SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Under
Rule 14a-12
RPM, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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RPM, INC. - 2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258 - 330-273-5090
[RPM LOGO]
THOMAS C. SULLIVAN
Chairman
August 29, 2002
TO RPM SHAREHOLDERS:
This year's Annual Meeting of RPM Shareholders will be held at 2:00 p.m.,
Eastern Daylight Time, Friday, October 11, 2002, at Severance Hall, located on
the northeast corner of Euclid Avenue and East Boulevard in Cleveland's
University Circle area. The Cleveland Orchestra will not be performing at the
Annual Meeting. Please note the enclosed insert for further details.
In addition to discussing the items of business outlined in this Proxy
Statement, we look forward to giving you a progress report on the first quarter
of our current fiscal year, which will end on August 31. As in the past, there
will be an informal discussion of the Company's activities, during which time
your questions and comments will be welcomed.
In addition to electing four Directors in Class III, the agenda for this
year's meeting includes a proposal to change RPM's state of incorporation from
Ohio to Delaware. The reincorporation proposal will not have a material impact
on you as a shareholder. The proposed reincorporation will enable us to align
the legal structure of our various operating companies consistent with their
business objectives and our current financial reporting. The reincorporation
proposal is fully set forth in the accompanying Proxy Statement, which you are
urged to read thoroughly.
The agenda for this year's meeting also includes a proposal to approve the
2002 Performance Accelerated Restricted Stock Plan. In light of the executive
transition planned in connection with Jim Karman's and my retirement, the Board
of Directors and I believe that approval of a new incentive plan is desirable in
order to properly incentivize the key members of our corporate and operating
management teams. These individuals, many of whom are highlighted in this year's
Annual Report to Shareholders, have contributed significantly to our past
achievements and will, I am confident, lead the Company to even greater success
in the future.
FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, YOUR BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS.
We hope that you are planning to attend the Annual Meeting personally, and
we look forward to seeing you. Whether or not you expect to attend in person,
the return of the enclosed Proxy as soon as possible would be greatly
appreciated and will ensure that your shares will be represented at the Annual
Meeting. If you do attend the Annual Meeting, you may, of course, withdraw your
Proxy should you wish to vote in person.
On behalf of the Directors and management of RPM, I would like to thank you
for your continued support and confidence.
Sincerely yours,
/s/ Thomas C. Sullivan
THOMAS C. SULLIVAN
[RPM LOGO]
2628 PEARL ROAD - P.O. BOX 777
MEDINA, OHIO 44258
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of RPM, Inc.
will be held at Severance Hall, located on the northeast corner of Euclid Avenue
and East Boulevard in Cleveland's University Circle area, on Friday, October 11,
2002, at 2:00 P.M., Eastern Daylight Time, for the following purposes:
(1) To elect four Directors in Class III for a three-year term ending in
2005;
(2) To approve and adopt the reincorporation of RPM, Inc. (the "Company" or
"RPM") as a Delaware corporation pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") by and among the Company, RPM
International Inc., a newly formed Delaware corporation
("RPM-Delaware"), and a newly formed Ohio corporation and wholly-owned
subsidiary of RPM-Delaware ("RPM Merger Sub"), whereby RPM Merger Sub
will be merged with and into the Company and each outstanding common
share of the Company will be converted into the right to receive one
share of RPM-Delaware common stock, with the result that the Company
will become a wholly-owned subsidiary of RPM-Delaware;
(3) To approve and adopt a proposal to increase the number of authorized
shares of common stock from 200,000,000 to 300,000,000 and to add a
class of serial preferred stock in the amount of 50,000,000 shares,
subject to the approval of the change in the Company's state of
incorporation, as proposed above;
(4) To approve and adopt the RPM, Inc. 2002 Performance Accelerated
Restricted Stock Plan; and
(5) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Holders of Common Shares of record at the close of business on August 16,
2002 are entitled to receive notice of and to vote at the Annual Meeting.
By Order of the Board of Directors.
P. KELLY TOMPKINS
Secretary
August 29, 2002
Please fill in and sign the enclosed Proxy and return the Proxy
in the envelope enclosed herewith.
[RPM LOGO]
2628 PEARL ROAD - P.O. BOX 777
MEDINA, OHIO 44258
PROXY STATEMENT
MAILED ON OR ABOUT AUGUST 29, 2002
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 11, 2002
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of RPM, Inc. (the "Company" or "RPM") to be
used at the Annual Meeting of Shareholders of the Company to be held on October
11, 2002, and any adjournment or postponement thereof. The time, place and
purposes of the Annual Meeting are stated in the Notice of Annual Meeting of
Shareholders which accompanies this Proxy Statement.
The accompanying Proxy is solicited by the Board of Directors of the
Company. All validly executed Proxies received by the Board of Directors of the
Company pursuant to this solicitation will be voted at the Annual Meeting, and
the directions contained in such Proxies will be followed in each instance. If
no directions are given, the Proxy will be voted FOR the election of the four
nominees listed on the Proxy, FOR the approval and adoption of the
reincorporation of RPM from Ohio to Delaware pursuant to the Merger Agreement,
FOR the increase in the number of authorized shares of common stock from
200,000,000 to 300,000,000 and the addition of a class of preferred stock in the
amount of 50,000,000 shares, subject to the approval of the reincorporation
proposal, and FOR the approval and adoption of the RPM, Inc. 2002 Performance
Accelerated Restricted Stock Plan.
Any person giving a Proxy pursuant to this solicitation may revoke it. A
shareholder, without affecting any vote previously taken, may revoke a Proxy by
giving notice to the Company in writing, in open meeting or by a duly executed
Proxy bearing a later date.
The expense of soliciting Proxies, including the cost of preparing,
assembling and mailing the Notice, Proxy Statement and Proxy, will be borne by
the Company. The Company may pay persons holding shares for others their
expenses for sending proxy materials to their principals. In addition to
solicitation of Proxies by mail, the Company's Directors, officers and
employees, without additional compensation, may solicit Proxies by telephone,
telegraph and personal interview. The Company retained Innisfree M&A
Incorporated to aid in the solicitation of proxies for an anticipated base fee
of approximately $12,500, plus reimbursement of certain expenses related to the
mailing and solicitation.
VOTING RIGHTS
The record date for determination of shareholders entitled to vote at the
Annual Meeting was the close of business on August 16, 2002. On that date, the
Company had 114,829,899 common shares, without par value ("Common Shares"),
outstanding and entitled to vote at the Annual Meeting. Each Common Share is
entitled to one vote.
At the Annual Meeting, in accordance with the General Corporation Law of
Ohio and the Company's Code of Regulations ("Code"), the inspectors of election
appointed by the Board of Directors for the Annual Meeting will determine the
presence of a quorum and will tabulate the results of shareholder voting. As
provided by the General Corporation Law of Ohio and the
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Company's Code, holders of shares entitling them to exercise a majority of the
voting power of the Company, present in person or by proxy at the Annual
Meeting, will constitute a quorum for such meeting. The inspectors of election
intend to treat properly executed proxies marked "abstain" as "present" for
these purposes. In the event a quorum is not present, the Company expects to
adjourn or postpone the meeting in order to solicit additional proxies.
Nominees for election as Directors receiving the greatest number of votes
will be elected Directors. Votes that are withheld or broker non-votes in
respect of the election of Directors will not be counted in determining the
outcome of the election. The General Corporation Law of Ohio provides that if
notice in writing is given by any shareholder to the President, a Vice President
or the Secretary of the Company not less than 48 hours before the time fixed for
holding the meeting that the shareholder desires the voting at the election to
be cumulative, each shareholder shall have cumulative voting rights in the
election of Directors. Cumulative voting enables shareholders to give one
nominee for Director as many votes as is equal to the number of Directors to be
elected multiplied by the number of shares in respect of which a shareholder is
voting, or to distribute votes on the same principle among two or more nominees,
as the shareholder sees fit.
THE PROPOSAL TO REINCORPORATE THE COMPANY IN DELAWARE REQUIRES THE
AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF THE
COMPANY AT THE CLOSE OF BUSINESS ON AUGUST 16, 2002, THE RECORD DATE. THE
PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES AND ADD A CLASS OF
PREFERRED STOCK REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING COMMON SHARES AS OF THE RECORD DATE. THEREFORE, BROKER NON-VOTES
AND ABSTENTIONS WILL HAVE THE EFFECT OF NEGATIVE VOTES WITH RESPECT TO THESE
PROPOSALS. ACCORDINGLY, THE COMPANY'S BOARD OF DIRECTORS URGES THE COMPANY'S
SHAREHOLDERS TO COMPLETE, SIGN AND DATE AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED, POSTAGE-PREPAID ENVELOPE.
Pursuant to the Company's Code, all other questions and matters brought
before the Annual Meeting, including the proposal to approve and adopt the RPM,
Inc. 2002 Performance Accelerated Restricted Stock Plan, will be decided, unless
otherwise provided by law or by the Articles of Incorporation of the Company
("Articles"), by the vote of the holders of a majority of the shares entitled to
vote thereon present in person or by proxy at the Annual Meeting. In voting for
such other proposals, votes may be cast in favor, against or abstained.
Abstentions will count as present for purposes of the item on which the
abstention is noted and will have the effect of a vote against. Broker
non-votes, however, are not counted as present for purposes of determining
whether a proposal has been approved and will have no effect on the outcome of
any such proposal.
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REINCORPORATION PROPOSAL
QUESTIONS AND ANSWERS
Q: WHAT IS THE REINCORPORATION PROPOSAL?
A: The Board is proposing to change RPM's state of incorporation from Ohio to
Delaware. The reincorporation will occur by merging RPM Merger Sub, a newly
formed Ohio corporation and wholly-owned subsidiary of RPM International
Inc., a newly formed Delaware corporation ("RPM-Delaware"), with and into
RPM. Each outstanding Common Share of RPM will be converted into the right to
receive one share of RPM-Delaware common stock, with the result that RPM will
become a wholly-owned subsidiary of RPM-Delaware. The Company is
alternatively referred to as RPM throughout the remainder of this Proxy
Statement.
Q: HOW WILL THE RIGHTS OF RPM'S SHAREHOLDERS CHANGE AS A RESULT OF THE MERGER?
A: Following the merger, the internal affairs of RPM-Delaware will be governed
by Delaware law and by RPM-Delaware's certificate of incorporation and
by-laws. RPM-Delaware's certificate of incorporation and by-laws are similar
in substance to RPM's existing Articles and Code. The differences between the
Delaware certificate of incorporation and by-laws, on the one hand, and the
Ohio Articles and Code, on the other hand, which differences affect the
rights of the Company's shareholders, arise in part as a result of the
differences between the corporation laws of Delaware and Ohio. Additionally,
the RPM charter provisions requiring supermajority voting for interested
shareholder transactions and transactions involving the sale of substantially
all of the assets of the Company have been eliminated in the RPM-Delaware
charter. The RPM-Delaware certificate of incorporation also eliminates the
ability of stockholders to take action by written consent (which, given the
current requirement for unanimous written consent by shareholders, will not,
in practice, impact the rights of shareholders) and does not provide for
cumulative voting in the election of Directors. A discussion of some of these
differences is included in the section titled "Comparison of Shareholder
Rights Under Ohio and Delaware Law" on page 36. Subject to approval of the
reincorporation, the Company is also separately seeking shareholder approval
to increase the number of authorized shares of common stock and to authorize
a new class of serial preferred stock. See "Proposal Three -- Increase in
Number of Authorized Shares; Addition of Class of Serial Preferred Stock."
Q: WHY IS THE BOARD PROPOSING THE DELAWARE REINCORPORATION?
A: By reincorporating in Delaware, RPM will be able to take advantage of
Delaware's modern and flexible corporate laws as well as the expertise of the
Delaware courts in corporate matters. The favorable business corporation laws
of Delaware should benefit RPM by allowing it to conduct its affairs in a
more flexible and efficient manner. In addition, the reincorporation will
allow RPM to more effectively align the legal structure of its various
operating companies under appropriate intermediate holding companies and
further streamline the management and operations of its businesses.
Q: WHAT WILL HAPPEN TO RPM, INC.?
A: RPM will become one of RPM-Delaware's wholly-owned subsidiaries, along with
several intermediate holding companies and other wholly-owned subsidiaries.
RPM currently serves as a holding company for its various operating
companies. After the reincorporation, we intend to realign our various
operating companies according to their product offerings, served end markets,
customer base and operating philosophy. RPM will become one of RPM-Delaware's
intermediate holding companies. Those operating companies that tend to be
entrepreneurial and serve niche markets (such as many of the entities that
make up the group of companies referred to as "RPM II") will continue to be
owned by RPM. Operating companies that primarily serve the consumer market
will be transferred to a new intermediate holding company to be wholly-owned
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by RPM-Delaware. Operating companies that primarily serve the industrial
market will be transferred to a new intermediate holding company to also be
wholly-owned by RPM-Delaware.
Q: WHAT IS A HOLDING COMPANY?
A: A holding company is a parent company that conducts no business operations
itself. It owns stock of operating subsidiaries and may own various
investments. Its sources of revenue are cash flow from it subsidiaries and
earnings on any investments it holds. Many public companies are organized as
holding companies. For example, many financial institutions, insurance
companies and utilities are organized as holding companies. Many other
companies also find this structure to be effective for their businesses,
including several in the building products and construction business. As
previously mentioned, RPM is a holding company and our business is currently
conducted through a holding company structure. Therefore, the establishment
of a holding company structure in Delaware will have no impact on our
shareholders.
Q: ARE OTHER LARGE COMPANIES INCORPORATED IN DELAWARE?
A: Yes. In fact, according to the Delaware Division of Corporations,
approximately 60 percent of the Fortune 500 companies are incorporated in
Delaware.
Q: WHAT WILL I RECEIVE WHEN THE DELAWARE REINCORPORATION OCCURS?
A: Each Common Share of RPM that you own on the effective date of the merger
will automatically be converted into one share of common stock of
RPM-Delaware.
Q: WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DELAWARE
REINCORPORATION TO ME?
A: We believe that the exchange of the Common Shares of RPM for shares of common
stock of RPM-Delaware will be tax-free for federal income tax purposes. To
review the tax consequences in greater detail, see page 34.
Q: WHO MUST APPROVE THE DELAWARE REINCORPORATION?
A: The affirmative vote of the holders of at least two-thirds of the outstanding
Common Shares of RPM is required to approve the Delaware reincorporation.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY A BROKER OR BANK, WILL MY BROKER OR
BANK VOTE MY SHARES FOR ME ON THE REINCORPORATION PROPOSAL?
A: Your broker or bank will vote your shares held in "street name" only if you
provide instructions on how to vote. You should follow the directions
provided by your broker or bank.
Q: MAY I CHANGE MY VOTE AFTER SUBMITTING MY PROXY?
A: Yes. If you submit a proxy in connection with this solicitation, you may
revoke your proxy at any time before it is voted at the Annual Meeting. You
may revoke your proxy in writing or, if you are a record holder, by appearing
at the Annual Meeting to vote in person. If your shares are held in an
account at a broker or bank, you should contact your broker or bank to change
your vote.
Q: DO I HAVE APPRAISAL RIGHTS WITH RESPECT TO THE DELAWARE REINCORPORATION?
A: Yes. Under Ohio law, shareholders of RPM who properly exercise and perfect
dissenters' rights with respect to the reincorporation will have the right to
receive the "fair cash value" of their shares (excluding any appreciation or
depreciation in market value resulting from the reincorporation). In order to
exercise these rights, shareholders must comply with the procedural
requirements of Section 1701.85 of the Ohio Revised Code, the full text of
which is attached as Appendix D. A failure to vote against the Delaware
reincorporation will not be a
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waiver of dissenters' appraisal rights, but a failure to take any of the
steps required under Section 1701.85 on a timely basis may result in the loss
of such rights. To review your appraisal rights in greater detail, see page
35.
Q: WILL MY DIVIDENDS BE AFFECTED?
A: No. This transaction, in and of itself, will have no effect on RPM's dividend
policy. Future dividends on RPM-Delaware's common stock will depend on the
earnings, financial condition and capital requirements of RPM-Delaware and
its subsidiaries. Any decisions on RPM-Delaware's future dividend policy will
be made by RPM-Delaware's Board of Directors.
Q: WHO WILL MANAGE THE DELAWARE COMPANY?
A: Other than the change in one of the Directors in Class II resulting from a
vacancy created by a planned resignation, the directors and officers of RPM
will become the directors and officers of RPM-Delaware.
Q: WILL THE DELAWARE COMPANY HAVE NEW "ANTI-TAKEOVER" PROTECTION?
A: Generally no. The reincorporation is not being proposed for anti-takeover
reasons. In fact, some anti-takeover provisions in RPM's Articles will be
eliminated and the statutory anti-takeover provisions available to Delaware
companies are generally believed to be less extensive than those available to
Ohio companies. If the shareholders approve Proposal Three herein, RPM-
Delaware's certificate of incorporation will contain a provision authorizing
a new class of serial preferred stock, the issuance of which could be used to
discourage attempts to acquire control of RPM-Delaware, as more fully
discussed beginning on page 33. However, the Board of Directors of
RPM-Delaware will not issue any series of preferred stock for any defensive
or anti-takeover purpose without first obtaining shareholder approval.
RPM-Delaware's certificate of incorporation and/or by-laws, (i) will
eliminate the availability of action by the written consent of shareholders
(which, given the current requirement for unanimous written consent by
shareholders, will not, in practice, impact the rights of shareholders) and
(ii) do not provide for cumulative voting, which provisions may be viewed as
having anti-takeover implications. In addition, there will be other
differences arising as a result of the differences between Ohio and Delaware
law. See "Comparison of Shareholder Rights Under Ohio and Delaware Law" on
page 36.
Q: WHAT ARE THE CONSEQUENCES IF I DO NOT VOTE?
A: An abstention or broker non-vote has the same effect as a vote against the
reincorporation because each abstention or broker non-vote is one less vote
in favor of the reincorporation.
Q: WHY IS THE COMPANY ASKING ME TO VOTE SEPARATELY ON THE CHARTER PROVISION?
A: The Company is not required to ask its shareholders to separately consider
and approve the increase in the number of authorized shares of common stock
and the addition of a new class of serial preferred stock. In fact, most
companies that propose to change their state of incorporation tend to
aggregate these types of proposals with the reincorporation proposal
presented to their shareholders. However, the Company's management felt that
the authorized common stock and preferred stock proposal should not be
aggregated with the reincorporation proposal in order to give the Company's
shareholders the opportunity to separately consider the two proposals.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES?
A: No. If the Delaware reincorporation is approved, your Common Shares of RPM
automatically will be converted on a share-for-share basis to common stock of
RPM-Delaware. You will not need to surrender your stock certificate.
5
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
Proxy Statement, please complete, sign, and mail your proxy card or voting
instructions as soon as possible so that your shares will be represented at
the Annual Meeting. If you sign and send in your proxy card without
specifying how your shares should be voted, your shares will be voted for the
election of Directors, the adoption of the Delaware reincorporation, the
charter proposal and the approval and adoption of the RPM, Inc. 2002
Performance Accelerated Restricted Stock Plan.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the proposal or if you need additional copies
of this document, you should contact our proxy solicitor, Innisfree M&A
Incorporated, toll-free at (877) 750-9496 (banks and brokers should call
collect at (212) 750-5833).
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SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Shares as
of May 31, 2002, unless otherwise indicated, by (i) each person or group known
by RPM to own beneficially more than 5% of the outstanding Common Shares, (ii)
each Director and nominee for election as a Director of the Company, (iii) each
executive officer named in the Executive Compensation tables below and (iv) all
Directors and executive officers as a group. All information with respect to
beneficial ownership has been furnished by the respective Director, nominee for
election as a Director, or executive officer, as the case may be. Unless
otherwise indicated below, each person named has sole voting and investment
power with respect to the number of shares set forth opposite his or her
respective name. The address of each director and executive officer is 2628
Pearl Road, P.O. Box 777, Medina, Ohio 44258.
NUMBER OF
COMMON SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED(1) COMMON SHARES(1)
------------------------ ------------- ----------------
Max D. Amstutz(2)......................................... 24,843 *
Edward B. Brandon(3)...................................... 25,000 *
Lorrie Gustin(4).......................................... 2,099 *
E. Bradley Jones(5)....................................... 14,893 *
James A. Karman(6)........................................ 1,048,435 0.9
Robert L. Matejka(7)...................................... 15,578 *
Donald K. Miller(8)....................................... 30,983 *
William A. Papenbrock(9).................................. 18,742 *
Albert B. Ratner(10)...................................... 6,250 *
Frank C. Sullivan(11)..................................... 466,911 0.4
Thomas C. Sullivan(12).................................... 1,892,100 1.6
Jerry Sue Thornton(13).................................... 0 *
P. Kelly Tompkins(14)..................................... 64,292 *
Joseph P. Viviano(15)..................................... 11,000 *
All Directors and executive officers as a group (twenty
persons including the directors and executive officers
named above)(16)........................................ 4,041,713 3.5
---------------
* Less than .1%.
(1) In accordance with Securities and Exchange Commission ("Commission") rules,
each beneficial owner's holdings have been calculated assuming full
exercise of outstanding options covering Common Shares, if any, exercisable
by such owner within 60 days after May 31, 2002, but no exercise of
outstanding options covering Common Shares held by any other person.
(2) Dr. Amstutz is a Director of RPM.
(3) Mr. Brandon is a Director of RPM.
(4) Ms. Gustin is a Director of RPM.
(5) Mr. Jones is a Director of RPM.
(6) Mr. Karman is a Director and an executive officer of RPM. Mr. Karman's
ownership is comprised of 239,317 Common Shares which he owns directly,
42,627 Common Shares which are owned by his wife, 227,372 Common Shares
which are held by a family-owned corporation, of which Mr. Karman is an
officer and director, 100,000 Common Shares owned by the James A. Karman
Grantor Retained Annuity Trust, of which Mr. Karman serves as Trustee,
436,344 Common Shares which he has the right to acquire within 60 days
after May 31, 2002 through the exercise of stock options, and approximately
2,775 Common Shares held by Key Trust Company of Ohio, N.A., as trustee of
the RPM, Inc. 401 (k) Plan, which represents Mr. Karman's approximate
percentage ownership of the total Common Shares held in the RPM, Inc. 401
(k) Plan as of May 31, 2002. The ownership of
7
the shares held by the James A. Karman Grantor Retained Annuity Trust, by
his wife and by the family-owned corporation is attributed to Mr. Karman
pursuant to Commission rules.
(7) Mr. Matejka is an executive officer of RPM. Mr. Matejka's ownership is
comprised of 10,000 Common Shares which he owns directly, 5,000 Common
Shares which he has the right to acquire within 60 days after May 31, 2002
through the exercise of stock options and approximately 578 Common Shares
held by Key Trust Company of Ohio, N.A., as trustee of the RPM, Inc. 401
(k) Plan, which represents Mr. Matejka's approximate percentage ownership
of the total Common Shares held in the RPM, Inc. 401 (k) Plan as of May 31,
2002.
(8) Mr. Miller is a Director of RPM.
(9) Mr. Papenbrock is a Director of RPM. All of Mr. Papenbrock's Common Shares
are owned through his retirement plan for which National City Bank is
Trustee.
(10) Mr. Ratner is a Director of RPM.
(11) Mr. Frank C. Sullivan is a Director and an executive officer of RPM. Mr.
Sullivan's ownership is comprised of 156,936 Common Shares which he owns
directly, 7,266 Common Shares which he holds as Custodian for his sons,
300,001 Common Shares which he has the right to acquire within 60 days
after May 31, 2002 through the exercise of stock options, and approximately
2,708 Common Shares held by Key Trust Company of Ohio, N.A., as trustee of
the RPM, Inc. 401 (k) Plan, which represents Mr. Sullivan's approximate
percentage ownership of the total Common Shares held in the RPM, Inc. 401
(k) Plan as of May 31, 2002. The ownership of the shares held as Custodian
for his sons is attributed to Mr. Sullivan pursuant to Commission rules.
(12) Mr. Thomas C. Sullivan is Chairman of the Board of Directors and Chief
Executive Officer of RPM. Mr. Sullivan's ownership is comprised of 800,733
Common Shares which he owns directly, 218,375 Common Shares which are owned
by his wife, 88,331 Common Shares owned by the Thomas C. Sullivan Family
Foundation, Inc., of which Mr. Sullivan serves as Co-Trustee, 781,876
Common Shares which he has the right to acquire within 60 days after May
31, 2002 through the exercise of stock options, and approximately 2,785
Common Shares held by Key Trust Company of Ohio, N.A., as trustee of the
RPM, Inc. 401 (k) Plan, which represents Mr. Sullivan's approximate
percentage ownership of the total Common Shares held in the RPM, Inc. 401
(k) Plan as of May 31, 2002. The ownership of the shares held by his wife
and by the Thomas C. Sullivan Family Foundation, Inc. is attributed to Mr.
Sullivan pursuant to Commission rules.
(13) Dr. Thornton is a Director of RPM. Dr. Thornton has elected to receive her
Directors' fees in the form of stock equivalents in connection with the
Company's Deferred Compensation Program. As of May 31, 2002, Dr. Thornton
had approximately 5,128 stock equivalents in the Deferred Compensation
Program. Stock equivalents do not carry the right to vote on matters
submitted to shareholders.
(14) Mr. Tompkins is an executive officer of RPM. Mr. Tompkins' ownership is
comprised of 7,096 Common Shares which he owns directly, 55,025 Common
Shares which he has the right to acquire within 60 days after May 31, 2002
through the exercise of stock options, and approximately 2,171 Common
Shares held by Key Trust Company of Ohio, N.A., as trustee of the RPM, Inc.
401 (k) Plan, which represents Mr. Tompkins' approximate percentage
ownership of the total Common Shares held in the RPM, Inc. 401 (k) Plan as
of May 31, 2002.
(15) Mr. Viviano is a Director of RPM.
(16) The number of Common Shares shown as beneficially owned by RPM's Directors
and executive officers as a group on May 31, 2002 includes 1,946,061 Common
Shares which RPM's Directors and executive officers as a group have the
right to acquire within 60 days after said date through the exercise of
stock options granted to them under RPM's stock option plans, and
approximately 22,101 Common Shares held by Key Trust Company of Ohio, N.A.,
as trustee of the RPM, Inc. 401 (k) Plan, which represents the group's
approximate percentage ownership of the total Common Shares held in the
RPM, Inc. 401 (k) Plan as of May 31, 2002.
8
PROPOSAL ONE
ELECTION OF DIRECTORS
The authorized number of Directors of the Company presently is fixed at
twelve, with the Board of Directors divided into three Classes of four Directors
each. The term of office of one Class of Directors expires each year, and at
each Annual Meeting of Shareholders the successors to the Directors of the Class
whose term is expiring at that time are elected to hold office for a term of
three years.
The term of office of Class III of the Board of Directors expires at this
year's Annual Meeting of Shareholders. The term of office of the persons elected
Directors in Class III at this year's Annual Meeting will expire at the time of
the Annual Meeting held in 2005. Each Director in Class III will serve until the
expiration of that term or until his or her successor shall have been duly
elected. The Board of Directors' nominees for election as Directors in Class III
are Dr. Max D. Amstutz, E. Bradley Jones, Albert B. Ratner and Dr. Jerry Sue
Thornton. Each of the nominees currently serves as a Director in Class III.
Lorrie Gustin, a Director in Class II, has indicated that she intends to
resign from the Board of Directors of the Company as of the date of this year's
Annual Meeting of Shareholders. The Board of Directors has indicated that it
currently intends to fill the vacancy created following the resignation of Ms.
Gustin by appointing Bruce A. Carbonari, the President and Chief Executive
Officer of Fortune Brands Home and Hardware, to serve for the remainder of the
full term of Class II, which term will expire at the Annual Meeting of
Shareholders to be held in 2003, at which time the shareholders will elect a
successor.
The Proxy holders named in the accompanying Proxy or their substitutes will
vote such Proxy at the Annual Meeting or any adjournment or postponement thereof
for the election as Directors of the four nominees unless the shareholder
instructs, by marking the appropriate space on the Proxy, that authority to vote
is withheld. If cumulative voting is in effect, the Proxy holders shall have
full discretion and authority to vote for any one or more of the nominees. In
the event of cumulative voting, the Proxy holders will vote the shares
represented by each Proxy so as to maximize the number of Board of Directors'
nominees elected to the Board. Each of the nominees has indicated his or her
willingness to serve as a Director, if elected. If any nominee should become
unavailable for election (which contingency is not now contemplated or
foreseen), it is intended that the shares represented by the Proxy will be voted
for such substitute nominee as may be named by the Board of Directors. In no
event will the accompanying Proxy be voted for more than four nominees or for
persons other than those named below and any such substitute nominee for any of
them.
9
NOMINEES FOR ELECTION
[DR. MAX D. AMSTUTZ PHOTO]
DR. MAX D. AMSTUTZ, age 73 -- Director since 1995.
Chairman since 1998 of SGS-Societe Generale de Surveillance Holding
S.A., Geneva, Switzerland, a world leader in verification, testing and
certification. From 1970 to 1994, Dr. Amstutz was Managing Director of
Holderbank Financiere Glaris Ltd., a world leader in cement. From 1994
to 2000, Dr. Amstutz was Chairman and Chief Executive Officer of Von
Roll Holding Ltd., a designer and manufacturer of environmental tech-
nology products, electrotechnical and industrial insulation systems and
industrial metal specialties, and from 1986 to 1999, was Vice Chairman
of Alusuisse -- Lonza Holding Ltd., a conglomerate of chemical, alumi-
num and packaging firms. Dr. Amstutz received his degree in Business
Administration and a Doctorate of Economics from the University of
Berne, Switzerland.
COMMON SHARES BENEFICIALLY OWNED: 24,843 NOMINEE FOR CLASS III
(TERM EXPIRING IN 2005)
[E. BRADLEY JONES PHOTO]
E. BRADLEY JONES, age 74 -- Director since 1990.
Retired Chairman and Chief Executive Officer of LTV Steel Company and
Group Vice President of The LTV Corporation. Mr. Jones received his
B.A. degree from Yale University. He began his career with Republic
Steel Corporation in 1954 in sales and became President in 1979 and
Chairman and Chief Executive Officer in 1982. Following the merger of
Republic Steel Corporation and The LTV Corporation in June 1984, Mr.
Jones served as Chairman and Chief Executive Officer of The LTV Steel
Company and Group Vice President of The LTV Corporation until his
retirement in December 1984. Mr. Jones also serves as a Director of CSX
Corporation and is a Trustee of Fidelity Charitable Gift Fund.
COMMON SHARES BENEFICIALLY OWNED: 14,893 NOMINEE FOR CLASS III
(TERM EXPIRING IN 2005)
[ALBERT B. RATNER PHOTO]
ALBERT B. RATNER, age 74 -- Director since 1996.
Co-Chairman of the Board of Forest City Enterprises, Inc., a conglom-
erate corporation engaged in the ownership, development, sales, ac-
quisition and management of commercial and residential real estate
throughout the United States. Mr. Ratner received his B.S. degree from
Michigan State University.
COMMON SHARES BENEFICIALLY OWNED: 6,250 NOMINEE FOR CLASS III
(TERM EXPIRING IN 2005)
10
[JERRY SUE THORNTON PHOTO]
DR. JERRY SUE THORNTON, age 55 -- Director since 1999.
President of Cuyahoga Community College since 1992. From 1985 to 1992,
Dr. Thornton served as President of Lakewood Community College in White
Bear Lake, Minnesota. She received her Ph.D. from the University of
Texas at Austin and her M.A. and B.A. from Murray State University. Dr.
Thornton is also a Director of National City Corporation, American
Greetings Corporation, Applied Industrial Technologies, Inc. and
OfficeMax, Inc. Dr. Thornton is also a board member of United Way of
Cleveland, The Cleveland Foundation and the Rock and Roll Hall of Fame
and Museum -- Cleveland and New York.
COMMON SHARES BENEFICIALLY OWNED: 0* NOMINEE FOR CLASS III
(TERM EXPIRING IN 2005)
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER ANNUAL MEETING
[EDWARD B. BRANDON PHOTO]
EDWARD B. BRANDON, age 70 -- Director since 1989.
Retired Chairman, National City Corporation. Mr. Brandon received his
B.S. degree in economics from Northwestern University and his M.B.A.
degree from Wharton School of Banking and Finance. He joined National
City Bank in 1956. Mr. Brandon served as President of National City
Corporation and President and Chief Executive Officer of National City
Bank prior to his election as Chairman in September 1987, and served as
Chief Executive Officer of National City Bank until April 1989. Mr.
Brandon also served as Chief Executive Officer of National City
Corporation from September 1987 until July 1995. Mr. Brandon retired
from National City Corporation in October 1995, however, he remains on
the Corporation's Board of Directors.
COMMON SHARES BENEFICIALLY OWNED: 25,000 DIRECTOR IN CLASS I
(TERM EXPIRES IN 2004)
[WILLIAM A. PAPENBROCK PHOTO]
WILLIAM A. PAPENBROCK, age 63 -- Director since 1972.
Retired Partner, Calfee, Halter & Griswold LLP, Attorneys-at-law. Mr.
Papenbrock received his B.S. degree in Business Administration from
Miami University (Ohio) and his LL.B. degree from Case Western Reserve
Law School. After serving one year as the law clerk to Chief Justice
Taft of the Ohio Supreme Court, Mr. Papenbrock joined Calfee, Halter &
Griswold LLP as an attorney in 1964. He became a partner of the firm in
1969 and is the past Vice Chairman of the firm's Executive Committee.
Calfee, Halter & Griswold LLP serves as counsel to the Company.
COMMON SHARES BENEFICIALLY OWNED: 18,742 DIRECTOR IN CLASS I
(TERM EXPIRES IN 2004)
---------------
* Dr. Thornton has elected to participate in the Company's Deferred Compensation Program, and is
deferring the payment of her Directors' fees in the form of stock equivalents. As of May 31, 2002, Dr.
Thornton had approximately 5,128 stock equivalents in the Deferred Compensation Program.
11
[THOMAS C. SULLIVAN PHOTO]
THOMAS C. SULLIVAN, age 65 -- Director since 1963.
Chairman and Chief Executive Officer, RPM, Inc. Mr. Thomas C. Sullivan
received his B.S. degree in Business Administration from Miami
University (Ohio). He joined RPM, Inc. as a Divisional Sales Manager in
1961 and was elected Vice President in 1967. He became Executive Vice
President in 1969, and in 1971, Mr. Sullivan was elected Chairman of
the Board, President and Chief Executive Officer of RPM, Inc. Mr.
Sullivan is a Director of Pioneer-Standard Electronics, Inc., National
City Bank, Huffy Corporation and Kaydon Corporation.
COMMON SHARES BENEFICIALLY OWNED: 1,892,100 DIRECTOR IN CLASS I
(TERM EXPIRES IN 2004)
[FRANK C. SULLIVAN PHOTO]
FRANK C. SULLIVAN, age 41 -- Director since 1995.
President and Chief Operating Officer, RPM, Inc. Mr. Frank C. Sullivan
entered the University of North Carolina as a Morehead Scholar and
received his B.A. degree in 1983. From 1983 to 1986, Mr. Sullivan held
various commercial lending and corporate finance positions at Harris
Bank and First Union National Bank prior to joining RPM as a Technical
Service Representative from 1987 to 1988 and as Regional Sales Manager
from 1988 to 1989 at RPM's AGR Company joint venture. In 1989, he
became the Company's Director of Corporate Development. He became a
Vice President of the Company in 1991, Chief Financial Officer in 1993,
Executive Vice President in 1995, President in August 1999 and was
elected Chief Operating Officer in October 2001. Frank C. Sullivan is
the son of Thomas C. Sullivan.
COMMON SHARES BENEFICIALLY OWNED: 466,911 DIRECTOR IN CLASS I
(TERM EXPIRES IN 2004)
[JAMES A. KARMAN PHOTO]
JAMES A. KARMAN, age 65 -- Director since 1963.
Vice Chairman, RPM, Inc. Mr. Karman holds a B.S. degree from Miami
University (Ohio) and an M.B.A. degree from the University of Wiscon-
sin. Mr. Karman taught corporate finance at the University of Wiscon-
sin and was an Investment Manager, The Union Bank & Trust Company,
Grand Rapids, Michigan, prior to joining RPM, Inc. From October 1973
through September 1978, Mr. Karman served as our Executive Vice
President, Secretary and Treasurer and, prior to that time, as Vice
President- Finance and Treasurer. From September 1978 to August 1999,
he served as our President and Chief Operating Officer. Mr. Karman also
served as Chief Financial Officer from October 1982 to October 1993,
and again from June 2001 to October 2001. He was elected Vice Chairman
on August 5, 1999. Mr. Karman is a Director of A. Schulman, Inc.,
Metropolitan Financial Corp. and Shiloh Industries, Inc.
COMMON SHARES BENEFICIALLY OWNED: 1,048,435 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2003)
12
[DONALD K. MILLER PHOTO]
DONALD K. MILLER, age 70 -- Director since 1972.
Chairman of Axiom International Investor LLC, an international equity
asset management firm, since 1999. From 1992 to 1997, Mr. Miller was
Chairman of Greylock Financial Inc., a venture capital firm. Formerly,
Mr. Miller served as Chairman and CEO of Thomson Advisory Group L.P.
('Thomson'), a money management firm, from November 1990 to March 1993
and Vice Chairman from April 1993 to November 1994 when Thomson became
PIMCO Advisors L.P. Mr. Miller served as a Director of PIMCO Advisors,
L.P. from November 1994 to December 1997. Mr. Miller is a Director of
Layne Christensen Company, a successor corporation to Christensen
Boyles Corporation, a supplier of mining products and services, where
Mr. Miller served as Chairman from January 1987 through December 1995.
Mr. Miller received his B.S. degree from Cornell University and his
M.B.A. degree from Harvard University Graduate School of Business
Administration. Mr. Miller is also a Director of Huffy Corporation.
COMMON SHARES BENEFICIALLY OWNED: 30,983 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2003)
[JOSEPH P. VIVIANO PHOTO]
JOSEPH P. VIVIANO, age 64 -- Director since July 2001.
Retired Vice Chairman of Hershey Foods, a manufacturer, distributor and
marketer of consumer food products. Prior to his retirement, Mr.
Viviano served as the Vice Chairman of Hershey Foods from 1999 to March
2000, and as its President and Chief Operating Officer from 1994 to
March 1999. Mr. Viviano is also a Director of Chesapeake Corporation,
Harsco Corporation, Huffy Corporation and R.J. Reynolds Tobacco
Holdings, Inc.
COMMON SHARES BENEFICIALLY OWNED: 11,000 DIRECTOR IN CLASS II
(TERM EXPIRES IN 2003)
13
INFORMATION REGARDING MEETINGS AND COMMITTEES
OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, a Compensation Committee
and an Audit Committee. The Executive Committee exercises the power and
authority of the Board in the interim period between Board meetings. The
Compensation Committee administers the Company's Stock Option Plans, Incentive
Compensation Plan and Restricted Stock Plan, and will administer the RPM, Inc.
2002 Performance Accelerated Restricted Stock Plan. The Compensation Committee
also reviews and determines the salary and bonus compensation of certain key
executives. The Audit Committee reviews the activities of the Company's
independent auditors and various Company policies and practices. Each of the
members of the Audit Committee satisfies the independence and financial literacy
requirements of the New York Stock Exchange. The Board of Directors does not
have a nominating committee.
Set forth below is the current membership of each of the above-described
Committees, with the number of meetings held during the fiscal year ended May
31, 2002 in parentheses:
EXECUTIVE COMPENSATION AUDIT
COMMITTEE (NONE) COMMITTEE (FOUR) COMMITTEE (FOUR)
---------------- ---------------- ----------------
Thomas C. Sullivan Edward B. Brandon Donald K. Miller
(Chairman) (Chairman) (Chairman)
James A. Karman Albert B. Ratner E. Bradley Jones
Frank C. Sullivan Dr. Jerry Sue Thornton Lorrie Gustin
Edward B. Brandon Joseph P. Viviano Dr. Max D. Amstutz
E. Bradley Jones
Albert B. Ratner
Dr. Jerry Sue Thornton
The Board of Directors held four meetings during the fiscal year ended May
31, 2002. During that fiscal year, no Director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period he or she served as a Director and (ii) the total number of
meetings held by Committees of the Board on which the Director served, during
the periods that the Director served.
Directors who are not also employees of the Company receive a quarterly fee
of $7,500 and an additional $1,000 for each Board and Committee meeting
attended, except for the Chairman of each Committee who receives $1,500 for each
Committee meeting attended. William A. Papenbrock, Assistant Secretary of the
Company, attends all Committee meetings as acting secretary of each Committee,
and as such he receives the same compensation as the members of the Committees.
Under the Company's revised and updated Deferred Compensation Plan,
participating Directors may elect to defer the payment of Directors' fees until
a future date during which period of time the deferred fees will be credited
with investment gains or losses as if the deferred amounts were invested in
selected investment funds. Payment of such deferred fees, together with any
investment gains, is to commence 60 days following the date of the participating
Director's retirement, resignation or death. In the fiscal year ended May 31,
2002, the Company paid Donald K. Miller $25,000 in additional Director
compensation for services provided by Mr. Miller as an independent
representative of the Board of Directors on the pricing committee related to the
Company's public offering of 11,500,000 Common Shares, which was consummated in
April 2002.
14
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended May 31, 2002, 2001 and 2000 of those persons who were, at May 31, 2002:
(i) the Chief Executive Officer; and (ii) the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------------------------
RESTRICTED
ANNUAL COMPENSATION SECURITIES STOCK PLAN ALL OTHER
NAME AND -------------------------- UNDERLYING GRANTS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS DOLLAR VALUE(1) (2)(3)
------------------ ---- -------- -------- ------------ --------------- ------------
Thomas C. Sullivan 2002 $870,000 $700,000 -- $448,020 $25,797
Chairman of the Board 2001 $870,000 $404,000 -- $693,413 $23,589
and Chief Executive 2000 $870,000 $475,000 -- $685,775 $23,948
Officer
James A. Karman 2002 $685,000 $600,000 -- $347,804 $34,193
Vice Chairman 2001 $685,000 $332,000 -- $550,569 $32,236
2000 $685,000 $390,000 -- $539,430 $34,791
Frank C. Sullivan 2002 $430,000 $375,000 -- $ 42,969 $ 8,105
President and 2001 $430,000 $174,000 100,000 $ 52,388 $ 7,154
Chief Operating 2000 $430,000 $205,000 130,000 $ 52,590 $ 7,155
Officer
P. Kelly Tompkins 2002 $230,000 $100,000 -- $ 18,180 $ 7,891
Vice President, 2001 $215,000 $ 75,000 40,000 $ 16,861 $ 7,282
General Counsel 2000 $190,000 $ 75,000 45,000 $ 13,440 $ 6,691
and Secretary
Robert L. Matejka 2002 $190,000 $100,000 10,000 $ -- $12,680
Vice President, 2001 $190,000 $ 75,000 20,000 -- 1,663
Chief Financial Officer 2000 -- -- -- -- --
and Controller
---------------
(1) THE PURPOSE OF THE 1997 RESTRICTED STOCK PLAN IS TO REPLACE, OVER A PERIOD
OF TIME, THE CASH BASED BENEFIT RESTORATION PLAN WITH A STOCK BASED PLAN.
SHARES GRANTED UNDER THE RESTRICTED STOCK PLAN DIRECTLY REDUCE AND REPLACE
THE CASH AMOUNT OF SUPPLEMENTAL RETIREMENT RESTORATION BENEFITS AND
SUPPLEMENTAL DEATH RESTORATION BENEFITS OWED TO PARTICIPANTS UNDER THE
BENEFIT RESTORATION PLAN. FOR EVERY DOLLAR OF VALUE GRANTED TO AN INDIVIDUAL
UNDER THE RESTRICTED STOCK PLAN, THERE IS A CORRESPONDING DOLLAR-FOR-DOLLAR
DECREASE IN THE CASH AMOUNT OF SUPPLEMENTAL RETIREMENT RESTORATION BENEFITS
AND SUPPLEMENTAL DEATH RESTORATION BENEFITS OWED TO THE INDIVIDUAL UNDER THE
COMPANY'S BENEFIT RESTORATION PLAN. SEE "BENEFIT RESTORATION PLAN" AND
"RESTRICTED STOCK PLAN" HEREINAFTER. Dollar value for the fiscal year ended
May 31, 2002 calculated by multiplying the number of restricted shares
granted pursuant to the Company's 1997 Restricted Stock Plan (Mr. Thomas C.
Sullivan -- 55,448 Common Shares, Mr. Karman -- 43,045 Common Shares, Mr.
Frank C. Sullivan -- 5,318 Common Shares and Mr. Tompkins -- 2,250 Common
Shares) by the closing price of $8.08 on July 11, 2001, the effective date
of grant. The dollar value for the fiscal year ended May 31, 2001 was
calculated by multiplying the number of restricted shares granted pursuant
to the Company's 1997 Restricted Stock Plan (Mr. Thomas C.
Sullivan -- 67,650 Common Shares, Mr. Karman -- 53,714 Common Shares, Mr.
Frank C. Sullivan -- 5,111 Common Shares, and Mr. Tompkins -- 1,645 Common
Shares) by the closing price of $10.25 on July 17, 2000, the effective date
of grant. The dollar value for the fiscal year ended May 31, 2000 was
calculated by multiplying the number of restricted shares granted pursuant
to the Company's 1997 Restated Stock Plan (Mr. Thomas C. Sullivan -- 45,717
Common Shares, Mr. Karman -- 35,962 Common Shares, Mr. Frank C.
Sullivan -- 3,506 Common Shares and Mr. Tompkins -- 896 Common Shares) by
the closing price of $15.00 on August 3, 1999, the effective date of grant.
At the end of the fiscal year ended May 31, 2002, the number and value
(based upon the closing price on May 31, 2002 of $15.74) of the aggregate
restricted stock holdings, including dividends accrued thereon, were as
follows: Mr. Thomas C. Sullivan -- 267,053 Common Shares -- $4,203,414; Mr.
Karman -- 211,128 Common Shares -- $3,323,155; Mr. Frank C.
Sullivan -- 20,470 Common Shares -- $322,198; and Mr. Tompkins -- 5,664
Common Shares -- $89,151. Dividends are paid on restricted stock as and when
15
dividends are paid on Common Shares. With the exception of the restricted
stock awards made to Mr. Thomas C. Sullivan and Mr. Karman, all of which are
scheduled to vest on January 1, 2003, the scheduled retirement date of Mr.
Sullivan and Mr. Karman, none of the restricted stock awards reported on the
Summary Compensation Table are scheduled to vest within three years from the
respective date of grant.
(2) All Other Compensation consists of (i) insurance premiums paid by the
Company in connection with split dollar and other executive life insurance
policies and (ii) in fiscal 2002, the value (Mr. Thomas C. Sullivan $5,500,
Mr. Karman $5,500, Mr. Frank C. Sullivan $5,375, Mr. Tompkins $5,288 and Mr.
Matejka $5,100) of the Company's matching contributions, in the form of
Common Shares, to the RPM, Inc. 401(k) Plan relating to before-tax
contributions made by the Named Executive Officers. In fiscal 2001 and 2000,
the value of the Company's matching contributions, in the form of Common
Shares, to the RPM, Inc. 401(k) Plan for each of the Named Executive
Officers were as follows: Mr. Thomas C. Sullivan $5,100 (2001) and $4,937
(2000); Mr. Karman $5,100 (2001) and $4,939 (2000); Mr. Frank C. Sullivan
$5,100 (2001) and $5,356 (2000); Mr. Tompkins $5,413 (2001) and $5,113
(2000); and Mr. Matejka $1,663 (2001).
(3) All Other Compensation includes the following amounts equal to the full
dollar economic value of the premiums paid by the Company in connection with
life insurance policies issued pursuant to the Split Dollar Life Insurance
Agreements between the Company and the following named Executive Officers
during 2002, 2001 and 2000, respectively: Mr. Thomas C. Sullivan $13,074
(2002), $12,939 (2001) and $13,419 (2000); Mr. Karman $20,863, (2002),
$21,117 (2001) and $21,786 (2000); Mr. Frank C. Sullivan $1,380 (2002),
$1,029 (2001) and $1,045 (2000); Mr. Tompkins $713 (2002), $419 (2001) and
$360 (2000); and Mr. Matejka $1,160 (2002). The premiums paid by the Company
in connection with the life insurance policies issued pursuant to such Split
Dollar Life Insurance Agreements set forth in the preceding sentence will be
recovered in full by the Company upon the payment of any death benefits
under any such life insurance policy.
16
OPTION GRANTS
Shown below is information on grants of stock options pursuant to the
Company's 1996 Key Employees Stock Option Plan during the fiscal year ended May
31, 2002 to the executive officers who are named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT
--------------------------- ASSUMED
PERCENTAGE ANNUAL RATES OF
OF TOTAL STOCK PRICE
OPTIONS APPRECIATION
NUMBER OF GRANTED TO FOR OPTION
SECURITIES EMPLOYEES EXERCISE OR TERMS(3)(4)
UNDERLYING IN FISCAL BASE PRICE EXPIRATION --------------------
NAME OPTIONS(1) YEAR (PER SHARE)(2) DATE 5% 10%
---- ---------- ---------- -------------- ---------- -- ---
Thomas C. Sullivan -- -- N/A N/A N/A N/A
Chairman of the Board
and Chief Executive Officer
James A. Karman -- -- N/A N/A N/A N/A
Vice Chairman
Frank C. Sullivan -- -- N/A N/A N/A N/A
President and
Chief Operating Officer
P. Kelly Tompkins -- -- N/A N/A N/A N/A
Vice President, General
Counsel and Secretary
Robert L. Matejka 10,000(5) 2.02% $10.26 10/03/2011 $64,525 $163,518
Vice President,
Chief Financial Officer
and Controller
---------------
(1) The option agreements relating to the options granted under the Company's
1996 Key Employees Stock Option Plan provide that such options become fully
vested upon certain "changes in control" of the Company described in such
option agreements. Twenty-five percent of the shares subject to the option
become exercisable on each anniversary date thereof.
(2) This price represents the fair market value at the date of grant pursuant to
the terms of the Company's 1996 Key Employees Stock Option Plan.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% appreciation rates dictated by the Commission and are not
intended to be forecasts of the Company's stock price.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERMS
--------------------------------
5% 10%
-- ---
(4) Value created for all shareholders: $1,135,355,809 $2,877,214,533
Gain of named executive officers as a percent of value 0.01% 0.01%
created for all shareholders:
(5) These options were granted on October 3, 2001 pursuant to the Company's 1996
Key Employees Stock Option Plan. Twenty-five percent of the shares subject
to the option become exercisable on each anniversary date thereof.
17
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the exercise of stock options
during the fiscal year ended May 31, 2002 to purchase the Company's Common
Shares by the executive officers named in the Summary Compensation Table and
with respect to the unexercised stock options at May 31, 2002 to purchase the
Company's Common Shares for the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND MAY 31, 2002 OPTION VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT MAY 31, 2002 AT MAY 31, 2002(1)
NUMBER OF --------------------------- ---------------------------
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- ----------- ----------- ------------- ----------- -------------
Thomas C. Sullivan 46,875 $335,625 781,876 0 $1,419,217 $ 0
Chairman of the Board and
Chief Executive Officer
James A. Karman 144,204 $750,555 436,344 0 $ 520,014 $ 0
Vice Chairman
Frank C. Sullivan -- -- 290,001 150,000 $ 937,404 $724,413
President and Chief
Operating Officer
P. Kelly Tompkins 16,225 $104,208 50,025 57,500 $ 57,226 $279,019
Vice President, General
Counsel and Secretary
Robert L. Matejka -- -- 5,000 25,000 $ 33,519 $155,356
Vice President,
Chief Financial Officer
and Controller
---------------
(1) Based on the last sales price of the Common Shares of $15.74 on the New York
Stock Exchange on May 31, 2002. The ultimate realization of profit on the
sale of the Common Shares underlying such options is dependent upon the
market price of such shares on the date of sale.
(2) Represents the difference between the option exercise price and last sales
price of a Common Share on the New York Stock Exchange on the date of
exercise.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning Common Shares
authorized or available for issuance under the Company's equity compensation
plans as of the fiscal year ended May 31, 2002.
(c)
NUMBER OF SECURITIES
REMAINING AVAILABLE
(a) FOR FUTURE ISSUANCE
NUMBER OF SECURITIES (b) UNDER EQUITY
TO BE ISSUED UPON WEIGHTED AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (a))(1)
------------- -------------------- -------------------- --------------------
Equity Compensation Plans Approved
by Shareholders.................. 6,222,574 $12.58 4,000,899
Equity Compensation Plans Not
Approved by Shareholders(2)...... -- -- --
--------- ------ ---------
Total......................... 6,222,574 $12.58 4,000,899
18
---------------
(1) Includes 907,602 shares available for future issuance under the Company's
1997 Restricted Stock Plan.
(2) The Company does not maintain equity compensation plans that have not been
approved by its shareholders.
EMPLOYMENT AND CONSULTING AGREEMENTS
Pursuant to the terms of a Succession and Post-Retirement Consulting letter
agreement entered into in April 2002, between Thomas C. Sullivan and the Company
(the "Sullivan Consulting Agreement"), Mr. Sullivan will step down from his
position as the Chief Executive Officer of the Company effective as of October
11, 2002, and will retire as an employee of the Company effective as of January
1, 2003. Mr. Sullivan, however, will continue to serve as Chairman of the Board
and as a member of the Board of Directors. Under the Sullivan Consulting
Agreement, Mr. Sullivan will no longer be entitled to further payment of his
annual bonus, and will no longer participate in any of the Company's benefit
plans, except as provided by law or as governed by the terms of the benefit
plans themselves or by the terms of the Sullivan Consulting Agreement. The
Sullivan Consulting Agreement provides that effective January 1, 2003 and
continuing through May 31, 2005, Mr. Sullivan will serve the Company in a
consulting capacity, providing assistance in the area of corporate development,
when and as may be requested by the Company. During the 29-month consulting
period, Mr. Sullivan will be entitled to monthly payments that are equal to his
current monthly base salary for his service as a consultant, Chairman of the
Board and Board member. In addition, in connection with Mr. Sullivan's
retirement, the Compensation Committee previously approved the extension of the
terms of certain stock options granted to him in the past.
Until Mr. Sullivan's retirement as an employee of the Company as discussed
above, the terms of his employment are governed by an Amended and Restated
Employment Agreement, dated as of February 1, 2001. Pursuant to the terms of his
Employment Agreement, Mr. Sullivan is to receive an annual base salary of not
less than $870,000. In addition to his base salary, Mr. Sullivan is entitled to
such annual incentive compensation or bonuses as the Compensation Committee
determines and the Board of Directors approves, and to participate in the other
benefit plans provided by the Company. Under the provisions of the Employment
Agreement, the Company may terminate the employment of Mr. Sullivan for
Disability or Cause (as defined). If the Company were to terminate Mr.
Sullivan's employment without Cause (as defined) at any time or he resigns for
Good Reason (as defined) within two years after a Change of Control (as
defined), he would be entitled to receive an amount equal to the product of his
annual base salary then in effect multiplied by five, plus his incentive
compensation for the preceding fiscal year (if not yet paid) and an amount equal
to his average annual incentive compensation prorated for the current year, and
continuation, for a period of five years, of health, welfare and other specified
benefits. In addition, if the Company were to terminate Mr. Sullivan's
employment without Cause at any time or he resigns for Good Reason within two
years after a Change in Control, Mr. Sullivan would also be entitled to the
lapse of restrictions on restricted shares and a lump-sum payment equal to the
cash value of the benefits he would have received under the 1997 Restricted
Stock Plan had he continued to receive annual awards under that plan for a
period of five years. A portion of payments made to Mr. Sullivan as a result of
the termination of his employment in connection with a Change in Control of the
Company may not be deductible to the Company as an ordinary and necessary
business expense and may be subject to a 20% excise tax imposed on Mr. Sullivan
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). The Employment Agreement provides for an additional
payment to Mr. Sullivan equal to the amount of any excise tax imposed on him by
Section 4999 of the Internal Revenue Code and any taxes, interest or penalties
incurred with respect thereto, which could be substantial. The Employment
Agreement also provides for the payment by the Company of up to $500,000 in
legal fees incurred by Mr. Sullivan in the event that, following a Change of
Control, Mr. Sullivan may be caused to institute or defend legal proceedings to
enforce
19
his rights under the Employment Agreement. In addition, the Employment Agreement
imposes customary noncompetition, nonsolicitation and confidentiality
obligations on Mr. Sullivan.
Pursuant to the terms of a Succession and Post-Retirement Consulting letter
agreement entered into in April 2002, between James A. Karman and the Company
(the "Karman Consulting Agreement"), Mr. Karman will step down from his position
as Vice Chairman of the Board effective as of October 11, 2002, and will retire
as an employee of the Company as of January 1, 2003. Mr. Karman, however, will
continue to serve as a member of the Board of Directors. Under the Karman
Consulting Agreement, Mr. Karman will no longer be entitled to further payment
of his annual bonus, and will no longer participate in any of the Company's
benefit plans, except as provided by law or as governed by the terms of the
benefit plans themselves or by the terms of the Karman Consulting Agreement. The
Karman Consulting Agreement provides that effective January 1, 2003 and
continuing through May 31, 2004, Mr. Karman will serve the Company in a
consulting capacity, providing assistance in the area of investor relations,
when and as may be requested by the Company. During the 17-month consulting
period, Mr. Karman will be entitled to monthly payments that are equal to his
current monthly base salary for his service as a consultant and Board member. In
addition, in connection with Mr. Karman's retirement, the Compensation Committee
previously approved the extension of the terms of certain stock options granted
to him in the past.
Until Mr. Karman's retirement as an employee of the Company as discussed
above, the terms of his employment are governed by an Amended and Restated
Employment Agreement, dated as of February 1, 2001. Pursuant to the terms of the
Employment Agreement, Mr. Karman is to receive an annual base salary of not less
than $685,000. Mr. Karman's Employment Agreement otherwise contains
substantially the same provisions that are described above for Mr. Thomas C.
Sullivan's Employment Agreement.
Under an Amended and Restated Employment Agreement, dated as of February 1,
2001, Frank C. Sullivan is employed as the President and Chief Operating Officer
of the Company for a term ending on May 31, 2003, which is automatically
extended for additional one-year periods unless Mr. Sullivan or the Company give
the other party notice of nonrenewal two months in advance of the annual renewal
date. Pursuant to the terms of his Agreement, Frank C. Sullivan is to receive an
annual base salary of not less than $600,000 beginning June 1, 2002. Except as
described below, the Agreement contains substantially the same provisions that
are described above for Thomas C. Sullivan's Employment Agreement. If the
Company were to terminate Frank C. Sullivan's employment without Cause (as
defined) or the Company elected not to renew the term of the Agreement, Mr.
Sullivan would be entitled to receive an amount equal to the product of his
annual base salary then in effect multiplied by two, plus his incentive
compensation for the preceding fiscal year (if not yet paid) and an amount equal
to his average annual incentive compensation prorated for the current year, and
continuation, for a period of two years, of health, welfare and other specified
benefits. Alternatively, if the Company terminates Frank C. Sullivan's
employment without Cause within two years after a Change in Control (as
defined), or if Mr. Sullivan resigns for Good Reason (as defined) during that
period, he would be entitled to receive an amount equal to the product of his
annual base salary then in effect multiplied by three, plus his incentive
compensation for the preceding fiscal year (if not yet paid) and an amount equal
to his average annual incentive compensation prorated for the current year, and
continuation, for a period of three years, of health, welfare, and other
specified benefits. In addition, if his employment is terminated without Cause
at any time or he resigns for Good Reason within two years after a Change in
Control, Mr. Sullivan would also be entitled to the lapse of restrictions on
restricted shares and a lump-sum payment equal to the cash value of the benefits
he would have received under the 1997 Restricted Stock Plan had he continued to
receive annual awards under that plan for a period of two years or, if his
employment is so terminated within two years after a Change in Control, for a
period of three years. Given the fact that Thomas C. Sullivan will step down as
Chief Executive Officer on October 11, 2002, the Board of Directors intends to
elect Frank C. Sullivan to the position of Chief Executive Officer at that time.
20
Under an Amended and Restated Employment Agreement, dated as of February 1,
2001, P. Kelly Tompkins is employed as the Vice President, General Counsel and
Secretary of the Company for a term ending on May 31, 2003, which is
automatically extended for additional one-year periods unless Mr. Tompkins or
the Company give the other party notice of nonrenewal two months in advance of
the annual renewal date. Pursuant to the terms of the Agreement, Mr. Tompkins is
to receive an annual base salary of not less than $245,000 beginning June 1,
2002. Mr. Tompkins' Agreement contains substantially the same provisions that
are described above for Frank C. Sullivan's Agreement.
Under an Employment Agreement, dated as of February 1, 2001, Robert L.
Matejka is employed as the Vice President, Chief Financial Officer and
Controller of the Company for a term ending on May 31, 2003, which is
automatically extended for additional one-year periods unless Mr. Matejka or the
Company give the other party notice of nonrenewal two months in advance of the
annual renewal date. Pursuant to the terms of the Agreement, Mr. Matejka is to
receive an annual base salary of not less than $220,000 beginning June 1, 2002.
Mr. Matejka's Agreement contains substantially the same provisions that are
described above for Frank C. Sullivan's Agreement.
DEFINED BENEFIT PENSION PLAN
The table below sets forth the normal annual retirement benefits payable
upon retirement at age 65 (as of June 1, 2002) under the Company's tax qualified
defined benefit retirement plan (the "Retirement Plan") for employees in the
compensation ranges specified, under various assumptions with respect to average
annual compensation and years of benefit service, assuming that the employee
elected to receive his or her pension on a normal life annuity basis:
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
AVERAGE (AS OF JUNE 1, 2002) WITH YEARS OF SERVICE INDICATED (1)
ANNUAL --------------------------------------------------------
COMPENSATION (2) 5 YEARS 10 YEARS 20 YEARS 30 YEARS 35 YEARS
---------------- ------- -------- -------- -------- --------
$ 100,000 $ 5,696 $ 11,393 $ 22,786 $ 34,179 $ 36,125
150,000 9,179 18,357 36,714 55,072 58,625
200,000 12,661 25,321 50,643 75,964 81,125
250,000 16,143 32,286 64,571 96,857 103,625
300,000 19,625 39,250 78,500 117,750 126,125
350,000 23,107 46,214 92,429 138,643 148,625
400,000 26,589 53,179 106,357 159,536 171,125
450,000 30,071 60,143 120,286 180,429 193,625
500,000 33,554 67,107 134,214 201,322 216,125
550,000 37,036 74,071 148,143 222,214 238,625
600,000 40,518 81,036 162,071 243,107 261,125
650,000 44,000 88,000 176,000 264,000 283,625
700,000 47,482 94,964 189,929 284,893 306,125
750,000 50,964 101,929 203,857 305,786 328,625
800,000 54,446 108,893 217,786 326,679 351,125
850,000 57,929 115,857 231,714 347,572 373,625
900,000 61,411 122,821 245,643 368,644 396,125
950,000 64,893 129,786 259,571 389,357 418,625
1,000,000 68,375 136,750 273,500 410,250 441,125
1,050,000 71,857 143,714 287,429 431,143 463,625
1,100,000 75,339 150,679 301,357 452,036 486,125
1,150,000 78,821 157,643 315,286 472,929 508,625
1,200,000 82,304 164,607 329,214 493,822 531,125
1,250,000 85,786 171,571 343,143 514,714 553,625
---------------
(1) The amounts listed may be reduced in accordance with certain provisions of
the Internal Revenue Code which limit the maximum amount of compensation
that may be taken into account under the Retirement Plan to $200,000 and the
maximum annual benefit payable under the Retirement Plan to $160,000. Prior
to June 1, 1997, the Company maintained a cash Benefit Restoration Plan for
its executive officers providing for the payment of supplemental retirement
benefits because of such Internal Revenue Code limits. See "Benefit
Restoration Plan" below. At the October 1997 Annual Shareholders Meeting,
the shareholders
21
approved the adoption of the RPM, Inc. 1997 Restricted Stock Plan. The
Benefit Restoration Plan was frozen as of June 1, 1998 and will be
eliminated over time.
(2) Includes base compensation as in effect on June 1, 2001, overtime and
commissions paid and bonuses paid or accrued. The compensation covered by
the Retirement Plan for the executive officers named in the Summary
Compensation Table is the salary and bonus listed in such table.
With respect to the executive officers listed in the Summary Compensation
Table: Mr. Thomas C. Sullivan has 40.4 years of benefit service; Mr. Karman,
39.4 years of service; Mr. Frank C. Sullivan, 13.3 years of service; Mr.
Tompkins, 5.9 years of service; and Mr. Matejka, 2.0 years of service.
BENEFIT RESTORATION PLAN
Effective January 1, 1991, the Company established the RPM, Inc. Benefit
Restoration Plan (the "Benefit Restoration Plan") for the purpose of providing
for the payment of supplemental retirement and death benefits to officers of the
Company designated by the Board of Directors whose Retirement Plan benefits may
be limited under the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA") and the Internal Revenue Code. In April 1991, the Board of
Directors designated Messrs. Thomas C. Sullivan and James A. Karman as
participants in the Benefit Restoration Plan. In July 1993, the Board of
Directors also designated Mr. Frank C. Sullivan and certain other officers as
participants in the Benefit Restoration Plan. The Benefit Restoration Plan
replaced the prior Supplemental Executive Retirement Plan which provided similar
supplemental retirement benefits. The Benefit Restoration Plan is an unfunded
excess benefit plan which is administered by the Company. The Benefit
Restoration Plan provides that any cash payment under the plan is to be made in
an amount equal to the amount by which a participant's benefits otherwise
payable under the Company's Retirement Plan are reduced as a result of
limitations under ERISA and the Internal Revenue Code. The supplemental
retirement benefits are forfeited if the officer terminates employment before
attaining five years of vesting service and age 55. Supplemental death benefits
are paid to the surviving spouse or designated beneficiary of the officer. The
Company is entitled to a federal tax deduction in an amount equal to the cash
benefits at the time such cash benefits are paid to a participant.
RESTRICTED STOCK PLAN
At the October 1997 Annual Shareholders Meeting, the shareholders approved
the adoption of the 1997 Restricted Stock Plan (the "Restricted Stock Plan").
THE PURPOSE OF THE RESTRICTED STOCK PLAN IS TO REPLACE, OVER A PERIOD OF TIME,
THE CASH BASED BENEFIT RESTORATION PLAN WITH A STOCK BASED PLAN. SHARES GRANTED
UNDER THE RESTRICTED STOCK PLAN (THE "RESTRICTED SHARES") DIRECTLY REDUCE AND
REPLACE THE CASH AMOUNT OF SUPPLEMENTAL RETIREMENT RESTORATION BENEFITS AND
SUPPLEMENTAL DEATH RESTORATION BENEFITS OWED TO PARTICIPANTS UNDER THE BENEFIT
RESTORATION PLAN. The Restricted Stock Plan is administered by the Compensation
Committee of the Board of Directors, which has the exclusive right and sole
discretion to authorize the granting of Restricted Shares. Only employees of the
Company, including employee Directors who are not members of the Compensation
Committee, are eligible to participate in the Restricted Stock Plan. The Company
is permitted to take a tax deduction for the value of the Restricted Shares upon
the vesting of such shares. The Restricted Stock Plan was amended in 2002 to
permit participants to elect to credit any of the shares awarded under such plan
to the new Deferred Compensation Plan also adopted in 2002. The Restricted Stock
Plan will expire on May 31, 2007 or such earlier date as may be determined by
the Board of Directors.
The Restricted Shares are Common Shares of the Company which are
forfeitable and nontransferable for a specified period of time. The transfer
restrictions remain in place until the earliest of (a) the later of either the
employee's termination of employment or the lapse of forfeiture restrictions,
(b) a "change of control" with respect to the Company, as such term is defined
in the Restricted Stock Plan, or (c) the termination of the Restricted Stock
Plan. The Restricted Shares
22
are subject to complete forfeiture until the earliest to occur of (a) the later
of either the employee's attainment of age 55 or the fifth anniversary of the
May 31st immediately preceding the date on which the Restricted Shares were
awarded, (b) the retirement of the employee on or after the attainment of age
65, or (c) a "change in control" with respect to the Company, as such is defined
in the Restricted Stock Plan. Notwithstanding the above, if the employee's
service to the Company is terminated on account of the death or total disability
prior to the lapsing of restrictions, such restrictions shall lapse.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors administers the cash
salary, bonus, and other incentive compensation and stock option programs for
the executive officers of the Company pursuant to (i) the Code of the Company,
which was adopted by the shareholders on October 14, 1987, and (ii) a
Compensation Committee Charter, which was first adopted by the Board of
Directors on January 24, 1992. The Compensation Committee Charter, as amended,
provides for the Compensation Committee (i) to review and recommend to the Board
of Directors the amount of compensation for services rendered to the Company to
be paid to the executive officers of the Company, (ii) to review and approve the
terms and conditions of written Employment Agreements for executive officers of
the Company, (iii) to administer the Company's Stock Option Plans, (iv) to
review and recommend to the Board of Directors the amount of reasonable
compensation and payment of expenses and other benefits to be paid to members of
the Board of Directors for serving as a Director of the Company, (v) to review
and approve the Compensation Committee Report to be included in the Company's
Proxy Statement for its Annual Shareholders Meeting, and (vi) to review,
approve, and administer any other matters or plans specifically delegated to the
Committee by the Board of Directors. The Compensation Committee presently
consists of four independent Directors who are appointed to the Committee by and
report to the entire Board of Directors. Each member of the Compensation
Committee qualifies as a "non-employee director" within the definition of Rule
16b-3 under the Securities Exchange Act of 1934 and as an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code.
The Compensation Committee reviews and recommends the cash salaries,
incentive compensation, and bonuses to be awarded to Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer, and certain other executive
officers, annually in July or August of each year based upon a number of
factors, but the Committee does not utilize pre-established, specific
performance goals in making cash salary compensation decisions. Historically,
Mr. Sullivan has prepared a recommendation to the Compensation Committee for
cash salary and bonus increases and stock option awards for himself and the
other executive officers which the Committee then reviews and considers in light
of a number of factors, including (i) increases in sales, net income, and
earnings per share, (ii) performance of the Company's Common Shares in the open
market, (iii) increases in cash dividends paid to shareholders, (iv) return on
shareholders' equity, and (v) acquisitions, corporate financings, and other
general corporate objectives which were achieved during the May 31 fiscal year.
Any increases in cash salaries for Mr. Sullivan and the other executive officers
are made retroactive to June 1 of each fiscal year. Once awarded, an increase in
salary cannot be reduced without the officer's consent.
INCENTIVE COMPENSATION PLAN
In 1995, the Company retained a professional compensation consulting firm
to review the Company's executive compensation programs in light of Section
162(m) of the Internal Revenue Code which disallows a tax deduction for certain
compensation paid in excess of $1,000,000 to certain key executives. The
regulations under Section 162(m), however, except from this $1,000,000 limit
various forms of compensation, including "performance-based" compensation. The
consulting firm eventually recommended to the Compensation Committee a
performance-based Incentive Compensation Plan (the "Plan") which would satisfy
the requirements of Sec-
23
tion 162(m). The Plan was approved by the Committee and the Board of Directors
in July 1995 and was approved by the Company's shareholders at the October 1995
Annual Shareholders Meeting.
The Plan provides for the granting of annual cash bonus awards (the "Bonus
Awards") to those employees of the Company who in any respective fiscal year are
the Chief Executive Officer and the other four most highly compensated officers
of the Company (the "Covered Employees").
The Plan is designed to promote the interests of the Company and its
shareholders by attracting and retaining officers who are key employees of the
Company; motivating such officers by reason of performance-related incentives to
achieve the Company's performance goals; enabling such officers to participate
in the growth and financial success of the Company; and, by qualifying the Bonus
Awards as "performance-based" compensation under Section 162(m) of the Internal
Revenue Code, assuring that the Company will continue to be able to deduct cash
bonuses paid to the Covered Employees. The Plan is intended to be utilized as
the primary annual cash bonus program for the Company's Covered Employees.
The Plan calls for providing an aggregate Bonus Award pool of 1.3% of the
Company's Income Before Income Taxes ("pre-tax income") in each applicable
fiscal year for the Covered Employees. Within the first three months of each
fiscal year the Compensation Committee, which administers the Plan, is required
to determine in writing the portion of such aggregate Bonus Award pool that each
Covered Employee may receive in respect of such fiscal year. At the end of each
fiscal year, the Compensation Committee shall calculate the aggregate Bonus
Award pool based on the Company's audited pre-tax income and each individual's
Bonus Award payout amount.
The Compensation Committee may reduce or eliminate a Covered Employee's
Bonus Award, at the Compensation Committee's sole discretion, based solely on
individual performance. The total of all Bonus Award payments made under the
Plan in any given fiscal year shall not exceed 1.3% of the Company's pre-tax
income. Furthermore, the total of all payments to any one individual Covered
Employee under the Plan in any fiscal year shall not exceed $1,500,000. Payments
under the Plan, pursuant to the terms herein described, are intended to satisfy
the requirements of Section 162(m) of the Internal Revenue Code as
"performance-based" compensation and therefore be fully tax deductible to the
Company.
In August 2001, the Compensation Committee determined on a percentage basis
the portion of the aggregate Bonus Award pool to be awarded to each Covered
Employee in respect of the Company's performance for the fiscal year ending May
31, 2002 as follows: Thomas C. Sullivan, 35%; James A. Karman, 30%; Frank C.
Sullivan, 25%; P. Kelly Tompkins, 5%; and Robert L. Matejka, 5%; the
Compensation Committee will follow the same procedure in 2002 as in 2001.
For fiscal year May 31, 2002, the Company's pre-tax income was $154.1
million, providing a Bonus Pool under the Plan for the five highest paid
executive officers of $2.0 million. Upon the recommendation of Mr. Thomas C.
Sullivan, the Compensation Committee awarded bonuses totaling $1.9 million to
the five highest paid executives. The bonus paid to Mr. Frank C. Sullivan for
fiscal year 2002 was significantly below the bonus amount which is authorized to
be paid pursuant to the Bonus Pool formula. See "Executive
Compensation -- Summary Compensation Table."
SPECIAL SENIOR EXECUTIVE PERFORMANCE AWARD PROGRAM
On April 28, 2000, at the recommendation of the Compensation Committee, the
Board of Directors adopted the Special Senior Executive Performance Award
Program (the "Award Program"). The Award Program is designed to promote the
interests of shareholders by motivating the Company's senior management,
specifically Mr. Thomas C. Sullivan, and Mr. James A. Karman, to maximize
shareholder value.
Under the Award Program, the Company's stock price from October 8, 1999 to
December 31, 2002 (the "Performance Period") is measured against the performance
of the stock price of a peer group of competitors comprised of the following
companies: Detrex Corporation, Ferro Corporation,
24
H.B. Fuller Company, Imperial Chemical Industries PLC, NL Industries, Inc., PPG
Industries Inc., Rohm and Haas Company, The Sherwin-Williams Company and Valspar
Corporation (the "Peer Group Companies"). As a result of its acquisition by
Valspar Corporation in the 2001 fiscal year, Lilly Industries, Inc. has been
eliminated from the group of Peer Group Companies. The maximum awards available
under the Award Program for Mr. Sullivan and Mr. Karman are $1,500,000 and
$1,000,000, respectively. The amount of an award will be determined by comparing
the appreciation in the Company's stock price with the appreciation in the stock
price of the Peer Group Companies over the Performance Period.
Awards are not earned unless the appreciation in the Company's stock price
exceeds the median appreciation in the stock price of the Peer Group Companies
(the "Award Threshold"). Once the Award Threshold is met, awards are earned
based on the following scale:
PERCENTILE PERFORMANCE OF THE COMPANY'S STOCK PRICE
AS COMPARED TO THE PEER GROUP COMPANIES PERCENT OF MAXIMUM AWARD EARNED
--------------------------------------------------- -------------------------------
Greater than 50(th) to 60(th) 50%
Greater than 60(th) to 70(th) 60%
Greater than 70(th) to 80(th) 75%
Greater than 80(th) to 90(th) 90%
Greater than 90(th) 100%
Awards will be determined at the conclusion of the Performance Period. Any
awards earned will be paid in cash within 60 days of the end of the Performance
Period, except that the Compensation Committee may choose to defer the payment
of any award earned under the Award Program so that such payment will be tax
deductible under Section 162(m) of the Internal Revenue Code. Subject to
exceptions for death and disability at the discretion of the Board of Directors,
no award will be earned if the executive terminates his employment for any
reason prior to December 31, 2002.
1996 KEY EMPLOYEES STOCK OPTION PLAN
The Company's 1996 Key Employees Stock Option Plan for its executive
officers and other key employees is intended to provide long-term equity
incentive to the officers and employees and, in the long-term, relates to
shareholder value. Options to executive officers are awarded by the Committee
based upon the recommendation of Mr. Thomas C. Sullivan, and the various
presidents of the Company's operating subsidiaries submit recommendations with
respect to option grants to subsidiary employees. Options are granted at the
last sales price on the date of grant, have a term of ten years, and generally
vest at the rate of 25% per year after one year.
On October 3, 2001, the Compensation Committee granted options totaling
186,000 shares to executive officers and other key employees of the Company and
its subsidiaries and granted options totaling 78,000 shares to roofing sales
representatives of the Company's subsidiary, Tremco Incorporated. In addition,
on November 6, 2001, the Compensation Committee granted options totaling 102,000
shares, and on December 17, 2001, the Committee granted options totaling 120,000
shares, to certain key employees of the Company. As of May 31, 2002, 3,093,297
shares were available for future grant under the 1996 Key Employees Stock Option
Plan.
DEFERRED COMPENSATION PLAN
The Company's revised and updated Deferred Compensation Plan, adopted in
2002, supersedes the deferred compensation plan that was adopted by the Company
in February 1994. Under the new plan, selected management employees, certain
highly compensated employees and Directors are eligible to defer a portion of
their salary, bonus, incentive plan amounts, Director fees and grants of
restricted stock until a future date. The new plan also provides that if a
participant elects to defer compensation that she or he would otherwise have
contributed to the Company's 401(k) Plan, the participant's account will be
credited with an amount equal to the matching contribution the Company otherwise
would have made to the 401(k) Plan for the participant,
25
reduced by the amount of any matching contribution the Company makes to the
401(k) Plan on behalf of the participant. Amounts credited to a participant's
account under the predecessor deferred compensation plan were credited to the
participant's account under the new plan. A participant's account will be
credited with investment gains or losses as if the amounts credited to the
account were invested in selected investment funds. Any compensation deferred
under the plan is not included in the $1,000,000 limit provided for under
Section 162(m) of the Internal Revenue Code until the year in which the
compensation actually is paid. In addition, to the extent that any compensation
paid to a participant would not be deductible by the Company by reason of the
Section 162(m) limitation, the Company may defer payment of any or all of a
distribution under the plan and such deferred amount will be distributed to the
participant at the earliest date on which the deductibility of the compensation
will not be limited by Section 162(m).
SUCCESSION AND POST-RETIREMENT PLANNING AGREEMENTS
In April 2002, the Compensation Committee and the Board of Directors
approved the form of the Succession and Post-Retirement Consulting letter
agreements of both Mr. Thomas C. Sullivan and Mr. James A. Karman. See
"Executive Compensation -- Employment Agreements."
PERFORMANCE ACCELERATED RESTRICTED STOCK PLAN
In July 2002, at the recommendation of the Compensation Committee, the
Board of Directors adopted the RPM, Inc. 2002 Performance Accelerated Restricted
Stock Plan (the "Performance Accelerated Plan"), which is being submitted for
shareholder approval at this Annual Meeting, the purpose of which plan is to
provide an added incentive to key officers to improve the long-term performance
of the Company. The Performance Accelerated Plan will be administered by the
Compensation Committee of the Board of Directors. Officers of the Company and
its subsidiaries will be eligible to participate in the Performance Accelerated
Plan. The Performance Accelerated Plan is described in greater detail in the
section titled, "Proposal Four -- Adoption of RPM, Inc. 2002 Performance
Accelerated Restricted Stock Plan," however, some of the significant provisions
of the plan include the following: (i) restrictions on shares granted under the
Performance Accelerated Plan will lapse if all performance goals are attained
during any fiscal year beginning prior to June 1, 2011, and (ii) alternatively,
restrictions on shares will lapse on May 31, 2012 for any participant who has
been continually employed with the Company or a subsidiary from June 1, 2002 to
May 31, 2012. The performance goals for the Company in any fiscal year beginning
prior to June 1, 2011 will be the financial or other goals determined by the
Compensation Committee and set forth in a restricted stock agreement entered
into in connection with the Performance Accelerated Plan. The performance goals
for the initial grants are as follows: (a) Company earnings of at least
$200,000,000 and (b) earnings per share of at least $1.75. The Performance
Accelerated Plan terminates on May 31, 2012. The plan will not be considered a
performance-based compensation plan satisfying the requirements of Section
162(m) of the Internal Revenue Code and, therefore, payments made by the Company
under the plan may not be entirely tax deductible.
Edward B. Brandon, Chairman
Albert B. Ratner
Dr. Jerry Sue Thornton
Joseph P. Viviano
26
PERFORMANCE GRAPHS
Set forth below are line graphs comparing the yearly cumulative total
shareholders' return on the Company's Common Shares against the yearly
cumulative total return of the S&P Composite -- 500 Stock Index and an index of
certain companies selected by the Company as comparative to the Company (the
"Peer Group Index"). The companies selected to form the Peer Group Index are:
Detrex Corporation, Ferro Corporation, H. B. Fuller Company, Imperial Chemical
Industries PLC, NL Industries, Inc., PPG Industries Inc., Rohm and Haas Company,
The Sherwin-Williams Company and Valspar Corporation.
The graphs assume that the value of the investment in the Company's Common
Shares, the S&P Composite -- 500 Stock Index and the respective Peer Group Index
was $100 on May 31, 1997 and May 31, 1992, respectively, and that all dividends,
if any, were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG RPM, INC., THE S&P 500 INDEX AND
A PEER GROUP
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
---------------------------------------------------
5/97 5/98 5/99 5/00 5/01 5/02
------ ------ ------ ------ ------ ------
RPM, INC.............................. 100.00 114.93 96.76 70.88 63.18 125.57
S&P 500............................... 100.00 130.68 158.16 174.73 156.29 134.65
PEER GROUP............................ 100.00 135.25 99.11 78.91 76.13 76.34
* $100 INVESTED ON 05/31/97 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MAY 31.
27
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN*
AMONG RPM, INC., THE S&P 500 INDEX AND
A PEER GROUP
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
------------------------------------------------------------------------------------------------
5/92 5/93 5/94 5/95 5/96 5/97 5/98 5/99 5/00 5/01 5/02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
RPM, INC............. 100.00 124.64 125.67 143.31 153.91 181.45 208.54 175.58 128.62 114.65 227.85
S&P 500.............. 100.00 111.61 116.36 139.86 179.64 232.47 303.81 367.69 406.21 363.34 313.03
PEER GROUP........... 100.00 88.23 65.81 71.88 80.87 91.66 123.98 90.84 72.33 69.78 71.01
* $100 INVESTED ON 05/31/92 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MAY 31.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and Directors and persons who own 10% or more of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Commission.
Officers, Directors and 10% or greater shareholders are required by Commission
regulations to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that, except as described below, all of its
officers and Directors complied with all filing requirements applicable to them
with respect to transactions during the fiscal year ended May 31, 2002. Joseph
P. Viviano inadvertently omitted to report 1,000 of the Common Shares owned by
him on his initial Statement of Beneficial Ownership of Securities on Form 3.
Mr. Viviano filed an amended Form 3 in June 2002 to correct the omission.
28
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board. The Audit Committee's activities are governed by a written
charter adopted by the Board of Directors. In fulfilling its responsibilities,
the Audit Committee has reviewed and discussed the audited financial statements
contained in the 2002 Annual Report on the Commission's Form 10-K with the
Company's management and the independent auditors. Management is responsible for
the financial statements and the reporting process, including the system of
internal controls. The independent auditors are responsible for expressing an
opinion on the conformity of those audited financial statements with accounting
principles generally accepted in the United States.
The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended. In addition, the Audit
Committee has discussed with the independent auditors the auditors' independence
from the Company and its management, including the matters in the written
disclosures required by Independence Standard Board No. 1, Independence
Discussions with Audit Committees, which the Company has received.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Company's Annual Report on SEC Form 10-K
for the fiscal year ended May 31, 2002, for filing with the Commission.
The Audit Committee has determined that the rendering of the non-audit
services by Ciulla, Smith & Dale, LLP is compatible with maintaining the
auditor's independence.
Submitted by the Audit Committee of the Board of Directors as of July 22,
2002.
Donald K. Miller, Chairman
E. Bradley Jones
Lorrie Gustin
Dr. Max D. Amstutz
During the fiscal year ended May 31, 2002, Ciulla, Smith & Dale, LLP
provided various audit services and non-audit services to the Company. Set forth
below are the aggregate fees billed for these services:
Audit Fees: The aggregate fees billed for professional services rendered
for the audit of the Company's annual financial statements for the fiscal year
ended May 31, 2002 and for the reviews of the financial statements included in
the Company's quarterly reports on Form 10-Q for the fiscal year ended May 31,
2002 were $1,480,000.
Financial Information Systems Design and Implementation Fees: There were
no fees billed by Ciulla, Smith & Dale, LLP for professional services rendered
for information technology services relating to financial information systems
design and implementation for the fiscal year ended May 31, 2002.
All Other Fees: The aggregate fees billed by Ciulla, Smith & Dale, LLP for
services rendered to the Company, other than the services described above under
"Audit Fees" and "Financial Information Systems Design and Implementation Fees"
for the fiscal year ended May 31, 2002 were $476,000. The aggregate fees
included in this category partially relate to the Company's offering of
11,500,000 Common Shares, which closed on April 2, 2002, registered with the
Commission on a Registration Statement on Form S-3. The fees also relate to tax
preparation and planning, pension plan audits, assistance with corporate
development activities and other audit and accounting services.
29
PROPOSAL TWO
REINCORPORATION FROM OHIO TO DELAWARE
GENERAL
For the reasons set forth below, the Board believes that it is in the best
interests of the Company and its shareholders to change the state of
incorporation of the Company from Ohio to Delaware (the "Proposed
Reincorporation"). Throughout the remainder of this Proxy Statement, the Company
as currently incorporated in Ohio will be alternatively referred to as "RPM" and
the Company as reincorporated in Delaware will be referred to as "RPM-Delaware."
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION. THE EFFECT
OF AN ABSTENTION OR A BROKER NON-VOTE IS THE SAME AS THAT OF A VOTE AGAINST THE
PROPOSED REINCORPORATION.
SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS SECTION OF THE PROXY
STATEMENT, INCLUDING THE RELATED APPENDICES REFERENCED BELOW AND ATTACHED TO
THIS PROXY STATEMENT, BEFORE VOTING ON THE PROPOSED REINCORPORATION.
The Proposed Reincorporation will be effected by merging an Ohio
corporation that is a wholly-owned subsidiary of newly formed RPM-Delaware with
and into RPM (the "Merger"). Upon completion of the Merger, RPM will continue to
exist as a wholly-owned subsidiary of RPM-Delaware.
As provided by the Agreement and Plan of Merger, in the form attached
hereto as Appendix A (the "Merger Agreement"), each outstanding Common Share of
RPM, without par value, will be converted into one share of RPM-Delaware common
stock, $.01 par value per share (the "Common Stock"), at the effective time of
the Merger. Each stock certificate representing issued and outstanding Common
Shares of RPM will continue to represent the same number of shares of RPM-
Delaware Common Stock. It will not be necessary for shareholders to exchange
their existing RPM stock certificates for RPM-Delaware stock certificates.
However, shareholders may request that their certificates be exchanged if they
so choose. Once the Merger is consummated, RPM-Delaware will own all of the
outstanding Common Shares of RPM, and you and the other shareholders will hold
all of the issued and outstanding shares of RPM-Delaware Common Stock.
RPM Common Shares are listed for trading on the New York Stock Exchange
and, after the Merger, RPM-Delaware Common Stock will be traded on the New York
Stock Exchange under the same symbol as the Common Shares of RPM are currently
traded.
There will be no interruption in the trading of RPM-Delaware's Common Stock
as a result of the Merger. As of June 18, 2002, the date the Board resolved to
undertake the Proposed Reincorporation, the closing price of RPM's Common Shares
on the New York Stock Exchange was $16.06 per share. The Proposed
Reincorporation includes the implementation of a new certificate of
incorporation and by-laws for RPM-Delaware to replace the current Articles of
Incorporation ("Articles") and Code of Regulations ("Code") of RPM. As a
Delaware corporation, RPM-Delaware will be subject to the Delaware General
Corporation Law. RPM is subject to the General Corporation Laws of Ohio.
Differences between the Delaware certificate of incorporation and by-laws, on
the one hand, and the Ohio Articles and Code, on the other hand, must be viewed
in the context of the differences between the Delaware law and the Ohio law.
These differences are discussed below under "Comparison of Shareholder Rights
under Ohio and Delaware Law."
The affirmative vote of the holders of two-thirds of the outstanding Common
Shares of RPM is required for approval of the Proposed Reincorporation which
will be implemented in accordance with the Merger Agreement. The Proposed
Reincorporation has been approved by the members of RPM's Board of Directors,
who recommend a vote in favor of the Proposed Reincorporation. The Merger will
become effective upon the filing of a certificate of merger with the Secretary
of State of
30
Ohio. It is anticipated that this filing will be made as soon as practicable
following the Annual Meeting. The Company has the right to defer this filing and
the completion of the Merger for any period of time that the Company deems
appropriate, although the Company's present intention is to complete the Merger
as soon as practicable following the Annual Meeting. In addition, as described
in the Merger Agreement, the Merger (and thus the Proposed Reincorporation) may
be abandoned or the Merger Agreement may be amended by the Board either before
or after shareholder approval has been obtained (except that the principal terms
may not be amended without stockholder approval) and prior to the Effective Time
if, in the opinion of the Board, circumstances arise that make it inadvisable to
proceed with the Proposed Reincorporation under the original terms of the Merger
Agreement. As provided under Ohio law, shareholders of RPM will have appraisal
rights with respect to the Merger. See "Appraisal Rights in the Merger" below.
The discussion below is qualified in its entirety by reference to the Merger
Agreement and the certificate of incorporation and by-laws of RPM-Delaware,
copies of which are attached to this Proxy Statement as Appendices A, B and C.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL ALSO
CONSTITUTE APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION
AND BY-LAWS OF RPM-DELAWARE AND ALL PROVISIONS THEREOF, SUBJECT TO THE SEPARATE
APPROVAL BY THE SHAREHOLDERS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION PURSUANT TO PROPOSAL THREE CONTAINED HEREAFTER.
NO CHANGE IN BOARD MEMBERS, BUSINESS, MANAGEMENT, CAPITALIZATION, BOARD OF
DIRECTORS STRUCTURE, EMPLOYEE BENEFIT PLANS OR LOCATION OF PRINCIPAL FACILITIES
The Proposed Reincorporation will effect only a change in the legal
domicile of the Company and other changes of a legal nature. The material
changes are described in this Proxy Statement. Other than in connection with the
reorganization of some of the Company's operating companies following the
Proposed Reincorporation, as further described below, the Proposed
Reincorporation will NOT result in any change in the business, management,
capitalization, board of directors structure, fiscal year or location of the
principal facilities of the Company. Other than the change to Class II of the
Board of Directors resulting from the vacancy created by the planned resignation
of Lorrie Gustin (which is currently expected to be filled by the remaining
Directors by appointing Bruce A. Carbonari to Class II), the directors of RPM
will serve as the directors of RPM-Delaware. All employee benefit and stock
option plans of RPM will become RPM-Delaware plans, and each option or right
issued by such plans will automatically be converted into an option or right to
purchase the same number of shares of RPM-Delaware Common Stock, at the same
price per share, upon the same terms and subject to the same conditions.
Shareholders should note that approval of the Proposed Reincorporation will also
constitute approval of these plans continuing as RPM-Delaware plans. Other
employee benefit arrangements of RPM will also be continued by RPM-Delaware upon
the terms and subject to the conditions currently in effect. As noted above,
after the Proposed Reincorporation, RPM-Delaware intends to internally realign
the ownership of some of its operating companies in order to further streamline
the management and operations of its businesses and to more effectively align
the legal structure of its various operating companies under appropriate
intermediate holding companies.
THE CHARTERS AND BY-LAWS AND CODE OF REGULATIONS OF RPM-DELAWARE AND RPM
The provisions of the RPM-Delaware certificate of incorporation and by-laws
are similar in substance to those of the RPM Articles and Code in most respects.
The differences include (i) the elimination of the supermajority voting
provisions for interested shareholder transactions and upon the sale of
substantially all of the Company's assets, (ii) the elimination of the ability
of shareholders to cumulate votes in the election of Directors and (iii) the
elimination of the availability of action by the written consent of shareholders
which, given the current requirement for unanimous written consent by
shareholders, will not, in practice, impact the rights of shareholders. The
Company is also separately seeking shareholder approval to increase the number
of authorized shares of common stock from 200,000,000 to 300,000,000 and to add
a class of serial preferred stock to
31
RPM-Delaware's certificate of incorporation, see "Proposal Three -- Increase in
the Number of Authorized Shares; Addition of Class of Serial Preferred Stock".
In addition, as discussed more fully in this Proxy Statement, the Proposed
Reincorporation includes the implementation of certain other provisions in the
RPM-Delaware certificate of incorporation and by-laws that are different from
the RPM Articles and Code. For a discussion of such changes, see "Comparison of
Shareholder Rights under Ohio and Delaware Law." This discussion of the
certificate of incorporation and by-laws of RPM-Delaware is qualified by
reference to Appendices B and C hereto, respectively. In addition, RPM-Delaware
could implement certain other changes by amending its certificate of
incorporation or by-laws in the future.
The Articles of RPM currently authorize the Company to issue up to
200,000,000 Common Shares and do not have provisions authorizing the issuance of
preferred stock. The certificate of incorporation of RPM-Delaware, assuming
approval of Proposal Three, will provide that RPM-Delaware will have 300,000,000
authorized shares of Common Stock, par value $0.01 per share, and 50,000,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock").
ANTICIPATED POST-REINCORPORATION CORPORATE STRUCTURE
RPM currently functions as a holding company for its various operating
companies. After the Proposed Reincorporation, RPM will continue to exist as a
wholly-owned subsidiary of RPM-Delaware. As such, RPM will serve as an
intermediate holding company for a number of RPM-Delaware's operating companies.
After the Proposed Reincorporation, we anticipate that we will realign the
ownership of our various operating companies according to their product
offerings, served end markets, customer base and operating philosophy. Pursuant
to this anticipated plan, operating companies that tend to be entrepreneurial
and serve niche markets (such as many of the entities that make up the group of
companies commonly referred to as "RPM II") will continue to be owned by RPM.
Operating companies that serve the consumer market will be transferred to a new
intermediate holding company to be wholly-owned by RPM-Delaware. Ownership of
operating companies that primarily serve the industrial market will be
transferred to a new intermediate holding company to also be wholly-owned by
RPM-Delaware. Following this anticipated realignment, RPM-Delaware's corporate
structure will generally be as set forth below:
----------------------------
Stockholders
----------------------------
----------------------------
RPM International Inc.
(Delaware)
----------------------------
--------------------------------------------------------------------------------------------------
---------------------------- ---------------------------- ----------------------------
RPM Consumer RPM, Inc. RPM Industrial
Holding Company (Ohio) Holding Company
(Delaware) (Delaware)
---------------------------- ---------------------------- ----------------------------
---------------------------- ---------------------------- ----------------------------
Consumer-Focused Entrepreneurial Industrial-Focused
Operating Companies Operating Companies Operating Companies
---------------------------- ---------------------------- ----------------------------
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
For many years, Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has been a leader in adopting,
construing, and implementing comprehensive, flexible corporate laws responsive
to the legal and business needs of corporations
32
organized under its laws. Many corporations have initially chosen Delaware, or
chosen to reincorporate in Delaware, in a manner similar to that proposed by the
Company. The Board of Directors believes that the principal reasons for
considering such a reincorporation are:
- the development in Delaware over the last century of a well-established
body of case law construing the Delaware General Corporation Law, which
provides businesses with a greater measure of predictability than exists
in any other jurisdiction; the certainty afforded by the well-established
principles of corporate governance under Delaware law are of benefit to
RPM and its shareholders and should assist RPM in its ability to continue
to attract and retain outstanding directors and officers;
- Delaware law itself, which is generally acknowledged to be the most
advanced and flexible corporate statute in the country;
- the Delaware Court of Chancery, which brings to its handling of complex
corporate issues a level of experience, a speed of decision and a degree
of sophistication and understanding unmatched by any other court in the
country, and the Delaware Supreme Court, the only appeals court, which is
highly regarded and currently consists primarily of former Vice
Chancellors and corporate practitioners;
- the Delaware General Assembly, which each year considers and adopts
statutory amendments that have been proposed by the Corporation Law
Section of the Delaware bar to meet changing business needs; and
- the reincorporation will provide the Company with the opportunity to
realign the ownership of various operating companies according to their
product offerings, served end markets, customer base and operating
philosophy, whereby operating companies that tend to be entrepreneurial
and serve niche markets will continue to be owned by RPM, while operating
companies that primarily serve the consumer market will be transferred to
a newly-formed intermediate holding company and operating companies that
primarily serve the industrial market will be transferred to another
newly-formed intermediate holding company, all of which will be wholly
owned by RPM-Delaware.
As noted above, after the Merger, the shares of RPM-Delaware's Common Stock
will continue to be traded, without interruption, on the New York Stock Exchange
and under the same symbol "RPM". The Company believes that the Proposed
Reincorporation will not significantly affect any of its material contracts with
any third parties and that RPM's rights and obligations under such material
contractual arrangements will continue since most of the arrangements will be
assumed by RPM-Delaware and since certain other contractual arrangements will be
re-executed by RPM-Delaware.
POTENTIAL ANTI-TAKEOVER IMPLICATIONS OF PROPOSED REINCORPORATION
Delaware, like many other states, permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to unsolicited
takeover attempts through amendment of the corporate certificate of
incorporation or by-laws or otherwise. Delaware, like Ohio, has an interested
stockholder statute which may be viewed as an anti-takeover provision. However,
Ohio's anti-takeover statutes are generally more extensive than those in
Delaware. As discussed above, the Proposed Reincorporation is being proposed to
allow the Company to avail itself of the favorable corporate environment in
Delaware, and not to prevent a change in control of the Company. RPM-Delaware's
organizational documents will not contain certain interested stockholder and
business combination provisions that are currently in RPM's organizational
documents and which may be viewed as offering anti-takeover protections. On the
other hand, the restriction on the ability of shareholders to act by written
consent and the elimination of cumulative voting are changes that may be viewed
as having anti-takeover implications. See "Comparison of Shareholder Rights
under Ohio and Delaware Law." As more fully described above in this Proxy
Statement,
33
although RPM-Delaware's certificate of incorporation will include a provision
that authorizes a new class of Preferred Stock which could be used to discourage
takeover attempts that the Board of Directors oppose, the Board of Directors
will not issue any series of Preferred Stock as a defensive mechanism without
obtaining prior approval from the shareholders.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Merger qualifies as an exchange under Section 351 and/or a
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code, the
following tax consequences generally will result:
(a) No gain or loss will be recognized by RPM shareholders as a result
of the deemed exchange of RPM capital stock for RPM-Delaware capital stock
pursuant to the Merger;
(b) The aggregate tax basis of the RPM-Delaware capital stock received
by an RPM shareholder in the Merger will be equal to the aggregate tax
basis of RPM capital stock deemed to have been exchanged by that
shareholder pursuant to the Merger; and
(c) The holding period of the RPM-Delaware capital stock received in
the Merger will include the holding period of the RPM capital stock deemed
to have been exchanged pursuant to the Merger, provided that the RPM
capital stock is held as a capital asset at the time of the Merger.
The receipt of cash, pursuant to the exercise of dissenters' rights, as the
fair value for RPM's Common Shares, will be a taxable transaction for federal
income tax purposes to shareholders receiving such cash. A dissenting
shareholder who owns no shares of RPM-Delaware Common Stock after the
consummation of the Proposed Reincorporation (either directly or constructively
pursuant to certain rules of constructive ownership under applicable tax laws)
will recognize gain or loss measured by the difference between the cash so
received and such shareholder's adjusted tax basis in RPM's Common Shares
exchanged therefor. Such gain or loss will be treated as a capital gain or loss
if RPM's Common Shares are capital assets in the hands of such shareholder, and
will be long-term capital gain or loss if such shareholder has held such shares
for more than one year.
The Company does not intend to request a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the Merger. The Company
has, however, received an opinion from PricewaterhouseCoopers LLP, attached to
this Proxy Statement as Appendix E, to the effect that the Merger will qualify
as an exchange within the meaning of Section 351 and/or a reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code. This opinion (the "Tax
Opinion") neither binds the IRS nor precludes the IRS from successfully
asserting a contrary position. In addition, the Tax Opinion is subject to
certain assumptions and qualifications and is based on the truth and accuracy of
representations made by RPM.
If the Merger fails to qualify as an exchange under Section 351 and/or a
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code or
otherwise as a tax-free reorganization, an RPM shareholder would recognize gain
or loss with respect to each share of RPM capital stock deemed to have been
exchanged pursuant to the Merger equal to the difference between the
shareholder's basis in such share and the fair market value of the RPM-Delaware
capital stock received in exchange therefor. A shareholder's aggregate basis in
the RPM-Delaware capital stock so received would equal the stock's fair market
value, and the shareholder's holding period for such stock would begin the day
of the Merger.
State, local, or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above.
34
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF THE
PROPOSED REINCORPORATION UNDER APPLICABLE FEDERAL, STATE, LOCAL, OR FOREIGN
INCOME TAX LAWS IN LIGHT OF THEIR PERSONAL TAX CIRCUMSTANCES.
APPRAISAL RIGHTS IN THE MERGER
Under Ohio law, holders of record of Common Shares who properly exercise
and perfect dissenters' rights with respect to the Proposed Reincorporation will
have the right to receive the "fair cash value" of their shares (excluding any
appreciation or depreciation in market value resulting from the Proposed
Reincorporation). In order to exercise such rights, shareholders must comply
with the procedural requirements of Section 1701.85 of the Ohio Revised Code
(the "ORC"). Failure to vote against the Proposed Reincorporation will not
constitute a waiver of dissenters' appraisal rights. However, failure to take
any of the steps required under Section 1701.85 on a timely basis may result in
the loss of dissenter's rights.
THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SECTION 1701.85 OF THE ORC, A COPY OF WHICH IS ATTACHED
HERETO AS APPENDIX D. ANY SHAREHOLDER CONTEMPLATING THE EXERCISE OF DISSENTERS'
RIGHTS IS URGED TO REVIEW CAREFULLY SUCH PROVISIONS AND TO CONSULT LEGAL COUNSEL
BECAUSE DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS UNDER
SECTION 1701.85 OF THE ORC ARE NOT FULLY AND PRECISELY SATISFIED.
Shareholders of RPM who (i) are shareholders of record on the August 16,
2002 record date established for determining who is entitled to notice of the
Annual Meeting, (ii) do not vote in favor of the Proposed Reincorporation, and
(iii) who, within 10 days after the date of the vote on the Proposed
Reincorporation is taken, deliver written demand in compliance with the
provisions of Section 1701.85(A)(2) of Ohio law, will be entitled to receive the
fair cash value of the shares that were not voted in favor of the Proposed
Reincorporation (the "Dissenting Shares"). A vote against the Proposed
Reincorporation will not by itself satisfy the notice requirement. The written
demand must set forth the shareholder's address, the number and class of shares
as to which the shareholder seeks relief and the amount the shareholder claims
as the fair cash value of the Dissenting Shares. Shareholders will not be
notified of the expiration of the 10-day notice period. However, if the vote on
the Proposed Reincorporation is held as scheduled on October 11, 2002, then the
10-day period would end on October 21, 2002.
If RPM receives a written demand from a shareholder seeking the fair cash
value of Dissenting Shares, it may request delivery of the certificate or
certificates that represent the Dissenting Shares. The dissenting shareholder
must deliver the certificate or certificates representing the Dissenting Shares
to RPM within 15 days of the date of its request therefor or the shareholder's
rights with respect to the Dissenting Shares will terminate. If the certificate
or certificates representing the Dissenting Shares are delivered to RPM, it must
promptly endorse the certificates with a legend to the effect that a demand for
the fair cash value for the Dissenting Shares has been made and return the
certificates to the dissenting shareholder.
If RPM and the dissenting shareholder cannot agree on the fair cash value
of the Dissenting Shares, then either may, within three months after the date of
the service of the demand for fair cash value was made by the dissenting
shareholder, file a complaint in the court of common pleas of the county in
which the principal office of RPM was located when the Reincorporation Proposal
was adopted by the shareholders of RPM, i.e., the Medina County, Ohio Court of
Common Pleas. The court will first make a determination if the dissenting
shareholder is entitled to receive the fair cash value of the Dissenting Shares.
If the court determines that the dissenting shareholder is entitled to the fair
cash value of the Dissenting Shares, the court will appoint an appraiser or
appraisers to make a finding as to the fair cash value of the Dissenting Shares.
The fair cash value will be determined based on what a willing seller who
is under no compulsion to sell would be willing to accept and that which a
willing buyer who is under no compulsion to purchase would be willing to pay for
the Dissenting Shares. In no event will the fair
35
cash value exceed the amount stated in the written demand by the dissenting
shareholder. In computing the fair cash value, any appreciation or depreciation
in the market value resulting from the Proposed Reincorporation will be
excluded.
The fair cash value that is agreed upon between the parties or that is
determined by the court shall be paid within 30 days after the date of the final
determination of such value or the consummation of the Proposed Reincorporation,
whichever occurs last. Payment will be made only upon and simultaneously with
the surrender of the certificate or certificates representing the Dissenting
Shares.
The costs of the action, including reasonable compensation to the
appraisers, will be fixed by the court and will be assessed or apportioned as
the court considers equitable.
A shareholder's right to receive the fair cash value of the Dissenting
Shares terminates if (i) the dissenting shareholder does not strictly comply
with the requirements of Section 1701.85, (ii) the Proposed Reincorporation is
abandoned, (iii) the dissenting shareholder withdraws the demand for fair cash
value, or (iv) RPM (or RPM-Delaware) and the dissenting shareholder have not
come to an agreement regarding the fair cash value of the Dissenting Shares and
neither has filed a complaint with the court of common pleas within the time
period described in Section 1701.85(B). Failure to follow the steps required by
Section 1701.85 of the ORC for perfecting dissenting shareholder rights may
result in the loss of such rights, in which event a shareholder of RPM would
normally be entitled to receive the consideration to be issued with respect to
such shares in accordance with the Proposed Reincorporation.
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED IN FAVOR OF THE PROPOSED REINCORPORATION, A HOLDER OF
COMMON SHARES WHO WISHES TO EXERCISE DISSENTERS' RIGHTS MUST EITHER NOT SIGN AND
RETURN THE PROXY CARD OR, IF SUCH HOLDER SIGNS AND RETURNS A PROXY CARD, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE PROPOSED REINCORPORATION, AS INDICATED
ABOVE.
COMPARISON OF SHAREHOLDER RIGHTS UNDER OHIO AND DELAWARE LAW
As a result of the Proposed Reincorporation, each outstanding RPM Common
Share will be converted into one share of RPM-Delaware Common Stock and
shareholders of RPM shares will become stockholders of RPM-Delaware. The
following is a summary of some of the significant differences between the rights
of stockholders under Delaware law and Ohio law, including differences between
the Articles and Code of RPM and certificate of incorporation and by-laws of
RPM-Delaware. The differences arise in large part from the differences between
the Delaware General Corporation Law and the Ohio General Corporation Law.
Although it is impractical to compare all of the aspects in which Delaware law
and Ohio law differ with respect to the rights of stockholders, the following
discussion summarizes significant differences between the laws of the two
states.
The identification of specific differences is not meant to indicate that
other differences do not exist. Consequently, we urge you to read RPM's Articles
and Code and RPM-Delaware's certificate of incorporation and by-laws. Copies of
RPM's Articles and Code have been attached as exhibits to RPM's filings with the
Commission, are available for inspection at the principal executive offices of
RPM and will be sent to holders of RPM Common Shares upon request. Copies of
RPM-Delaware's certificate of incorporation and by-laws are included as
Appendices B and C, respectively, to this document.
Business Combinations
Generally, under Ohio law, the approval by the affirmative vote of holders
of two-thirds of the voting power of a corporation entitled to vote on the
matter is required for mergers, consolidations, majority share acquisitions,
combinations involving the issuance of shares with one-sixth or more of the
voting power of the corporation, and any transfers of all or substantially all
of the assets of a
36
corporation unless the articles of incorporation of the corporation specify a
different proportion (which cannot be less than a majority).
RPM's Articles require the affirmative vote of holders of two-thirds of the
voting power of the corporation to approve certain mergers or the disposition by
the corporation of all or substantially all of its assets. If the merger or
disposition of assets involves a "related company" as such term is defined in
the Articles, the Articles require the affirmative vote of 80% of the voting
power of the Company.
Under Delaware law, the approval by the affirmative vote of holders of a
majority of the voting power of a corporation entitled to vote is required for
mergers, consolidations and transfers of all or substantially all of the assets
of the corporation. RPM-Delaware's certificate of incorporation does not contain
the supermajority provisions contained in RPM's Articles. RPM-Delaware's
certificate does not change the effect of Delaware law with respect to such
voting requirements.
Appraisal Rights
Under both Ohio and Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights enabling the stockholder to
receive cash in the amount of the "fair value" of his or her shares, as
determined by a court, in lieu of the consideration he or she would otherwise
receive in the transaction.
Under Ohio law, dissenting shareholders are entitled to appraisal rights in
connection with the transfer of all or substantially all of the assets of a
corporation and in connection with certain amendments to a corporation's
articles of incorporation. Shareholders of an Ohio corporation are also entitled
to appraisal rights if the corporation is merged or consolidated into a
surviving or new entity or, if the corporation is merged with another Ohio
corporation, the shareholders of the surviving corporation will have appraisal
rights if, in connection with the merger, the surviving corporation issues
shares having one-sixth or more of its voting power to shareholders of the
corporation which is being merged into it.
Under Delaware law, such appraisal rights are available only with respect
to a merger or consolidation and are not available: (i) with respect to the
sale, lease or exchange of all or substantially all of the assets of a
corporation or the amendment of its charter; (ii) with respect to a merger or
consolidation by a corporation the shares of which are either listed on a
national securities exchange or are held of record by more than 2,000 holders,
if the stockholders receive only shares of the surviving corporation or shares
of another corporation that are either listed on a national securities exchange
or held of record by more than 2,000 holders, plus cash in lieu of fractional
shares; or (iii) to the stockholders of a corporation surviving a merger if no
vote of the stockholders of the surviving corporation is required to approve the
merger under Delaware law.
Dividends
Both Delaware law and Ohio law provide that dividends may be paid in cash,
property or shares of a corporation's capital stock. Delaware law provides that
a corporation may pay dividends out of any surplus, and, if it has no surplus,
out of any net profits for the fiscal year in which the dividend was declared or
for the preceding fiscal year (provided that such payment will not reduce
capital below the amount of capital represented by all classes of shares having
a preference upon the distribution of assets). Ohio law provides that a
corporation may pay dividends out of surplus and must notify its shareholders if
a dividend is paid out of capital surplus.
Interested Shareholder Rules
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS. Under Delaware law, a
corporation is prohibited from engaging in any business combination (as defined
below) with an interested stockholder (as defined below) for a period of three
years from the time that the stockholder first
37
became an interested stockholder unless (1) the directors approved such
transaction prior to the stockholder becoming an interested stockholder or
approved the purchase pursuant to which the stockholder became an interested
stockholder, (2) upon the consummation of the transaction pursuant to which the
stockholder became an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation or (3) the transaction is
approved by the affirmative vote of at least 66 2/3% of the outstanding voting
stock not owned by the interested stockholder. Delaware law defines the term
"business combination" to include transactions such as mergers, consolidations
or transfers of 10% or more of the assets of the corporation and defines the
term "interested stockholder" generally as any person who, directly or
indirectly, beneficially owns 15% or more of the outstanding voting stock of the
corporation or was the owner of 15% or more of the outstanding voting stock of
the corporation at any time during the three-year period immediately prior to
the date in question. A corporation may elect not to be governed by the business
combination statute in its certificate of incorporation or by-laws.
RPM-Delaware will be subject to the Delaware business combination statute
and will not retain the interested shareholder provisions currently included in
RPM's Articles.
TRANSACTIONS INVOLVING INTERESTED SHAREHOLDERS. Section 1704.02 of the ORC
prohibits interested shareholders from engaging in any Chapter 1704 transaction
(as defined below) for a period of three years from the date on which a
shareholder first becomes an interested shareholder (as defined below) unless
the directors of the corporation approved the transaction prior to the
shareholder becoming an interested shareholder or approved the transaction
pursuant to which the shareholder became an interested shareholder. A "Chapter
1704 transaction" is defined in Ohio law to include a variety of transactions
such as mergers, consolidations, combinations or majority share acquisitions
between an Ohio corporation and an "interested shareholder" or an affiliate of
an interested shareholder. Under Ohio law, an interested shareholder is defined
generally as any person who, directly or indirectly, beneficially owns 10% or
more of the outstanding voting stock of the corporation. After the three-year
period, a Chapter 1704 transaction is prohibited unless certain fair price
provisions are complied with, the directors of the corporation approved the
purchase of shares which made the shareholder an interested shareholder, or the
shareholders of the corporation approve the transaction by the affirmative vote
of two-thirds of the voting power of the corporation or such other percentage
set forth in the articles of incorporation of the corporation provided that a
majority of the disinterested shareholders approve the transaction.
RPM's Articles contain provisions relating to business combinations with
interested shareholders. Pursuant to those provisions, unless the Directors have
given approval to the transaction prior to the acquisition by a related party
(as such term is defined in the articles) of a 5% interest in the corporation,
the affirmative vote of the holders of shares entitling them to exercise 80% of
the voting power of the corporation is necessary to authorize or approve a
business combination with a related company. An interested shareholder is
defined generally in RPM's Articles as any person or entity that, together with
its affiliates and associates, is the beneficial owner of shares having at least
5% of the shares of any outstanding class of shares of corporation. RPM-Delaware
will not retain these additional provisions in its certificate of incorporation
and will rely solely on Delaware law to protect against interested shareholder
transactions.
CONTROL SHARE ACQUISITIONS. Section 1701.831 of the ORC generally
prohibits transactions pursuant to which a person obtains one-fifth or more but
less than one-third of all the voting power of a public corporation, one-third
or more but less than a majority of all of the voting power of a public
corporation, or a majority or more of all the voting power of a public
corporation (a "control share acquisition"), unless the corporation's
shareholders approve the transaction at a special meeting, at which a quorum is
present, by both the affirmative vote of a majority of the voting power of the
corporation and by the affirmative vote of a majority of the voting power of the
corporation, excluding the voting power of the interested shares. A corporation
can provide in its articles of incorporation or code of regulations that Section
1701.831 does not apply to control share
38
acquisitions of its shares. RPM did not elect to opt out of the Ohio control
share acquisition provisions.
Shareholder Rights Plan
Assuming that the Proposed Reincorporation is approved by the shareholders,
prior to the effectiveness of the Merger, either the Company's current
Shareholder Rights Plan will be amended to reflect that the proper party
subsequent to the reincorporation is RPM-Delaware, or RPM-Delaware's Board of
Directors will adopt a stockholder rights plan that is substantially identical
to the current Shareholder Rights Plan of the Company. If a new rights plan is
adopted, each share of RPM-Delaware's common stock issued and outstanding at the
effective time of the Proposed Reincorporation and each share issued in the
future will have a right attached to it, the terms of which will be defined by
RPM-Delaware's stockholder rights plan.
Issuance of Preferred Stock
The certificate of incorporation of RPM-Delaware authorizes the Board of
Directors to issue shares of Preferred Stock from time to time in one or more
series and to determine all relevant terms of each series at the time of
issuance. The effect of this provision is more fully described in "The Charters
and By-Laws and Code of Regulations of RPM-Delaware and RPM," "Potential Anti-
takeover Implications of Proposed Reincorporation" sections, above, and
"Proposal Three -- Increase in the Number of Authorized Shares; Addition of
Class of Serial Preferred Stock", below. RPM's Articles do not contain any
provisions similar to the Preferred Stock provision set forth in the
RPM-Delaware certificate of incorporation.
Amendments to Certificate and Articles of Incorporation
Under Ohio law, an amendment to the articles of incorporation requires the
affirmative vote of two-thirds of the voting power of a corporation unless a
greater or lesser percentage (which cannot be less than a majority) is specified
in the corporation's articles of incorporation.
RPM's Articles provide that the Articles may be amended by the affirmative
vote of a majority of the voting power of RPM, except that the affirmative vote
of at least two-thirds of the voting power of the Company is required to amend
any provision which changes Article Seventh (relating to mergers,
consolidations, acquisitions and asset sales) and the affirmative vote of
holders of 80% of the voting power is required to amend any provision which
changes Article Eighth (relating to business combinations with interested
shareholders).
Under Delaware law, in general, to amend a corporation's certificate of
incorporation, first the directors of the corporation must adopt a resolution
indicating that they deem the amendment advisable. Then, holders of a majority
of the outstanding stock entitled to vote must vote in favor of the amendment.
RPM-Delaware's certificate of incorporation does not change the effect of
Delaware law in this regard, with the exception that the affirmative vote of at
least 80% of the voting power of the corporation is required to amend Article
VII, Section I (relating to the number, election and terms of Directors), as
currently required under RPM's Code, as discussed in the next section.
Amendments to By-laws and Code of Regulations
Under Ohio law, the power to adopt, alter and repeal the code of
regulations of a corporation is vested only in the shareholders. Such action can
be taken by the affirmative vote of a majority of the voting power of the
corporation at a meeting held for that purpose, or without a meeting upon
written consent of two-thirds of the voting power of the corporation, unless the
articles of incorporation or code of regulations provide for a greater or lesser
proportion (but not less than a majority).
39
RPM's Code provides that the Code may be adopted or amended (1) at a
meeting by the affirmative vote of holders of shares entitling them to exercise
a majority of the voting power of the corporation or (2) without a meeting by
the written consent of holders of shares entitling them to exercise two-thirds
of the voting power of the Company. In addition, the affirmative vote of at
least 80% of the voting power is required to amend Article II of the Code
(relating to the number, classification and election of directors and their
respective terms of office).
Under Delaware law, the power to adopt, alter and repeal the by-laws is
vested in the stockholders unless the certificate of incorporation also vests
such power in the directors. Vesting this power in the directors does not divest
the stockholders of power to adopt, alter or repeal the by-laws. RPM-Delaware's
certificate of incorporation gives the board of directors, along with the
stockholders, the power to amend the by-laws and provides that the affirmative
vote of at least 80% of the voting power of the Company is required to amend
Article IV, Section 2 (relating to the number, election and terms of Directors),
as currently required under RPM's Code.
RPM-Delaware's by-laws also allow for the amendment or adoption of new
by-laws at any meeting of stockholders, provided that any amendment to be acted
upon at any such meeting has been described or referred to in the notice of such
meeting, or at any meeting of the Board of Directors.
Stockholder Written Action
Under Ohio law, unless a corporation's articles of incorporation or code of
regulations prohibit the taking of action by the shareholders without a meeting,
any action that may be authorized or taken at a meeting of the shareholders may
also be authorized or taken without a meeting with the affirmative vote or
approval of, and in a writing setting signed by all shareholders who would be
entitled to notice of a meeting. The effect of this provision of the ORC is
that, generally, shareholders may act by unanimous written consent of all of the
shareholders entitled to vote. RPM's Articles and Code do not prohibit the
taking of action by the shareholders in writing by unanimous written consent.
Under Delaware law, unless a corporation's certificate of incorporation
provides otherwise, any action to be taken or which can be taken at a meeting of
stockholders may be taken without a meeting if a consent in writing is signed by
all of the stockholders having not less than the number of votes needed to
approve the action at a meeting.
RPM-Delaware's certificate of incorporation prohibits the taking of an
action by stockholders without a meeting. This provision has substantially the
same effect as the ORC since under Ohio law, shareholders generally may only act
by written consent if that consent is unanimous. RPM-Delaware's certificate of
incorporation provides that shareholders may act only at an annual or special
meeting and not by written consent. The elimination of this right will have no
practical effect on shareholders given the unlikelihood of obtaining the
unanimous written consent of the Company's very large shareholder base with
respect to any proposed action.
Special Stockholders' Meetings
Ohio law provides that a special meeting of shareholders may be called by
(1) the Chairman of the Board, (2) the President, (3) the directors by action at
a meeting or a majority of the directors acting without a meeting, (4) persons
holding 25% of all shares outstanding and entitled to vote at such meeting
(unless the articles or regulations specify a smaller or larger proportion but
not more than fifty percent) or (5) such other officers or persons specified in
the articles or regulations.
RPM's Code provides that, unless otherwise prescribed by law, a special
meeting of the shareholders may be called only by (1) the Chairman of the Board,
(2) the President, (3) the Directors by action at a meeting or a majority of the
Directors acting without a meeting or (4) persons holding at least 45% of all
shares outstanding and entitled to vote at the meeting.
40
Delaware law provides that a special meeting of stockholders may be called
by the board of directors or by other persons authorized by the certificate of
incorporation or by-laws.
RPM-Delaware's by-laws provide that, unless otherwise prescribed by law, a
special meeting of the stockholders may be called by (1) the Chairman of the
Board or (2) the President, (3) the majority of the Board of Directors and (4)
the Chairman of the Board or the President at the written request of
stockholders holding a majority of the voting power of the corporation.
Cumulative Voting of Shares
Where cumulative voting is permitted, it provides that each share is
entitled to as many votes as there are directors to be elected, and each
shareholder may cast all his votes for a single candidate or distribute such
votes among two or more candidates.
In accordance with Ohio law, cumulative voting (unless eliminated by an
amendment of the articles of incorporation) is required to be available for the
election of directors if notice to such effect is given by a shareholder prior
to a meeting of shareholders and an announcement to such effect is made at such
meeting. RPM's Articles do not prohibit cumulative voting.
Under Delaware law, shareholders of a corporation cannot elect directors by
cumulative voting unless its certificate of incorporation so provides.
RPM-Delaware's certificate of incorporation does not provide for cumulative
voting. As a result, a plurality of the stockholders of RPM-Delaware voting are
able to elect all directors then being elected.
Number and Election of Directors; Classified Board
Under Ohio law, the number of directors of a corporation may not be less
than three (unless the corporation has less than three shareholders). Ohio law
permits the articles of incorporation or code regulations of a corporation to
contain provisions classifying the directors into two or three classes
consisting of not less than three directors in each class (unless the
corporation has less than three shareholders in which event the number of
directors in each class may be less than three but not less than the number of
shareholders entitled to elect directors to each class). The term of each class
need not be the same but no term for any class may exceed three years. The Board
currently has twelve Directors who are split into three classes of four.
RPM's Code provides that the Board of Directors will consist of the number
of Directors, not less than nine nor more than 15, as determined by the
affirmative vote of a majority of the shares which are represented at an annual
or special meeting and entitled to vote on the proposal, so long as a quorum is
present at such meeting, or as the Directors may determine from time to time.
The Code also provides that the Board is to be divided into three classes with
each class consisting of not less than three Directors.
The persons elected as Directors of the Company at the Annual Meeting, as
well as the persons whose terms as Directors of the Company will continue
following the meeting (with the exception of Lorrie Gustin, who intends to
resign as of the date of the Annual Meeting of Shareholders), will serve as the
Directors of RPM-Delaware.
Delaware law provides that a corporation may have one or more directors.
The number of directors may be fixed by or in the manner provided in the
by-laws, unless the certificate of incorporation fixes the number of directors.
Additionally, the certificate of incorporation or by-laws may contain provisions
classifying the directors into two or three classes. Under Delaware law, there
is no minimum number of directors per class.
Pursuant to RPM-Delaware's certificate of incorporation and by-laws, its
Board of Directors shall consist of not less than nine nor more than 15
Directors to be divided into three classes, as nearly equal in number as is
possible. Within these parameters, the number of Directors may be changed by the
affirmative vote of the holders of a majority of the stock or as the Directors
may determine from time to time. The number of Directors set by the stockholders
at any meeting may
41
not be greater by more than one Director and no reduction by stockholders can
act to shorten the term of any incumbent Director. These provisions are almost
identical to the provisions regarding the number, election and terms of
Directors currently contained in RPM's Code.
Board Vacancies
Under Ohio law, unless the articles of incorporation or code of regulations
provide otherwise, the remaining directors (even if less than a majority of the
whole authorized number of directors) may, by the vote of a majority of such
remaining directors, fill any vacancy on the board of directors for the
unexpired term if a vacancy occurs because the shareholders do not elect the
whole number of authorized directors or the shareholders increase the number of
directors and fail at the meeting at which the number of directors was increased
to elect additional directors.
RPM's Code provides that if the office of any Director becomes vacant for
any reason, the remaining Directors, even if less than a quorum, may choose a
successor to hold the Director's office for the remainder of the unexpired term.
Delaware law provides that, unless the governing documents of a corporation
provide otherwise, vacancies and newly created directorships resulting from a
resignation, death, or other cause or resulting from an increase in the
authorized number of directors elected by all the stockholders voting as a
single class may be filled by a majority of the directors then in office.
RPM-Delaware's certificate of incorporation and by-laws provide that
whenever any vacancy occurs in the board by reason of death, resignation,
disqualification, removal or otherwise, it shall be filled by a majority vote of
the remaining Directors, even though less than a quorum, or by a sole remaining
Director and such successor shall hold office until the next annual meeting of
stockholders at which the class of Directors in which the vacancy occurred is
elected and until a successor shall have been duly elected and qualified, unless
sooner displaced.
Liability and Indemnification of Directors
Under Delaware law, a director of the corporation shall not be personally
liable to the corporation or its stockholders for breach of fiduciary duty as a
director, except for: (1) a breach of the director's duty of loyalty to the
corporation or its stockholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; (3)
liability under Section 174 of Delaware law; or (4) for any transaction in which
the director derived an improper benefit.
Ohio law provides, with certain limited exceptions, that a director may be
held liable in damages for his or her acts or omissions as a director only if it
is proved by clear and convincing evidence that the director undertook the act
or omission with deliberate intent to cause injury to the corporation or with
reckless disregard for its best interests.
Under Delaware law, Delaware corporations may indemnify directors from
liability if the director acted in good faith and in a manner reasonably
believed by the director to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal actions, if the director had no
reasonable grounds to believe his or her action was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of Delaware law require
indemnification of a director who has been successful on the merits or otherwise
in defense of any action, suit or proceeding that he or she was a party to by
reason of the fact that he or she is or was a director of the corporation.
Delaware law permits corporations to advance amounts to directors in payment of
expenses. The indemnification authorized by Delaware law is not exclusive and is
in addition to any other rights granted to directors under the certificate of
incorporation or by-laws of the corporation or to any agreement between the
directors and the corporation.
42
Under Ohio law, Ohio corporations are permitted to indemnify directors and
certain other persons within prescribed limits and must indemnify them under
certain circumstances. The indemnification provisions of Ohio law require
indemnification of a director who has been successful on the merits or otherwise
in defense of any action, suit or proceeding that he or she was a party to by
reason of the fact that he or she is or was a director of the corporation. In
all other cases, if it is determined that a director acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, indemnification is discretionary, except as
provided otherwise by a corporation's articles of incorporation, code of
regulations, or by contract. Ohio law provides that, unless at the time of a
director's act or omission, the articles of incorporation or code of regulations
provide otherwise, a director (but not an officer, employee, or agent) is
entitled to mandatory advancement of expenses, including attorneys' fees,
incurred in defending any action, including on behalf of a corporation, brought
against the director, provided that the director agrees to cooperate with the
corporation concerning the matter and to repay the amount advanced if it is
proved by clear and convincing evidence that such director's act or failure to
act was done with deliberate intent to cause injury to the corporation or with
reckless disregard for the corporation's best interests. In the case of an
action by or on behalf of a corporation, indemnification may not be made (1) if
the person seeking indemnification is adjudged liable for negligence or
misconduct, unless the court in which such action was brought determines such
person is fairly and reasonably entitled to indemnification or (2) if liability
asserted against such person concerns certain unlawful distributions. The
indemnification authorized by Ohio law is not exclusive and is in addition to
any other rights granted to directors under the articles of incorporation or
regulations of the corporation or to any agreement between the directors and the
corporation.
RPM's indemnification arrangements are set forth in its Code. Article Sixth
of the Code provides that the Company shall indemnify any person against
expenses and liability actually imposed upon or reasonably incurred by him in
connection with the defense of either any action, suit, or proceeding to which
he may be a party defendant or any claim of liability asserted against him by
reason of the fact that he is or was a Director, officer, employee, or agent of
the Company or he is or was serving at the request of the corporation as a
Director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise provided that he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe his action was unlawful.
With respect to actions brought by or in the right of the Company to
procure a judgment in the Company's favor, RPM, is not required to indemnify any
Director or officer in any matter in which he is adjudged to be liable by reason
of negligence or misconduct in the performance of his duties as such Director or
officer unless the court determines that the person is fairly and reasonably
entitled to such indemnity.
In addition, unless ordered by a court, indemnification shall be made by
the Company only as authorized in the specific case upon a determination that
indemnification of the Director, trustee, officer, employee or agent is proper.
This determination is made by (i) a majority vote of a quorum of Directors who
are not party to or threatened with the action, (ii) independent legal counsel,
(iii) the shareholders or (iv) a court. The indemnification provided for in the
Code is not exclusive of any other rights to which such director, officer or
employee may be entitled to under RPM's Articles or Code, any agreement, any
insurance purchased by the Company, any vote of shareholders or otherwise.
The indemnification provisions in RPM-Delaware's certificate of
incorporation are substantially similar to RPM's indemnification provisions
discussed above.
RPM has agreements with each of its Directors that provide substantially
the same rights to indemnification as provided under Ohio law. If the Proposed
Reincorporation is approved, RPM-
43
Delaware plans to implement similar agreements with each of its Directors, based
upon the provisions of Delaware law.
Consideration of Constituencies
Under applicable Ohio law, a director is permitted, in determining what the
director reasonably believes to be the best interests of the corporation, to
consider, in addition to the interests of the corporation's shareholders, any of
the following: (1) the interests of the corporation's employees, suppliers,
creditors, and customers; (2) the economy; (3) the community and societal
considerations; and (4) the long-term and short-term interests of the
corporation and its shareholders, including the possibility that these interests
may be best served by the continued independence of the corporation.
Delaware law contains no comparable provisions.
SINCE BROKER NON-VOTES AND ABSTENTIONS WILL HAVE THE EFFECT OF A NEGATIVE
VOTE WITH RESPECT TO THE PROPOSED REINCORPORATION, THE COMPANY'S BOARD OF
DIRECTORS URGES THE COMPANY'S SHAREHOLDERS TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED, POSTAGE-PREPAID
ENVELOPE.
44
PROPOSAL THREE
INCREASE IN NUMBER OF AUTHORIZED SHARES;
ADDITION OF CLASS OF SERIAL PREFERRED STOCK
The Articles of RPM currently authorize the Company to issue up to
200,000,000 Common Shares. The certificate of incorporation of RPM-Delaware
authorizes RPM-Delaware to issue up to 300,000,000 shares of Common Stock and
50,000,000 shares of Preferred Stock. The Board of Directors of RPM-Delaware has
no immediate plans to issue a significant number of additional shares of Common
Stock. However, the larger number of authorized shares of Common Stock provided
for in the RPM-Delaware certificate of incorporation will provide RPM-Delaware
with the certainty and flexibility to undertake various types of transactions,
including stock splits (in the form of stock dividends), stock-based
acquisitions, financings, increases in the shares reserved for issuance pursuant
to stock incentive plans, or other corporate transactions not yet determined.
As a result of the general growth rates experienced by the Company, the
Board of Directors of the Company has a history of approving stock splits. In
order for the Board of Directors of RPM-Delaware to continue to respond to the
growth in its business which may occur in the future with the same flexibility
the Company has had, RPM-Delaware must have a sufficient number of authorized
shares to cover appropriate levels of stock dividends. In addition, the increase
will make available additional shares of Common Stock for acquisitions, employee
benefit plans, public or private stock offerings and other corporate purposes.
The Company does not presently have any agreements or understandings with
respect to transactions which would call for the issuance of any of the addition
shares of Common Stock, although management is continuously investigating
various acquisition possibilities. RPM-Delaware's stockholders will have no
pre-emptive rights with respect to the issuance of additional shares and, except
under certain circumstances provided for by the New York Stock Exchange,
Delaware law or RPM-Delaware's certificate of incorporation, the issuance of
additional shares of Common Stock would not require further stockholder
approval.
RPM-Delaware's certificate of incorporation will also include a provision
that authorizes a new class of 50,000,000 shares of Preferred Stock, which
provision will allow the Board of Directors of RPM-Delaware, without further
action or authorization by the stockholders (unless required in the specific
circumstances by applicable law or regulations or stock exchange rules), to
authorize the issuance of shares of Preferred Stock from time to time in one or
more series and to determine the powers, preferences and rights, and the
qualifications, limitations or restrictions, and all other relevant terms of
each such series of Preferred Stock at the time of issuance. Such terms may
include the following: (i) the number of shares constituting such series, (ii)
the dividend rights, if any, (iii) voting rights, (iv) whether, and upon what
terms, the shares of such series would be redeemable, (v) whether, and upon what
terms, the shares of such series would be convertible into, or exchangeable for,
other securities, (vi) whether a sinking fund would be provided for the
redemption of the shares of such series and, if so, the terms of the sinking
fund and (vii) other preferences, powers, qualifications, special or relative
rights and privileges and limitations or restrictions of such preferences, if
any.
The Board of Directors believes that the provision authorizing the issuance
of Preferred Stock will provide flexibility for future financing purposes and
the Board has no present intention to issue any series of Preferred Stock.
RPM-Delaware could also issue Preferred Stock for other corporate purposes, such
as to make acquisitions or structure mergers, although no issuances for such
purposes are contemplated at this time. The Board of RPM-Delaware will have the
authority to specify the precise characteristics of the series of Preferred
Stock to be issued, depending on market conditions existing at that time and the
nature of the specific transaction.
The issuance of such shares could be used to discourage attempts to acquire
control of RPM-Delaware, which attempts the Board of Directors of RPM-Delaware
may oppose. The Board represents that it will not issue, without prior
shareholder approval, any series of Preferred Stock for any defensive or
anti-takeover purpose or with features intended to make any attempted
acquisition
45
of RPM-Delaware more difficult or costly. No Preferred Stock will be issued to
any individual or group for the purpose of creating a block of voting power to
support management on a controversial issue. Consequently, the Board of
Directors believes that, as structured, the Preferred Stock provision is in the
best interests of shareholders because the provision (i) is consistent with
sound corporate governance principles and (ii) enhances the ability of
RPM-Delaware to take advantage of financing alternatives and possible
acquisition transactions.
The affirmative vote of the holders of a majority of the Company's Common
Shares outstanding as of the August 16, 2002, the record date, will be required
to approve this proposal. If this proposal is not approved by the shareholders
but the shareholders approve the Proposed Reincorporation proposal, the Company
will reset the authorized shares of Common Stock of RPM-Delaware to 200,000,000,
as currently authorized for RPM, and then complete the Proposed Reincorporation.
IF THE PROPOSED REINCORPORATION IS NOT APPROVED, THE COMPANY WILL NOT SEEK
SHAREHOLDER APPROVAL OF THE INCREASE IN ITS AUTHORIZED SHARES OR THE ADDITION OF
A CLASS OF PREFERRED STOCK AT THIS TIME. THE BOARD OF DIRECTORS HAS APPROVED
THIS PROPOSAL AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO SET THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF RPM-DELAWARE AT 300,000,000 AND
TO ADD A CLASS OF PREFERRED STOCK.
46
PROPOSAL FOUR
ADOPTION OF RPM, INC. 2002 PERFORMANCE ACCELERATED
RESTRICTED STOCK PLAN
BACKGROUND
The Company's shareholders will be asked at the meeting to vote on a
proposal to approve the adoption of the RPM, Inc. 2002 Performance Accelerated
Restricted Stock Plan (the "Performance Accelerated Plan"). The Performance
Accelerated Plan was approved and adopted by the Compensation Committee on July
17, 2002 and by the Board of Directors on July 22, 2002, effective as of June 1,
2002, subject to shareholder approval. Although the Company is not required,
under either the rules of the Securities and Exchange Commission or the current
New York Stock Exchange rules, to submit the Performance Accelerated Plan to a
vote of the shareholders, the Company's management felt that submission of the
plan to the shareholders for their consideration and approval was appropriate.
The Performance Accelerated Plan will not be considered a performance-based
compensation plan satisfying the requirements of Section 162(m) of the Internal
Revenue Code, even with the approval of the shareholders, and, therefore,
payments made by the Company under the plan may not be entirely tax deductible.
The Performance Accelerated Plan differs from the Company's 1997 Restricted
Stock Plan, which aligned the Company's supplemental retirement benefits to
stock performance.
The following is a summary of the material features of the Performance
Accelerated Plan and is qualified in its entirety by reference to it. A copy of
the plan is attached as Appendix F to this Proxy Statement.
PURPOSE
The Performance Accelerated Plan is designed to incentivize and retain the
key members of the Company's corporate and operating management teams whose
performance will be even more important to the Company's future success, in
light of the retirement of the Chief Executive Officer and Vice Chairman at the
Annual Meeting. The purpose of the Performance Accelerated Plan will be to
provide certain key officers of the Company or its subsidiaries with (i) an
incentive to remain with the Company or its subsidiaries and to exert their best
efforts on behalf of the Company in order to enhance the long-term performance
and profitability of the Company and its subsidiaries and (ii) an opportunity to
acquire a proprietary interest in the success of the Company and its
subsidiaries. The Performance Accelerated Plan will further align the interests
of shareholders and plan participants by awarding Common Shares of the Company
that are subject to certain vesting and forfeiture restrictions (the "Restricted
Shares") at fair market value, thereby providing additional incentive for the
participants to increase the value of the Company's Common Shares.
ADMINISTRATION AND DURATION
The Performance Accelerated Plan will be administered by the Compensation
Committee of the Board of Directors, with the Board having the discretion and
authority to assume the administration of such plan. Each member of the
Compensation Committee is a "non-employee director" within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934. The Compensation
Committee will determine which officers are eligible participants under the
plan. The Compensation Committee will also have the exclusive authority to
determine whether the performance goals of any restricted stock agreement
entered into under the plan have been satisfied. The Performance Accelerated
Plan will expire on May 31, 2012 or such earlier date as may be determined by
the Board of Directors.
47
SECURITIES SUBJECT TO THE PERFORMANCE ACCELERATED PLAN
The Company will award authorized and unissued or treasury Common Shares
under the Performance Accelerated Plan. The maximum aggregate number of Common
Shares to be issued under the plan will not exceed 1,000,000 Common Shares,
except that in the event of any share split or combination, recapitalization,
reorganization or stock dividend, or similar occurrence, the Compensation
Committee may make an appropriate adjustment in the Common Shares subject to the
Performance Accelerated Plan.
ELIGIBILITY
The Compensation Committee will, from time to time and in its exclusive
discretion, determine those officers of the Company and its subsidiaries who are
eligible to receive awards of Restricted Shares. Only officers of the Company or
its subsidiaries, including employee Directors who are not members of the
Compensation Committee, are eligible to participate in the Performance
Accelerated Plan.
PARTICIPATION AND GRANTS OF RESTRICTED SHARES
The Performance Accelerated Plan provides for the granting of Restricted
Shares to eligible officers. The Restricted Shares will be Common Shares of the
Company which are forfeitable and nontransferable for a specified period of
time. The transfer restrictions remain in place until the earlier of: (i) the
achievement of all performance goals during any fiscal year beginning prior to
June 1, 2011, which performance goals will be determined by the Compensation
Committee and set forth in a restricted stock agreement entered into in
connection with the plan, or (ii) May 31, 2012, at which time the restrictions
will lapse if the participant was continually employed with the Company or a
subsidiary from June 1, 2002 until May 31, 2012, subject to all other provisions
of the plan. The performance goals for the initial grants, as set forth in the
restricted stock agreements, are as follows: (a) Company earnings of at least
$200,000,000 and (b) earnings per share of at least $1.75. If a participant's
employment is terminated (for reasons other than a change of control or death or
disability), any Restricted Shares granted under the Performance Accelerated
Plan whose restrictions have not lapsed will be forfeited and returned to the
Company. If a participant's service to the Company and its subsidiaries is
terminated on account of death or total disability before the lapse of
restrictions, or in the event of a "change in control" of the Company (as
defined in the Performance Accelerated Plan), all restrictions will lapse.
SHAREHOLDER RIGHTS
The Compensation Committee may require that the Company or an escrow agent
retain possession of the certificates representing the Restricted Shares with
respect to which all of the restrictions have not lapsed. Notwithstanding
retention of the certificates by the Company or an escrow agent, the
participants in whose name any certificate is issued will have all rights of a
shareholder of the Company, including dividend and voting rights.
AMENDMENTS
The Board of Directors may amend the Performance Accelerated Plan as it may
deem advisable, except that no amendment may impair the rights of participants
who have been awarded, or have been granted the right to an award of Restricted
Shares, without the participants' prior written consent. In addition, no
amendment to increase the 1,000,000 Common Shares that may be issued under the
plan may be made without shareholder approval.
FEDERAL TAX CONSEQUENCES
The restricted stock agreements entered into in connection with the
Performance Accelerated Plan will preclude a participant from making an election
under Section 83(b) of the Internal Revenue Code. Consequently, there will be no
tax consequences as a result of the grant of Restricted Shares until the
Restricted Shares are no longer subject to forfeiture. Generally, when the
forfeiture
48
restrictions expire, the holder will recognize ordinary income, and the Company
may be entitled to a deduction (to the extent the aggregate of any compensation
payments made by the Company to certain key executives do not exceed $1,000,000)
in an amount equal to the fair market value of the Common Shares at that time.
Section 162(m) of the Internal Revenue Code disallows a tax deduction for
certain compensation paid in excess of $1,000,000 to certain key executive
officers. However, the regulations promulgated under Section 162(m) provide an
exception from the $1,000,000 limitation for various forms of compensation,
including "performance-based" compensation. The Performance Accelerated Plan
will not be considered a performance-based compensation plan satisfying the
requirements of the regulations under Section 162(m) and, therefore, payments
made by the Company under the plan may not be entirely tax deductible. The
Compensation Committee has discretion, under certain circumstances, to transfer
the Restricted Shares of a participant to the participant's account under the
Deferred Compensation Plan so that the Company will be entitled to a deduction
under the Section 162(m) regulations at a future date. In the event that
Restricted Shares are not transferred to the Deferred Compensation Plan,
subsequently realized changes in the value of shares, after the forfeiture
restrictions expire, generally will be treated as long-term or short-term
capital gain or loss, depending on the length of time the Common Shares are held
prior to disposition of such shares.
NEW PLAN BENEFITS
An initial award of shares has been made under the Performance Accelerated
Plan. Decisions regarding future awards have not been made. Subject to
shareholder approval of the plan, the following table sets forth the amount and
dollar value of the initial awards to be received by each of the following
persons under the Performance Accelerated Plan:
RPM, INC. 2002 PERFORMANCE ACCELERATED RESTRICTED
STOCK PLAN
NAME AND POSITION NUMBER OF SHARES(1) DOLLAR VALUE(2)
----------------- -------------------- ----------------
Thomas C. Sullivan -- --
Chairman of the Board and
Chief Executive Officer
James A. Karman -- --
Vice Chairman
Frank C. Sullivan 85,000 $1,019,150
President and Chief Operating
Officer
P. Kelly Tompkins 40,000 $ 479,600
Vice President, General
Counsel and Secretary
Robert L. Matejka 40,000 $ 479,600
Vice President, Chief Financial
Officer and Controller
Executive Group 285,000 $3,417,150
Non-Executive Director Group 0 $ 0
Non-Executive Officer Group 199,800 $2,395,602
---------------
(1) On July 17, 2002, the Compensation Committee adopted and approved the
Performance Accelerated Plan and made the initial award of Restricted
Shares, which award was effective as of July 22, 2002, subject to approval
of the plan by the Board of Directors and the Company's shareholders. The
Board of Directors approved the plan on July 22, 2002, subject to
shareholder approval.
49
(2) The dollar value of the awards is based on the closing price of the
Company's Common Shares on July 22, 2002, the effective date of the grant.
The affirmative vote of the holders of a majority of the Common Shares
present, either in person or by proxy, at the meeting is required for the
approval and adoption of the Performance Accelerated Plan. Therefore,
shareholders who vote to abstain will in effect be voting against the proposal.
Broker non-votes, however, are not counted as present for determining whether
this proposal has been approved and have no effect on its outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF
THE RPM, INC. 2002 PERFORMANCE ACCELERATED RESTRICTED STOCK PLAN.
50
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected the firm of Ciulla,
Smith & Dale, LLP, independent certified public accountants, to examine and
audit the financial statements of the Company and its subsidiaries for the
fiscal year ending May 31, 2003. This firm has served as independent auditors
for the Company since 1964. A representative of Ciulla, Smith & Dale, LLP will
be present at the Annual Meeting and will have an opportunity to make a
statement should he so desire. The representative also will be available to
respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Each year the Board of Directors submits its nominations for election of
directors at the Annual Meeting of Shareholders. Other proposals may be
submitted by the Board of Directors or the shareholders for inclusion in the
Proxy Statement for action at the Annual Meeting. Any proposal submitted by a
shareholder for inclusion in the Proxy Statement for the Annual Meeting of
Shareholders to be held in 2003 must be received by the Company (addressed to
the attention of the Secretary) on or before May 1, 2003. Any shareholder
proposal to be submitted at the Company's 2003 Annual Meeting of Shareholders
and not included in the Company's Proxy Statement will be considered untimely,
and the Company may use its discretion in voting proxies with respect to such
proposal, unless notice thereof is received by the Secretary of the Company by
July 16, 2003. To be submitted at the meeting, any such proposal must be a
proper subject for stockholder action under the laws of the State of Delaware
and the Company's By-Laws (assuming the Proposed Reincorporation is approved).
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the meeting other than those mentioned in the accompanying Notice.
However, if other matters shall properly come before the meeting, it is the
intention of the persons named in the accompanying Proxy to vote in accordance
with their best judgment on such matters.
Upon the receipt of a written request from any shareholder entitled to vote
at the forthcoming Annual Meeting, the Company will mail, at no charge to the
shareholder, a copy of the Company's Annual Report on Form 10-K, including the
financial statements and schedules required to be filed with the Commission
pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, as amended,
for the Company's most recent fiscal year. Requests from beneficial owners of
the Company's voting securities must set forth a good-faith representation that
as of the record date for the Annual Meeting, the person making the request was
the beneficial owner of securities entitled to vote at such Annual Meeting.
Written requests for the Annual Report on Form 10-K should be directed to:
P. Kelly Tompkins, Secretary
RPM, Inc.
P.O. Box 777
Medina, Ohio 44258
You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the Annual Meeting. For your convenience a
return envelope is enclosed requiring no additional postage if mailed in the
United States.
By Order of the Board of Directors.
P. KELLY TOMPKINS
Secretary
August 29, 2002
51
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 29,
2002 among RPM, Inc., an Ohio corporation (the "Company"), RPM International
Inc., a Delaware corporation ("New Parent"), and RPM Merger Company, an Ohio
corporation and wholly-owned subsidiary of New Parent ("Merger Sub" and,
together with the Company, the "Constituent Corporations").
WHEREAS, the Company and Merger Sub desire to merge on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of New Parent and each of the
Constituent Corporations deems it advisable and in the best interests of each of
such corporation and their respective shareholders that Merger Sub be merged
with and into the Company and have approved this Agreement and the Merger (as
defined below);
WHEREAS, this Agreement and the Merger are being submitted for the approval
and adoption by the shareholders of the Company and the sole shareholder of
Merger Sub;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Constituent
Corporations hereby agrees that Merger Sub will be merged with and into the
Company in accordance with the provisions of the laws of the State of Ohio, upon
the terms and subject to the conditions set forth as follows:
ARTICLE I
THE CONSTITUENT CORPORATIONS
SECTION 1.1 THE COMPANY
The Company is a corporation duly organized and existing under the laws of
the State of Ohio and has an authorized capital of 200,000,000 common shares,
without par value (the "Company Common Shares"). As of August 26, 2002,
approximately 114,834,087 Company Common Shares were issued and outstanding and
7,822,842 Company Common Shares were issued and held in treasury.
SECTION 1.2 MERGER SUB
Merger Sub is a corporation duly organized and existing under the laws of
the State of Ohio and has an authorized capital of 100 common shares, without
par value (the "Merger Sub Common Shares"). As of the date of this Agreement,
100 Merger Sub Common Shares are issued and outstanding.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Ohio Revised Code (the "ORC"), at the Effective Time
(as hereinafter defined) Merger Sub will be merged with the Company and the
separate corporate existence of Merger Sub will thereupon cease (the "Merger").
The Company will be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "Surviving Corporation") and will be a wholly-owned
subsidiary of the New Parent.
A-1
SECTION 2.2 EFFECTIVE TIME
The Merger will become effective on the date and at the time at which the
filing of a Certificate of Merger with the Secretary of State of the State of
Ohio has occurred in the manner required to cause the Merger to become effective
under the applicable provisions of the ORC (the "Effective Time").
SECTION 2.3 EFFECTS OF THE MERGER
At the Effective Time, the Merger will have the effects provided for herein
and in the relevant provisions of the ORC. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Merger Sub will vest in the
Surviving Corporation, and all debts, liabilities and duties of Merger Sub will
become the debts, liabilities and duties of the Surviving Corporation.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1 ARTICLES OF INCORPORATION AND REGULATIONS
(a) At the Effective Time, the Articles of Incorporation of the Surviving
Corporation will be those of Merger Sub immediately prior to the Effective Time.
(b) At the Effective Time, the Regulations of the Surviving Corporation
will be those of Merger Sub immediately prior to the Effective Time.
SECTION 3.2 DIRECTORS AND OFFICERS
At and after the Effective Time, the board of directors of the Surviving
Corporation will be comprised of the directors of Merger Sub immediately prior
to the Effective Time, and the officers of the Surviving Corporation will be the
officers of Merger Sub immediately prior to the Effective Time, in each case
until their respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Regulations in
effect after the Effective Time.
ARTICLE IV
TREATMENT OF SHARES OF CONSTITUENT CORPORATIONS
SECTION 4.1 CONVERSION OF SHARES
At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of the Company, New Parent or Merger
Sub:
(a) each Company Common Share issued and outstanding immediately prior
to the Effective Time will, subject to Section 4.3 hereof, be converted
into and become one share of common stock, $.01 par value per share, of New
Parent ("New Common Stock");
(b) each Company Common Share which is held in the treasury of the
Company immediately prior to the Effective Time will, by virtue of the
Merger, cease to be issued and shall be canceled and retired without
payment of any consideration therefor;
(c) each Merger Sub Common Share issued and outstanding immediately
prior to the Effective Time will be converted into and become one common
share, without par value, of the Surviving Corporation; and
A-2
(d) each share of New Common Stock issued and outstanding immediately
prior to the Effective Time, if any, will be canceled and will cease to
exist and no payment or distribution will be made with respect thereto, and
such shares will be returned to the status of authorized but unissued
shares.
SECTION 4.2 STOCK CERTIFICATES
At and after the Effective Time, each certificate theretofore representing
Company Common Shares, without any action on the part of the Company, New Parent
or the holder thereof, will be deemed to represent an equivalent number of
shares of New Common Stock and will cease to represent any rights in any Company
Common Shares.
SECTION 4.3 DISSENTING SHARES
(a) Notwithstanding anything to the contrary contained in this Agreement,
holders of Company Common Shares with respect to which dissenters' rights, if
any, are granted by reason of the Merger under the ORC and who do not vote in
favor of the Merger and otherwise comply with Section 1701.85 of the ORC
("Dissenting Shares"), shall not be entitled to certificates for shares of New
Common Stock pursuant to Section 4.1(a) hereof, unless and until the holder
thereof shall have failed to perfect or shall have effectively withdrawn or lost
such holder's right to dissent from the Merger under the ORC, and shall be
entitled to receive only the payment provided for by Section 1701.85 of the ORC.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's dissenters' rights under the ORC, such holder's
Dissenting Shares shall thereupon be deemed to be outstanding shares of New
Common Stock.
(b) Any payments relating to Dissenting Shares will be made solely by the
Surviving Corporation and no funds or other property have been or will be
provided by New Parent or any of its other direct or indirect subsidiaries for
such payment.
SECTION 4.4 CLOSING OF TRANSFER BOOKS
From and after the Effective Time, the stock transfer books of the Company
(but not of the Surviving Corporation) will be closed and no transfer of shares
of Company Common Shares will thereafter be made. If, after the Effective Time,
certificates formerly representing Company Common Shares are presented to the
Surviving Corporation, they will be canceled and exchanged for certificates
representing shares of New Common Stock as set forth in Section 4.3 hereof.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 AUTHORIZED CAPITAL OF NEW PARENT
If the shareholders of the Company approve and adopt a proposal to increase
the number of shares of common stock of New Parent from 200,000,000 to
300,000,000, and to add a class of serial preferred stock in the amount of
50,000,000 shares at the meeting held to consider this Agreement and the Merger,
New Parent will have the authority to issue up to 350,000,000 shares, consisting
of 300,000,000 shares of New Common Stock and 50,000,000 shares of preferred
stock, par value $0.01 (the "New Parent Preferred Stock"). If, however, the
shareholders of the Company do not approve and adopt the foregoing proposal, the
authorized number of shares of New Common Stock of New Parent will be
200,000,000 (the number of Company Common Shares that the Company had the
authority to issue immediately prior to the Effective Time), and New Parent will
not have the authority to issue any New Parent Preferred Stock.
A-3
SECTION 5.2 ASSIGNMENT AND ASSUMPTION OF EMPLOYEE BENEFIT PLANS; SHARE
EQUIVALENTS
At the Effective Time, the Company hereby assigns to New Parent and New
Parent hereby assumes all of the employee benefit plans (the "Benefit Plans") of
the Company existing immediately before the Effective Time, including without
limitation the Benefit Plans listed in Exhibit A hereto. As a result of this
assignment and assumption, New Parent will become the sponsor of each Benefit
Plan and will assume all of the powers, authorities, duties, responsibilities
and obligations of the Company to the extent indicated in each Benefit Plan,
including but not limited to assuming the role of Benefit Plan administrator
where indicated.
To the extent that law and contract permit, the execution of this Agreement
shall be deemed to accomplish the assignments and assumptions referred to above.
To the extent that law or contract may require additional documentation, or if
it would be expeditious to execute such documents whether or not legally
required, Company and New Parent may execute such documents as may be
appropriate to further the purposes of the assignment and assumption and to
accomplish and complete such assignments and assumptions, including but not
limited to any appropriate amendments to the Benefit Plans.
The assignment and assumption provisions above shall be interpreted in
light of the parties' intent that the Benefit Plans that are intended to be
qualified under the Internal Revenue Code of 1986, as amended (the "Code")
and/or the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including but not limited to the tax-qualified retirement plans and
incentive stock option plans, should continue to qualify under and comply with
the applicable requirements of the Code and ERISA, as appropriate.
With respect to each Benefit Plan the benefits of which are based on
Company Common Shares, or the equivalent value of such shares, each outstanding
and unexercised option, grant, right to purchase, or other right to acquire such
Company Common Shares shall be converted at the Effective Time into the same
option, grant, right to purchase, or other right to acquire shares of New Common
Stock, at the same exercise or conversion price per share, and the same terms
and subject to the same conditions, as set forth in the applicable Benefit Plan
in effect at the Effective Time. In addition, the same number of shares of New
Common Stock will be reserved for purposes of the Benefit Plans as is equal to
the number of Company Common Shares so reserved as of the Effective Time.
SECTION 5.3 TAX CONSEQUENCES
The parties hereto intend that the Merger shall constitute a transfer of
property by the holders of the Company Common Shares to New Parent governed by
Section 351 of the Code or a reorganization pursuant to Section 368(a)(1)(B) of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
SECTION 5.4 INDEMNIFICATION
Immediately following the Effective Time, the Company will, to the extent
set forth in its Articles of Incorporation, Regulations, and any Indemnity
Agreements existing immediately prior to the Effective Time, indemnify and hold
harmless, each current and former director or officer of New Parent and Merger
Sub and their respective subsidiaries, as a director, officer, trustee, partner,
fiduciary, employee, or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan, or enterprise
(collectively, the "Indemnified Parties") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding, or investigation (whether arising before or after the
Effective Time), whether civil, administrative, criminal, or investigative,
arising out of or pertaining to any action or omission in their capacities as
officers or directors of New Parent or Merger Sub, in each case occurring before
the Effective Time
A-4
(including transactions contemplated by this Agreement). Without limiting the
foregoing, in the event of any such claim, action, suit, proceeding, or
investigation, (i) the Company will pay the reasonable fees and expenses of
counsel selected by any Indemnified Party, which counsel will be reasonably
satisfactory to the Company, promptly after statements therefore are received
and (ii) the Company will reasonably cooperate in the defense of any such
matter, provided, however, that the Company will not be liable for any
settlement effected without its written consent (which consent will not be
unreasonably withheld or delayed). In the event that any claim or claims for
indemnification are asserted or made, all rights to indemnification in respect
of any such claim or claims will continue until the disposition of any and all
such claims.
SECTION 5.5 AMENDMENT
This Agreement may be amended by written agreement of the parties hereto at
any time prior to the Effective Time.
SECTION 5.6 ABANDONMENT
At any time prior to the Effective Time, this Agreement may be terminated
and abandoned by the unilateral action of the appropriate officers, as
authorized by the Board of Directors of the Company.
SECTION 5.7 STATUTORY AGENT IN OHIO
The name and address of the statutory agent in Ohio upon whom any process,
notice or demand against Merger Sub or the Surviving Corporation may be served
is:
The Prentice-Hall Corporation System, Inc.
50 West Broad Street
Columbus, Ohio 43215
SECTION 5.8 COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of which
will be considered one and the same agreement and will become effective when two
or more counterparts have been signed by each of the parties and delivered to
the other parties.
SECTION 5.9 GOVERNING LAW
This Agreement will be governed by, and construed in accordance with, the
laws of the State of Ohio, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
RPM, INC.
/s/ THOMAS C. SULLIVAN
--------------------------------------
By: Thomas C. Sullivan
Its: Chairman and Chief Executive
Officer
RPM INTERNATIONAL INC.
/s/ FRANK C. SULLIVAN
--------------------------------------
By: Frank C. Sullivan
Its: President
RPM MERGER COMPANY
/s/ RONALD A. RICE
--------------------------------------
By: Ronald A. Rice
Its: Secretary
A-6
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
Employee Benefit Plans of the Company
Qualified Retirement Plans and Trusts
-------------------------------------
RPM, Inc. Retirement Plan
RPM, Inc. Master Retirement Trust
RPM, Inc. Union Retirement Plan
Trust Agreement for RPM, Inc. Union Retirement Plan
RPM, Inc. 401(k) Trust and Plan
RPM, Inc. Union 401(k) Retirement Savings Trust and Plan
Stock Plans and Related Documents
---------------------------------
RPM, Inc. 2002 Performance Accelerated Restricted Stock Plan
RPM, Inc. Deferred Compensation Plan (2002)
RPM, Inc. Deferred Compensation Trust
RPM, Inc. 1997 Restricted Stock Plan
RPM, Inc. 1996 Key Employees Stock Option Plan, as amended 5/3/01
RPM, Inc. 1989 Stock Option Plan, as amended
RPM, Inc. Benefit Restoration Plan (1991)
RPM, Inc. Employee Stock Purchase Plan
Welfare and Fringe Benefit Plans
--------------------------------
RPM, Inc. Health and Welfare Plan
RPM, Inc. Flexible Benefits Plan
RPM, Inc. Life and Disability Welfare Plan
RPM Retiree Medical Premium Payment Plan
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NOTE: If Proposal Two (Reincorporation from Ohio to Delaware) is approved
and adopted by the Company's shareholders and Proposal Three (Increase in Number
of Authorized Shares; Addition of Class of Serial Preferred Stock) is approved
and adopted, the Amended and Restated Certificate of Incorporation of
RPM-Delaware will be in the form set forth below. If Proposal Two is approved
and adopted by the Company's shareholders, but Proposal Three is not approved,
the Amended and Restated Certificate of Incorporation of RPM-Delaware will be in
the form set forth below, with the exception that RPM-Delaware will have the
authority to issue 200,000,000 shares of common stock and all references to
preferred stock in the Amended and Restated Certificate of Incorporation will be
eliminated.
APPENDIX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RPM INTERNATIONAL INC.
ARTICLE I
The name of the corporation is RPM International Inc. (hereinafter, the
"Company").
ARTICLE II
The address of the Company's registered office in the State of Delaware is
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The name of the
Company's registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Company is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware, as amended (the "DGCL").
ARTICLE IV
Section 1. Authorized Capital Stock. The Company is authorized to issue
two classes of capital stock, designated Common Stock and Preferred Stock. The
total number of shares of capital stock that the Company is authorized to issue
is 350,000,000 shares, consisting of 300,000,000 shares of common stock, par
value $0.01 per share (the "Common Stock"), and 50,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock").
Section 2. Preferred Stock. The Preferred Stock may be issued in one or
more series. The Board of Directors of the Company (the "Board") is hereby
authorized to issue the shares of Preferred Stock in such series and to fix from
time to time before issuance the number of shares to be included in any such
series and the designation, relative powers, preferences, rights and
qualifications, limitations or restrictions of such series. The authority of the
Board with respect to each such series will include, without limiting the
generality of the foregoing, the determination of any or all of the following:
(a) the number of shares of any series and the designation to
distinguish the shares of such series from the shares of all other series;
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(b) the voting powers, if any, and whether such voting powers are full
or limited in such series;
(c) the redemption provisions, if any, applicable to such series,
including the redemption price or prices to be paid;
(d) whether dividends, if any, will be cumulative or noncumulative,
the dividend rate of such series, and the dates and preferences of
dividends on such series;
(e) the rights of such series upon the voluntary or involuntary
dissolution of, or upon any distribution of the assets of, the Company;
(f) the provisions, if any, pursuant to which the shares of such
series are convertible into, or exchangeable for, shares of any other class
or classes or of any other series of the same or any other class or classes
of stock, or any other security, of the Company or any other corporation or
other entity and the rates or other determinants of conversion or exchange
applicable thereto;
(g) the right, if any, to subscribe for or to purchase any securities
of the Company or any other corporation or other entity;
(h) the provisions, if any, of a sinking fund applicable to such
series; and
(i) any other relative, participating, optional or other special
powers, preferences or rights and qualifications, limitations or
restrictions thereof;
all as may be determined from time to time by the Board and stated or expressed
in the resolution or resolutions providing for the issuance of such Preferred
Stock (collectively, a "Preferred Stock Designation").
Section 3. Common Stock. Subject to the rights of the holders of any
series of Preferred Stock, the holders of Common Stock will be entitled to one
vote on each matter submitted to a vote at a meeting of stockholders for each
share of Common Stock held of record by such holder as of the record date for
such meeting.
ARTICLE V
The Board may make, amend and repeal the By-Laws of the Company. Any By-Law
made by the Board under the powers conferred hereby may be amended or repealed
by the Board (except as specified in any such By-Law so made or amended) or by
the stockholders in the manner provided in the By-Laws of the Company. The
Company may in its By-Laws confer powers upon the Board in addition to the
foregoing and in addition to the powers and authorities expressly conferred upon
the Board by applicable law. For the purposes of this Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation"), "Voting
Stock" means stock of the Company of any class or series entitled to vote
generally in the election of the directors of the Board (the "Directors").
ARTICLE VI
Subject to the rights of the holders of any series of Preferred Stock:
(a) any action required or permitted to be taken by the stockholders
of the Company must be effected at a duly called annual or special meeting
of stockholders of the Company and may not be effected by any consent in
writing of such stockholders; and
(b) special meetings of stockholders of the Company may be called only
by (i) the Chairman of the Board (the "Chairman"), (ii) the President of
the Company (the "President"), (iii) the majority of the total number of
Directors that the Company would have if there
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were no vacancies, or (iv) the Chairman or the President at the written
request of stockholders owning a majority of the Voting Stock.
At any annual meeting or special meeting of stockholders of the Company,
only such business will be conducted or considered as has been brought before
such meeting in the manner provided in the By-Laws of the Company.
ARTICLE VII
Section 1. Number, Election, and Terms of Directors. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, the number of the Directors of the Company will not be less than
nine nor more than 15 and will be fixed from time to time in the manner provided
in the By-Laws of the Company. The Directors, other than those who may be
elected by the holders of any series of Preferred Stock, will be classified with
respect to the time for which they severally hold office into three classes, as
nearly equal in number as possible, designated Class I, Class II and Class III.
At any meeting of stockholders at which Directors are to be elected, the number
of Directors elected may not exceed the greatest number of Directors then in
office in any class of Directors. The Board of Directors, as initially
appointed, shall consist of the following: (i) Class I: Edward B. Brandon,
William A. Papenbrock, Thomas C. Sullivan and Frank C. Sullivan (ii) Class II:
Bruce A. Carbonari, James A. Karman, Donald K. Miller and Joseph P. Viviano and
(iii) Class III: Dr. Max D. Amstutz, E. Bradley Jones, Albert B. Ratner and Dr.
Jerry Sue Thornton. The Directors first appointed to Class I will hold office
for a term expiring at the annual meeting of stockholders to be held in 2004;
the Directors first appointed to Class II will hold office for a term expiring
at the annual meeting of stockholders to be held in 2003 and the Directors first
appointed to Class III will hold office for a term expiring at the annual
meeting of stockholders to be held in 2005, with the members of each class to
hold office until their successors are elected and qualified. At each succeeding
annual meeting of the stockholders of the Company, the successors to the class
of Directors whose term expires at that meeting will be elected by plurality
vote of all votes cast at such meeting to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election. Directors may be elected by the stockholders only at an annual
meeting of stockholders. Election of Directors of the Company need not be by
written ballot unless requested by the Chairman or by the holders of a majority
of the Voting Stock present in person or represented by proxy at a meeting of
the stockholders at which Directors are to be elected. If authorized by the
Board, such requirement of written ballot shall be satisfied by a ballot
submitted by electronic transmission, provided that any such electronic
transmission must either set forth or be submitted with information from which
it can be determined that the electronic transmission was authorized by the
stockholder or proxy holder. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the Voting Stock, voting together as a single class,
is required to amend or repeal, or to adopt any provisions inconsistent with,
this Article VII, Section 1.
Section 2. Nomination of Director Candidates. If the Company's By-Laws
provide for advance notice of stockholder nominations for the election of
Directors, notice must be given in the manner provided in such By-Laws.
Section 3. Newly Created Directorships and Vacancies. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board resulting from death,
resignation, disqualification, removal, or other cause will be filled solely by
the affirmative vote of a majority of the remaining Directors then in office,
even though less than a quorum of the Board, or by a sole remaining Director.
Any Director elected in accordance with the preceding sentence will hold office
for the remainder of the full term of the class of Directors in which the new
directorship was created or the
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vacancy occurred and until such Director's successor has been elected and
qualified. No decrease in the number of Directors constituting the Board may
shorten the term of any incumbent Director.
Section 4. Removal. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, any Director may be removed from
office by the stockholders only for cause and only in the manner provided in
this Article VII, Section 4. At any annual meeting or special meeting of the
stockholders, the notice of which states that the removal of a Director or
Directors is among the purposes of the meeting, the affirmative vote of the
holders of at least a majority of the outstanding Voting Stock, voting together
as a single class, may remove such Director or Directors for cause.
ARTICLE VIII
To the full extent permitted by the DGCL or any other applicable law
currently or hereafter in effect, no Director of the Company will be personally
liable to the Company or its stockholders for or with respect to any acts or
omissions in the performance of his or her duties as a Director of the Company.
Any repeal or modification of this Article VIII will not adversely affect any
right or protection of a Director of the Company existing prior to such repeal
or modification.
ARTICLE IX
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another company or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (an "Indemnitee"), whether the basis of such
Proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Company to the
fullest extent permitted or required by the DGCL, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than such law permitted the Company to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection therewith;
provided, however, that, except as provided in Section 3 of this Article IX with
respect to Proceedings to enforce rights to indemnification, the Company shall
indemnify any such Indemnitee in connection with a Proceeding (or part thereof)
initiated by such Indemnitee only if such Proceeding (or part thereof) was
authorized by the Board.
Section 2. Right to Advancement of Expenses. The right to indemnification
conferred in Section 1 of this Article IX shall include the right to be paid by
the Company the expenses (including, without limitation, attorneys' fees and
expenses) incurred in defending any such Proceeding in advance of its final
disposition (an "Advancement of Expenses"); provided, however, that, if the DGCL
so requires, an Advancement of Expenses incurred by an Indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such Indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Company of an undertaking (an "Undertaking"), by or on behalf of such
Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (a "Final Adjudication") that such Indemnitee is not entitled to be
indemnified for such expenses under this Section 2 or otherwise. The rights to
indemnification and to the Advancement of Expenses conferred in Sections 1 and 2
of this Article IX shall be contract rights and such rights shall continue as to
an Indemnitee who has ceased to be a
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director, officer, employee or agent and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit. If a claim under Section 1
or 2 of this Article IX is not paid in full by the Company within 60 calendar
days after a written claim has been received by the Company, except in the case
of a claim for an Advancement of Expenses, in which case the applicable period
shall be 20 calendar days, the Indemnitee may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the Company to
recover an Advancement of Expenses pursuant to the terms of an Undertaking, the
Indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the Indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the Indemnitee
to enforce a right to an Advancement of Expenses) it shall be a defense that,
and (ii) any suit brought by the Company to recover an Advancement of Expenses
pursuant to the terms of an Undertaking, the Company shall be entitled to
recover such expenses upon a Final Adjudication that, the Indemnitee has not met
any applicable standard for indemnification set forth in the DGCL. Neither the
failure of the Company (including its Board, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the DGCL, nor an actual determination by the Company (including its Board,
independent legal counsel or stockholders) that the Indemnitee has not met such
applicable standard of conduct, shall create a presumption that the Indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit. In any suit brought by the
Indemnitee to enforce a right to indemnification or to an Advancement of
Expenses hereunder, or brought by the Company to recover an Advancement of
Expenses pursuant to the terms of an Undertaking, the burden of proving that the
Indemnitee is not entitled to be indemnified, or to such Advancement of
Expenses, under this Article IX or otherwise shall be on the Company.
Section 4. Non-Exclusivity of Rights. The rights to indemnification and
to the Advancement of Expenses conferred in this Article IX shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Company's Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 5. Insurance. The Company may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Company would have
the power to indemnify such person against such expense, liability or loss under
the DGCL.
Section 6. Indemnification of Employees and Agents of the Company. The
Company may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the Advancement of Expenses to
any employee or agent of the Company to the fullest extent of the provisions of
this Article IX with respect to the indemnification and Advancement of Expenses
of directors and officers of the Company.
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APPENDIX C
AMENDED AND RESTATED
BY-LAWS
OF
RPM INTERNATIONAL INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Company shall
be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Company may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
(the "Board") may from time to time determine or the business of the Company may
require.
ARTICLE II
FISCAL YEAR
Section 1. Fiscal Year. The fiscal year of the Company shall end upon
each May 31, or otherwise shall be as designated by the Board.
ARTICLE III
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders for the
election of Directors, and for the transaction of any other proper business,
shall be held on such date after the annual financial statements of the Company
have been prepared as shall be determined by the Board from time to time. Only
such business shall be conducted as shall have been properly brought before the
meeting. In the event that the annual meeting is not held on the date designated
therefor in accordance with this Section 1, the Directors shall cause the annual
meeting to be held as soon after that date as convenient.
Section 2. Special Meetings. Special meetings of the stockholders may be
called at any time by the Chairman of the Board, the President of the Company,
the majority of the Board and the Chairman of the Board or the President at the
written request of stockholders owning a majority of shares of the Voting Stock
(as such term is defined in the Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation")). Special meetings of holders
of the outstanding preferred stock, $0.01 par value per share, of the Company
(the "Preferred Stock"), if any, may be called in the manner and for the
purposes provided in the applicable Preferred Stock Designation (as such term is
defined in the Certificate of Incorporation). Calls for special meetings shall
specify the purpose or purposes of the proposed meeting, and no business shall
be considered at any such meeting other than that specified in the call
therefor.
Section 3. Place of Meetings. All meetings of the stockholders shall be
held at such place, if any, either within or without the State of Delaware, as
shall be designated in the notice of such meeting. The Board may, in its sole
discretion, determine that the meeting shall not be held at any place, but may
instead be held solely by means of remote communication as authorized by the
Delaware General Corporation Law. If authorized by the Board, and subject to
such guidelines and procedures as the Board may adopt, stockholders and
proxyholders not physically present at a meeting of stockholders may, by means
of remote communication, participate and be deemed present in person and vote at
a meeting of stockholders whether such meeting is to be held at a
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designated place or solely by means of remote communication, provided that: (a)
the Company shall implement reasonable measures to verify that each person
deemed present and permitted to vote at the meeting by means of remote
communication is a stockholder or proxyholder; (b) the Company shall implement
reasonable measures to provide such stockholders and proxyholders a reasonable
opportunity to participate in the meeting and to vote on matters submitted to
the stockholders, including an opportunity to read or hear the proceedings of
the meeting substantially concurrently with such proceedings; and (c) if any
stockholder or proxyholder votes or takes other action at the meeting by means
of remote communication, a record of such vote or other action shall be
maintained by the Company.
Section 4. Notice of Meetings and Adjourned Meetings. Written or other
proper notice of any meeting of stockholders stating the place, if any, date and
hour of the meeting, the means of remote communication, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at
such meeting, the information needed to access the stockholders' list during the
meeting if the meeting is held by means of remote communication and the purpose
or purposes for which the meeting is called, shall be given to each stockholder
entitled to vote at such meeting not less than 10 nor more than 60 days before
the date of the meeting. Without limiting the manner by which notice otherwise
may be given effectively to stockholders, any notice to stockholders given by
the Company under any provision of these Amended and Restated By-laws (the
"By-laws") or otherwise shall be effective if given by a form of electronic
transmission consented to by the stockholder to whom the notice is given; any
such consent shall be deemed revoked if (a) the Company is unable to deliver by
electronic transmission two consecutive notices given by the Company in
accordance with such consent, and (b) such inability becomes known to the
Secretary or an Assistant Secretary of the Company or to the transfer agent, or
other person responsible for the giving of notice; provided, however, that the
inadvertent failure to treat such inability as a revocation shall not invalidate
any meeting or other action. Notice given pursuant to the preceding sentence
shall be deemed given: (i) if by facsimile telecommunication, when directed to a
number at which the stockholder has consented to receive notice; (ii) if by
electronic mail, when directed to an electronic mail address at which the
stockholder has consented to receive notice; (iii) if by a posting on an
electronic network together with separate notice to the stockholder of such
specific posting, upon the later of (A) such posting, and (B) the giving of such
separate notice; and (iv) if by any other form of electronic transmission, when
directed to the stockholder in the manner consented to by the stockholder.
When a meeting is adjourned to another time or place, if any, notice need
not be given of the adjourned meeting if the time and place, if any, thereof,
and the means of remote communication, if any, by which stockholders and
proxyholders may be deemed to be present in person and vote at such adjourned
meeting, are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Company may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
For purposes of these By-laws, "electronic transmission" means any form of
communication, not directly involving the physical transmission of paper, that
creates a record that may be retained, retrieved and reviewed by a recipient
thereof, and that may be directly reproduced in paper form by such a recipient
through an automated process.
Section 5. Stockholders' List. The officer who has charge of the stock
ledger of the Company shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting for a period of at least 10 days prior to the meeting,
either (a) on a reasonably accessible electronic network, provided that the
information required to gain access to such list is provided with
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the notice of the meeting, or (b) during ordinary business hours, at the
principal place of business of the Company. If the meeting is to be held at a
place, the list shall be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. If the meeting is to be held solely by means of remote communication,
then the list also shall be open to the examination of any stockholder during
the whole time of the meeting on a reasonably accessible electronic network, and
the information required to access such list shall be provided with the notice
of the meeting.
Section 6. Quorum. At any meeting of the stockholders, except as
otherwise provided by the Delaware General Corporation Law, the Certificate of
Incorporation, or these By-laws, a majority of the shares entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business; provided, that no action required by the
Certificate of Incorporation or these By-laws to be authorized or taken by a
designated proportion of shares may be authorized or taken by a lesser
proportion; provided, further, that where a separate vote by a class or classes
of shares is required by law, the Certificate of Incorporation or these By-laws,
a majority of the outstanding shares of such class or classes, present in person
or represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote. If such quorum shall not be present or represented by
proxy at any meeting of the stockholders, the stockholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented by proxy.
Section 7. Voting. In all matters other than the election of Directors
and other than any matters upon which by express provision of the Delaware
General Corporation Law, the Certificate of Incorporation or of these By-laws a
different vote is required, the vote of a majority of the shares entitled to
vote on the subject matter and present in person or represented by proxy at the
meeting shall be the act of the stockholders. Directors shall be elected by a
plurality of the votes of the shares entitled to vote on the election of
Directors and present in person or represented by proxy at the meeting. Except
as otherwise provided in the Certificate of Incorporation, each stockholder
entitled to vote at any meeting of the stockholders shall be entitled to one
vote for each share of capital stock held by such stockholder.
Section 8. Proxies. Each stockholder entitled to vote at a meeting of the
stockholders may authorize, by any means permitted pursuant to the Delaware
General Corporation Law and approved by the Board, another person or persons to
act for him by proxy. No such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 9. Inspectors. The Board shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act as judges of the
voting, to determine those entitled to vote at any such meeting, or any
adjournments thereof, and to make a written report of any such meeting. The
Board may designate one or more persons as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the presiding officer of the meeting may appoint one or
more substitute inspectors.
Section 10. Action of Stockholders Without a Meeting. Pursuant to the
Company's Certificate of Incorporation, the right of the stockholders to take
any action by consent in writing without a regular or special meeting of the
stockholders is expressly denied.
Section 11. Order of Business. The Chairman, or such other officer of the
Company designated by a majority of the Board, will call meetings of the
stockholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board prior to the meeting, the presiding officer of
the meeting of the stockholders will also determine the order of business and
have the authority in his or her sole discretion to regulate the conduct of any
such meeting, including without limitation by imposing restrictions on the
persons (other than stockholders of the Company or their duly appointed proxies)
that may attend any such stockholders' meeting, by ascertaining whether any
stockholder or his proxy may be excluded from any meeting of the stockholders
based
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upon any determination by the presiding officer, in his sole discretion, that
any such person has unduly disrupted or is likely to disrupt the proceedings
thereat, and by determining the circumstances in which any person may make a
statement or ask questions at any meeting of the stockholders.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Company shall
be managed by or under the direction of a Board, except as may be otherwise
provided in the Delaware General Corporation law or in the Certificate of
Incorporation.
Section 2. Number, Election, and Terms. Subject to the rights, if any, of
any series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, and to the minimum and maximum
number of authorized Directors provided in the Certificate of Incorporation, the
authorized number of Directors may be determined from time to time by (i)
resolution of the Board adopted by the affirmative vote of a majority of the
entire Board or (ii) by the affirmative vote of the holders of a majority of
shares of the Voting Stock at any annual meeting of stockholders called for that
purpose at which a quorum is present; provided, however, that the number of
Directors fixed by the stockholders at any meeting many not be greater by more
than one Director than the number fixed or authorized at the next preceding
annual meeting of stockholders, and, provided, further, that no reduction in the
number of Directors by the stockholders shall of itself have the effect of
shortening the term of any incumbent Director. Directors may, but need not, be
stockholders. The Directors, other than those who may be elected by the holders
of any series of Preferred Stock, will be classified with respect to the time
for which they severally hold office in accordance with the Certificate of
Incorporation.
Section 3. Removal. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, any Director may be removed from
office by the stockholders only for cause and only in the manner provided in the
Certificate of Incorporation and, if applicable, any amendment to this Section
3.
Section 4. Vacancies and Newly Created Directorships. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board resulting from death,
resignation, disqualification, removal, or other cause will be filled solely by
the affirmative vote of a majority of the remaining Directors then in office,
even though less than a quorum of the Board, or by a sole remaining Director.
Any Director elected in accordance with the preceding sentence will hold office
for the remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until such Director's
successor is elected and qualified. No decrease in the number of Directors
constituting the Board will shorten the term of an incumbent Director.
Section 5. Resignation. Any Director may resign at any time upon notice
given in writing or by electronic transmission to the Company. A resignation
from the Board shall be deemed to take effect immediately upon receipt of such
notice or at such other time as the Director may specify in such notice.
Section 6. Annual Meeting. Immediately following each annual meeting of
stockholders for the election of Directors, the Board may meet for the purpose
of organization, the election of officers and the transaction of other business
at the place, if any, where the annual meeting of stockholders for the election
of Directors is held. Notice of such meeting need not be given. Such meeting may
be held at any other time or place, if any, which shall be specified in a notice
given as hereinafter provided for special meetings of the Board or in a consent
and waiver of notice thereof signed by all of the Directors.
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Section 7. Regular Meetings. Regular meetings of the Board may be held at
such places (within or without the State of Delaware), if any, and at such times
as the Board shall by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be held,
then the meeting which would otherwise be held on that day shall be held at such
place, if any, at the same hour and on the next succeeding business day not a
legal holiday. Notice of regular meetings need not be given.
Section 8. Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, President or by any two of the
Directors. Notice of each such meeting shall be mailed to each Director,
addressed to him at his residence or usual place of business, at least three
days before the day on which the meeting is to be held, or shall be sent to him
by telegram or cablegram so addressed, or shall be delivered personally or by
telephone or telecopy or other electronic or wireless means, at least 24 hours
before the time the meeting is to be held. Each such notice shall state the time
and place (within or without the State of Delaware), if any, of the meeting but
need not state the purposes thereof, except as otherwise required by the
Delaware General Corporation Law or by these By-laws.
Section 9. Quorum: Voting Adjournment. Except as otherwise provided by
the Certificate of Incorporation or by these By-laws, a majority of the total
number of Directors shall constitute a quorum for the transaction of business at
any meeting, and the vote of a majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board. In the absence of a
quorum, the Director or Directors present at any meeting may adjourn such
meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given.
Section 10. Communications. Members of the Board, or of any committee
thereof, may participate in a meeting of such board or committee by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 10 shall constitute presence in person at such
meeting.
Section 11. Action of Directors Without a Meeting. Except as may be
otherwise provided for in the Certificate of Incorporation, any action required
or permitted to be taken at any meeting of the Board, or of any committee
thereof, may be taken without a meeting if all members of the Board or such
committee, as the case may be, consent thereto in writing or by electronic
transmission, and such written consent or consents or electronic transmission or
transmissions are filed with the minutes of proceedings of the Board or such
committee. Such filings shall be in paper form if the minutes are maintained in
paper form and shall be in electronic form if the minutes are maintained in
electronic form.
Section 12. Compensation. The Board may establish the compensation for,
and reimbursement of the expenses of, Directors for membership on the Board and
on committees of the Board, attendance at meetings of the Board or committees of
the Board, and for other services by Directors to the Company or any of its
majority-owned subsidiaries. Nothing herein contained shall be construed so as
to preclude any Director from serving the Company in any other capacity, or from
serving any of its stockholders, subsidiaries or affiliated corporations in any
capacity, and receiving compensation therefor.
Section 13. Committees. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of three or more of the Directors of the Company. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
to act at the meeting in the place of any such absent or disqualified member.
Subject to the limitations of Section 141(c) of the Delaware General Corporation
Law, as amended from time to time (or of any successor thereto,
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however denominated), any such committee, to the extent provided in the Board
resolution, shall have and may exercise the powers and authority of the Board in
the management of the business and affairs of the Company, and may authorize the
seal of the Company (if any) to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board. Each committee shall keep
regular minutes of its meetings and report the same to the Board when required.
ARTICLE V
NOTICES
Section 1. Notices. Whenever, under the provisions of the Delaware
General Corporation Law or of the Certificate of Incorporation or these By-laws,
notice is required to be given to any Director or stockholder, it shall not be
necessary that personal notice be given, and such notice may be given in
writing, by mail, addressed to such Director or stockholder, at his address as
it appears on the records of the Company or at his residence or usual place of
business, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice also may be given in any other proper form, as authorized by the Delaware
General Corporation Law. Notice that is given by facsimile shall be deemed
delivered when sent to a number at which any Director or stockholder has
consented to receive such notice. Notice by telegram or cablegram shall be
deemed to be given when the same shall be filed. Notice that is given in person
or by telephone shall be deemed to be given when the same shall be delivered.
Without limiting the manner by which notice otherwise may be given effectively
to any Director or stockholder, any notice given under any provision of these
By-laws shall be effective if given by a form of electronic transmission
consented to by such person. Notice given by electronic mail shall be deemed
delivered when directed to an electronic mail address at which such person has
consented to receive notice and notice given by a posting on an electronic
network together with separate notice to such person of such specific posting
shall be deemed delivered upon the later of (a) such posting and (b) the giving
of such separate notice. Notice given by any other form of electronic
transmission shall be deemed given when directed to any Director or stockholder
in the manner consented to by such Director or stockholder.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under any provision of the Delaware General Corporation Law or of the
Certificate of Incorporation or these By-laws, a written waiver, signed by the
person or persons entitled to said notice, or a waiver by electronic
transmission by the person or persons entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE VI
OFFICERS
Section 1. Officers. The officers of the Company shall be a President, a
Secretary, a Treasurer and, if the Board shall so determine, or as may be deemed
necessary by the Board from time to time, a Chairman of the Board, one or more
Vice Presidents and other officers and assistant officers. The Chairman of the
Board, if any, and the President, shall be chosen from among the members of the
Board; however; none of the other officers need be a Director. Any number of
offices may be held by the same person.
Section 2. Election of Officers. Each officer of the Company shall be
elected by the Board and shall hold office at the pleasure of the Board until
his successor has been elected or until his earlier resignation or removal.
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Section 3. Resignation. Any officer may resign at any time by giving
written notice of his resignation to the Company. Any such resignation shall
take effect immediately upon receipt of such notice or at such other time
specified in such notice. Unless otherwise specified in such notice, the
acceptance of such resignation by the Company shall not be necessary to make it
effective.
Section 4. Removal. Any officer may be removed at any time, either with
or without cause, by action of the Board.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal or any other reason shall be filled by the Board.
Section 6. Powers and Duties. All officers, as between themselves and the
Company, shall have such authority and perform such duties as are customarily
incident to their respective offices, and as may be specified from time to time
by the Board, regardless of whether such authority and duties are customarily
incident to such office. In the absence of any officer of the Company, or for
any other reason the Board may deem sufficient, the Board may delegate for the
time being the powers or duties of such officer, or any of them, to any other
officer or to any Director. The Board may from time to time delegate to any
officer the authority to appoint and remove subordinate officers and to
prescribe their authority and duties.
Section 7. Compensation. The compensation of the officers and agents of
the Company shall be fixed by the Board and the Board may delegate such
authority to a committee of the Board or to any one or more officers of the
Company.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 1. Share Certificates. Certificates representing shares of stock
of the Company will be in such form as is determined by the Board, subject to
applicable legal requirements. Each such certificate will be numbered and its
issuance recorded in the books of the Company, and such certificate will exhibit
the holder's name and the number of shares and will be signed by, or in the name
of, the Company by the Chairman of the Board or the President and the Secretary
or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and will
also be signed by, or bear the facsimile signature of, a duly authorized officer
or agent of any properly designated transfer agent of the Company. Any or all of
the signatures and the seal of the Company, if any, upon such certificates may
be facsimiles, engraved, or printed. Such certificates may be issued and
delivered notwithstanding that the person whose facsimile signature appears
thereon may have ceased to be such officer at the time the certificates are
issued and delivered.
Section 2. Classes of Stock. The designations, powers, preferences and
relative, participating, optional or other special rights of the various classes
of stock or series thereof, and the qualifications, limitations or restrictions
thereof, will be set forth in full or summarized on the face or back of the
certificates which the Company issues to represent its stock or, in lieu
thereof, such certificates will set forth the office of the Company from which
the holders of certificates may obtain a copy of such information at no charge.
Section 3. Lost, Stolen or Destroyed Certificates. The Board may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Company alleged to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate for stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Company a bond in such sum as it may direct as indemnity
against any claim that may be made
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against the Company with respect to the certificate or certificates alleged to
have been lost, stolen or destroyed.
Section 4. Transfers. Upon surrender to the Company or the transfer agent
of the Company of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Company to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. Record Dates. In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to receive payment of any dividend or other
distribution or allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing such record date is adopted by
the Board. In the case of (a) a meeting, such record date also shall not be more
than 60 nor less than 10 days before the date of such meeting, or (b) the
payment of any dividend or other distribution, allotment of any rights, exercise
of any rights in respect of any change, conversion or exchange of stock or any
other lawful action, such record date also shall not be more than 60 days prior
to such action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
Section 6. Protection of Company. The Company shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VIII
BANKING
All funds of the Company not otherwise employed shall be deposited from
time to time to the credit of the Company in such banks, trust companies or
other depositaries as the Board may authorize. The Board may make such special
rules and regulations with respect to such bank accounts, not inconsistent with
the provisions of these By-laws, as it may deem expedient. For the purpose of
deposit and for the purpose of collection for the account of the Company,
checks, drafts and other orders for the payment of money which are payable to
the order of the Company shall be endorsed, assigned and delivered by such
person or persons and in such manner as may from time to time be authorized by
the Board.
ARTICLE IX
FORM OF RECORDS
Any records maintained by the Company in the regular course of its
business, including its stock ledger, books of account and minute books, may be
kept in any manner authorized by the Delaware General Corporation Law, including
by means of, or in the form of, any storage device or method, provided that
records so kept can be converted into clearly legible paper form within a
reasonable time. The Company shall so convert any records kept in such manner
upon the request of any person entitled to inspect such records pursuant to the
Delaware General Corporation Law.
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ARTICLE X
RELIANCE ON BOOKS, REPORTS AND RECORDS
Each Director, each member of a committee designated by the Board, and each
officer of the Company will, in the performance of his or her duties, be fully
protected in relying in good faith upon the records of the Company and upon such
information, opinions, reports, or statements presented to the Company by any of
the Company's officers or employees, or committees of the Board, or by any other
person or entity as to matters the Director, committee member, or officer
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Company.
ARTICLE XI
CORPORATE SEAL
The corporate seal of the Company shall be in circular form and shall
contain the name of the Company. Failure to affix the corporate seal to any
instrument executed on behalf of the Company shall not affect the validity of
such instrument.
ARTICLE XII
EMERGENCY BY-LAWS
The Board may adopt, either before or during an emergency, as that term is
defined by the Delaware General Corporation Law, any emergency by-laws permitted
by the Delaware General Corporation Law which shall be operative only during
such emergency. In the event the Board does not adopt any such emergency
by-laws, the special rules provided in the Delaware General Corporation Law
shall be applicable during an emergency as therein defined.
ARTICLE XIII
SECTION HEADINGS
The headings contained in these By-laws are for reference purposes only and
shall not be construed to be part of and shall not affect in any way the meaning
or interpretation of these By-laws.
ARTICLE XIV
AMENDMENTS
Except as otherwise provided by law or by the Certificate of Incorporation
or these By-Laws, these By-Laws or any of them may be amended in any respect or
repealed at any time, either (i) at any meeting of stockholders, provided that
any amendment or supplement proposed to be acted upon at any such meeting has
been described or referred to in the notice of such meeting; and provided,
however, that the affirmative vote of at least 80% of the Voting Stock, voting
together as a single class, is required to amend, or repeal, or to adopt any
provision inconsistent with, Article IV, Section 2, relating to the number,
election and terms of office of Directors, or (ii) at any meeting of the Board,
provided that no amendment adopted by the Board may vary or conflict with any
amendment adopted by the stockholders in accordance with the Certificate of
Incorporation and these By-Laws.
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APPENDIX D
SEC. 1701.85 DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF SHARES.
TEXT OF STATUTE
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 (1701.80.1) of the Revised Code shall be a
record holder of the shares of the corporation as to which he seeks relief as of
the date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 (1701.80.1) of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for payment with
the same information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
D-1
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for hearing on the complaint or any adjournment of it, the court shall determine
from the complaint and from such evidence as is submitted by either party
whether the dissenting shareholder is entitled to be paid the fair cash value of
any shares and, if so, the number and class of such shares. If the court finds
that the dissenting shareholder is so entitled, the court may appoint one or
more persons as appraisers to receive evidence and to recommend a decision on
the amount of the fair cash value. The appraisers have such power and authority
as is specified in the order of their appointment. The court thereupon shall
make a finding as to the fair cash value of a share and shall render judgment
against the corporation for the payment of it, with interest at such rate and
from such date as the court considers equitable. The costs of the proceeding,
including reasonable compensation to the appraisers to be fixed by the court,
shall be assessed or apportioned as the court considers equitable. The
proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505, of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or as fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 (1701.80.1) of the
Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
D-2
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
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APPENDIX E
TAX OPINION
[PRICEWATERHOUSECOOPERS LOGO]
--------------------------------------------------------------------------------
PricewaterhouseCoopers
LLP
BP Tower
200 Public Square
27th Floor
Cleveland OH 44114-2301
Telephone (216) 875-3000
Board of Directors
RPM, Inc.
2628 Pearl Road
Medina, OH 44258
August 29, 2002
To the Members of the Board of Directors of RPM, Inc:
On behalf of RPM, Inc. ("RPM"), you have requested the opinion (the "Opinion")
of PricewaterhouseCoopers L.L.P. (the "Firm") as to certain U.S. federal income
tax issues arising in connection with the restructuring of RPM's U.S. operations
(the "Transaction"). All section references herein are to the Internal Revenue
Code of 1986, as amended ("Code") and all regulation section references are to
the Federal Income Tax Regulations, unless otherwise indicated.
I. FACTS AND ASSUMPTIONS
For purposes of rendering our opinion, the Firm understands that RPM is a
publicly traded, widely held U.S. corporation that is incorporated in the state
of Ohio, and is the parent corporation of a wholly owned group of corporations,
with members located both in and outside the United States (collectively the
"RPM Group"). The steps of the Transaction are as follows:
Step 1: An outside incorporator has formed a Delaware corporation, RPM
International Inc. ("RPM International"). RPM International has formed
an Ohio corporation, RPM Merger Sub ("RPM Merger").
Step 2: RPM Merger will merge into RPM with RPM surviving. As a result of the
merger, all public shareholders of RPM will be deemed to exchange their
shares in RPM for voting shares of RPM International. Any dissenting
shareholders in the merger that have properly exercised dissenter
rights under Ohio law will receive cash in exchange for their RPM
shares.
Step 3: RPM will distribute various wholly owned subsidiaries to RPM
International.
Step 4: RPM International will form several wholly owned holding companies and
transfer stock of certain distributed subsidiaries to one of the newly
formed holding companies.
The objectives of the plan of reorganization as described above are:
- To simplify and rationalize the group's ownership structure by better
aligning its businesses into three distinct intermediate holding
companies: Consumer, Industrial, and Entrepreneurial.
- To take advantage of Delaware's more modern and flexible corporate laws
as well as the expertise of the Delaware courts in corporate matters.
As of the effective time of the merger, each of RPM, RPM International, and RPM
Merger, are duly formed under all applicable laws and regulations, and are
corporations for U.S. federal income tax purposes as defined under Treas. Reg.
sections 301.7701-1 through 301.7701-3.
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II. OPINION
In rendering our opinion, we have relied upon certain written statements and
representations made to us by the management of RPM, Inc. dated the date hereof,
and we have assumed that such statements and representations will be complete
and accurate as of the effective time. It is our opinion, based on the facts and
representations noted above that:
1. The merger of RPM Merger with and into RPM with RPM surviving will not
constitute a taxable event for U.S. federal income tax purposes to
either RPM Merger, RPM International, or RPM.
2. Pursuant to either section 351 or, alternatively, sections 368(a)(1)(B)
and 354, the RPM stockholders will not recognize gain or loss when they
exchange their RPM common stock solely for RPM International voting
common stock.
3. The RPM stockholders' basis in the RPM International voting stock will
be equal to the basis they had in their RPM common stock.
4. The holding period of the RPM International voting stock to be received
by the RPM stockholders in the exchange will include the holding period
of the RPM common stock to be surrendered in exchange therefor, provided
the RPM common stock is held as a capital asset in the hands of the RPM
stockholders on the date of the exchange.
III. QUALIFICATION AND LIMITATION
1. Our opinions are based on the facts, assumptions and representations set
forth or referenced in this letter. You have read the facts,
representations and assumptions prior to the issuance of this letter. If
any fact, representation or assumption is not entirely complete or
correct, it is imperative that we be informed immediately in writing as
the incompleteness or inaccuracy could cause us to change our opinions.
Although we have not independently verified each fact, assumption, and
representation set forth or referenced in this letter, no information
that has come to our attention leads us to believe that any of these
facts, assumptions, or representations are inaccurate or incomplete.
2. The conclusions reached in this opinion represent and are based upon our
best judgment regarding the application of federal income tax laws
arising under the Code, existing judicial decisions, administrative
regulations and published rulings and procedures. This opinion is not
binding upon the Internal Revenue Service, or the courts. It is our
opinion that the Internal Revenue Service will not successfully assert a
contrary position, although this cannot be guaranteed in the absence of
a private letter ruling from the Internal Revenue Service. Furthermore,
no assurance can be given that future legislative or administrative
changes, on either a prospective or retroactive basis, would not
adversely affect the accuracy of the conclusions stated herein.
PricewaterhouseCoopers LLP undertakes no responsibility to advise any
party or shareholder of any new developments in the application or
interpretation of the Federal income tax laws.
3. This opinion does not address any Federal tax consequences of the
Transaction set forth above, or transactions related or proximate to the
Transaction set forth above, except as specifically set forth herein.
This opinion does not address any state, local, or foreign tax
consequences that may result from the Transaction set forth above, or
transactions related to the Transaction set forth above.
4. This opinion does not address any transaction other than the one
described above, or any transactions whatsoever, if all the transactions
described herein were not consummated as described herein without waiver
or breach of any material provision thereof. In the event any one of the
representations is incorrect, the conclusions reached in this opinion
might be adversely affected.
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5. We consent to the inclusion of the opinion in the proxy statement and
proxy materials describing the Transaction, which will be sent to the
RPM stockholders. The issuance of this consent, however, does not
constitute an admission that we are an "Expert" within the meaning of
Section 11 of the Securities Act of 1933, as amended, or within the
category of persons whose consent is required by section 7 of such Act.
This opinion has been delivered to you and is intended solely for your
benefit and, except as set forth above, may not be circulated, quoted or
otherwise referred to for any other purpose without our written consent.
Yours very truly,
[PRICEWATERHOUSECOOPERS SIGNATURE]
PricewaterhouseCoopers LLP
E-3
APPENDIX F
RPM, INC.
2002 PERFORMANCE ACCELERATED
RESTRICTED STOCK PLAN
Effective Date: June 1, 2002
TABLE OF CONTENTS
ARTICLE I -- NAME AND PURPOSE...................................... F-1
1.1 Name........................................................ F-1
1.2 Purpose..................................................... F-1
ARTICLE II -- DEFINITIONS.......................................... F-1
2.1 Beneficiary................................................. F-1
2.2 Board of Directors.......................................... F-1
2.3 Code........................................................ F-1
2.4 Committee................................................... F-1
2.5 Common Shares............................................... F-1
2.6 Company..................................................... F-1
2.7 Continuous Employment....................................... F-1
2.8 Deferred Compensation Plan.................................. F-1
2.9 Eligible Employee........................................... F-1
2.10 Fair Market Value........................................... F-2
2.11 Grant....................................................... F-2
2.12 Grantee..................................................... F-2
2.13 Parent...................................................... F-2
2.14 Plan........................................................ F-2
2.15 Plan Year................................................... F-2
2.16 Restricted Stock............................................ F-2
2.17 Restricted Stock Agreement.................................. F-2
2.18 Rule 16b-3.................................................. F-2
2.19 Shareholders................................................ F-2
2.20 Stock Power................................................. F-2
2.21 Subsidiary.................................................. F-2
2.22 Termination of Employment................................... F-2
ARTICLE III -- ADMINISTRATION...................................... F-3
3.1 Plan Administration......................................... F-3
3.2 Powers and Duties of the Committee.......................... F-3
3.3 Governance of the Committee................................. F-3
3.4 Limitation of Liability..................................... F-3
3.5 Administrative Plan Years................................... F-3
ARTICLE IV -- ELIGIBILITY AND PARTICIPATION........................ F-3
4.1 Eligible Employees.......................................... F-3
4.2 Prohibition on Participation................................ F-3
4.3 Entry Date.................................................. F-3
ARTICLE V -- STOCK AVAILABLE FOR GRANTS............................ F-4
5.1 Available Shares............................................ F-4
5.2 Source of Shares............................................ F-4
ARTICLE VI -- RESTRICTED STOCK AGREEMENTS.......................... F-4
6.1 Granting of Restricted Stock................................ F-4
6.2 Restricted Stock Agreements................................. F-4
6.3 Stock Power................................................. F-4
6.4 Rights of Grantees.......................................... F-4
ARTICLE VII -- STOCK RESTRICTIONS.................................. F-5
7.1 Transfer Restrictions....................................... F-5
7.2 Other Restrictions.......................................... F-5
F-ii
ARTICLE VIII -- LAPSE OF RESTRICTIONS.............................. F-5
8.1 Lapse of Restrictions After Ten Years of Continuous
Employment.................................................. F-5
8.2 Performance Accelerated Lapse of Restrictions............... F-5
8.3 Determination of Achievement of Performance Goals........... F-5
8.4 Delivery of Restricted Stock Upon Lapse of Restrictions..... F-5
ARTICLE IX -- TERMINATION OF EMPLOYMENT............................ F-6
9.1 Termination of Employment for Reasons Other Than Change of
Control, Death or Disability................................ F-6
9.2 Termination of Employment Due to Death or Disability........ F-6
9.3 Termination of Employment Due to Change in Control.......... F-6
9.4 Definition of "Change in Control"........................... F-6
9.5 Delivery of Restricted Stock................................ F-7
ARTICLE X -- ESCROW AGREEMENT AND LEGENDS.......................... F-7
10.1 Escrow Agreements........................................... F-7
10.2 Legends..................................................... F-7
ARTICLE XI -- BENEFICIARY DESIGNATION.............................. F-8
11.1 Procedures for Beneficiary Designation...................... F-8
11.2 Default Beneficiaries....................................... F-8
ARTICLE XII -- AMENDMENTS.......................................... F-8
12.1 Plan May Be Amended......................................... F-8
12.2 Limitations on Plan Amendment............................... F-8
ARTICLE XIII -- EFFECTIVE DATE AND TERMINATION..................... F-8
13.1 Effective Date.............................................. F-8
13.2 Plan May Be Terminated...................................... F-8
13.3 Termination................................................. F-8
ARTICLE XIV -- COORDINATION WITH DEFERRED COMPENSATION PLAN........ F-9
14.1. Credit to Deferred Compensation Plan Determined by
Committee................................................... F-9
14.2. Credit to Deferred Compensation Plan Determined by
Grantee..................................................... F-9
14.3 Vesting of Canceled or Surrendered Restricted Stock......... F-9
ARTICLE XV -- MISCELLANEOUS........................................ F-9
15.1 Consents.................................................... F-9
15.2 Right of Discharge Reserved................................. F-10
15.3 Nature of Grants............................................ F-10
15.4 Non-Uniform Determinations and Restricted Stock
Agreements.................................................. F-10
15.5 Other Payments or Awards.................................... F-10
15.6 Section Headings............................................ F-10
15.7 Number...................................................... F-10
15.8 Gender...................................................... F-10
15.9 Withholding................................................. F-10
15.10 Waiver...................................................... F-10
15.11 Governing Law............................................... F-10
F-iii
ARTICLE I
NAME AND PURPOSE
1.1 Name. The name of this Plan shall be: RPM, Inc. 2002 Performance
Accelerated Restricted Stock Plan.
1.2 Purpose. The Plan will be maintained to provide certain key executive
employees with (i) an incentive to remain in the service of RPM, Inc., Parent
and their Subsidiaries, (ii) an incentive to exert their best efforts on behalf
of RPM, Inc., Parent and their Subsidiaries and to maintain and enhance the
long-term performance and profitability of RPM, Inc., Parent and their
Subsidiaries and (iii) an opportunity to acquire a proprietary interest in the
success of RPM, Inc., Parent and their Subsidiaries.
ARTICLE II
DEFINITIONS
2.1 Beneficiary. The word "Beneficiary" shall mean the person, persons,
entity or entities so designated, or deemed to be designated, by a Grantee
pursuant to Article XI.
2.2 Board of Directors. The words "Board of Directors" shall mean the
Board of Directors of the Company, as constituted from time to time.
2.3 Code. The word "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any lawful regulations or pronouncements thereunder. Whenever
reference is made to a specific Code Section, such reference shall be deemed to
be a reference to any successor Code Sections with the same or similar purpose.
2.4 Committee. The word "Committee" shall mean the Compensation Committee
of the Board of Directors, as constituted from time to time, which shall:
(a) consist of at least three Directors, each of whom shall be a
"non-employee director" within the meaning of Rule 16b-3; and
(b) be authorized by the Board to exercise all authority granted to it
under this Plan and any Board actions.
2.5 Common Shares. The words "Common Shares" shall mean common shares of
RPM, Inc., without par value. Once applicable, the words "Common Shares" shall
mean common stock of the Parent, with par value of one cent ($.01) per share.
2.6 Company. The word "Company" shall mean RPM, Inc., an Ohio
corporation, or any corporation or other entity which assumes the obligations of
RPM, Inc. by operation of law or otherwise under the Plan. Once applicable, the
word "Company" shall mean Parent or any other corporation or entity which
assumes the obligations of Parent by operation of law or otherwise under the
Plan.
2.7 Continuous Employment. The words "Continuous Employment" shall mean
employment for an uninterrupted period during which a Grantee is an employee of
the Company and/or any Subsidiary, and shall include any authorized leaves of
absence.
2.8 Deferred Compensation Plan. The words "Deferred Compensation Plan"
shall mean the RPM, Inc. Deferred Compensation Plan, any similar deferred
compensation plan of Parent, or their successors.
2.9 Eligible Employee. The words "Eligible Employee" shall mean an
officer of the Company or a Subsidiary entitled to participate in the Plan
pursuant to Section 4.1.
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2.10 Fair Market Value. The words "Fair Market Value" shall mean the fair
market value of a Common Share or share of Restricted Stock (for purposes of
this Section, "Share"), as the context may require, as of the date it is
determined, and shall be deemed to be the closing price of such Share on such
date on the Nasdaq or New York Stock Exchange; or if the Share is not listed on
the Nasdaq or New York Stock Exchange as of such date, the closing price of the
Share on such date on such national securities exchange or transaction reporting
system on which the Share is then listed or quoted; or if the Share is not then
so listed or quoted, the fair market value of the Share on such date as
determined in good faith by the Board of Directors.
2.11 Grant. The word "Grant" shall mean a grant of Restricted Stock
subject to the terms and conditions of this Plan and any related Restricted
Stock Agreement.
2.12 Grantee. The word "Grantee" shall mean an Eligible Employee to whom
a Grant has been made in accordance with Article VI of this Plan.
2.13 Parent. The word "Parent" means any publicly-held corporation,
limited liability company or partnership that (a) is formed for the sole purpose
of acquiring, directly or indirectly (whether by distribution or otherwise),
substantially all of the outstanding voting stock of all classes of RPM, Inc.,
(b) is owned immediately after the acquisition described in clause (a) of this
definition by the same shareholders as were shareholders of RPM, Inc.
immediately prior to the acquisition described in clause (a) of this definition,
and (c) hereafter owns, directly or indirectly, all of the outstanding voting
stock of all classes of RPM, Inc.
2.14 Plan. The word "Plan" shall mean the RPM, Inc. 2002 Performance
Accelerated Restricted Stock Plan, as originally executed and as it may be
amended.
2.15 Plan Year. The words "Plan Year" shall mean the Company's annual
accounting period, which is presently the twelve (12) month period ending on May
31.
2.16 Restricted Stock. The words "Restricted Stock" shall mean Common
Shares which have been granted to a Grantee in accordance with, and subject to,
the terms and conditions of this Plan.
2.17 Restricted Stock Agreement. The words "Restricted Stock Agreement"
shall mean a written agreement executed by the Company and a Grantee containing
the terms and conditions of the granting of Restricted Stock to such Grantee
under this Plan.
2.18 Rule 16b-3. The term "Rule 16b-3" shall mean Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 and any successor to such rule with
the same or similar purpose.
2.19 Shareholders. The word "Shareholders" shall mean the individuals or
entities that own one or more Common Shares.
2.20 Stock Power. The words "Stock Power" shall mean a power of attorney
executed by an Eligible Employee and delivered to the Company which authorizes
the Company to transfer ownership of such Restricted Stock from the Grantee to
the Company in the event of forfeiture.
2.21 Subsidiary. The word "Subsidiary" shall mean any corporation in
which the Company owns, directly or indirectly, stock possessing at least eighty
percent (80%) or more of the total combined voting power of all classes of stock
entitled to vote or at least eighty percent (80%) of the total value of shares
of all classes of stock of such corporation as determined pursuant to Section
1563(a)(1) of the Code, but only during the period any such corporation would be
so defined.
2.22 Termination of Employment. The words "Termination of Employment"
shall mean the severance of an individual's employment relationship with the
Company or a Subsidiary for any reason whatsoever, whether voluntarily or
involuntarily, including by reason of retirement, death or disability.
F-2
ARTICLE III
ADMINISTRATION
3.1 Plan Administration. Unless otherwise specified by the Board, this
Plan shall be administered by the Committee. The Board may, in its sole
discretion, at any time and from time to time, by an official action, resolve to
administer the Plan effective as of a date specified in such action. In the
event that the Board exercises its discretion to administer the Plan, all
references to the "Committee" herein shall be deemed to be references to the
"Board."
3.2 Powers and Duties of the Committee. The Committee shall have the sole
and exclusive authority to: (i) exercise all powers granted to it under the Plan
and any Board actions; (ii) construe, interpret, and implement the Plan and any
Restricted Stock Agreements executed pursuant to Article VI; (iii) cause the
Company to enter into Restricted Stock Agreements with Eligible Employees
(including, but not limited to, the authority to determine the number of shares
of Restricted Stock awarded to each Eligible Employee, the price or prices at
which shares shall be awarded to each Eligible Employee, the time or times when
such shares may be awarded and to prescribe the form of such Restricted Stock
Agreements and the legend, if any, to be affixed to the certificates
representing such shares issued under this Plan); (iv) prescribe, amend and
rescind rules and interpretations relating to the Plan; (v) make all
determinations necessary or advisable in administering the Plan; (vi) correct
any defect, supply any omission and reconcile any inconsistency in the Plan; and
(vii) designate one or more persons or agents to carry out any or all of its
administrative duties hereunder (provided that none of the duties required to be
performed by the Committee under Rule 16b-3 or Article VI of the Plan may be
delegated to any other person).
3.3 Governance of the Committee. All actions of the Committee shall
require the affirmative vote of a majority of its members present at a meeting
at which a quorum is present (in person, telephonically, electronically, by
proxy or its equivalent or as otherwise permitted by the Company's governing
documents). The determination of the Committee on all matters relating to the
Plan or any Restricted Stock Agreement shall be conclusive.
3.4 Limitation of Liability. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any Restricted Stock Agreement.
3.5 Administrative Plan Years. The Plan shall be administered and
operated on the basis of the Plan Year. In the event that the Company changes
its annual accounting period, the Plan Year shall automatically change and the
Committee may make such adjustments to the operation of the Plan as appropriate
to reflect any short Plan Years, adjustments to the dates that shares of
Restricted Stock are awarded or that restrictions lapse hereunder or any other
adjustments that may be appropriate to reflect the change in the Plan Year.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
4.1 Eligible Employees. The Committee shall determine, from time to time
and in its sole and exclusive discretion, which officers of the Company or its
Subsidiaries shall be Eligible Employees hereunder.
4.2 Prohibition on Participation. Non-employee members of the Board of
Directors and members of the Committee shall not be eligible to participate in
the Plan.
4.3 Entry Date. An Eligible Employee designated pursuant to Section 4.1
shall be deemed to be a "Grantee" upon execution of a Restricted Stock Agreement
between such Eligible Employee and the Company in accordance with Article VI. An
Eligible Employee shall remain a "Grantee" until such time as he no longer has
any Restricted Stock subject to the terms of this Plan or any
F-3
Restricted Stock Agreement, including, but not limited to, the terms of Articles
VIII or IX which result in either the lapse of restrictions on Restricted Stock
or the forfeiture of Restricted Stock.
ARTICLE V
STOCK AVAILABLE FOR GRANTS
5.1 Available Shares. The total number of Common Shares with respect to
which Grants may be made under this Plan shall be equal to one million
(1,000,000). In the event that the number or kind of outstanding Common Shares
of the Company shall be changed by reason of recapitalization, reorganization,
redesignation, merger, consolidation, stock split, stock dividend, combination
or exchange of shares, exchange for other securities, or the like, the number
and kind of Common Shares which may thereafter be issued under this Plan may be
appropriately adjusted as determined by the Committee so as to reflect such
change. In accordance with (and without limitation upon) the foregoing, Common
Shares available under this Plan and covered by Grants which expire, terminate,
are forfeited or are canceled for any reason whatsoever shall again become
available for Grants under this Plan.
5.2 Source of Shares. The Restricted Stock which may be granted under
this Plan shall be made available from authorized and unissued or treasury
Common Shares of the Company.
ARTICLE VI
RESTRICTED STOCK AGREEMENTS
6.1 Granting of Restricted Stock. The Committee is authorized to make
Grants of Restricted Stock to Eligible Employees in such amounts, and subject to
such terms and conditions, as the Committee shall from time to time determine in
its sole discretion, subject to the terms of this Plan.
6.2 Restricted Stock Agreements. The granting of Restricted Stock to an
Eligible Employee under this Plan shall be contingent on such Eligible Employee
executing a Restricted Stock Agreement in the form prescribed by the Committee.
Each Restricted Stock Agreement shall: (i) indicate the number of shares of
Restricted Stock which will be granted to the Eligible Employee; (ii) include
provisions reflecting the transfer restrictions imposed upon Restricted Stock
under this Plan and the provisions for lapse of those restrictions under this
Plan; and (iii) include any other terms, conditions or restrictions the
Committee deems necessary or appropriate. The Committee may solicit the
recommendation of the Company's Chief Executive Officer in determining the
number of shares of Restricted Stock which shall be allocated to an Eligible
Employee.
6.3 Stock Power. The Committee shall require Eligible Employees to
execute and deliver to the Company a Stock Power in blank with respect to
Restricted Stock granted to such Eligible Employees. The Committee may, in its
sole discretion, deposit Restricted Stock certificates with an escrow agent in
accordance with Article X. Alternatively, the Company may retain possession of
the Restricted Stock certificates.
6.4 Rights of Grantees. Subject to the terms, conditions and restrictions
specified under this Plan and applicable Restricted Stock Agreements, the
Restricted Stock granted under this Plan shall be considered as issued and
outstanding and fully paid and non-assessable for all purposes. Notwithstanding
retention of Restricted Stock certificates by the Company or an escrow agent,
Grantees shall have all rights with respect to their Restricted Stock (subject
to the terms, conditions and restrictions specified under this Plan and any
applicable Restricted Stock Agreement) including:
(a) Title. Subject to the Grantee's execution of a Stock Power, any
Restricted Stock granted under this Plan shall be held by the Company or in
escrow under the Grantee's name.
(b) Voting Rights. Subject to the Grantee's execution of a Stock
Power, a Grantee shall be entitled to vote any Restricted Stock granted to
him under this Plan.
F-4
(c) Dividends. As of the date any dividend is paid on any Restricted
Shares under this Plan, the Grantee having title to such Restricted Stock
shall be credited with a dividend equivalent credit under the Deferred
Compensation Plan in such manner, and in such amount, as is provided in the
Deferred Compensation Plan for dividends paid on Restricted Shares
thereunder.
ARTICLE VII
STOCK RESTRICTIONS
7.1 Transfer Restrictions. Restricted Stock shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated (and any such sale, transfer or other disposition, pledge or other
hypothecation being hereinafter referred to as "to dispose of" or a
"disposition") until the earliest of: (i) a Change in Control (as described in
Sections 9.3 & 9.4); (ii) a Grantee experiencing a Termination of Employment due
to death or total disability (as described in Section 9.2); (iii) the
restrictions on such Restricted Stock lapse in accordance with Article VIII; or
(iv) termination of the Plan.
7.2 Other Restrictions. The Committee may impose restrictions on
Restricted Stock in addition to, or different from, those described in this
Plan, as it deems necessary or appropriate. Grants are not required to be made
with the same terms, conditions or restrictions. Grants may vary from time to
time and from Grantee to Grantee.
ARTICLE VIII
LAPSE OF RESTRICTIONS
8.1 Lapse of Restrictions After Ten Years of Continuous Employment. If a
Grantee remains in Continuous Employment from June 1, 2002 until May 31, 2012,
subject to all of the other provisions of this Plan, all restrictions imposed
upon Restricted Stock awarded to him pursuant to this Plan shall lapse and be of
no further force and effect. In the event of Termination of Employment prior to
May 31, 2012, the status of the restrictions imposed upon such Grantee's
Restricted Stock upon Termination of Employment shall be governed by Article IX.
8.2 Performance Accelerated Lapse of Restrictions. All restrictions on
the Restricted Stock granted pursuant to this Plan, whether contained in this
Plan or a Restricted Stock Agreement, shall lapse upon attainment of all
Performance Goals during any Plan Year beginning prior to June 1, 2011, as
determined in accordance with Section 8.3. The term "Performance Goals" shall
mean such financial or other goals as determined by the Committee and set forth
in a Restricted Stock Agreement.
8.3 Determination of Achievement of Performance Goals. Notwithstanding
anything contained in this Plan to the contrary, the Committee shall have sole
and exclusive authority to determine whether Performance Goals have been
satisfied. The Committee may, in its sole and exclusive discretion, adjust any
criteria or measure used to determine satisfaction of Performance Goals for any
Plan Year, solely for purposes of this Plan, to account for the effect of
acquisitions, divestitures, substantial asset sales, the payment of debt, the
classification of normal operating expenses as "unusual charges" for accounting
purposes, the use of non-standard accounting methodologies, changes in
accounting principles, or other extraordinary or non-recurring events. In making
any such adjustment, the Committee may rely upon the opinion of outside service
providers to the extent it deems necessary or appropriate.
8.4 Delivery of Restricted Stock Upon Lapse of Restrictions. As promptly
as practicable following a determination by the Committee that Performance Goals
have been satisfied, the Committee shall cause certificates for all Restricted
Stock, which certificates have been in the
F-5
physical custody of the Company or an escrow agent, to be issued to the
appropriate Grantees, with any legend making reference to the various
restrictions imposed hereunder removed.
ARTICLE IX
TERMINATION OF EMPLOYMENT
9.1 Termination of Employment for Reasons Other Than Change of Control,
Death or Disability. Except as otherwise provided in Sections 9.2 through 9.4,
in the event a Grantee experiences a Termination of Employment, any Restricted
Stock granted hereunder which is not unrestricted upon Termination of Employment
shall be forfeited and returned to the Company pursuant to a Stock Power.
9.2 Termination of Employment Due to Death or Disability. Notwithstanding
Section 9.1 to the contrary, in the event a Grantee experiences a Termination of
Employment by reason of death or total disability (as defined under the
Company's group long-term disability plan), any Restricted Stock granted
hereunder shall be deemed to be unrestricted, meaning that all restrictions
imposed on such Restricted Stock shall lapse and be of no further force and
effect. The Committee has the authority to determine whether a Grantee is
totally disabled.
9.3 Termination of Employment Due to Change in Control. Notwithstanding
Section 9.1 to the contrary, in the event of a Change in Control as described in
Sections 9.3 and 9.4, any Restricted Stock granted hereunder shall be deemed to
be unrestricted, meaning that all restrictions imposed on such Restricted Stock
shall lapse and be of no further force and effect. The Committee has the
authority to determine whether a Change in Control has occurred.
9.4 Definition of "Change in Control". A "Change in Control" shall be
deemed to have occurred upon the occurrence of any of the following events:
(a) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person or entity (other than Parent or
any Subsidiary of Parent), and as a result of such merger, consolidation or
reorganization less than a majority of the combined voting power of the
then-outstanding securities of such corporation, person or entity
immediately after such transaction are held in the aggregate by the holders
of the then-outstanding securities entitled to vote generally in the
election of Directors (the "Voting Stock") immediately prior to such
transaction;
(b) The Company sells or otherwise transfers all or substantially all
of its assets to any other corporation or other legal person or entity
(other than Parent or any Subsidiary of Parent), and less than a majority
of the combined voting power of the then-outstanding securities of such
corporation, person or entity immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock immediately prior to
such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule TO (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act but excluding Parent and
any Subsidiary of Parent) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing
15% or more of the total votes relating to the then-outstanding securities
entitled to vote generally in the election of Directors (the "Voting
Power");
(d) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-
F-6
existing contract or transaction (excluding any change in control in favor
of Parent or any Subsidiary of Parent);
(e) During any period of two consecutive years, individuals, who at
the beginning of any such period, constitute the Directors cease for any
reason to constitute at least a majority thereof, unless the nomination for
election by the Company's Shareholders of each new Director was approved by
a vote of at least two-thirds of the Directors then in office who were
Directors at the beginning of any such period; or
(f) Such event as the Board of Directors, in the good faith exercise
of its discretion, shall determine to be a "Change in Control."
Notwithstanding the foregoing provisions of paragraphs (c) and (d) of this
definition, a "Change in Control" shall not be deemed to have occurred for
purposes of this Plan (i) solely because (A) the Company, (B) a Subsidiary of
the Company, or (C) any Company-sponsored employee stock ownership plan or other
employee benefit plan of the Company or any Subsidiary, or any entity holding
shares of Voting Stock for or pursuant to the terms of any such plan, either
files or becomes obligated to file a report or proxy statement under or in
response to Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the Exchange Act,
disclosing beneficial ownership by it of shares of Voting Stock or because the
Company reports that a change in control of the Company has or may have occurred
or will or may occur in the future by reason of such beneficial ownership, (ii)
solely because any other person or entity either files or becomes obligated to
file a report on Schedule 13D or Schedule TO (or any successor schedule, form or
report) under the Exchange Act, disclosing beneficial ownership by it of shares
of Voting Stock, but only if both (A) the transaction giving rise to such filing
or obligation is approved in advance of consummation thereof by the Company's
Board of Directors and (B) at least a majority of the Voting Power immediately
after such transaction is held in the aggregate by the holders of Voting Stock
immediately prior to such transaction, or (iii) solely because of a change in
control of any Subsidiary of the Company.
9.5 Delivery of Restricted Stock. As promptly as practicable following
the occurrence of any of the events described in Sections 9.2 through 9.4, the
Committee shall cause certificates for all Restricted Stock which has become
unrestricted as a result of such events, which certificates have been in the
physical custody of the Company or an escrow agent, to be issued to the
appropriate Grantees, with any legend making reference to the various
restrictions imposed hereunder removed. In the event of a Grantee's Termination
of Employment by reason of death, certificates shall be delivered to the
Grantee's Beneficiary, determined in accordance with Article XI.
ARTICLE X
ESCROW AGREEMENT AND LEGENDS
10.1 Escrow Agreements. In order to enforce the restrictions imposed upon
Restricted Stock issued hereunder, the Committee may require any Grantee to
enter into an escrow agreement providing that the certificates representing
Restricted Stock issued pursuant to this Plan shall remain in the physical
custody of an escrow agent until any or all of the restrictions imposed upon
such Restricted Stock pursuant to this Plan have terminated. The Committee may
impose such additional restrictions on any Restricted Stock awarded pursuant to
the Plan as it may deem necessary or appropriate including, without limitation,
restrictions under the Securities Act of 1933, as amended, or other securities
the requirements of Nasdaq, the New York Stock Exchange or any other stock
exchange or transaction reporting system upon which such Restricted Stock is
then listed or quoted and any state blue sky laws applicable to such Restricted
Stock.
10.2 Legends. The Committee may cause a legend or legends to be placed on
any certificates representing Restricted Stock issued pursuant to this Plan,
which legend or legends shall
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make appropriate reference to the various restrictions imposed hereunder and any
other limitations or restrictions deemed necessary or advisable by the
Committee.
ARTICLE XI
BENEFICIARY DESIGNATION
11.1 Procedures for Beneficiary Designation. A Grantee may designate a
Beneficiary or Beneficiaries to receive Restricted Stock that becomes payable on
account of the Grantee's death, in such manner as the Committee may require.
11.2 Default Beneficiaries. If a Grantee has not designated a Beneficiary
or Beneficiaries in accordance with Section 11.1, any shares of Restricted Stock
that become unrestricted on account of the death of the Grantee shall be
distributed to the person or persons in the first of the following classes in
which there are any survivors of such Grantee, which person or persons shall be
deemed to have been designated a Beneficiary or Beneficiaries by the Grantee:
(a) his spouse at the time of death;
(b) his issue per stirpes;
(c) his parents; and
(d) the executor or administrator of his estate.
ARTICLE XII
AMENDMENTS
12.1 Plan May Be Amended. Subject to Section 12.2, this Plan may be
amended at any time by the Board of Directors.
12.2 Limitations on Plan Amendment. If this Plan shall have been approved
by the Shareholders of the Company, no amendment shall increase the maximum
number of Common Shares that may be issued pursuant to this Plan, except
pursuant to Section 5.1, without the further approval of such Shareholders. No
amendment to this Plan shall materially modify or impair the rights of Eligible
Employees who have been granted Restricted Stock, or who have the right to a
grant of Restricted Stock hereunder prior to any such amendment without such
Eligible Employees' prior written consent.
ARTICLE XIII
EFFECTIVE DATE AND TERMINATION
13.1 Effective Date. This Plan became effective upon its adoption by the
Board of Directors for the Plan Year beginning June 1, 2002.
13.2 Plan May Be Terminated. This Plan may be terminated at any time by
the Board of Directors.
13.3 Termination. This Plan shall terminate on the earliest of:
(a) May 31, 2012;
(b) such other date indicated in a resolution of the Board of
Directors; or
(c) anytime within twelve (12) months of the date of the Plan's
adoption by the Board of Directors, if the Plan does not receive the
approval of a majority of the outstanding Common Shares present (in person,
telephonically, electronically, by proxy or its equivalent or as otherwise
permitted by the Company's governing documents) and entitled to vote at a
meeting of Shareholders of the Company.
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In the event the Plan is terminated pursuant to Section 13.2(c), all Grants of
Restricted Stock under the Plan shall be revoked and the Company and its
Subsidiaries shall not be liable for any such Grants under this Plan,
notwithstanding any other provision in the Plan to the contrary.
ARTICLE XIV
COORDINATION WITH DEFERRED COMPENSATION PLAN
14.1. Credit to Deferred Compensation Plan Determined by Committee. In
the event that an Eligible Employee receives a Grant of Restricted Stock, has
not made an election under Section 83(b) of the Code and will be in receipt of
an amount of compensation in excess of the amount that may be deducted under
Section 162(m) of the Code upon lapse of the restrictions, the Committee shall
have the right and authority to cancel such number of shares of Restricted Stock
as is necessary so that the compensation amount attributable to the remaining
Restricted Stock that will become unrestricted on or before the next immediate
May 31 will be deductible by the Company after taking into account Section
162(m) of the Code, and the Eligible Employee shall automatically have the same
number of shares of Restricted Stock credited to his Restricted Stock Account
under the Deferred Compensation Plan. The Committee may determine to make such a
cancellation at any time, but not later than ten (10) days prior to the date the
restrictions for such Restricted Stock lapse. The Eligible Employee shall be
notified in writing of any such cancellation and shall be subject to such
further requirements as determined by the Committee in its sole discretion.
14.2. Credit to Deferred Compensation Plan Determined by Grantee. In the
event that an Eligible Employee receives a Grant of Restricted Stock, has not
made an election under Section 83(b) of the Code and will be in receipt of an
amount of compensation upon lapse of such restrictions, the Grantee may elect to
surrender, as of a date specified in his election, any of the Restricted Stock
awarded under this Plan and the Grantee shall automatically have the same number
of shares of Restricted Stock credited to his Restricted Stock Account under the
Deferred Compensation Plan. For an election to be valid, it must be made in
accordance with the terms and conditions imposed by the Committee and the
requirements of the Deferred Compensation Plan. The surrender election with
respect to the Restricted Stock must be delivered to and accepted by the
Committee at least six (6) months prior to the date all restrictions with
respect to the Restricted Stock lapse.
14.3 Vesting of Canceled or Surrendered Restricted Stock. An employee
shall be vested in shares of Restricted Stock or amounts credited to his Account
Balance under the Deferred Compensation Plan as a result of cancellation or
surrender of Restricted Stock under this Plan when restrictions on the cancelled
or surrendered Restricted Stock would have lapsed under this Plan.
ARTICLE XV
MISCELLANEOUS
15.1 Consents. If the Committee shall at any time determine that any
Consent (as defined below) is necessary or desirable as a condition to, or in
connection with, any Grant under the Plan, the issuance of Common Shares or
other rights thereunder or the taking of any other action thereunder (each such
action being hereinafter referred to as a "Plan Action"), then such Plan Action
shall not be taken, in whole or in part, unless and until such Consent shall
have been effected or obtained to the full satisfaction of the Committee, or the
Committee may require that such Plan Action be taken only in such manner as to
make such Consent unnecessary.
The term "Consent" as used herein with respect to any Plan Action means (i)
any and all listings, registrations or qualifications in respect thereof upon
any securities exchange or under any federal, state or local law, rule or
regulation, (ii) any and all written agreements and representations by the
Grantee with respect to the acquisition or disposition of Common Shares, or with
respect to
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any other matter, which the Committee shall deem necessary or desirable to
comply with the terms of any such listing, registration or qualification or to
obtain an exemption from the requirement that any such listing, qualification or
registration be made and (iii) any and all consents, clearances and approvals by
any governmental or other regulatory bodies.
15.2 Right of Discharge Reserved. Nothing in the Plan or in any
Restricted Stock Agreement shall be construed to confer upon any Eligible
Employee the right to continue in the employment or service of the Company or
any Subsidiary, or to be employed or serve in any particular position therewith,
or affect any right which the Company or any Subsidiary may have to terminate
the employment or service of such Eligible Employee.
15.3 Nature of Grants.
(a) Any and all Grants and issuances of Restricted Stock hereunder
shall be in consideration of services performed for the Company or for a
Subsidiary by the Grantee.
(b) All Grants hereunder shall constitute a special incentive to the
Grantee and shall not be taken into account in computing the amount of
salary or compensation of the Grantee for purposes of determining any
pension, retirement, death or other benefits under (i) any pension,
retirement, profit-sharing, bonus, life insurance or other benefit plan of
the Company or any Subsidiary or (ii) any agreement between the Company or
any Subsidiary, on the one hand, and the Grantee, on the other hand, except
as such plan or agreement shall otherwise expressly provide.
15.4 Non-Uniform Determinations and Restricted Stock Agreements. The
Company's, Board's or Committee's determinations under the Plan need not be
uniform and may be made selectively among Eligible Employees who receive, or are
eligible to receive, Grants under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Company, Board and Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Restricted Stock Agreements as to (i) the persons to receive Grants
under the Plan, and (ii) the terms, conditions and restrictions of Grants under
the Plan.
15.5 Other Payments or Awards. Nothing contained in the Plan shall be
deemed to in any way limit or restrict the Company, any Subsidiary, the Board or
the Committee from making any award or payment to any person under any other
plan, arrangement or understanding, whether now existing or hereafter in effect.
15.6 Section Headings. The section headings contained herein are for
purposes of convenience only and are not intended to define or limit the
contents of said sections.
15.7 Number. The singular herein shall include the plural, or vice versa,
wherever the context so requires.
15.8 Gender. A pronoun in the masculine, feminine, or neuter gender shall
be deemed, where appropriate, to include also the masculine, feminine or neuter
gender.
15.9 Withholding. The Company may withhold, or require a Grantee to remit
to the Company, an amount sufficient to satisfy any applicable federal, state or
local withholding tax requirement.
15.10 Waiver. No waiver of any term or provision of this Plan by the
Company, any Subsidiary, Board or Committee will constitute a waiver of the same
term or provision in any subsequent case.
15.11 Governing Law. This Plan shall be governed by, construed and
enforced in accordance with the internal laws of the State of Ohio, without
reference to principles of conflict of laws.
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RPM, INC.
ANNUAL MEETING OF SHAREHOLDERS - OCTOBER 11, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints THOMAS C. SULLIVAN, JAMES A. KARMAN and
FRANK C. SULLIVAN, and each of them, as Proxy holders and attorneys, with full
power of substitution, to appear and vote all of the Common Shares of RPM, Inc.,
which the undersigned shall be entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at Severance Hall, located on the
northeast corner of Euclid Avenue and East Boulevard in Cleveland's University
Circle area, on Friday, October 11, 2002 at 2:00 P.M. Eastern Time, and at any
adjournment or postponement thereof, hereby revoking any and all proxies
heretofore given and (ii) authorizes and directs said Proxy holders to vote all
of the Common Shares of the Company represented by this Proxy as follows, WITH
THE UNDERSTANDING THAT IF NO DIRECTIONS ARE GIVEN ON THE REVERSE SIDE, SAID
COMMON SHARES WILL BE VOTED "FOR" THE ELECTION OF THE FOUR DIRECTORS NOMINATED
BY THE BOARD OF DIRECTORS, "FOR" THE APPROVAL AND ADOPTION OF THE
REINCORPORATION OF THE COMPANY FROM OHIO TO DELAWARE PURSUANT TO THE MERGER
AGREEMENT, "FOR" THE APPROVAL AND ADOPTION OF THE PROPOSAL TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 TO 300,000,000 AND
TO ADD A CLASS OF SERIAL PREFERRED STOCK IN THE AMOUNT OF 50,000,000 SHARES,
SUBJECT TO THE APPROVAL OF THE REINCORPORATION PROPOSAL, AND "FOR" THE APPROVAL
AND ADOPTION OF THE RPM, INC. 2002 PERFORMANCE ACCELERATED RESTRICTED STOCK
PLAN.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE. THE PROXIES CANNOT VOTE YOUR COMMON SHARES UNLESS YOU
SIGN AND RETURN THIS CARD.
ELECTRONIC ACCESS TO FUTURE DOCUMENTS AVAILABLE
-----------------------------------------------
In the future, the Company expects to provide its Proxy Statements and
Annual Reports over the Internet. If you give your consent to receive these
documents via the Internet, we will advise you when these documents become
available. Once you give your consent, it will remain in effect until you notify
the Company by mail that you wish to resume mail delivery of the Proxy
Statements and Annual Reports. Even if you give your consent, you will have the
right to request copies of these documents at any time by mail. You will be
responsible for costs associated with Internet usage, such as telephone charges
and access fees. To give your consent, please check the appropriate box located
at the bottom of the reverse side of this card.
The RPM Board of Directors recommends that you vote FOR the following proposals.
FOR WITHHOLD FOR ALL
1. ELECTION OF DIRECTORS ALL ALL EXCEPT:
(01) Dr. Max D. Amstutz
(02) E. Bradley Jones [ ] [ ] [ ]
(03) Albert B. Ratner
(04) Dr. Jerry Sue Thornton
To withhold authority to vote,
mark "For All Except" and write the
nominee's number on the line below.
------------------------------------
FOR AGAINST ABSTAIN
2. APPROVE AND ADOPT THE REINCORPORATION [ ] [ ] [ ]
OF THE COMPANY FROM OHIO TO DELAWARE
PURSUANT TO THE MERGER AGREEMENT
FOR AGAINST ABSTAIN
3. SUBJECT TO THE APPROVAL OF PROPOSAL #2,
APPROVE AND ADOPT AN INCREASE IN THE [ ] [ ] [ ]
NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 200,000,000 TO 300,000,000
AND THE ADDITION OF A CLASS OF SERIAL
PREFERRED STOCK IN THE AMOUNT OF
50,000,000 SHARES
FOR AGAINST ABSTAIN
4. APPROVE AND ADOPT THE RPM, INC. 2002
PERFORMANCE ACCELERATED RESTRICTED [ ] [ ] [ ]
STOCK PLAN
In their discretion, to act on any other matter or matters which may properly
come before the meeting.
CHANGE OF ADDRESS [ ] Will Attend Annual [ ]
(mark box and revise Meeting
pre-printed address
as necessary).
CONSENT TO ELECTRONIC DELIVERY
By checking the box to the right, I consent to receive Proxy
Statements and Annual Reports electronically via the
internet instead of in the mail. The Company will not
distribute printed materials to me for future shareholder [ ]
meetings unless I request them or revoke my consent, and
will notify me when and where its Proxy Statements and
Annual Reports are available on the internet.
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, or guardian, please
give full title as such.
Date:__________________________________________________, 2002
_____________________________________________________________
Signature(s)
_____________________________________________________________
Signature(s)
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
PROXY PROXY
DIRECTION CARD
RPM, INC. 401(k) TRUST AND PLAN
TO: KEY TRUST COMPANY OF OHIO, N.A. TRUSTEE
The undersigned hereby directs Key Trust Company of Ohio, N.A., RPM, Inc. 401(k)
Trust and Plan Trustee to vote Common Shares held for the undersigned's 401(k)
Plan account at the Annual Meeting of Shareholders of the Company to be held at
Severance Hall, located on the northeast corner of Euclid Avenue and East
Boulevard in Cleveland's University Circle area, on Friday, October 11, 2002 at
2:00 P.M. Eastern Time, and at any adjournment or postponement thereof, as
specified, WITH THE UNDERSTANDING THAT IF A SIGNED DIRECTION CARD IS RETURNED
WITH NO DIRECTIONS GIVEN ON REVERSE SIDE, SAID SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE FOUR DIRECTORS (LISTED BELOW) NOMINATED BY THE BOARD OF
DIRECTORS, "FOR" THE APPROVAL AND ADOPTION OF THE REINCORPORATION OF THE COMPANY
FROM OHIO TO DELAWARE PURSUANT TO THE MERGER AGREEMENT, "FOR" THE APPROVAL AND
ADOPTION OF THE PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 200,000,000 TO 300,000,000 AND TO ADD A CLASS OF SERIAL PREFERRED
STOCK IN THE AMOUNT OF 50,000,000 SHARES, SUBJECT TO THE APPROVAL OF THE
REINCORPORATION PROPOSAL, AND "FOR" THE APPROVAL AND ADOPTION OF THE RPM, INC.
2002 PERFORMANCE ACCELERATED RESTRICTED STOCK PLAN AND TO VOTE IN ACCORDANCE
WITH ITS DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Election of Directors, Nominees:
Dr. Max D. Amstutz
E. Bradley Jones
Albert B. Ratner
Dr. Jerry Sue Thornton
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE.
THE RPM BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING PROPOSALS.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT:
1. Election of Directors (see reverse)
[ ] [ ] [ ]
For, except vote withheld from
the following nominee(s):
________________________________
________________________________
FOR AGAINST ABSTAIN
2. Approve and adopt the reincorporation
of the Company from Ohio to Delaware [ ] [ ] [ ]
pursuant to the Merger Agreement
FOR AGAINST ABSTAIN
3. Subject to the approval of proposal
#2, approve and adopt an increase in [ ] [ ] [ ]
the number of authorized shares of
common stock from 200,000,000 to
300,000,000 and the addition of a
class of serial preferred stock in
the amount of 50,000,000 shares
FOR AGAINST ABSTAIN
4. Approve and adopt the RPM, Inc. 2002
Performance Accelerated Restricted [ ] [ ] [ ]
Stock Plan
5. In their discretion, to act on any
other matter or matters which may
properly come before the meeting.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
Date:____________________________________________________________, 2002
_______________________________________________________________________
Signature(s)
_______________________________________________________________________
Signature(s)
Note: Your signature to this Direction Card form should be exactly the same as
the name imprinted hereon. Persons signing as executors, administrators,
trustees, or in similar capacities should so indicate.
IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
AND HOUSEHOLDING ELECTION
August 29, 2002
In December 2000, the Securities and Exchange Commission enacted a new rule
that permits multiple shareholders residing at the same address the convenience
of receiving a single copy of proxy information statements, annual reports and
prospectuses if they consent to do so. This is referred to as "Householding."
The Company is committed to increasing the efficiency and reducing the cost
associated with the annual solicitation of proxies for its Annual Meeting and
other shareholder communications. This year, we are introducing the option of
receiving shareholder communications via the Internet and intend to adopt
Householding of Proxy Statements, Annual Reports and Prospectuses. Please note
that if you do not respond, Householding will begin 60 days after the mailing of
this Proxy Statement.
Under Householding, the Company will send just one Proxy Statement, Annual
Report, or other shareholder communication materials to shareholders that have
the same household. Each account, however, will continue to receive its own
separate proxy card. Householding will eliminate duplication of materials sent
to shareholders with the same address.
In reviewing our records, we have identified your account as one of the
multiple accounts having the same household mailing address. We are requesting
your participation in our program to mail only one copy of various corporate
communications to your household. Participation requires no action on your part;
however, IF YOU DO NOT WISH TO PARTICIPATE IN THIS PROGRAM SIMPLY RETURN THE
CARD BY OCTOBER 28, 2002, and you will continue to receive separate shareholder
mailings. We have included a postage-paid return envelope for your convenience,
which may be used for the return of the proxy card and the card attached to this
letter. If this card is not received by October 28, 2002, you will automatically
be entered into the Householding program.
Your participation will remain in full effect until consent is revoked by
you. It may be revoked by notifying us by calling toll free at 1-800-988-5238.
Separate mailings will occur within 30 days of your notice to the Company to
stop participation in Householding.
Sincerely,
P. Kelly Tompkins,
Secretary
DETACH HERE
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I do not wish to participate in the Householding program. [ ]
Signature(s):
________________________________________
________________________________________