of their
operations and their cash flows for the nine months then ended in
conformity with generally accepted accounting principles (subject to
normal year-end adjustments).
(iii) The Company and its Subsidiaries did not on the date of the
balance sheet referred to in clause (i) above, and will not on the
Closing Date, have any material contingent liabilities, material
liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or
provided for in said balance sheet.
(c) The Company has disclosed to the Lenders in writing any and all
facts (other than general economic and industry conditions) which have or may
have a Material Adverse Effect.
(d) Since May 31, 1999 no event has occurred and no condition has come
into existence which has had, or is reasonably likely to have, a Material
Adverse Effect.
8.03 Litigation. Except as disclosed in the Disclosure Documents, there
are no legal or arbitral proceedings or any proceedings by or before any
governmental or regulatory authority or agency, now pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which in any manner draw into question the validity of the Credit
Agreement or the Notes. The disclosure of litigation to the Lenders pursuant to
this Section does not necessarily mean that such litigation is of the type
described in this Section or that the Company believes that such litigation has
any merit whatsoever.
8.04 No Breach. None of the execution and delivery of the Basic
Documents, the consummation of the transactions therein contemplated or
compliance with the terms and provisions thereof will conflict with or result in
a breach of, or require any consent under, the Articles of Incorporation or
Codes of Regulation or comparable instruments of the Company or any of its
Subsidiaries, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
Basic Document or other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which it is bound or to which it is
subject, or constitute a default under any such material agreement or
instrument, or result in the creation or
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imposition of any Lien upon any of the revenues or assets of the Company or any
of its Subsidiaries pursuant to the terms of any such agreement or instrument.
8.05 Corporate Action. The Company has all necessary corporate power
and authority to execute, deliver and perform its obligations under the Basic
Documents to which it is a party; the execution, delivery and performance by the
Company of the Basic Documents to which it is a party have been duly authorized
by all necessary corporate action; and this Agreement has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company and, on the Closing Date, each of the other
Basic Documents to which the Company is to be a party will constitute its legal,
valid and binding obligation, in each case enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general equitable principles.
8.06 Approvals. Each of the Company and its Subsidiaries has obtained
all authorizations, approvals and consents of, and has made all filings and
registrations with, any governmental or regulatory authority or agency and any
third party necessary for the execution, delivery or performance by it of any
Basic Document to which it is a party, or for the validity or enforceability
thereof.
8.07 Regulations U and X. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U or X of the Board of Governors
of the Federal Reserve System) and no part of the proceeds of any Loan hereunder
will be used to purchase or carry any such margin stock.
8.08 ERISA. The Company and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No such Person has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan, or made any
amendment to any Plan, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code or (iii)
incurred any liability under Title IV of ERISA (other than a liability to the
PBGC for premiums under Section 4007 of ERISA).
8.09 Taxes. Each of the Company and its Subsidiaries has filed all
United States Federal income tax returns and all other material tax returns
which are
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required to be filed by it and has paid all taxes due pursuant to such returns
or pursuant to any assessment received by it, except to the extent the same may
be contested as permitted by Section 9.02 hereof. There are no material tax
disputes or contests pending as of the Closing Date. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Company, adequate.
8.10 Subsidiaries. Schedule I hereto is a complete and correct list, as
of the date of this Agreement, of all Subsidiaries of the Company and of all
Investments held by the Company or any of its Subsidiaries in any material joint
venture or other similar Person. The Company owns, free and clear of Liens, all
outstanding shares of its Subsidiaries and all such shares are validly issued,
fully paid and non-assessable and the Company (or the respective Subsidiary of
the Company) also owns, free and clear of Liens, all such Investments.
8.11 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
8.12 Public Utility Holding Company Act. Neither the Company nor any of
its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
8.13 Ownership and Use of Properties. Each of the Company and its
Subsidiaries will have on the Closing Date and at all times thereafter, legal
title or ownership of, or the right to use pursuant to enforceable and valid
agreements or arrangements, all tangible property, both real and personal, and
all franchises, licenses, copyrights, patents and know-how which is material to
the operation of its business as proposed to be conducted.
8.14 Environmental Matters. Except as disclosed in the Disclosure
Documents, neither the Company nor any of its Subsidiaries has (i) failed to
obtain any permits, certificates, licenses, approvals, registrations and other
authorizations which are required under any applicable Environmental Law where
failure to have any such permit, certificate, license, approval, registration or
authorization would have a Material Adverse Effect; (ii) failed to comply with
the terms and conditions of all such permits, certificates, licenses, approvals,
registrations and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
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Law or in any notice or demand letter from any regulatory authority issued,
entered, promulgated or approved thereunder where failure to comply would have a
Material Adverse Effect; or (iii) failed to conduct its business so as to comply
in all respects with applicable Environmental Laws where failure to so comply
would have a Material Adverse Effect. The disclosure of any failure or alleged
failure to the Lenders pursuant to this Section does not necessarily mean that
such failure is of the type described in this Section or that any such
allegation has any merit whatsoever.
SECTION 9. Covenants. The Company agrees that, so long as any of the
Commitments are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable hereunder, unless the Majority
Lenders shall agree otherwise as contemplated by Section 12.05 hereof:
9.01 Information. The Company shall deliver to each of the Lenders:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, consolidated statements of income,
shareholders' equity and cash flows of the Company 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 Ciulla, Smith &
Dale LLP or other 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 Company and its Subsidiaries as at
the end of, and for, such fiscal year;
(b) as soon as available and in any event within 60 days after the end
of each fiscal quarter of the Company other than the last fiscal quarter in each
fiscal year, consolidated statements of income, shareholders' equity and cash
flows of the Company 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,
accompanied, in each case, by a certificate of a Senior Officer, which
certificate shall state that said consolidated financial statements fairly
present in all material respects the consolidated financial condition and
results of operations of the Company in accordance with GAAP (except for
footnotes of the type required by the Securities and Exchange Commission to be
included in quarterly reports on Form 10-Q), consistently applied, as at the end
of, and for, such period (subject to normal year-end audit adjustments);
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(c) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(d) promptly upon the filing thereof, copies of all registration
statements (other than any registration statements on Form S-8 or its
equivalent) and any reports which the Company shall have filed with the
Securities and Exchange Commission;
(e) if and when the Company or any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC, (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice; (iv) applies for a waiver of the minimum
funding standard under Section 412 of the Code, a copy of such application; (v)
gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information filed with the PBGC; (vi) gives notice
of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of a Senior Officer setting forth details as to such
occurrence and action, if any, which the Company or member of the Controlled
Group is required or proposes to take;
(f) promptly after management of the Company knows that any Default has
occurred and is continuing, a notice of such Default, describing the same in
reasonable detail; and
(g) from time to time such other information regarding the financial
condition, operations, prospects or business of the Company as the
Administrative Agent or any Lender through the Administrative Agent may
reasonably request.
The Company will furnish to each Lender, at the time it furnishes each
set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a Senior Officer (i) to the effect that, to the best of his
knowledge after due inquiry, no Default has occurred and is continuing (or, if
any Default has occurred and is
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continuing, describing the same in reasonable detail) and (ii) setting forth in
reasonable detail the computations necessary to determine whether it was in
compliance with Sections 9.08 to 9.12, inclusive, and 9.16 hereof as of the end
of the respective fiscal quarter or fiscal year.
9.02 Taxes and Claims. The Company will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon the property of the Company or such Subsidiary, provided that
neither the Company nor such Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim the payment of which is being contested in
good faith and by proper proceedings if it maintains adequate reserves with
respect thereto and if such contest, proceedings and reserves have been
described in a certificate of a Senior Officer delivered to the Lenders.
9.03 Insurance. The Company will maintain, and will cause each of its
Subsidiaries to maintain, insurance with responsible companies in such amounts
and against such risks as is usually carried by companies of established repute
engaged in the same or similar businesses, owning similar properties, and
located in the same general areas as the Company and its Subsidiaries.
9.04 Maintenance of Existence; Conduct of Business. The Company will
preserve and maintain, and will cause each of its Subsidiaries to preserve and
maintain, its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business, and
will conduct its business in a regular manner; provided that nothing herein
shall prevent (i) the merger and dissolution of any Subsidiary of the Company
into the Company so long as the Company is the surviving corporation, (ii) the
merger of any Subsidiary of the Company into any other Subsidiary of the
Company, or (iii) the sale of any Subsidiary of the Company which is not a
Significant Subsidiary. It is understood that the preservation and maintenance
of rights, privileges and franchises shall not prevent the Company and its
Subsidiaries from disposing of assets in any transaction not otherwise
prohibited pursuant to this Section 9.04 or Section 9.10 hereof.
9.05 Maintenance of and Access to Properties. The Company will keep,
and will cause each of its Subsidiaries to keep, all of its properties necessary
in its business in good working order and condition (having regard to the
condition of such properties at the time such properties were acquired by the
Company or such Subsidiary), ordinary wear and tear excepted, and proper books
of record and account in which full, true and correct entries in conformity with
GAAP shall be
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made of all dealings and transactions in relation to its business activities,
and will permit representatives of the Lenders to inspect such properties and,
upon reasonable notice and at reasonable times, to examine and make extracts and
copies from the books and records of the Company and any such Subsidiary.
9.06 Compliance with Applicable Laws. The Company will comply, and will
cause each of its Subsidiaries to comply, with the requirements of all
applicable laws, rules, regulations and orders of any governmental body or
regulatory authority (including, without limitation, all Environmental Laws), a
breach of which would have a Material Adverse Effect, except where contested in
good faith and by proper proceedings.
9.07 Litigation. The Company will promptly give to the Administrative
Agent (which shall promptly notify each Lender) notice in writing of all
litigation and of all proceedings of which it is aware before any courts,
arbitrators or governmental or regulatory agencies affecting the Company or any
of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect.
9.08 Leverage Ratio. The Company will not permit Indebtedness of the
Company and its Subsidiaries, determined on a consolidated basis, on any date to
exceed 65% of the sum of such Indebtedness and consolidated shareholders' equity
of the Company and its Subsidiaries on such date.
9.09 Interest Coverage Ratio. The Company will not permit the ratio,
calculated as at the end of each fiscal quarter ending after the Closing Date
for the four fiscal quarters then ended, of EBITDA for such period to Interest
Expense for such period to be less than 3.5:1.
9.10 Mergers, Asset Dispositions, Etc. The Company will not (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, in one transaction or a series of
related transactions, all or substantially all of its business or assets;
provided that the Company may merge with another Person if (A) the Company is
the corporation surviving such merger and (B) immediately after giving effect to
such merger, no Default shall have occurred and be continuing.
9.11 Liens. The Company will not, and will not permit any of its
Subsidiaries to, create or suffer to exist any Lien upon any property or assets,
now owned or hereafter acquired, securing any Indebtedness or other obligation,
except:
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(i) Liens existing on the Closing Date and securing Indebtedness
in an aggregate principal amount not exceeding $10,000,000;
(ii) Liens existing on other assets at the date of acquisition
thereof or which attach to such assets concurrently with or within 90
days after the acquisition thereof, securing Indebtedness incurred to
finance the acquisition thereof in an aggregate principal amount at any
time outstanding not exceeding $15,000,000;
(iii) any Lien existing on any asset of any corporation at the
time such corporation becomes a Subsidiary of the Company or is merged
or consolidated with or into the Company or one of its Subsidiaries and
not created in contemplation of such event;
(iv) any Lien arising out of the refinancing, extension, renewal
or refunding of any Indebtedness secured by any Lien permitted by any
of the foregoing clauses of this Section 9.11, provided that such
Indebtedness is not increased and is not secured by any additional
assets;
(v) other Liens arising in the ordinary course of the business of
the Company or such Subsidiary which are not incurred in connection
with the borrowing of money or the obtaining of advances or credit, do
not secure any obligation in an amount exceeding $15,000,000 and do not
materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business; and
(vi) Liens not otherwise permitted by the foregoing clauses of
this Section 9.11 securing Indebtedness in an aggregate principal or
face amount at any date not to exceed $15,000,000.
9.12 Investments. The Company will not, and will not permit any of its
Subsidiaries to, make or permit to remain outstanding any advances, loans or
other extensions of credit or capital contributions (other than prepaid expenses
in the ordinary course of business) to (by means of transfers of property or
assets or otherwise), or purchase or own any stocks, bonds, notes, debentures or
other securities of, any Person (all such transactions being herein called
"INVESTMENTS"), except: (i) operating deposit accounts; (ii) Liquid Investments;
(iii) subject to Section 9.13 hereof, Investments in accounts and notes
receivable acquired in the ordinary course of business as presently conducted;
(iv) Investments existing on the Closing Date in Subsidiaries or joint ventures,
and Investments after the Closing Date by First Colonial Insurance Company, a
wholly-owned Subsidiary of the Company, in the ordinary course of its business;
(v) Investments not otherwise permitted by the foregoing clauses of this Section
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9.12 in Subsidiaries of the Company and in Persons which become Subsidiaries of
the Company as the result of such Investments; (vi) Investments not otherwise
permitted by the foregoing clauses of this Section 9.12 in joint ventures in an
aggregate amount not to exceed $35,000,000; and (vii) Investments not otherwise
permitted by the foregoing clauses of this Section 9.12 in an aggregate amount
not to exceed $5,000,000.
9.13 Transactions with Affiliates. Except as expressly permitted by
this Agreement the Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly: (i) make any Investment in an Affiliate of the
Company (other than a Subsidiary of the Company); (ii) transfer, sell, lease,
assign or otherwise dispose of any assets to an Affiliate of the Company (other
than a Subsidiary of the Company); (iii) merge into or consolidate with or
purchase or acquire assets from an Affiliate of the Company (other than a
Subsidiary of the Company); or (iv) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate of the Company (other than a
Subsidiary of the Company) (including, without limitation, Guaranties and
assumptions of obligations of an Affiliate of the Company (other than a
Subsidiary of the Company)); provided that (a) any Affiliate of the Company who
is an individual may serve as a director, officer or employee of the Company and
receive reasonable compensation or indemnification in connection with his or her
services in such capacity; and (b) any transaction entered into by the Company
or a Subsidiary of the Company with an Affiliate of the Company which is not a
Subsidiary of the Company providing for the leasing of property, the rendering
or receipt of services or the purchase or sale of inventory and other assets in
the ordinary course of business must be for a monetary or business consideration
which would be substantially as advantageous to the Company or such Subsidiary
as the monetary or business consideration which would obtain in a comparable
arm's length transaction with a Person not an Affiliate of the Company.
9.14 Lines of Business. The Company and its Subsidiaries, taken as a
whole, shall not engage to any substantial extent in any line or lines of
business activity other than present or related product lines.
9.15 Environmental Matters. The Company will promptly give to the
Lenders notice in writing of any complaint, order, citation, notice or other
written communication from any Person with respect to, or if the Company becomes
aware after due inquiry of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law or Environmental Liability at,
upon, under or within any property now or previously owned, leased, operated or
used by the Company or any of its Subsidiaries or any part thereof, or due to
the operations or activities of the Company, any Subsidiary on or in connection
with such property or any part thereof (including receipt by the Company or any
Subsidiary of any
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notice of the happening of any event involving the Release of a reportable
quantity under any applicable Environmental Law or cleanup of any Hazardous
Substance), (ii) any Release on such property or any part thereof in a quantity
that is reportable under any applicable Environmental Law, (iii) the
commencement of any cleanup pursuant to or in accordance with any applicable
Environmental Law of any Hazardous Substances on or about such property or any
part thereof and (iv) any pending or threatened proceeding for the termination,
suspension or non-renewal of any permit required under any applicable
Environmental Law, in each case which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
9.16 Lease Payments. Neither the Company nor any of its Subsidiaries
has incurred or assumed or will incur or assume (whether pursuant to a Guaranty
or otherwise) any liability for rental payments under a lease with a lease term
(as defined in Financial Accounting Standards No. 13 of the Financial Accounting
Standards Board, as in effect on the date hereof) if (i) such lease is of an
asset previously owned by the Company or any of its Subsidiaries and (ii) after
giving effect thereto, the aggregate amount of minimum lease payments that the
Company and its Subsidiaries have so incurred or assumed will exceed, on a
consolidated basis, $15,000,000 for any calendar year under all such leases.
SECTION 10. Defaults.
10.01 Events of Default. If one or more of the following events (herein
called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) default in the payment of (i) any principal of any Loan when due
or of (ii) any interest on any Loan or other amount payable hereunder within
five Business Days after the due date thereof; or
(b) the Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on Indebtedness having an
aggregate outstanding principal amount of at least $20,000,000 (other than the
Loans); or any event or condition shall occur which results in the acceleration
of the maturity of any such Indebtedness or enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of any such
Indebtedness or any Person acting on such holder's behalf to accelerate the
maturity thereof; or
(c) any representation or warranty made or deemed made by the Company
or any Subsidiary herein, or in any certificate furnished to any Lender or the
Administrative Agent pursuant to the provisions hereof, shall prove to have been
false or misleading in any material respect as of the time made or furnished; or
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(d) (i) the Company shall default in the performance of any of its
obligations under Section 2.07 or Sections 9.08 through 9.13 and 9.16 hereof; or
(ii) the Company or any Subsidiary shall default in the performance of any of
its other obligations hereunder, and such default described in this subclause
(ii) shall continue unremedied for a period of 30 days after notice thereof to
the Company by the Administrative Agent or any Lender (through the
Administrative Agent); or
(e) the Company or any of its Significant Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as such debts
become due; or
(f) the Company or any of its Significant Subsidiaries shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate or partnership action for the
purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of the Company or any of its Significant Subsidiaries in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of such
Person or of all or any substantial part of its assets, or (iii) similar relief
in respect of such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 90 days; or an order for relief against
such Person shall be entered in an involuntary case under the Bankruptcy Code;
or
(h) a final judgment or judgments for the payment of money shall be
rendered by a court or courts against the Company or any of its Subsidiaries in
excess of $35,000,000 in the aggregate (excluding any amount of such judgment as
to which an Acceptable Insurer has acknowledged liability), and the same shall
not be discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within 10 days from the date of
entry
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thereof, or the Company or such Subsidiary shall not, within said period of 10
days, or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) the Company or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $20,000,000 for which
it shall have become liable under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans having aggregate Unfunded Liabilities in excess of
$20,000,000 shall be filed under Title IV of ERISA by the Company or any member
of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed to administer, any
Plan or Plans having aggregate Unfunded Liabilities in excess of $20,000,000; or
a condition shall exist by reason of which the PBGC would be entitled to obtain
a decree adjudicating that any Plan or Plans having aggregate Unfunded
Liabilities in excess of $20,000,000 must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause the Company or one or more members of the Controlled Group to incur
a current payment obligation in excess of $20,000,000; or
(j) (i) as a result of one or more transactions after the date of this
Agreement, any "person" or "group" of persons shall have "beneficial ownership"
(within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended, and the applicable rules and regulations thereunder) of 30% or
more of the outstanding common stock of the Company; or (ii) without limiting
the generality of the foregoing, during any period of 12 consecutive months,
commencing after the date of this Agreement, individuals who at the beginning of
such 12-month period were directors of the Company shall cease for any reason to
constitute a majority of the board of directors of the Company;
THEREUPON: the Administrative Agent may (and, if directed by the Majority
Lenders, shall) by notice to the Company (a) declare the Commitments terminated
(whereupon the Commitments shall be terminated) and/or (b) declare the principal
amount then outstanding of and the accrued interest on the Loans and fees and
all other amounts payable hereunder and under the Notes to be forthwith due and
payable, whereupon such amounts shall be and become immediately due and payable,
without other notice, presentment, demand, protest or other formalities of any
kind (all of which are hereby expressly waived by the Company); provided that in
the case of the occurrence of an Event of Default with respect to the Company
referred to in clause (f) or (g) of this Section 10.01, the
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Commitments shall be automatically terminated and the principal amount then
outstanding of and the accrued interest on the Loans and fees and all other
amounts payable hereunder and under the Notes shall be and become automatically
and immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company. Each Lender hereby agrees that, unless so requested by the
Administrative Agent with the consent of the Majority Lenders, it shall not take
or cause to be taken any action to declare the Commitments terminated or to
declare payable or collect the amounts referred to above that is independent
from any action taken or to be taken by the Administrative Agent, unless such
action is taken in connection with an Event of Default described in clause (a),
(e), (f) or (g) of this Section 10.01.
SECTION 11. The Administrative Agent.
11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the Notes with such powers as are specifically delegated to the
Administrative Agent by the terms hereof and thereof, together with such other
powers as are reasonably incidental thereto. The Administrative Agent (which
term as used in this Section 11 shall include reference to its affiliates and
its and its affiliates' officers, directors, employees and agents): (a) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the Notes, and shall not by reason of this Agreement or any Note
be a trustee for any Lender; (b) shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement
or the Notes, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement or any the Notes, or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any Note or any other document referred to or
provided for herein or therein or for any failure by the Company or any of its
Subsidiaries or any other Person to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any Note except to the extent
requested by the Majority Lenders, and (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any Note or any
other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
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11.02 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or the Notes, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with instructions
signed by the Majority Lenders and such instructions of the Majority Lenders and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
11.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or facility or utilization fees) unless the
Administrative Agent has received notice from a Lender or the Company specifying
such Default and stating that such notice is a "NOTICE OF DEFAULT". In the event
that the Administrative Agent receives such a notice of the occurrence of a
Default, the Administrative Agent shall give prompt notice thereof to the
Lenders (and shall give each Lender prompt notice of each such non-payment). The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders.
11.04 Rights as a Lender. With respect to its Commitment and the Loans
made by it, Chase in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Administrative Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with the Company (and any of its Affiliates) as if it were not acting as the
Administrative Agent and the Administrative Agent may accept fees and other
consideration from the Company (in addition to the agency fees and arrangement
fees heretofore agreed to between
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the Company, the Administrative Agent) for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the Administrative
Agent (to the extent not reimbursed under Section 12.03 or 12.04 hereof, but
without limiting the obligations of the Company under said Sections 12.03 and
12.04), ratably in accordance with their respective Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Basic Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which the Company is obligated to pay under Sections 12.03
and 12.04 hereof but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or its Note or Notes. The Administrative
Agent shall not be required to keep itself informed as to the performance or
observance by the Company or any other Person of this Agreement or any of the
other Basic Documents or any other document referred to or provided for herein
or therein or to inspect the properties or books of the Company or any other
Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or under the Notes, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Company or any
other Person (or any of their affiliates) which may come into the possession of
the Administrative Agent.
11.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under any Note, the Administrative Agent
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shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction by
the Lenders of their indemnification obligations under Section 11.05 hereof
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
11.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent reasonably acceptable to the Company. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent (the "NOTICE DATE"), then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent reasonably acceptable to the Company. Any
successor Administrative Agent shall be (i) a Lender or (ii) if no Lender has
accepted such appointment within 40 days after the Notice Date, a bank which has
an office in New York, New York with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 11 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
SECTION 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Administrative Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or the Notes
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in this Agreement and the Notes are cumulative and not exclusive of any
remedies provided by law.
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12.02 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy,
cable or other writing and telexed, telecopied, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof; or, as to any party, at such other
address as shall be designated by such party in a notice to the Company and the
Administrative Agent given in accordance with this Section 12.02. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
12.03 Expenses, Etc. If an Event of Default occurs, the Company agrees
to pay or reimburse each of the Lenders and the Administrative Agent for paying
all costs and expenses of each of the Lenders and the Administrative Agent
(including counsels' fees) incurred as a result of such Event of Default and
collection, enforcement, bankruptcy, insolvency and other proceedings resulting
therefrom.
12.04 Indemnification. The Company shall indemnify the Administrative
Agent, the Lenders and each affiliate thereof and their respective directors,
officers, employees, attorneys and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims or damages to which any of them
may become subject, insofar as such losses, liabilities, claims or damages arise
out of or result from (i) any actual or proposed use by the Company of the
proceeds of any extension of credit by any Lender hereunder or breach by the
Company of this Agreement or any other Basic Document, (ii) any Environmental
Liabilities or (iii) any investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to the
foregoing, whether or not the indemnified Person is a party thereto, and the
Company shall reimburse the Administrative Agent and each Lender, and each
affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any expenses (including legal fees and fees of
engineers, environmental consultants and similar technical personnel) incurred
in connection with any such investigation or proceeding; but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.
12.05 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or the Notes, nor any consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Majority Lenders and the Company, and each such waiver or
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<PAGE> 57
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment, waiver or consent shall
(i) increase any Commitment of any Lender or subject any Lender to any
additional obligations, without the written consent of such Lender; (ii) reduce
the principal of, or interest on, any Loan, or any fees hereunder, without the
written consent of each Lender affected thereby; (iii) postpone any date fixed
for any payment of principal of, or interest on, any Loan, or any fee hereunder
pursuant to Sections 2.03, 4.01 or 4.02 hereof, without the written consent of
each Lender affected thereby; (iv) change the percentage of any of the
Commitments or of the aggregate unpaid principal amount of any of the Loans, or
the number of Lenders, which shall be required for the Lenders or any of them to
take any action under this Agreement, without the written consent of each
Lender; or (v) change any provision contained in Sections 2.07, 6, 12.03 or
12.04 hereof or this Section 12.05 or Section 12.08 hereof. Notwithstanding
anything in this Section 12.05 to the contrary, no amendment, waiver or consent
shall be made with respect to Section 11 without the consent of the
Administrative Agent.
12.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that the Company may not assign its rights or obligations
hereunder or under the Notes without the prior written consent of all of the
Lenders. Each Lender may assign any Loan or Loans or all or any part of its
Commitment (i) to any affiliate thereof, (ii) to any other Lender, or (iii) with
the consent of the Company and the Administrative Agent, which consents shall
not be unreasonably withheld, to any other bank or financial institution or
fund; provided that (x) any assignment shall not be less than $5,000,000 or, if
less, shall constitute an assignment of all of such Lender's Commitment and
Loans and (y) the Company shall be deemed to be reasonable in withholding
consent if the assignee is not exempt from United States withholding taxes. Upon
execution by the assignor and the assignee of an instrument pursuant to which
the assignee assumes such rights and obligations, payment by such assignee to
such assignor of an amount equal to the purchase price agreed between such
assignor and such assignee and delivery to the Administrative Agent and the
Company of an executed copy of such instrument together with payment by such
assignee to the Administrative Agent of a processing fee of $2,500, such
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights and benefits as it would have if it were a Lender
hereunder and the assignor shall be, to the extent of such assignment (unless
otherwise provided therein) released from its obligations under this Agreement.
Upon the consummation of such assignment, the Company shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor and the
assignee. If such assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the effectiveness of
the applicable instrument of assumption, deliver to the
52
<PAGE> 58
Company and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 5.08(f). Each Lender may (without the consent of any other party to
this Agreement) sell participations in all or any part of any Loan or Loans made
by it to another bank or other entity, in which event the participant shall not
have any rights under this Agreement (except as provided in the next succeeding
sentence hereof), or in the case of a Loan, such Lender's Note (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto, which agreement shall not give the participant the
right to consent to any modification, amendment or waiver other than one
described in clause (i), (ii) or (iii) of Section 12.05 hereof). The Company
agrees that each participant shall be entitled to the benefits of Sections 5.07
and 6 with respect to its participation; provided that no participant shall be
entitled to receive any greater amount pursuant to such Sections than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such participant
had no such transfer occurred. Each Lender may furnish any information
concerning the Company and its Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective assignees
and participants) which have agreed in writing to be bound by the provisions of
Section 12.07 hereof. The Administrative Agent and the Company may, for all
purposes of this Agreement, treat any Lender as the holder of any Note drawn to
its order (and owner of the Loans evidenced thereby) until written notice of
assignment or other transfer shall have been received by them from such Lender.
Notwithstanding anything to the contrary, any Lender may at any time assign all
or any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank. No such assignment shall release the transferor Lender from its
obligations hereunder.
12.07 Confidentiality. Each Lender agrees to keep confidential any
information delivered or made available by the Company to it prior to the end of
the term of this Agreement which is clearly indicated to be confidential
information; provided that nothing herein shall prevent any Lender from
disclosing such information (i) to any other Lender, (ii) to its officers,
directors, employees, affiliates, agents, attorneys and accountants who have a
need to know such information in accordance with customary banking practices and
who receive such information having been made aware of the restrictions set
forth in this Section, (iii) upon the order (which, for avoidance of doubt,
includes any subpoena) of any court or administrative agency, (iv) upon the
request or demand of any regulatory agency or authority having jurisdiction over
such Lender, (v) which has been publicly disclosed, (vi) to the extent
reasonably required in connection with any litigation to which the
Administrative Agent, any Lender, the Company or their respective affiliates may
be a party, (vii) to the extent
53
<PAGE> 59
reasonably required in connection with the exercise of any remedy hereunder,
(viii) to such Lender's legal counsel and independent auditors, and (ix) to any
actual or proposed participant or assignee of all or part of its rights
hereunder which has agreed in writing to be bound by the provisions of this
Section 12.07.
12.08 Survival. The obligations of the Company under Sections 5.08,
6.01, 6.05, 12.03 and 12.04 hereof and the obligations of the Lenders under
Sections 11.05 and 12.07 shall survive the repayment of the Loans and the
termination of the Commitments.
12.09 Captions. The table of contents and the captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.10 Counterparts; Integration. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral and written, relating to the subject matter
hereof (except to the extent specific reference is made to any such agreement in
Section 2.03 hereof).
12.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. THE COMPANY HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
54
<PAGE> 60
12.12 Waiver and Termination of Existing Credit Agreements. The Company
and each of the Lenders that is also a "Lender" party to the credit agreements
dated as of February 3, 1997 and July 29, 1999, as amended, in each case among
the Company, the lenders party thereto and Chase, as administrative agent
(collectively, the "EXISTING CREDIT AGREEMENTS"), waives compliance with Section
9.09 of the Existing Credit Agreements for the period ended May 31, 2000, and
agrees that the "Commitments" as defined in the Existing Credit Agreements shall
be terminated in their entirety in accordance with the terms thereof on the date
the conditions precedent set forth in Section 7.01 of this Agreement have been
fulfilled (the "NEW AGREEMENTS DATE"), subject only to this Section 12.12. Each
of such Lenders waives any requirement of notice of such termination pursuant to
Section 5.05 of the Existing Credit Agreements and any claim to any facility
fees or other fees under the Existing Credit Agreements for any day on or after
the New Agreements Date. The Company represents and warrants that (x) after
giving effect to the preceding sentences of this Section 12.12, the commitments
under the Existing Credit Agreements will be terminated effective not later than
the New Agreements Date and (y) no loans are, as of the date hereof, or will be,
as of the New Agreements Date, outstanding under the Existing Credit Agreements,
and covenants that all accrued and unpaid facility fees and any other amounts
due and payable under the Existing Credit Agreements shall have been paid on or
prior to the New Agreements Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
RPM, INC.
By /s/ Frank Sullivan
---------------------------------
Title: President
Address for Notices:
2628 Pearl Road
P.O. Box 777
Medina, Ohio 44258
Attention: Chief Financial Officer
Telephone Number: 330-273-8833
Telecopy Number: 330-225-6574
55
<PAGE> 61
Commitment: THE CHASE MANHATTAN BANK
$59,285,714.29
By /s/ Peter A. Dedousis
---------------------------------
Title: Managing Director
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue, 38th Floor
New York, New York 10017
Attention: Stacey Haimes
Telecopy Number: (212) 270-1355
56
<PAGE> 62
Commitment: KEYBANK NATIONAL ASSOCIATION
$59,285,714.29
By /s/ Marianne T. Meil
---------------------------------
Title: Vice President
Address for Notices:
127 Public Square
Cleveland, Ohio 44114
Attention: Diane Cox
Telecopy Number: 216-689-4981
57
<PAGE> 63
Commitment: NATIONAL CITY BANK
$59,285,714.29
By /s/ Terri L. Cable
---------------------------------
Title: Senior Vice President
Address for Notices:
National City Bank
1900 E. Ninth Street - Loc. #2077
Cleveland, OH 44114
Attention: Revette Vickerstaff
Telecopy Number: 216-488-7110
58
<PAGE> 64
Commitment: BANK OF AMERICA, N.A.
$46,428,571.43
By /s/ Richard G. Parkhurst, Jr.
------------------------------
Title: Managing Director
Address for Notices:
101 N. Tryon Street
15th Floor
Charlotte, NC 28255
Attention: Sheila Baggarly
Telecopy Number: 704-409-0086
59
<PAGE> 65
Commitment: BANK ONE, MICHIGAN
$46,428,571.43
By /s/ William J. McCaffrey
---------------------------------
Title: First Vice President
Address for Notices:
Bank One, Michigan
611 Woodward Avenue
Mail Suite #8073
Detroit, MI 48226
Attention: Joyce Gardner
Telecopy Number: 313-225-0855
60
<PAGE> 66
Commitment: WACHOVIA BANK, N.A.
$46,428,571.43
By /s/ Bradford L. Watkins
---------------------------------
Title: Vice President
Address for Notices:
Wachovia Bank, N.A.
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: Yvette Epps
Telecopy Number: 404-332-4320
61
<PAGE> 67
Commitment: FIRST UNION NATIONAL BANK
$32,142,857.14
By /s/ Bjarne W. Howatt
---------------------------------
Title: Vice President
Address for Notices:
201 South College Street
Charlotte Plaza 6th Floor
Charlotte, NC 28288
Attention: Ben Howatt
Telecopy Number: 704-715-1117
62
<PAGE> 68
Commitment: MELLON BANK, N.A.
$25,000,000.00
By /s/ Charles E. Frankenberry
---------------------------------
Title: Lending Officer
Address for Notices:
Mellon Bank, N.A.
One Mellon Center, Room 370
Pittsburgh, PA 15258
Attention: Jeffrey R. Dickson
Vice President
Telecopy Number: 412-234-8888
63
<PAGE> 69
Commitment: FIFTH THIRD BANK, NORTHEASTERN
OHIO
$17,857,142.86
By /s/ Roy C. Lanctot
---------------------------------
Title: Vice President
Address for Notices:
1404 East Ninth Street
Cleveland, Ohio 44114
Attention: Roy C. Lanctot
Telecopy Number: 216-274-5510
64
<PAGE> 70
Commitment: THE INDUSTRIAL BANK OF JAPAN,
LIMITED
$17,857,142.86
By /s/ Walter R. Wolff
---------------------------------
Title: Joint General Manager
Address for Notices:
The Industrial Bank of Japan, Ltd.
New York Branch
1251 Avenue of the Americas
New York, NY 10020
Attention: Credit Administration
Department
Telecopy Number: 212-282-4480
65
<PAGE> 71
Commitment: SUNTRUST BANK
$17,857,142.86
By /s/ Stephen L. Leister
---------------------------------
Title: Vice President
Address for Notices:
SunTrust Bank
303 Peachtree Street, N.E., 3rd Floor
Mail Code 1928
Atlanta, GA 30308
Attention: Stephen L. Leister
Telecopy Number: 404-588-8505
66
<PAGE> 72
Commitment: FIRSTAR BANK, N.A.
$15,000,000.00
By /s/ W. Gregory Schmid
---------------------------------
Title: Vice President
Address for Notices:
Firstar Bank, N.A.
1350 Euclid Ave. Suite 800
Cleveland, OH 44115
Attention: John D. Barrett
Senior Vice President
Telecopy Number: 216-623-9208
67
<PAGE> 73
Commitment: THE BANK OF NEW YORK
$14,285,714.29
By /s/ Walter C. Parelli
---------------------------------
Title: Vice President
Address for Notices:
The Bank of New York
One Wall Street, 21 Fl.
New York, NY 10286
Attention: Kenneth R. McDonnell
Telecopy Number: 212-635-7978
68
<PAGE> 74
Commitment: THE FUJI BANK, LIMITED
$10,714,285.71
By /s/ Peter L. Chinnici
---------------------------------
Title: Senior Vice President & Group
Head
Address for Notices:
225 West Wacker Drive, Suite 2000
Chicago, IL 60606
Attention: Peter Chinnici
Telecopy Number: 312-621-3386
69
<PAGE> 75
Commitment: KBC BANK N.V.
$10,714,285.71
By /s/ Robert Snauffer
---------------------------------
Title: First Vice President
By /s/ Raymond F. Murray
---------------------------------
Title: First Vice President
Address for Notices:
KBC Bank N.V.
125 West 55th Street
New York, NY 10019
Attention: John Thierfelder
Telecopy Number: 212-541-0793
70
<PAGE> 76
Commitment: THE SANWA BANK, LIMITED
$10,714,285.71
By /s/ Lee E. Prewitt
---------------------------------
Title: Vice President
Address for Notices:
The Sanwa Bank, Limited
10 South Wacker Drive, Suite 1825
Chicago, IL 60606
Attention: Kenneth Eichwald
Telecopy Number: 312-346-6677
71
<PAGE> 77
Commitment: FIRST COMMERCIAL BANK
$10,714,285.71
By /s/ Vincent T. C. Chen
-----------------------
Title: SVP & GM
Address for Notices:
2 World Trade Center, Suite #7868
New York, NY 10048
Attention: Jeffrey Wang
Telecopy Number: 212-432-7250
Total Commitments:
$500,000,000
72
<PAGE> 78
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Peter A. Dedousis
---------------------------------
Title: Managing Director
Address for Notices:
The Chase Manhattan Bank
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Loan and Agency Services
Lisa Pucciarelli
Telecopy Number: (212) 552-5777
Copy to:
The Chase Manhattan Bank
270 Park Avenue, 38th Floor
New York, New York 10017
Attention: Stacey Haimes
Telecopy Number: (212) 270-1355
73
<PAGE> 79
PRICING SCHEDULE
The Applicable Margin and facility fee rate for any day are the
respective percentages set forth below in the applicable row under the column
corresponding to the Status that exists on such day:
================================================================================
Level Level Level Level Level
Status I II III IV V
- --------------------------------------------------------------------------------
Eurodollar Loans .40% .50% .60% .70% .625%
- --------------------------------------------------------------------------------
Facility Fee Rate .10% .125% .15% .175% .375%
================================================================================
For purposes of this Schedule, the following terms have the following
meanings:
"Applicable Indebtedness" means senior unsecured long-term debt of the
Company.
"Level I Status" exists at any date if, at such date, the Applicable
Indebtedness is rated A- or higher by S&P and A3 or higher by Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Applicable Indebtedness is rated BBB+ or higher by S&P and Baa1 or higher by
Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Applicable Indebtedness is rated BBB or higher by S&P and Baa2 or higher by
Moody's and (ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the
Applicable Indebtedness is rated BBB- or higher by S&P and Baa3 or higher by
Moody's and (ii) none of Level I Status, Level II Status or Level III Status
exists.
"Level V Status" exists at any date if, at such date, no other Status
exists.
"Moody's" means Moody's Investors Service, Inc.
<PAGE> 80
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Status" refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status or Level V Status exists at any
date.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to senior unsecured long-term debt securities without third-party
credit enhancement, and any rating assigned to any other debt security shall be
disregarded. The rating in effect at any date is that in effect at the close of
business on such date.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11.1
<SEQUENCE>7
<FILENAME>ex11-1.txt
<DESCRIPTION>EXHIBIT 11.1
<TEXT>
<PAGE> 1
RPM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
EXHIBIT 11.1
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended May 31
--------------------------------------------------------
2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET INCOME
Net income applicable to common shares for basic
earnings per share $ 40,992 $ 94,546 $ 87,837
Add back interest net of tax on convertible
securities assumed to be converted 1,005 5,638
--------------- --------------- ---------------
Net income applicable to common shares for diluted
earnings $ 40,992 $ 95,551 $ 93,475
=============== =============== ===============
SHARES OUTSTANDING
Weighted average shares for basic earnings per share 107,221 108,731 98,527
Net issuable common share equivalents 163 567 944
Additional shares issuable assuming conversion of
convertible securities 2,078 12,192
--------------- --------------- ---------------
Total shares for diluted earnings per share 107,384 111,376 111,663
=============== =============== ===============
Basic Earnings Per Common Share $.38 $.87 $.89
==== ==== ====
Diluted Earnings Per Common Share $.38 $.86 $.84
==== ==== ====
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>8
<FILENAME>ex13-1.txt
<DESCRIPTION>EXHIBIT 13.1
<TEXT>
<PAGE> 1
Exhibit 13.1
Management's Discussion and Analysis
of Results of Operations and Financial Condition
Reportable Segment and Geographic Area Information
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information, requires disclosure of
segment information using the management approach, or the basis used internally
for evaluating operating performance and to decide resource allocations.
The Company has determined that it has two such 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 division, 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 the two divisions based on
earnings before interest and taxes since interest expense is essentially related
to corporate acquisitions, as opposed to segment operations.
The Industrial Division has operations throughout North America and
accounts for most of the Company's sales in Europe, South America, Asia, South
Africa, Australia and the Middle East. The Industrial product line is primarily
sold to distributors, contractors and to end users, such as industrial
manufacturing facilities, educational and governmental institutions and
commercial establishments. Industrial Division products reach their markets
through a combination of direct sales, sales representative organizations,
distributor sales and sales of licensees and joint ventures.
The Consumer Division's products are sold throughout North America by
mass merchandisers, home centers, hardware stores, paint stores, automotive
supply stores and craft shops. Major customers include The Home Depot, Lowe's
Home Centers, Wal-Mart, Kmart, Sherwin-Williams, Ace Hardware Stores and Cotter
& Company. Consumer Division products are sold to retailers through a
combination of direct sales, sales representative organizations and distributor
sales.
Sales to the major home improvement centers represent approximately
16%, 12% and 11% of consolidated net sales for the years ended May 31, 2000,
1999 and 1998, respectively. These sales are predominantly within the Consumer
Division and comprise approximately 37%, 32% and 29% of the division's sales for
the respective periods.
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 the Company's 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.
These corporate and other assets and expenses reconcile operating segment data
to total consolidated net external sales, EBIT, identifiable assets, capital
expenditures, and depreciation and amortization, as follows on page 13.
Sales for the years ended May 31, 2000, 1999 and 1998, do not include
sales of Company products by joint ventures and licensees of approximately
$35,000,000, $72,000,000, and $88,000,000, respectively. The Company reflects
income from joint ventures on the equity method and receives royalties from its
licensees. Export sales were less than 10% of total consolidated revenue for
each of the three years.
12
<PAGE> 2
<TABLE>
<CAPTION>
REPORTABLE SEGMENT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------
DIVISION INFORMATION (IN THOUSANDS)
Year Ended May 31, 2000 1999 1998
==============================================================================================================================
<S> <C> <C> <C>
Net external sales
Industrial Division $1,082,733 $1,052,825 $ 998,069
Consumer Division 871,398 659,329 616,836
Corporate/Other 369
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $1,954,131 $1,712,154 $1,615,274
==============================================================================================================================
Earnings before interest and taxes (EBIT) (1) (2)
Industrial Division $120,363 $ 98,980 $ 135,632 $ 125,537
Consumer Division 73,550 47,907 71,294 74,435
Corporate/Other (18,389) (23,333) (14,548) (13,716)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $175,524 $ 123,554 $ 192,378 $ 186,256
==============================================================================================================================
Identifiable assets
Industrial Division $1,120,801 $1,102,531 $1,035,419
Consumer Division 914,334 586,846 586,864
Corporate/Other 64,068 47,859 63,634
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $2,099,203 $1,737,236 $1,685,917
==============================================================================================================================
Capital expenditures
Industrial Division $ 34,331 $ 35,779 $ 32,813
Consumer Division 27,929 26,648 26,490
Corporate/Other 925 979 1,040
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 63,185 $ 63,406 $ 60,343
==============================================================================================================================
Depreciation and amortization
Industrial Division $ 38,519 $ 32,668 $ 29,607
Consumer Division 39,862 28,387 27,225
Corporate/Other 769 1,080 177
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 79,150 $ 62,135 $ 57,009
==============================================================================================================================
(1) Before restructuring and asset impairment charge
(2) As reported
GEOGRAPHIC INFORMATION (IN THOUSANDS)
Year Ended May 31, 2000 1999 1998
==============================================================================================================================
Net external sales (based on shipping locations)
United States $1,529,568 $1,320,410 $1,303,032
Foreign
Canada 167,574 145,123 102,317
Europe 176,160 175,741 151,376
Other Foreign 80,829 70,880 58,549
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign 424,563 391,744 312,242
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $1,954,131 $1,712,154 $1,615,274
==============================================================================================================================
Assets employed
United States $1,740,882 $1,445,599 $1,436,557
Foreign
Canada 133,899 88,965 82,040
Europe 155,330 144,636 127,552
Other Foreign 69,092 58,036 39,768
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign 358,321 291,637 249,360
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $2,099,203 $1,737,236 $1,685,917
==============================================================================================================================
</TABLE>
13
<PAGE> 3
Results of Operations
FISCAL 2000 COMPARED TO FISCAL 1999
The Company's fiscal 2000 net sales of $1.95 billion were $242 million, or 14%,
greater than in 1999, resulting in the 53rd consecutive year of business growth
for RPM, Inc. The vast majority of this increase came as a net result of the
August 1999 acquisition of DAP Products, Inc. and DAP Canada Corp. (collectively
"DAP"), and several product line additions, net of divestitures. DAP,
headquartered in Baltimore, Maryland, has annual sales of approximately $250
million and is a leading North American manufacturer and marketer of caulks and
sealants, spackling and glazing compounds, contact cements and other specialty
adhesives. DAP's brand names, which include DAP, Kwik Seal and Durabond, are
well known throughout the U.S. and Canada. DAP was neutral to the Company's
earnings results in fiscal 2000, but is anticipated to be a positive contributor
hereafter. DAP accounted for 67% of the Company's year 2000 sales increase,
adjusted for divestitures during 2000 and for foreign exchange differences
between years. Growth within the Industrial and Consumer Divisions' base
businesses, not impacted by acquisitions or divestitures, was approximately 3%
and 4%, respectively. These growth rates include several product line additions
and are generally reflective of real unit volume increases as price levels
year-to-year remained fairly stable.
Gross profit margins this year declined 2.2%, ending at 43.7%, compared
to last year's 45.9% performance. The Industrial Division's deterioration was
lower at 0.8%, falling to 45.2% from 46%. The key influence to this change was
due to the difficulties experienced in combining Carboline into the StonCor
organization, most notably at non-U.S. operations. Additionally, there were
sales mix differences and minor raw material price increases during the year.
The Company believes that such cost increases can be effectively managed,
prospectively, as activities continue in its Purchasing Action Group. This group
focuses on purchasing major common raw materials used across all business units,
and will continue its effort to identify and expand into other opportunities
during 2001. The Consumer Division year 2000 margins of 42% were 3.6% lower than
in 1999, when a 45.6% level was experienced. Approximately 56% of this margin
reduction resulted from the DAP acquisition. DAP's entire cost structure differs
from other Company business units. It has much lower gross margins, but requires
lower support levels in the selling, general and administrative areas. The
Consumer Division also incurred the majority of the $7.9 million in inventory
discontinuation costs associated with the restructuring program, further
described below. In addition, the Consumer Division experienced raw material
price movements similar to those described for the Industrial Division, and
likewise should be able to effectively manage such cost movements going forward,
albeit at a somewhat slower pace as there is less pricing flexibility within
this division.
Selling, general and administrative ("SG&A") expenses were essentially
unchanged from 1999 as a percentage of sales, ending the year at the 34.7%
level. The base businesses' cost levels for both the Industrial and Consumer
Divisions were modestly up as a percent of sales; Industrial was up 0.2% to 34%,
and Consumer ended at 35.2%, up 0.4%. The Industrial Division on an all-in
basis, spent at a 34.1% level, 1% higher than a year ago, with this increase
almost totally driven by the divestiture of business units which experienced
much lower SG&A expense levels. Conversely, in the Consumer Division, the all-in
spending level of 33.5% is 1.3% lower than 1999 as a result of the lower SG&A
structure of DAP.
Excluding the restructuring and asset impairment charge of $52 million,
and the related $7.9 million of additional cost of sales, earnings before
interest and taxes (EBIT) were $183.4 million in the year 2000, a $9.0 million
reduction from the 1999 amount of $192.4 million. As set forth above, within the
Industrial Division, the earnings benefits of modest volume increases were
principally offset by costs incurred in combining the Carboline business into
the StonCor organization and other cost increases not recovered by price
increases. The Consumer Division year-over-year comparisons disclose similar
occurrences; however, the DAP acquisition helped to more than offset the
earnings reduction. Absent the DAP effect, within the Consumer Division,
selected business unit difficulties, in particular at Bondo, and general cost
increases not recovered in prices, drove a net cost increase which exceeded the
benefits realized from modest sales volume growth.
Basic corporate and other expenses increased just over 10%, and the
investment initiative for e-commerce infrastructure development provided the
balance of this cost increase.
In August 1999, the Company announced a restructuring program to
generate manufacturing, distribution and administrative efficiencies, and to
better position the Company for increased profitability and long-term growth.
The pre-tax restructuring and asset impairment charge of $52 million ($.29 per
share after tax) was taken during the first and fourth quarters of this year.
The program is expected to generate annualized pre-tax savings of approximately
$23 million ($.13 per share after tax), once completed. These savings will phase
in over the next two years, with the full savings expected beginning in fiscal
year 2002. Through year-end
14
<PAGE> 4
2000, the Company had incurred $38.4 million of these charges, primarily
associated with facility shutdown costs and the write-down of certain designated
property and intangibles (refer to Note I to the Consolidated Financial
Statements). The net cash requirements of the restructuring program are
estimated at approximately $10 million.
The Company divested two non-core product lines, with annual sales of
$65 million, for a net gain during the year. This net gain was offset by
non-recurring expenses during the year.
Net interest expense increased $19.0 million in 2000 [refer to Note A
(12)], reflecting primarily the additional indebtedness to acquire DAP and
smaller acquisitions throughout the year, and to repurchase common shares of the
Company. These increases were partly offset by interest saved from the August
10, 1998 redemption of the Company's convertible debt securities, which reduced
interest expense by $1.3 million, and from debt paydowns during the past year.
Fractionally higher interest rates in 2000 further increased net interest
expense.
The effective income tax rate in 2000 was 42.9%, compared to a 1999
rate of 40.8%. The higher rate is totally attributable to the restructuring and
asset impairment charge of $52 million and related costs (principally for
inventory write-offs on certain discontinued product lines) of $7.9 million, all
being tax credited incrementally, at only the U.S. statutory rate (35%), plus
the net state and local income tax rates. The resultant net effective tax credit
rate of 37.2% increases the Company's effective tax rate for "normal" operations
to 40.3% and results in the reported effective rate of 42.9%.
Net income of $41 million, or $0.38 per diluted share, in the year 2000
was $53.5 million lower than in 1999 when net income totaled $94.5 million, or
$0.86 per diluted share. As described above, in 2000, the Company incurred a
combined $59.8 million pre-tax charge for restructuring, asset impairment
charges and related costs ($37.6 million after income taxes). Prior to such
costs, the 2000 net income was $78.6 million, or $0.73 per diluted share.
Changes in average common shares outstanding in these calculations had little or
no effect year-to-year.
FISCAL 1999 COMPARED TO FISCAL 1998
The Company achieved its 52nd consecutive record year of sales and earnings in
the 1999 fiscal year. Sales grew 6%, to $1.7 billion, while earnings grew 8%, to
$94.5 million.
Effective February 1, 1999, the Company acquired the remaining 50% of
The Euclid Chemical Company ("Euclid") from the Company's former partner,
Holderbank Financiere Glaris Ltd. As part of the Tremco Group within the
Industrial Division, Euclid offers a full line of concrete and masonry repair
and maintenance products marketed under the Euco name and is pursuing its
strategy of global expansion in the concrete and masonry industry.
Approximately 60% of the 1999 sales increase was attributable to net
acquisitions, most notably that of Euclid and of The Flecto Company, Inc.
("Flecto") on March 31, 1998. The Company's existing operations and several
product line additions generated the balance of the sales increase, growing at
the rate of approximately 2% for the year, almost entirely from higher unit
volume as pricing adjustments were flat to somewhat soft, particularly in the
Consumer Division. Exchange rate differences had a slight negative effect of
less than 1% on year-to-year sales.
Internal sales grew much more slowly than anticipated in 1999. Growth
slowed to approximately 2.5% in the Industrial Division from a softening North
American market and continued depressed overseas markets, particularly in the
financially troubled Asian and South American economies. A stronger dollar
against most foreign currencies further reduced demand for the Company's
products outside North America. Growth slowed in the Consumer Division to
approximately 1% from continuing consolidation in the do-it-yourself (D-I-Y)
retailing industry; inventory reductions at a number of major D-I-Y accounts,
despite solid sell-through rates; and continued weakness in the automobile
aftermarket.
The gross profit margin strengthened to 45.9% compared with 1998's
44.8%, with the Industrial Division improving to 46.0% from 44.3% and the
Consumer Division achieving 45.6% compared with 45.5% the prior year. This
improvement reflects generally lower raw material costs, including lower costs
on goods sourced outside the U.S. from the strength of the dollar. Margin
improvement also continued at Tremco, within the Industrial Division, through
1999, mainly from ongoing purchasing savings and the successful restructuring of
its operations, since its acquisition in February 1997. Other margin improvement
came from Flecto in the Consumer Division and Euclid in the Industrial Division,
with their comparatively higher margins. The positive effects of Flecto and
lower raw material costs more than offset certain product mix and market
share-driven lower margins within the Consumer Division.
15
<PAGE> 5
Selling, general and administrative expenses of 34.6% of sales compared
with 33.3% the prior year. The Industrial Division expenses increased to 33.1%
of sales from 31.8% and the Consumer Division expenses increased to 34.8% from
33.5% in 1998. Both divisions continued with many of their product and market
development, promotional and other growth-related initiatives to set the stage
for stronger sales growth in the future. The Consumer Division, in particular,
incurred higher freight and handling costs to accommodate increased demands for
smaller, more frequent shipments of products. Flecto also has proportionately
much higher costs in this category, including acquisition-related expenses. The
Industrial Division incurred costs associated with certain minor restructurings
during 1999, and there were certain timing differences on a number of expenses
between years.
The Industrial Division generated the EBIT growth in 1999, primarily
from existing operations, while slower sales growth, coupled with the higher
servicing and development costs, adversely affected the Consumer Division.
The August 10, 1998 redemption of the Company's convertible debt
securities (refer to Liquidity and Capital Resources) lowered interest expense
by $6.8 million in 1999, more than offsetting $4.3 million of additional
interest expense from increased indebtedness to acquire Flecto, Euclid and other
smaller acquisitions. Debt repayments throughout 1999, higher interest income,
and slightly lower interest rates between years further reduced net interest
expense, comparatively [refer to Note A(12)].
The tax rate improved in 1999 to 40.8% from 41.3% in 1998 [refer to
Note C], with the largest improvement coming from proportionately lower state
and local taxes.
Approximately two-thirds of the growth in earnings and diluted earnings
per share was internal, mainly within the Industrial Division, with the balance
of growth resulting from the net effect of acquisitions and divestitures. The
Company's net income margin improved to 5.5% from 5.4% in 1998. The issuance of
common shares in connection with the August 10, 1998 redemption of the Company's
convertible debt securities negatively impacted the calculation of basic
earnings per share compared with 1998. This redemption was also the principal
cause of the comparative difference between the percentage changes in net income
and earnings per share between years. This effect was much less after the first
quarter of fiscal 2000.
Liquidity and Capital Resources
CASH PROVIDED FROM OPERATIONS
The Company generated $103 million in cash from operations during 2000, $15
million less than during 1999. The $59.8 million (pre-tax) restructuring, asset
impairment and related charges are the major factors impacting net income and
represent the primary difference when comparing 2000 cash flow with 1999. When
comparing 1999 cash flow with 1998, other than normal timing differences within
the balance sheets, certain inventories had been built up during 1998 to
accommodate increased retail business in the Consumer Division. These built-up
inventories have since come down significantly along with other inventory
reductions, primarily within the Consumer Division, in order to conserve working
capital.
The Company's strong cash flow from operations continues to be its
primary source of financing internal growth, with limited use of short-term
credit.
INVESTING ACTIVITIES
The Company is not capital intensive, and capital expenditures generally do not
exceed depreciation and amortization in a given year. Capital expenditures are
made primarily to accommodate the Company's continued growth through improved
production and distribution efficiencies and capacity, and to enhance
administration. Capital expenditures in 2000 of $63 million compare with
depreciation and amortization of $79 million. Approximately $17 million of these
expenditures were information technology (IT) related, including major new
installations ongoing at Rust-Oleum's North American operations. The more
significant IT systems changeovers have now taken place, and capital spending in
this area is expected to trend downward over the next few years.
The investment of $323 million in new businesses reflects the
acquisitions of DAP and several smaller businesses and product lines, net of
cash acquired. The Company has historically acquired complementary businesses
and this trend is expected to continue.
The Company's captive insurance company invests in marketable
securities in the ordinary course of conducting its operations, and this
activity will continue. The differences between the years are primarily
attributable to the timing of investments.
During 2000, the Company received proceeds of $55.2 million associated
with sales of the majority of the business assets of two business units, in
addition to the sale of several real estate properties.
16
<PAGE> 6
FINANCING ACTIVITIES
On January 22, 1999, the Company announced the authorization of a share
repurchase program, allowing the repurchase of up to 5 million of the Company's
common shares over a period of 12 months. On October 8, 1999, the Company
announced the authorized expansion of this repurchase program to a total of 10
million common shares. As of May 31, 2000, the Company had repurchased 7.8
million of its common shares at an average price of $11.33 per share.
During 2000, $333 million of additional debt was incurred primarily
related to acquisitions, $72 million of debt was incurred related to the share
repurchase program, and approximately $27 million of debt was repaid. The
acquisitions were financed through issuance of debt through a $700 million
Commercial Paper Program fully backed by two revolving credit agreements [Refer
to Note B]. The Company's debt to capitalization ratio has increased to 60% from
44% at May 31, 1999, mainly as a result of the DAP acquisition and the share
repurchase program.
Subsequent to year end, on July 14, 2000, the Company refinanced its
existing $300 million revolving credit facility and its $400 million revolving
credit facility with a $200 million 364-day revolving credit facility, and a
$500 million 5-year revolving credit facility. The credit facilities are mainly
used to back up the Company's $700 million Commercial Paper Program.
The stronger dollar effect on the Company's foreign net assets tended
to further reduce shareholder's equity this past year, and this trend could
continue if the dollar continues to strengthen, and the growth of foreign net
assets continues.
The Company maintains excellent relations with its banks and other
financial institutions to further enable the financing of future growth
opportunities.
Other Matters
YEAR 2000 READINESS DISCLOSURE
The Company has completed its Year 2000 remediation efforts and, since the turn
of the century, has not experienced any significant problems internally or with
suppliers and customers in connection with this event. Nevertheless, there still
remain some future dates that could potentially cause computer systems problems.
The Company's most reasonably likely worst case scenario would be a
short-term slowdown or cessation of manufacturing operations at one or more of
its facilities and a short-term inability of the Company to process orders and
billings in a timely manner, and to deliver product to customers. Because the
Company has not, to date, experienced any significant problems in the Year 2000,
it does not anticipate any major impact in its operations.
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 (refer to Note H to the Consolidated Financial Statements).
Market Risk
The Company is exposed to market risk from changes in interest rates and foreign
currency exchange rates since it funds its operations through long- and
short-term borrowings and denominates its business transactions in a variety of
foreign currencies. A summary of the Company's primary market risk exposures is
presented below.
INTEREST RATE RISK
The Company's primary interest rate risk exposure results from floating rate
debt including various revolving credit and other lines of credit. At May 31,
2000, approximately 73% of the Company's total long-term debt consisted of
floating rate debt. If interest rates were to increase 100 basis points (1%)
from May 31, 2000 rates, and assuming no changes in long-term debt from the May
31, 2000 levels, the additional annual expense would be approximately $7.0
million on a pre-tax basis. The Company currently does not hedge its exposure to
floating interest rate risk.
17
<PAGE> 7
FOREIGN CURRENCY RISK
The Company's foreign sales and results of operations are subject to the impact
of foreign currency fluctuations. As most of the Company's foreign operations
are in countries with fairly stable currencies, such as the United Kingdom,
Belgium and Canada, this effect has not been material. In addition, foreign debt
is denominated in the respective foreign currency, thereby eliminating any
related translation impact on earnings. If the dollar continues to strengthen,
the Company's foreign results of operations will be negatively impacted, but the
effect is not expected to be material. A 10% adverse change in foreign currency
exchange rates would not have resulted in a material impact in the Company's net
income for the year ended May 31, 2000. The Company does not currently hedge
against the risk of exchange rate fluctuations.
EURO CURRENCY CONVERSION
On January 1, 1999, eleven of the fifteen members of the European Union adopted
a new European currency unit (the "euro") as their common legal currency. The
participating countries' national currencies will remain legal tender as
denominations of the euro from January 1, 1999 through January 1, 2002, and the
exchange rates between the euro and such national currency units will be fixed.
The Company has assessed the potential impact of the euro currency conversion on
its operating results and financial condition. The impact of pricing differences
on country-to-country indebtedness is not expected to be material. The Company
converted its European operations to the euro currency basis effective June 1,
1999.
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) the price and supply of raw materials, particularly titanium
dioxide, certain resins, aerosols and solvents; (b) continued growth in demand
for the Company's products; (c) environmental liability risks inherent in the
chemical coatings business; (d) the effect of changes in interest rates; (e) the
effect of fluctuations in currency exchange rates upon the Company's foreign
operations; (f) the potential impact of the euro currency conversion; (g) the
effect of non-currency risks of investing in and conducting operations in
foreign countries, including those relating to political, social, economic and
regulatory factors; (h) future acquisitions and the Company's ability to
effectively integrate such acquisitions; (i) the potential future impact of Year
2000 related software conversion issues; the potential impact of the Company's
suppliers', customers' and other third parties' ability to identify and resolve
their own Year 2000 obligations in such a way as to allow them to continue
normal business operations or furnish raw materials, products, services or data
to the Company and its operating companies without interruption; (j) liability
risks inherent in the Company's EIFS and asbestos litigation; and (k) the
ability of the Company to realize the projected pre-tax savings associated with
the restructuring and consolidation program, and to divest non-core product
lines.
18
<PAGE> 8
CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
RPM, Inc. and Subsidiaries
<TABLE>
<CAPTION>
May 31 2000 1999
===============================================================================================================================
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments (Note A) $ 31,340 $ 19,729
Trade accounts receivable (less allowances of $16,248 in 2000 and $14,248 in 1999) 399,683 362,611
Inventories (Note A) 244,559 242,445
Prepaid expenses and other current assets 109,510 80,634
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 785,092 705,419
- -------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST (NOTE A)
Land 24,055 27,887
Buildings and leasehold improvements 190,658 197,567
Machinery and equipment 384,966 347,236
- ------------------------------------------------------------------------------------------------------------------------------
599,679 572,690
Less allowance for depreciation and amortization 233,451 232,993
- -------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 366,228 339,697
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Cost of businesses over net assets acquired, net of amortization (Note A) 595,106 425,951
Other intangible assets, net of amortization (Note A) 320,631 232,556
Other 32,146 33,613
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 947,883 692,120
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,099,203 $1,737,236
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and accounts payable $ 154,256 $ 131,118
Current portion of long-term debt (Note B) 4,987 3,764
Accrued compensation and benefits 68,938 58,277
Accrued loss reserves (Note H) 64,765 49,296
Accrued restructuring reserve (Note I) 13,540
Other accrued liabilities 68,702 50,843
Income taxes payable (Notes A and C) 1,014 9,251
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 376,202 302,549
- -------------------------------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current maturities (Note B) 959,330 582,109
Other long-term liabilities 57,381 55,832
Deferred income taxes (Notes A and C) 60,566 53,870
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 1,077,277 691,811
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,453,479 994,360
- -------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares, stated value $.015 per share; authorized 200,000,000 shares;
issued 110,947,000 and outstanding 103,134,000 in 2000; issued
110,739,000 and outstanding 109,443,000 in 1999 (Note D) 1,616 1,613
Paid-in capital 424,077 423,204
Treasury shares, at cost (Note D) (88,516) (17,044)
Accumulated other comprehensive loss (Note A) (39,555) (23,908)
Retained earnings 348,102 359,011
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 645,724 742,876
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,099,203 $1,737,236
===============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 9
Consolidated Statements of Income
RPM, Inc. and Subsidiaries
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended May 31 2000 1999 1998
==================================================================================================================================
<S> <C> <C> <C>
NET SALES $1,954,131 $1,712,154 $1,615,274
Cost of sales 1,099,637 927,110 891,862
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 854,494 785,044 723,412
Selling, general and administrative expenses 678,970 592,666 537,156
Restructuring and asset impairment charge (Note I) 51,970
Interest expense, net 51,793 32,781 36,700
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 71,761 159,597 149,556
Provision for income taxes (Note C) 30,769 65,051 61,719
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 40,992 $ 94,546 $ 87,837
==================================================================================================================================
Average shares outstanding (Note D) 107,221 108,731 98,527
==================================================================================================================================
Basic earnings per common share (Note D) $.38 $.87 $.89
==================================================================================================================================
Diluted earnings per common share (Note D) $.38 $.86 $.84
==================================================================================================================================
Cash dividends per common share $.49 $.46 $.44
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
20
<PAGE> 10
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY RPM, Inc. and Subsidiaries (In thousands, except per share amounts)
Common Shares Accumulated
-------------------- Other
Number Comprehensive
Of Shares Stated Paid-In Treasury Loss Retained
(Note D) Value Capital Shares (Note A) Earnings Total
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MAY 31, 1997 98,029 $ 1,428 $229,619 $ (8,114) $270,465 $493,398
--------
Comprehensive income
Net income 87,837 87,837
Other comprehensive loss (6,428) (6,428)
--------
Comprehensive income 81,409
Dividends paid (6) (83) (43,391) (43,474)
Debt conversion 32 499 499
Business combinations 1,813 26 32,259 32,285
Stock option exercises 276 4 2,216 2,220
Restricted share awards 110 2 (2)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 31, 1998 100,254 1,460 264,508 (14,542) 314,911 566,337
Comprehensive income
Net income 94,546 94,546
Reclassification adjustments (65) (65)
Other comprehensive loss (9,301) (9,301)
Comprehensive income 85,180
Dividends paid (50,446) (50,446)
Debt conversion 10,135 148 156,896 157,044
Business combinations (24) (417) (417)
Repurchase of shares (1,296) (17,044) (17,044)
Stock option exercises 281 4 2,218 2,222
Restricted share awards 93 1 (1)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 31, 1999 109,443 1,613 423,204 (17,044) (23,908) 359,011 742,876
--------
Comprehensive income
Net income 40,992 40,992
Reclassification adjustments 738 738
Other comprehensive loss (16,385) (16,385)
--------
Comprehensive income 25,345
Dividends paid (51,901) (51,901)
Repurchase of shares (6,517) (71,472) (71,472)
Stock option exercises 100 1 875 876
Restricted share awards 108 2 (2)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 31, 2000 103,134 $ 1,616 $424,077 $(88,516) $(39,555) $348,102 $645,724
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 11
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows RPM, Inc. and Subsidiaries (In thousands, except per share mounts)
Year Ended May 31 2000 1999 1998
================================================================================================================================
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 40,992 $ 94,546 $ 87,837
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 42,290 34,803 30,823
Amortization of goodwill 18,352 13,625 12,435
Other amortization 18,508 13,707 13,751
Asset impairment charge, net of gains 6,940
(Decrease) in deferred liabilities (31,081) (4,189) (10,459)
(Earnings) of unconsolidated affiliates (435) (2,332) (2,217)
Non-cash interest expense 1,696 9,599
Changes in assets and liabilities, net of effect
from purchases and sales of businesses:
(Increase) decrease in accounts receivable 6,251 (27,828) (26,944)
(Increase) decrease in inventory 4,716 11,089 (19,727)
(Increase) in prepaid and other assets (13,484) (11,523) (4,163)
Increase (decrease) in accounts payable 1,615 (6,349) 6,138
Increase in accrued restructuring 13,540
Increase (decrease) in accrued liabilities (11,285) 7,639 18,413
Other 5,659 (7,163) (3,883)
- ----------------------------------------------------------------------------------------------------------------------------
Cash From Operating Activities 102,578 117,721 111,603
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (63,185) (63,406) (60,343)
Acquisition of businesses, net of cash acquired (323,033) (34,551) (47,709)
Purchase of marketable securities (19,816) (31,666) (27,224)
Proceeds from marketable securities 13,142 29,895 17,355
Distributions from joint ventures 1,063 592
Investments in joint ventures (500) (2,702)
Proceeds from sale of assets and businesses 55,290 565 131,222
- ----------------------------------------------------------------------------------------------------------------------------
Cash From (Used For) Investing Activities (338,102) (98,100) 11,191
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term and short-term debt 2,147,077 1,169,127 1,238,371
Reductions of long-term and short-term debt (1,776,610) (1,144,022) (1,316,000)
Cash dividends (51,901) (50,446) (43,474)
Exercise of stock options 876 2,222 2,220
Repurchase of shares (71,472) (17,044)
- ----------------------------------------------------------------------------------------------------------------------------
Cash From (Used For) Financing Activities 247,970 (40,163) (118,883)
- ----------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (835) (512) (570)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 11,611 (21,054) 3,341
CASH AT BEGINNING OF YEAR 19,729 40,783 37,442
- ----------------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 31,340 $ 19,729 $ 40,783
============================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
============================================================================================================================
Cash paid during the year for:
Interest $ 55,253 $ 36,155 $ 32,375
Income taxes $ 70,086 $ 71,904 $ 70,189
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Interest accreted on LYONs $ $ 1,696 $ 9,599
Shares issued (returned) in business combinations $ $ (417) $ 32,285
Conversion of debt to equity $ $ 157,044 $ 499
Receivables (debt) from business combinations $ (6,724) $ (1,557) $
</TABLE>
Additions and reductions to long-term and short-term debt relate to periodic
rollovers of amounts borrowed under the Company's Commercial Paper Program.
<PAGE> 12
May 31, 2000, 1999 and 1998
NOTE A - Summary of Significant Accounting Principles
(1) POLICIES OF CONSOLIDATION: The consolidated financial statements
include the accounts of RPM, Inc. and its majority owned domestic and foreign
subsidiaries. The Company accounts for its investment in less than majority
owned joint ventures under the equity method. Intercompany accounts,
transactions and unrealized profits and losses are eliminated in consolidation.
Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
(2) BUSINESS COMBINATIONS: During the two year period ended May 31,
2000, the Company completed several acquisitions. In August 1999, the Company
acquired all the outstanding shares of DAP Products, Inc. This acquisition and
several other smaller acquisitions have been accounted for by the purchase
method of accounting. The difference of approximately $216,341,000 between the
fair value of net assets acquired and the purchase consideration of $395,100,000
has been allocated to goodwill. The assets, liabilities and operating results of
these companies are reflected in the Company's financial statements from their
respective dates of acquisition forward.
The Company also completed several divestitures of businesses and
product lines during the past two years, realizing proceeds of approximately
$51,000,000. The resulting gain of approximately $12,000,000, when netted
against non-recurring costs, had an immaterial effect on net income.
The following data summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company and DAP Products for the year
ended May 31, 1999. The pro forma amounts give effect to appropriate adjustments
resulting from the combination, but are not necessarily indicative of future
results of operations, or of what results would have been for the combined
companies. Pro forma results for the year ended May 31, 2000, were immaterial
and consequently are not presented.
- --------------------------------------------------------------------------------
May 31,
(In thousands, except per share amounts [Unaudited]) 1999
- --------------------------------------------------------------------------------
Net sales $1,944,880
==========
Net income $ 86,876
==========
Basic earnings per common share $.80
====
Diluted earnings per common share $.79
====
- --------------------------------------------------------------------------------
(3) FOREIGN CURRENCY: The functional currency of foreign subsidiaries
is their local currency. Accordingly, for the periods presented, assets and
liabilities have been translated using exchange rates prevailing at year end
while income and expense for the periods have been translated using an average
exchange rate. The resulting translation adjustments have been recorded in
Other Comprehensive Loss, a component of shareholders' equity, and will be
included in net earnings only upon the sale or liquidation of the underlying
foreign investment, which is not contemplated at this time. Transaction gains
and losses have been immaterial during the past three fiscal years.
23
<PAGE> 13
(4) COMPREHENSIVE INCOME: Accumulated other comprehensive loss (which
is shown net of taxes) consists of the following components:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FOREIGN MINIMUM UNREALIZED
CURRENCY PENSION GAIN(LOSS)
TRANSLATION LIABILITY ON
(IN THOUSANDS) ADJUSTMENTS ADJUSTMENTS SECURITIES TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at May 31, 1997 $ (8,216) $ $ 102 $ (8,114)
Other comprehensive loss (5,605) (786) (37) (6,428)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998 (13,821) (786) 65 (14,542)
Less: Reclassification adjustments for
(gains) losses included in net income (65) (65)
Other comprehensive loss (8,496) (67) (738) (9,301)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1999 (22,317) (853) (738) (23,908)
Less: Reclassification adjustments for
(gains) losses included in net income 738 738
Other comprehensive loss (16,223) 853 (1,015) (16,385)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 31, 2000 $(38,540) $ $ (1,015) $(39,555)
===========================================================================================================================
</TABLE>
(5) CASH AND SHORT-TERM INVESTMENTS: For purposes of the statement of
cash flows, the Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The Company does
not believe it is exposed to any significant credit risk on cash and short-term
investments.
(6) MARKETABLE SECURITIES: Marketable securities, all of which are
classified as available for sale, total $29,277,000 and $23,351,000 at May 31,
2000 and 1999, respectively. The estimated fair values of these securities are
included in other current assets and are based on quoted market prices.
(7) FINANCIAL INSTRUMENTS: The Company's financial instruments recorded
on the balance sheet include cash and short-term investments, accounts
receivable, notes and accounts payable, and debt. The carrying amount of cash
and short-term investments, accounts receivable and notes and accounts payable
approximates fair value because of their short-term maturity.
The carrying amount of the Company's debt instruments approximates fair
value based on quoted market prices, variable interest rates, or borrowing rates
for similar types of debt arrangements.
(8) INVENTORIES: Inventories are stated at the lower of cost or market,
cost being determined substantially on a first-in, first-out (FIFO) basis and
market being determined on the basis of replacement cost or net realizable
value. Inventory costs include raw material, labor and manufacturing overhead.
Inventories were composed of the following major classes:
May 31
-----------------------------
(In thousands) 2000 1999
- --------------------------------------------------------------------
Raw material and supplies $ 86,755 $ 80,827
Finished goods 157,804 161,618
- --------------------------------------------------------------------
TOTAL INVENTORIES $244,559 $242,445
======================================================================
24
<PAGE> 14
(9) DEPRECIATION: Depreciation is computed over the estimated useful
lives of the assets primarily using the straight-line method. Depreciation
expense charged to operations for the three years ended May 31, 2000 was
$42,290,000, $34,803,000 and $30,823,000, respectively. The annual depreciation
rates are based on the following ranges of useful lives:
Land improvements 10 to 50 years
Buildings and improvements 5 to 50 years
Machinery and equipment 3 to 20 years
(10) INTANGIBLES: The excess of cost over the underlying value of the
net assets of companies acquired is being amortized on the straight-line basis,
primarily over forty years. Amortization expense charged to operations for the
three years ended May 31, 2000 was $18,352,000, $13,625,000 and $12,435,000,
respectively. Cost of businesses over net assets acquired is shown net of
accumulated amortization of $88,060,000 at May 31, 2000 ($71,150,000 at May 31,
1999).
Intangible assets also represent costs allocated to formulae,
trademarks and other specifically identifiable assets arising from business
acquisitions. These assets are being amortized using the straight-line method
over periods of 7 to 40 years. The Company assesses the recoverability of the
excess of cost over the assigned value of net assets acquired by determining
whether the amortization of the balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operations.
Amortization expense charged to operations for the three years ended May 31,
2000 was $17,084,000, $12,504,000 and $11,473,000, respectively.
Other intangible assets consist of the following major classes:
<TABLE>
<CAPTION>
May 31
-------------------------------------
(In thousands) 2000 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Formulae $170,146 $ 89,358
Trademarks 106,363 84,194
Distributor networks 39,076 39,000
Workforce 40,589 37,433
Patents 11,080 10,987
Licenses 10,672 10,215
Other 12,883 13,169
- --------------------------------------------------------------------------------------
390,809 284,356
Accumulated amortization 70,178 51,800
- --------------------------------------------------------------------------------------
OTHER INTANGIBLE ASSETS, NET $320,631 $232,556
======================================================================================
</TABLE>
(11) RESEARCH AND DEVELOPMENT: Research and development costs are
charged to operations when incurred and are included in operating expenses. The
amounts charged for the three years ended May 31, 2000 were $22,328,000,
$18,022,000 and $15,815,000, respectively. The customer sponsored portion of
such expenditures was not significant.
(12) INTEREST EXPENSE, NET: Interest expense is shown net of investment
income which consists of interest, dividends and capital gains. Investment
income for the three years ended May 31, 2000 was $2,643,000, $4,880,000 and
$4,154,000, respectively.
(13) INCOME TAXES: The Company and its wholly owned domestic
subsidiaries file a consolidated federal income tax return. The tax effects of
transactions are recognized in the year in which they enter into the
determination of net income, regardless of when they are recognized for tax
purposes. As a result, income tax expense differs from actual taxes payable.
The accumulation of these differences at May 31, 2000 is shown as a noncurrent
liability of $60,566,000 (net of a noncurrent asset of $70,691,000). At May 31,
1999, the noncurrent liability was $53,870,000 (net of a noncurrent asset of
$40,333,000). The Company does not intend to distribute the accumulated
earnings of consolidated foreign subsidiaries amounting to $92,706,000 at May
31, 2000, and $92,021,000 at May 31, 1999, and therefore no provision has been
made for the taxes which would result if such earnings were remitted to the
Company.
25
<PAGE> 15
(14) ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(15) REPORTABLE SEGMENTS: Reportable segment information appears on
page 12 of this report.
Note B - Borrowings
<TABLE>
<CAPTION>
A description of long-term debt follows:
- ----------------------------------------------------------------------------------------------------
May 31
-------------------------
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit agreement for $300,000,000 with ten
banks through February 2, 2002. The chairman of the
board and chief executive officer of the Company is a
director of one of the banks providing this facility. $ $215,000
Commercial paper with a weighted average interest
rate at May 31, 2000 of 6.75%. These obligations
along with other short-term borrowings were
reclassified as long-term debt reflecting the
Company's intent and ability through unused credit
facilities, to refinance these obligations. 604,000
Short-term borrowings with a bank bearing interest
of 6.82% at May 31, 2000. 75,000 85,000
7.00% unsecured senior notes due June 15, 2005. 150,000 150,000
6.50% unsecured notes due March 1, 2008. 100,000 100,000
Revolving 364 day multi-currency credit agreement for
$23,445,000 with a bank. Interest, which is tied to
one of various rates, averaged 5.30% at May 31, 2000 17,553 19,884
6.75% unsecured senior notes due to an insurance company in annual
installments through 2003. 6,857 8,571
Other notes and mortgages payable at various rates of interest
due in installments through 2008, substantially secured by property. 10,907 7,418
- ----------------------------------------------------------------------------------------------------
964,317 585,873
Less current portion 4,987 3,764
- ----------------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT, LESS CURRENT MATURITIES $959,330 $582,109
====================================================================================================
</TABLE>
In addition to the $300,000,000 revolving credit facility, the Company
had a $400,000,000 one-year credit facility, the combination of which are used
as back up to the Company's borrowings in the Commercial Paper market.
Subsequent to the year end the Company refinanced both of these facilities with
two new facilities, a $500,000,000 five-year revolving credit facility and a
$200,000,000 one-year credit facility.
At May 31, 2000, the Company has unused short-term lines of credit with
several banks totalling $21,751,000.
The aggregate maturities of long-term debt for the five years
subsequent to May 31, 2000 are as follows: 2001 - $4,987,000; 2002 -
$201,750,000; 2003 - $3,536,000; 2004 - $3,023,000; 2005 - $929,000.
26
<PAGE> 16
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NOTE C - Income Taxes
Consolidated income before taxes consists of the following:
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31
---------------------------------------------------
<S> <C> <C> <C>
(In thousands) 2000 1999 1998
United States $ 41,424 $ 124,965 $ 118,011
Foreign 30,337 34,632 31,545
- -----------------------------------------------------------------------------------------------------------------------------------
$ 71,761 $ 159,597 $ 149,556
====================================================================================================================================
Provision for income taxes consists of the following:
Current:
U.S. federal $ 43,174 $ 48,609 $ 49,802
State and local 3,547 7,448 9,281
Foreign income and withholding taxes 15,129 13,183 13,096
- -----------------------------------------------------------------------------------------------------------------------------------
61,850 69,240 72,179
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred:
U.S. federal (29,028) (6,238) (9,970)
Foreign (2,053) 2,049 (490)
- -----------------------------------------------------------------------------------------------------------------------------------
(31,081) (4,189) (10,460)
- -----------------------------------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES $ 30,769 $ 65,051 $ 61,719
====================================================================================================================================
A reconciliation between the actual income tax expense provided and the income tax expense computed by applying the statutory
federal income tax rate of 35% to income before tax is as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31
---------------------------------------------------
(In thousands) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Income taxes at U.S. statutory rate $ 25,116 $ 55,859 $ 52,345
Excess of foreign taxes over the U.S. statutory rate 2,458 1,032 433
State and local income taxes net of federal income tax benefit 2,306 4,841 6,033
Tax credits (340) (660) (1,132)
Amortization of goodwill 4,285 3,326 3,346
Tax benefits from foreign sales corporation (1,725) (1,860) (1,400)
Other items, none of which exceed 5% of computed tax (1,331) 2,513 2,094
- -----------------------------------------------------------------------------------------------------------------------------------
ACTUAL TAX EXPENSE $ 30,769 $ 65,051 $ 61,719
====================================================================================================================================
ACTUAL TAX RATE 42.88% 40.76% 41.27%
====================================================================================================================================
</TABLE>
Deferred income taxes result from temporary differences in recognition of
revenue and expense for book and tax purposes, primarily from the temporary tax
differences relating to business combinations.
Note D - Common Shares
There are 200,000,000 common shares authorized with a stated value of $.015 per
share. At May 31, 2000 and 1999, there were 103,134,000 and 109,443,000 shares
outstanding respectively, each of which is entitled to one vote.
Basic earnings per share is computed by dividing income available to
common shareholders, the numerator, by the weighted average number of common
shares outstanding during each year, the denominator (107,221,000 in 2000,
108,731,000 in 1999 and 98,527,000 in 1998). In computing diluted earnings per
share, the net income was increased in 1999 and 1998 by the add back of interest
expense, net of tax, on convertible securities assumed to be converted. In
addition, the number of common shares was
27
<PAGE> 17
increased by common stock options with exercisable prices lower than the average
market prices of common shares during each year and reduced by the number of
shares assumed to have been purchased with proceeds from the exercised options.
In 1999 and 1998 the number of common shares was also increased by additional
shares issuable assuming conversion of convertible securities.
In April 1997, the Company adopted a Restricted Stock Plan. The Plan is
intended to replace, over a period of time, the Company's existing cash based
Benefit Restoration Plan. Under the terms of the Plan, up to 1,563,000 shares
may be awarded to certain employees through May 2007. For the year ended May 31,
2000, 108,000 shares were awarded under this Plan net of forfeitures (93,000
shares in 1999). None of these awards, which generally are subject to forfeiture
until the completion of five years of service, were vested at May 31, 2000 or
May 31, 1999.
In 1999, the Company authorized the repurchase of up to 10,000,000 of
its common shares. The repurchase of shares under this program may be made in
the open market or in private transactions, at times and in amounts and prices
that management deems appropriate. The Company may terminate or limit the
repurchase program at any time. Through May 31, 2000, the Company had
repurchased 7,813,000 shares (1,296,000 in 1999) at an aggregate cost of
$88,516,000 ($17,044,000 in 1999). Shares repurchased under this program are
held at cost and are included in Shareholders' Equity as Treasury Shares.
In April 1999, the Company adopted a Shareholder Rights Plan and
declared a dividend distribution of one right for each outstanding common share.
The Plan provides existing shareholders the right to purchase shares of the
Company at a discount in certain circumstances as defined by the Plan. The
rights are not exercisable at May 31, 2000 and expire in May 2009.
The Company has options outstanding under two stock option plans, the
1989 Stock Option Plan and the 1996 Key Employees Stock Option Plan, which
provides for the granting of options for up to 4,500,000 shares. These options
are generally exercisable cumulatively in equal annual installments commencing
one year from the grant date and have expiration dates ranging from July 2000 to
February 2010. At May 31, 2000, 291,000 shares (2,134,000 at May 31, 1999) were
available for future grants.
Transactions during the last two years are summarized as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SHARES UNDER OPTION 2000 1999
(In thousands)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, beginning of year (weighted average price of $13.54 ranging from
$5.84 to $17.25 per share) 4,708 4,432
Granted (weighted average price of $11.43 ranging from $9.56 to $15.00 per share) 1,843 722
Cancelled (weighted average price of $13.14 ranging from $9.56 to $16.35 per share) (208) (101)
Exercised (weighted average price of $8.79 ranging from $5.84 to $12.36 per share) (100) (345)
- -----------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING, END OF YEAR (WEIGHTED AVERAGE PRICE OF $13.01 RANGING FROM
$5.84 TO $17.25 PER SHARE) 6,243 4,708
===================================================================================================================================
EXERCISABLE, END OF YEAR (WEIGHTED AVERAGE PRICE OF $12.96 RANGING FROM
$5.84 TO $17.25 PER SHARE) 3,103 2,362
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
AT MAY 31, 2000 AT MAY 31, 2000
-------------------------------------------------------- ------------------------------------
Weighted Weighted Weighted
Range of Shares Average Average Shares Average
Exercise Prices (000's) Remaining Life Price (000's) Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5.00 - $ 9.99 1,288 8.1 $ 9.39 250 $ 8.67
$10.00 - $14.99 2,701 5.8 $12.65 1,947 $12.29
$15.00 - $17.25 2,254 7.6 $15.50 906 $15.59
----- -----
6,243 6.9 $13.01 3,103 $12.96
===== =====
</TABLE>
28
<PAGE> 18
The Company is accounting for its stock option plans under the provisions
of APB Opinion No. 25 and, accordingly, no compensation cost has been
recognized. If compensation cost had been determined based on the fair value at
the grant date for awards under this plan consistent with the method prescribed
by SFAS No. 123, the Company's net income and earnings per share for the years
ended May 31, 2000 and 1999, would have been reduced to the pro forma amounts
indicated in the following table:
- --------------------------------------------------------------------------------
(In thousands, except per share amounts) 2000 1999
- --------------------------------------------------------------------------------
Pro Forma Net Income $ 38,169 $ 92,239
================================================================================
Pro Forma Earnings Per Share:
Basic $.36 $.85
================================================================================
DILUTED $.36 $.84
================================================================================
The fair value of each option is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions. The expected volatility rate is 28.9% for shares granted in 2000
and 28.7% for 1999. The expected life is 7.5 and 7.3 years, with dividend yields
of 3.3% and 3.0% and risk-free interest rates of 6.4% and 5.0%, for 2000 and
1999, respectively.
Note E - Leases
At May 31, 2000, certain property, plant and equipment were leased by the
Company under long-term leases. Certain of these leases provide for increased
rental based upon an increase in the cost-of-living index. Future minimum lease
commitments as of May 31, 2000 for all non-cancelable leases are as follows:
- --------------------------------------------------------------------------------
May 31 (In thousands)
- --------------------------------------------------------------------------------
2001 $ 10,791
2002 8,127
2003 6,368
2004 3,005
2005 2,354
Thereafter 12,749
- --------------------------------------------------------------------------------
TOTAL MINIMUM LEASE COMMITMENTS $ 43,394
================================================================================
Rental expenses for all operating leases totalled $17,183,000 in 2000,
$13,934,000 in 1999 and $9,654,000 in 1998. Capitalized leases were
insignificant for the three years ended May 31, 2000.
Note F - Retirement Plans
The Company sponsors a non-contributory defined benefit pension plan (The
Retirement Plan) covering substantially all domestic non-union employees.
Pension coverage for employees of the Company's foreign subsidiaries is
provided, to the extent deemed appropriate, through separate plans, many of
which are governed by local statutory requirements. In addition, benefits for
domestic union employees are provided by separate plans.
The Retirement Plan provides benefits that are based upon years of service
and average compensation with accrued benefits vesting after five years.
Benefits for union employees are generally based upon years of service. The
Company's funding policy is to contribute annually an amount that can be
deducted for federal income tax purposes using a different actuarial cost method
and different assumptions from those used for financial reporting.
29
<PAGE> 19
- -------------------------------------------------------------------------------
Effective June 1, 1998, the Company adopted SFAS No. 132, Employers'
Disclosure About Pension and Other Postretirement Benefits. SFAS No. 132 does
not change the measurement or recognition of those plans, but revises the
disclosure requirements for pension and other postretirement benefit plans for
all years presented.
Net periodic pension cost (income) consisted of the following for the three
years ended May 31, 2000:
- --------------------------------------------------------------------------------
U.S. Plans Non-U.S. Plans
------------------------- --------------------------
(In thousands) 2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------
Service cost $ 6,650 $ 7,247 $ 5,575 $ 1,122 $ 1,041 $ 881
Interest cost 5,678 5,253 5,353 2,176 2,263 2,122
Expected return
on plan assets (6,123) (6,071) (4,930) (3,026) (3,183) (2,899)
Amortization of:
Prior service cost 132 114 110
Net gain on adoption
of SFAS No. 87 (96) (100) (100)
Net actuarial (gain)
loss recognized 439 71 (6) 91 1 (60)
Curtailment/settlement
(gains) losses 103 (1,728) (808) (24) (308)
- --------------------------------------------------------------------------------
NET PENSION COST $ 6,783 $ 4,786 $ 5,194 $ 339 $ (186) $ 44
================================================================================
30
<PAGE> 20
The changes in benefit obligations and plan assets, as well as the funded
status of the Company's pension plans at May 31, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
U.S. Plans Non-U.S. Plans
----------------------- ----------------------
(In thousands) 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 76,328 $ 74,091 $ 33,006 $ 32,093
Service cost 6,650 7,247 1,122 1,041
Interest cost 5,678 5,253 2,176 2,263
Benefits paid (3,820) (11,000) (1,376) (1,538)
Participant contributions 404 398
Actuarial (gain) loss (5,884) 2,755 (3,520) 1,126
Currency exchange rate changes 683 (1,466)
Curtailment/settlement (gains) losses (11,184) (2,018) (152) (911)
Plan amendments 2,786
Acquisitions 11,338
- ----------------------------------------------------------------------------------------------------------------
BENEFIT OBLIGATION AT END OF YEAR $ 81,892 $ 76,328 $ 32,343 $ 33,006
================================================================================================================
Fair value of plan assets at beginning of year $ 61,715 $ 64,132 $ 36,469 $ 38,106
Actual return on plan assets 22,675 607 4,138 871
Employer contributions 9,772 7,976 421 429
Participant contributions 404 398
Benefits paid (3,820) (11,000) (1,376) (1,702)
Currency exchange rate changes 865 (1,633)
Curtailment/settlement gains (losses) (6,092)
Acquisitions 17,252
- ----------------------------------------------------------------------------------------------------------------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR $ 101,502 $ 61,715 $ 40,921 $ 36,469
================================================================================================================
Excess (deficit) of plan assets versus
benefit obligations at end of year $ 19,610 $ (14,613) $ 8,577 $ 3,463
Contributions after measurement date 15 1,527 108 104
Unrecognized actuarial (gain) loss (13,191) 13,161 (1,811) 2,989
Unrecognized prior service cost 1,732 824
Unrecognized net transitional asset (285) (408)
- ----------------------------------------------------------------------------------------------------------------
NET AMOUNT RECOGNIZED $ 7,881 $ 491 $ 6,874 $ 6,556
================================================================================================================
</TABLE>
31
<PAGE> 21
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
U.S. Plans Non-U.S. Plans
----------------------- ----------------------
(In thousands) 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amounts recognized in the
consolidated balance sheets consist of:
Prepaid benefit cost $ 9,401 $ 2,788 $ 7,874 $ 7,446
Accrued benefit liability (1,520) (3,146) (1,000) (1,018)
Intangible asset (SFAS No. 87) 124
Accumulated other comprehensive loss (net of tax) 725 128
- ----------------------------------------------------------------------------------------------------------------
NET AMOUNT RECOGNIZED $ 7,881 $ 491 $ 6,874 $ 6,556
================================================================================================================
</TABLE>
For domestic plans with accumulated benefit obligations in excess of plan
assets, the projected benefit obligation, accumulated benefit obligation and
fair value of assets were $1,243,000, $124,000 and $ -0- , respectively, as of
May 31, 2000 and $4,000,000, $4,000,000 and $839,000, respectively, as of May
31, 1999. For foreign plans with accumulated benefit obligations in excess of
plan assets, the projected benefit obligation, accumulated benefit obligation
and fair value of assets were $1,088,000, $944,000 and $ -0- , respectively as
of May 31, 2000 and $1,018,000, $1,018,000 and $ -0- , respectively, as of May
31, 1999.
The following weighted average assumptions were used to determine the
Company's obligations under the plans:
- --------------------------------------------------------------------------------
U.S. Plans Non-U.S. Plans
----------------- ---------------
2000 1999 2000 1999
- --------------------------------------------------------------------------------
Discount rate 8.00% 7.00% 6.17% 5.83%
Expected return on plan assets 9.00% 9.00% 8.25% 8.25%
Rate of compensation increase 4.50% 4.50% 4.25% 4.25%
- --------------------------------------------------------------------------------
The plans' assets consist primarily of stocks, bonds and fixed income
securities. The Company also sponsors an employee savings plan under Section
401(k) of the Internal Revenue Code which covers substantially all non-union
employees in the United States. The Plan provides for matching contributions in
Company shares based upon qualified employee contributions. Matching
contributions charged to income were $4,925,000, $4,304,000 and $4,001,000 for
years ended May 31, 2000, 1999 and 1998, respectively.
32
<PAGE> 22
NOTE G - Postretirement Health Care Benefits
In addition to the defined benefit pension plan, the Company also provides
health care benefits to certain of its retired employees through unfunded plans.
Employees become eligible for these benefits if they meet minimum age and
service requirements. The components of this expense for the three years ended
May 31, 2000 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - Benefits earned during this period $ 110 $ 99 $ 90
Interest cost on the accumulated obligation 890 784 915
Amortization of unrecognized (gains) (55) (40) (52)
- -----------------------------------------------------------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT EXPENSE $ 945 $ 843 $ 953
===================================================================================================================================
</TABLE>
The changes in the benefit obligations of the plans at May 31, 2000 and 1999,
were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands) 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation at beginning of year $11,548 $14,661
Service cost 110 99
Interest cost 890 784
Settlement/curtailment (gains) losses (221)
Acquisitions 1,629
Benefit payments (902) (693)
Actuarial (gains) losses (1,238) (3,102)
Currency exchange rate changes 112 (201)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation at end of year 11,928 11,548
Unrecognized actuarial gains (losses) 2,881 1,625
- -----------------------------------------------------------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS $14,809 $13,173
===================================================================================================================================
</TABLE>
An 8% general discount rate was used in determining the accumulated
postretirement benefit obligation as of May 31, 2000 (7% for May 31, 1999). An
8% increase in the cost of covered health care benefits was generally assumed
for fiscal 2000 (9% for fiscal 1999). This trend rate in all cases is assumed tO
decrease to 5% after several years and remain at that level thereafter except
for various union plans which will cap at alternate benefit levels. A 1%
increase in the health care costs trend rate would have increased the
accumulated postretirement benefit obligation as of May 31, 2000 by $1,174,000
and the net postretirement expense by $119,000. A 1% decrease in the health care
costs trend rate would have decreased the accumulated postretirement benefit
obligation as of May 31, 2000 by $989,000 and the net postretirement expense by
$97,000.
<PAGE> 23
NOTE H - Contingencies and Loss Reserves
Accrued loss reserves consisted of the following classes:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
May 31
---------------------------------
(In thousands) 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued product liability reserves $ 41,176 $ 34,566
Accrued warranty reserves - current 7,908 8,234
Accrued environmental reserves 14,116 5,214
Accrued other 1,565 1,282
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued loss reserves - current 64,765 49,296
Accrued warranty reserves - long-term 13,740 18,816
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ACCRUED LOSS RESERVES $ 78,505 $ 68,112
===================================================================================================================================
</TABLE>
The Company, through its wholly owned insurance subsidiary, provides
certain insurance coverage, primarily product liability, to the Company's other
domestic subsidiaries. Excess coverage is provided by outside carriers. The
reserves reflected above provide for these potential losses as well as other
uninsured claims. Provision for estimated warranty costs is recorded at the time
of sale and periodically adjusted to reflect actual experience.
In addition, the Company, like others in similar businesses, is involved in
several proceedings relating to environmental matters. It is the Company's
policy to accrue remediation costs when it is probable that such efforts will be
required and the related costs can be reasonably estimated. These liabilities
are undiscounted and do not take into consideration any possible recoveries of
future insurance proceeds or claims against third parties. Included at May 31,
2000 are $7,000,000 of environmental reserves related to acquisitions during the
year.
Due to the uncertainty inherent in the loss reserve estimation process, it
is at least reasonably possible that actual costs will differ from estimates,
but, based upon information presently available, such future costs are not
expected to have a material adverse effect on the Company's competitive or
financial position or its ongoing results of operations. However, such costs
could be material to results of operations in a future period.
<PAGE> 24
NOTE I - Restructuring and Asset Impairment Charge
For the year ended May 31, 2000, the Company recorded a restructuring charge of
$45,000,000 in the first quarter plus $6,970,000 in the fourth quarter, for a
total of $51,970,000. Included in this charge are severance and other employee
related costs of $21,986,000, contract exit and termination costs of $2,059,000,
facility closures and write-downs of property, plant and equipment of
$22,342,000 and write-downs of intangibles of $5,583,000.
In addition to the $51,970,000 restructuring charge, related costs were
incurred during the year primarily to account for inventory of certain product
lines that are being discontinued, totalling $7,876,000, and these costs have
been charged to earnings and classified as a component of cost of sales.
Through May 31, 2000, the Company has paid or incurred $38,430,000 of the
$51,970,000 restructuring charge. The Company anticipates that substantially all
of the remaining restructuring costs will be paid by May 31, 2001.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Incurred
Total Through Balance
(In thousands) Charge May 31, 2000 May 31, 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Severance costs $21,986 $ 9,928 $12,058
Exit and termination costs 2,059 577 1,482
Property, plant and equipment 22,342 22,342
Intangibles 5,583 5,583
- -----------------------------------------------------------------------------------------------------------------------------------
$51,970 $38,430 $13,540
===================================================================================================================================
</TABLE>
The severance and other employee related costs provide for a reduction of
approximately 760 employees related to the facility closures and the
streamlining of operations related to cost reduction initiatives. The costs of
exit and contract termination are comprised primarily of non-cancelable lease
obligations on the closed facilities. The charge for property, plant and
equipment represents write-downs to net realizable value of less efficient and
duplicate facilities and machinery and equipment no longer needed in the
combined restructured manufacturing operations.
<PAGE> 25
NOTE J - Interim Financial Information (Unaudited)
The following is a summary of the unaudited quarterly results of operations for
the years ended May 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------
(In thousands, except per share amounts) August 31 November 30 February 29 May 31
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Net sales $495,542 $500,417 $411,398 $546,774
Gross profit $225,963 $214,276 $174,283 $239,972
Net income $ 7,264 $ 20,364 $ 3,731 $ 9,633
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $.07 $.19 $.04 $.09
==================================================================================================================================
DILUTED EARNINGS PER SHARE $.07 $.19 $.04 $.09
==================================================================================================================================
DIVIDENDS PER SHARE $.1175 $.1225 $.1225 $.1225
==================================================================================================================================
<CAPTION>
Three Months Ended
------------------------------------------------------------
(In thousands, except per share amounts) August 31 November 30 February 28 May 31
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Net sales $448,132 $415,725 $373,007 $475,290
Gross profit $204,402 $187,883 $164,626 $228,133
Net income $ 31,224 $ 21,712 $ 6,130 $ 35,480
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $.30 $.20 $.06 $.32
===================================================================================================================================
DILUTED EARNINGS PER SHARE $.29 $.20 $.06 $.32
===================================================================================================================================
DIVIDENDS PER SHARE $.1120 $.1175 $.1175 $.1175
===================================================================================================================================
</TABLE>
Quarterly earnings per share do not total to the yearly earnings per share
due to the weighted average number of shares outstanding in each quarter.
<PAGE> 26
<TABLE>
<S> <C> <C>
V Independent Auditor's Report
To The Board of Directors and Shareholders RPM, Inc. and Subsidiaries Medina, Ohio
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
We have audited the accompanying consolidated balance sheets of RPM, Inc.
and Subsidiaries as of May 31, 2000 and 1999, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three year period ended May 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of RPM, Inc.
and Subsidiaries at May 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the years in the three year period ended May
31, 2000, in conformity with generally accepted accounting principles.
/s/ Ciulla, Smith & Dale, LLP
Cleveland, Ohio
July 7, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>9
<FILENAME>ex21-1.txt
<DESCRIPTION>EXHIBIT 21.1
<TEXT>
<PAGE> 1
EXHIBIT 21.1
The following is a list of subsidiaries of RPM, Inc.(1) as of May 31, 2000.
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- ---- -------------
<S> <C>
American Emulsions Co., Inc. Georgia
Select Dye & Chemical, Inc. Georgia
Bondex International, Inc. Ohio
Bondo Corporation Ohio
Carboline Company Delaware
Carboline International Corporation(2) Delaware
Carboline Dubai Corporation Missouri
Chemical Coatings, Inc. North Carolina
Chemical Specialties Manufacturing Corp.(3) Maryland
Consolidated Coatings Corporation Ohio
DAP Canada Company(4) Canada
DAP Products Inc.(5) Delaware
Day-Glo Color Corp. Ohio
DesignCraft Fabric Corporation Illinois
DIFY.com, Inc. Delaware
Dryvit Holdings, Inc. Delaware
Dryvit Systems, Inc.(6) Rhode Island
Dryvit Systems Canada Company(7) Canada
Dryvit Systems New Zealand Limited New Zealand
Metro Clean Systems, Inc. Delaware
Tech 21 Panel Systems, Inc. Rhode Island
Ultra-Tex Surfaces, Inc. California
Fibergrate Composite Structures Incorporated Delaware
Chemgrate (Asia), Inc.(8) Washington
Chemgrate Corporation Washington
Chem-Grate Corporation Tennessee
Chemgrate (PRC), Inc.(9) Washington
Fibergrate Corporation(10) Texas
First Colonial Insurance Company, Inc. Vermont
Flecto International Supply, Inc. Nevada
Flecto Coatings Company(11) Canada
Guardian Products, Inc. Delaware
JanSanDex.com, Inc. Delaware
K-C Divestiture Corp. of Delaware Delaware
Kop-Coat, Inc. Ohio
K-C Divestiture Corp. New York
Kop-Coat New Zealand Limited New Zealand
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Agpro (N.Z.) Limited New Zealand
Mohawk Finishing Products, Inc. New York
Plasite Protective Coatings, Inc. Delaware
Briner Paint Mfg. Co. Texas
Republic Powdered Metals, Inc. Ohio
RPM Asia Pte. Ltd. Singapore
Alumanation (M) Sdn. Bhd. Malaysia
Espan Corporation Pte. Ltd.(12) Singapore
RPM China Pte. Ltd. Singapore
Magnagro Industries Pte. Ltd.(13) Singapore
Dryvit Wall Systems (Suzhou)
(Co. Ltd.) China
RPM Consumer Group, Inc. Ohio
RPM-e/c, Inc. Ohio
RPM/Europe B.V.(14) Netherlands
RPM/Belgium N.V.(15) Belgium
RPOW U.K. Limited U.K.
Bondo U.K. Limited U.K.
Carboline U.K. Limited U.K.
Chemspec Europe Limited U.K.
Dryvit U.K. Limited U.K.
Fibergrate Composite Structures Limited U.K.
Mantrose U.K. Limited U.K.
Agricoat Industries Limited U.K.
Wm. Zinsser Limited U.K.
RPM Holdings UK Limited U.K.
Dore Holdings Limited U.K.
Amtred Limited U.K.
Carboline Europe Limited U.K.
Rust-Oleum U.K. Limited U.K.
Stonhard (Ireland) Limited Ireland
Stonhard U.K. Limited U.K.
Rust-Oleum Netherlands B.V. Netherlands
StonCor Benelux B.V. Netherlands
Tremco B.V. Netherlands
RPM of Mass., Inc. Massachusetts
Haartz-Mason, Inc. Massachusetts
Westfield Coatings Corporation Massachusetts
RPM World Trade, Inc. Delaware
RPM World Trade, Ltd. Virgin Islands
Rust-Oleum Corporation(16) Illinois
ROC Sales, Inc.(17) Illinois
Rust-Oleum Holding, Inc.(18) Delaware
Rust-Oleum International Corporation(19) Delaware
Rust-Oleum Sales Company, Inc. Ohio
Star Finishing Products, Inc. Illinois
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
StonCor Group, Inc.(20) Delaware
Parklin Management Group, Inc.(21) New Jersey
StonCor Distribution, Inc.(22) Delaware
Stonhard Agencia en Chile Chile
Stonhard Company(23) Canada
TCI, Inc. Georgia
The Euclid Chemical Company(24) Ohio
Euclid Chemical International Sales Corp.(25) Ohio
Grandcourt N.V.(26) Netherlands
Redwood Transport, Inc.(27) Ohio
The Flecto Company, Inc.(28) California
The Testor Corporation Ohio
Tremco Incorporated(29) Ohio
Paramount Technical Products, Inc. South Dakota
Tremco A.B. Sweden
Tremco Asia Pacific Pty. Limited Australia
PABCO Products Pty. Limited Australia
Tremco (NZ) Limited New Zealand
Tremco Pty. Limited Australia
Tremco Asia Pte. Ltd. Singapore
Tremco GmbH Germany
Tremco Company(30) Canada
RPM Canada Investment Company Canada
Tremco Limited U.K.
OY Tremco Ltd. Finland
Tretobond Ltd. U.K.
Tretol Group Ltd. U.K.
Tretol Ltd. U.K.
Weatherproofing Technologies, Inc.(31) Delaware
William Zinsser & Co. Incorporated(32) New Jersey
Mantrose-Haeuser Co., Inc. Massachusetts
Richard E. Thibaut, Inc. New York
Zinsser Distribution, Inc.(33) Delaware
</TABLE>
- --------
(1) RPM, Inc. owns .32% of the outstanding shares of Radiant Color N.V.,
a Belgian corporation. The remaining 99.68% of the outstanding shares of Radiant
Color N.V. are held by RPM/Europe B.V. Radiant Color N.V. owns 99.99% of the
outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining
.01% of the outstanding shares of Martin Mathys N.V. are held by RPM/Belgium
N.V. RPM, Inc. owns 88% of the outstanding shares of RPM/Lux Consult S.A., a
Luxembourg corporation. The remaining 12% of the outstanding shares of RPM/Lux
Consult S.A. are held by Tremco Incorporated. RPM/Lux Consult S.A. owns .2% of
the outstanding shares of Monile France S.A.R.L., a French corporation. The
remaining 99.8% of the outstanding shares of Monile France S.A.R.L. are held by
RPM/Belgium N.V.
<PAGE> 4
- --------------------------------------------------------------------------------
(2) Carboline International Corporation owns 89.2683% of Chemrite Coatings
(Pty.) Ltd., a South African corporation; 49% of Carboline Korea Ltd.; 45% of
Carboline Norge AS; 49% of Carboline Middle East LLC; 33.33% of Japan Carboline
Company Ltd.; and 40% of CDC Carboline (India) Ltd. Chemrite Coatings (Pty.)
Ltd. owns 100% of Chemrite Equipment Systems (Pty.) Ltd., a South African
corporation.
(3) Chemical Specialties Manufacturing Corp. is a 49% joint venture partner in
Henan G&C Chemical Company Limited, a Chinese corporation.
(4) DAP Canada Company owns 10% of the outstanding shares of DAP Chile S.A., a
Chilean corporation. The remaining 90% of the outstanding shares of DAP Chile
S.A. are held by DAP Products Inc. DAP Canada Company is a partner in RPM
Canada, a General Partnership, an Ontario partnership. The remaining partners of
RPM Canada, a General Partnership are Dryvit Systems Canada Company, Flecto
Coatings Company, Stonhard Company and Tremco Company.
(5) DAP Products Inc. owns 90% of the outstanding shares of DAP Chile S.A., a
Chilean corporation. The remaining 10% of the outstanding shares of DAP Chile
S.A. are held by DAP Canada Company.
(6) Dryvit Systems, Inc. is a 51% joint venture partner in Beijing Dryvit
Chemical Building Materials Co., Ltd., a Peoples Republic of China company and a
55.41% joint venture partner in Dryvit Systems USA (Europe) sp z.oo., a Polish
company.
(7) Dryvit Systems Canada Company is a partner in RPM Canada, a General
Partnership, an Ontario partnership. The remaining partners of RPM Canada, a
General Partnership are DAP Canada Company, Flecto Coatings Company, Stonhard
Company and Tremco Company.
(8) Chemgrate (Asia), Inc. owns 50% of the outstanding shares of Chemgrate
Shanghai FRP Co., Ltd., a Chinese corporation. The remaining 50% of the
outstanding shares of Chemgrate Shanghai FRP Co., Ltd. are held by Chemgrate
(PRC), Inc.
(9) Chemgrate (PRC), Inc. owns 50% of the outstanding shares of Chemgrate
Shanghai FRP Co., Ltd., a Chinese corporation. The remaining 50% of the
outstanding shares of Chemgrate Shanghai FRP Co., Ltd. are held by Chemgrate
(Asia), Inc.
(10) Fibergrate Corporation owns 50% of Fibergrate B.V., a Netherlands
corporation.
(11) Flecto Coatings Company owns 21% of the outstanding shares of Harry A.
Crossland Investments, Ltd., a Nevada corporation. The remaining 79% of the
outstanding shares of Harry A. Crossland Investments, Ltd. are held by The
Flecto Company, Inc. Harry A. Crossland Investments, Ltd. owns 100% of the
outstanding shares of Crossland Distributors Ltd., a Canadian corporation.
Flecto Coatings Company is a partner in RPM Canada, a General
<PAGE> 5
- -------------------------------------------------------------------------------
Partnership, an Ontario partnership. The remaining partners of RPM Canada, a
General Partnership are DAP Canada Company, Dryvit Systems Canada Company,
Stonhard Company and Tremco Company.
(12) Espan Corporation Pte. Ltd. owns 40% of the outstanding shares of Pacific
Goldhill Pte. Ltd., a Singapore corporation.
(13) Magnagro Industries Pte. Ltd. owns 90% of the outstanding shares of
Shanghai Ban Lee Heng Construction Co., Ltd., a Chinese corporation.
(14) RPM/Europe B.V. owns 99.68% of the outstanding shares of Radiant Color
N.V., a Belgian corporation. The remaining .32% of the outstanding shares of
Radiant Color N.V. are held by RPM, Inc. Radiant Color N.V. owns 99.99% of the
outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining
.01% of the outstanding shares of Martin Mathys N.V. are held by RPM/Belgium
N.V. RPM/Europe B.V. owns 99.99% of the outstanding shares of RPOW France S.A.,
a French corporation. The remaining .01% of the outstanding shares of RPOW
France S.A. are held by directors of RPOW France S.A. RPOW France S.A. owns 100%
of the outstanding shares of Stonhard S.A.S and Corroline France S.A., both
French corporations, and 99.99% of the outstanding shares of Rust-Oleum France
S.A., a French corporation. The remaining .01% of the outstanding shares of
Rust-Oleum France S.A. are held by directors of Rust-Oleum France S.A. RPOW
France S.A. owns 95% of the outstanding shares of RPM Italy S.R.L., an Italian
corporation. The remaining 5% of the outstanding shares of RPM Italy S.R.L. are
held by RPM/Europe B.V. RPM Italy S.R.L. owns 100% of the outstanding shares of
APSA S.P.A., an Italian corporation.
(15) RPM/Belgium N.V. owns 99.8% of the outstanding shares of Monile France
S.A.R.L., a French corporation. The remaining .2% of the outstanding shares of
Monile France S.A.R.L. are held by RPM/Lux Consult S.A. RPM/Belgium N.V. owns
96% of the outstanding shares of Alteco Chemical S.A., a Portuguese company. Of
the remaining outstanding shares of Alteco Chemical S.A., 1% is held by Alteco
Technik GmbH and 3% are held by three directors of Alteco Chemical S.A.
(16) Rust-Oleum Corporation owns 99% of Rust-Oleum (Chile) Ltda, a Chilean
limited liability company. The remaining 1% of the outstanding shares of
Rust-Oleum (Chile) Ltda. are held by ROC Sales, Inc. Rust-Oleum Corporation owns
99.992% of the outstanding shares of Rust-Oleum Argentina S.A., an Argentine
corporation. The remaining .008% of the outstanding shares of Rust-Oleum
Argentina S.A. are owned by a resident director of Rust-Oleum Argentina S.A.
(17) ROC Sales, Inc. owns 1% of the outstanding shares of Rust-Oleum (Chile)
Ltda., a Chilean limited liability company. The remaining 99% of the outstanding
shares of Rust-Oleum (Chile) Ltda. are held by Rust-Oleum Corporation.
(18) Rust-Oleum Holding, Inc. is the 1% general partner of ROC, Limited
Partnership, a Delaware limited partnership. Rust-Oleum International
Corporation is the 99% limited partner of ROC, Limited Partnership.
<PAGE> 6
- --------------------------------------------------------------------------------
(19) Rust-Oleum International Corporation is the 99% limited partner of ROC,
Limited Partnership, a Delaware limited partnership. Rust-Oleum Holding, Inc. is
the 1% general partner of ROC, Limited Partnership.
(20) StonCor Group, Inc. owns 99% of the outstanding shares of Stonhard S.A., a
Luxembourg corporation. The remaining 1% of the outstanding shares of Stonhard
S.A. are held by Parklin Management Group, Inc. StonCor Group, Inc. owns 79% of
the outstanding shares of StonCor (Deutschland) GmbH, a German corporation. The
remaining 21% of the outstanding shares of StonCor (Deutschland) GmbH are held
by Parklin Management Group, Inc. StonCor (Deutschland) GmbH owns 100% of the
outstanding shares of Alteco Technik GmbH, a German corporation. Alteco Technik
GmbH owns 1% of the outstanding shares of Alteco Chemical S.A., a Portuguese
company. Of the remaining outstanding shares of Alteco Chemical S.A., 96% is
held by RPM/Belgium N.V. and 3% are held by three directors of Alteco Chemical
S.A. StonCor Group, Inc. owns 99.25% of the outstanding shares of Stonhard S.A.
de C.V. Mexico, a Mexican corporation, and 99.99% of the outstanding shares of
Stonhard de Mexico S.A. de C.V., a Mexican corporation. Stonhard S.A. de C.V.
Mexico owns 100% of the outstanding shares of Plasite S.A. de C.V. Mexico, a
Mexican corporation, and 100% of the outstanding shares of Stonhard S.A. de
C.V., a Columbian corporation. Stonhard de Mexico S.A. de C.V. owns 100% of the
outstanding shares of Juarez Immobiliaria S.A. de C.V., a Mexican corporation.
StonCor Group, Inc. owns 75% of the outstanding shares of Stonhard South America
Ltda., a Brazilian limited liability company and 80% of the outstanding shares
of Multicolor S.A. Argentina I.yC., an Argentine corporation. StonCor Group,
Inc. is a 50% joint venture partner in Stonhard Distribuidora de Suelos
Industriales S.A., a Spanish corporation. StonCor Group, Inc. is the 1% general
partner of Stonhard, L.P., a Delaware limited partnership. StonCor Distribution,
Inc. is the 99% limited partner of Stonhard, L.P.
(21) Parklin Management Group, Inc. owns 1% of the outstanding shares of
Stonhard S.A., a Luxembourg corporation. The remaining 99% of the outstanding
shares of Stonhard S.A. are held by StonCor Group, Inc. Parklin Management
Group, Inc. owns 21% of the outstanding shares of StonCor (Deutschland) GmbH, a
German corporation. The remaining 79% of the outstanding shares of StonCor
(Deutschland) GmbH are held by StonCor Group, Inc. StonCor (Deutschland) GmbH
owns 100% of the outstanding shares of Alteco Technik GmbH, a German
corporation. Alteco Technik GmbH owns 1% of the outstanding shares of Alteco
Chemical S.A., a Portuguese company. Of the remaining outstanding shares of
Alteco Chemical S.A., 96% is held by RPM/Belgium N.V. and 3% are held by three
directors of Alteco Chemical S.A.
(22) StonCor Distribution, Inc. is the 99% limited partner of Stonhard, L.P., a
Delaware limited partnership. StonCor Group, Inc. is the 1% general partner of
Stonhard, L.P.
(23) Stonhard Company is a partner in RPM Canada, a General Partnership, an
Ontario partnership. The remaining partners of RPM Canada, a General Partnership
are DAP Canada Company, Dryvit Systems Canada Company, Flecto Coatings Company,
and Tremco Company.
<PAGE> 7
- -------------------------------------------------------------------------------
(24) The Euclid Chemical Company is a 51% joint venture partner in Euclid
Admixture Canada, Inc., a Canadian corporation and a 51% joint venture partner
in Euclid Admixture LLC, a Mississippi limited liability company. The Euclid
Chemical Company owns 99.997% of the outstanding shares of Eucomex, S.A. de
C.V., a Mexican corporation. The remaining .003% of the outstanding shares of
Eucomex, S.A. de C.V. are held by Redwood Transport, Inc. The Euclid Chemical
Company owns 49% of the outstanding shares of Toxement S.A., a Columbian
corporation. Redwood Transport, Inc. and Euclid Chemical International Sales
Corp. each own .0025% of the outstanding shares of Toxement S.A. Grandcourt N.V.
owns 50.99% of the outstanding shares of Toxement S.A.
(25) Euclid Chemical International Sales Corp. owns .0025% of the outstanding
shares of Toxement S.A., a Columbian corporation.
(26) Grandcourt N.V. owns 50.99% of the outstanding shares of Toxement S.A., a
Columbian corporation.
(27) Redwood Transport, Inc. owns .003% of the outstanding shares of Eucomex,
S.A. de C.V., a Mexican corporation. The remaining 99.997% of the outstanding
shares of Eucomex, S.A. de C.V. are held by The Euclid Chemical Company. Redwood
Transport, Inc. owns .0025% of the outstanding shares of Toxement S.A., a
Columbian corporation.
(28) The Flecto Company, Inc. owns 79% of the outstanding shares of Harry A.
Crossland Investments, Ltd., a Nevada corporation. The remaining 21% of the
outstanding shares of Harry A. Crossland Investments, Ltd. are owned by Flecto
Coatings Company. Harry A. Crossland Investments, Ltd. owns 100% of the
outstanding shares of Crossland Distributors Ltd., a Canadian corporation.
(29) Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%
of the outstanding shares of Toxement S.A., a Columbian corporation. Tremco
Incorporated owns 49% of the outstanding shares of Sime Tremco Sdn. Bhd., a
Malaysian corporation. Tremco Incorporated owns 99.999% of the outstanding
shares of Tremco Far East Limited, a Hong Kong corporation. The remaining .001%
of the outstanding shares of Tremco Far East Limited is owned by a director of
Tremco Far East Limited. Tremco Far East Limited owns 100% of the outstanding
shares of Tremco (Malaysia) Sdn. Bhd., a Malaysian corporation. Tremco
Incorporated owns 12% of the outstanding shares of RPM/Lux Consult S.A., a
Luxembourg corporation. The remaining 88% of the outstanding shares of RPM/Lux
Consult S.A. are held by RPM, Inc. RPM/Lux Consult S.A. owns .2% of the
outstanding shares of Monile France S.A.R.L., a French corporation. The
remaining 99.8% of the outstanding shares of Monile France S.A.R.L. are held by
RPM/Belgium N.V.
(30) Tremco Company is a partner in RPM Canada, a General Partnership, an
Ontario partnership. The remaining partners of RPM Canada, a General Partnership
are DAP Canada Company, Dryvit Systems Canada Company, Flecto Coatings Company
and Stonhard Company.
<PAGE> 8
- -------------------------------------------------------------------------------
(31) Weatherproofing Technologies, Inc. owns .0025% of the outstanding shares of
Toxement S.A., a Columbian corporation.
(32) William Zinsser & Co. Incorporated is the 1% general partner of Zinsser,
L.P., a Delaware limited partnership. Zinsser Distribution, Inc. is the 99%
limited partner of Zinsser, L.P.
(33) Zinsser Distribution, Inc. is the 99% limited partner of Zinsser, L.P., a
Delaware limited partnership. William Zinsser & Co. Incorporated is the 1%
general partner of Zinsser, L.P.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>10
<FILENAME>ex23-1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<PAGE> 1
Exhibit 23.1
Consent of Independent Accountants
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated July 7, 2000 in the Annual Report
on Form 10-K for the year ending May 31, 2000, in RPM, Inc.'s Registration
Statements on Form S-3 (333-19305, acquisition of Marson Automotive Division,
and 333-51371 acquisition of The Flecto Company, Inc.) and Registration
Statements on Form S-8 (Reg. Nos. 2-65508, 1979 Stock Option Plan, 33-32794,
1989 Stock Option Plan and 333-35967, 1996 Stock Option Plan).
/s/ Ciulla, Smith & Dale LLP
-----------------------------
Ciulla, Smith & Dale, LLP
August 28, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>11
<FILENAME>ex27-1.txt
<DESCRIPTION>EXHIBIT 27.1
<TEXT>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> MAY-31-2000
<CASH> 31,340
<SECURITIES> 0
<RECEIVABLES> 415,931
<ALLOWANCES> 16,248
<INVENTORY> 244,559
<CURRENT-ASSETS> 785,092
<PP&E> 599,679
<DEPRECIATION> 233,451
<TOTAL-ASSETS> 2,099,203
<CURRENT-LIABILITIES> 376,202
<BONDS> 959,330
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 1,616
<OTHER-SE> 644,108
<TOTAL-LIABILITY-AND-EQUITY> 2,099,203
<SALES> 1,954,131
<TOTAL-REVENUES> 1,954,131
<CGS> 1,099,637
<TOTAL-COSTS> 1,778,607
<OTHER-EXPENSES> 51,970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,793
<INCOME-PRETAX> 71,761
<INCOME-TAX> 30,769
<INCOME-CONTINUING> 40,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,992
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
</TABLE>
</TEXT>
</DOCUMENT>
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