1
EXHIBIT 10(a)
THE SHERWIN-WILLIAMS COMPANY
1994 STOCK PLAN
(AMENDED AND RESTATED APRIL 23, 1997)
The Sherwin-Williams Company 1994 Stock Plan (the "Plan") is amended
and restated effective as of April 23, 1997. The Plan was established effective
as of 12:00:01 a.m. on February 16, 1994. The purpose of the Plan is to attract
and retain key executive, managerial, technical and professional personnel for
The Sherwin-Williams Company and its subsidiaries by providing incentives and
rewards for superior performance by such personnel.
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings unless the context clearly indicates otherwise:
1.01 Appreciation Right. A right to receive from the Company, upon
surrender of the related stock option, an amount equal to the Spread in
accordance with Article IV.
1.02 Board of Directors. The Board of Directors of the Company.
1.03 Code. The Internal Revenue Code of 1986, as the same has been or
may be amended from time-to-time.
1.04 Committee. The Compensation and Management Development Committee
of the Board of Directors or such other committee composed of not less than
three (3) non-employee directors appointed by the Board of Directors.
1.05 Common Stock. Common Stock of the Company or any security into
which such Common Stock may be changed by reason of any transaction or event of
the type described in Article VIII.
1.06 Company. The Sherwin-Williams Company, or its corporate successor
or successors.
1.07 Date of Grant. The date specified by the Board of Directors on
which a grant of Option Rights or Appreciation Rights or a grant or sale of
Restricted Stock shall become effective (which date shall not be earlier than
the date on which the Board of Directors takes action with respect thereto).
1
2
1.08 Eligible Employees. Persons who are selected by the Board of
Directors and who are, at the time such persons are selected, officers
(including officers who are members of the Board of Directors) or other key
employees of the Company or any of its subsidiaries.
1.09 Fair Market Value. The average between the highest and the lowest
quoted selling price of the Company's Common Stock on the New York Stock
Exchange or any successor exchange.
1.10 ISO. An "incentive stock option" within the meaning of section 422
of the Code.
1.11 Option Right. The right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Article III.
1.12 Participant. An Eligible Employee named in an agreement evidencing
an outstanding Option Right, Appreciation Right, sale or grant of Restricted
Stock or stock option granted under any stock option plan heretofore or
hereafter approved by the shareholders of the Company.
1.13 Plan. The Sherwin-Williams Company 1994 Stock Plan, as the same
may be amended from time-to-time.
1.14 Restricted Stock. Shares of Common Stock granted or sold pursuant
to Article V as to which neither the substantial risk of forfeiture nor the
prohibition or restriction on transfer referenced to therein has lapsed,
terminated or been cancelled.
1.15 Section 16. Section 16 of the Securities Exchange Act of 1934, as
the same has been and may be amended from time-to-time.
1.16 Spread. The excess of the Fair Market Value per share of Common
Stock on the date when an Appreciation Right is exercised over the option price
provided for in the related stock option.
1.17 Subsidiary. Any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Option Right, Appreciation Right or the grant or sale of
Restricted Stock, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
1.18 Tax Date. The date upon which the tax is first determinable.
2
3
ARTICLE II
COMMON STOCK AVAILABLE
2.01 Number of Shares. The shares of Common Stock which may be (a) sold
upon the exercise of Option Rights, (b) delivered upon the exercise of
Appreciation Rights, or (c) awarded or sold as Restricted Stock and released
from substantial risks of forfeiture thereof shall not exceed in the aggregate
14,000,000 shares plus the number of shares of Common Stock previously
authorized pursuant to the Plan which are available as of the date hereof, all
subject to adjustment as provided in Articles VII and VIII. Such shares may be
shares of original issuance or treasury shares or a combination of the
foregoing.
2.02 Reuse of Shares. If an Option Right or portion thereof shall
expire or terminate for any reason without having been exercised in full, or if
the rights of a Participant in Restricted Stock shall terminate prior to the
lapse of the substantial risk of forfeiture relating thereto, the shares covered
by such Option Right or Restricted Stock grant not transferred to the
Participant shall be available for future grants of Option Rights and/or
Restricted Stock.
ARTICLE III
OPTION RIGHTS
3.01 Authorization and Terms. The Board of Directors may, from
time-to-time and upon such terms and conditions as it may determine, consistent
with the terms of the Plan, authorize the granting of options to Eligible
Employees to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations and shall be subject to all of the applicable
limitations set forth in the Plan, including the following:
(A) Each grant shall specify the number of shares of Common
Stock to which it pertains;
(B) Each grant shall specify an option price per share equal
to the Fair Market Value per share on the Date of Grant, and that such
option price shall be payable in full at the time of exercise of the
option either (i) in cash, (ii) by exchanging for the shares to be
issued hereunder pursuant to the exercise of the option previously
acquired shares of the Company's Common Stock held for such period of
time, if any, as the Board of Directors may require and reflect in the
stock option certificate (valued at an amount equal to the Fair Market
Value of such stock on the date of exercise), or (iii) by a combination
of the payment methods specified in clauses (i) and (ii) hereof. The
proceeds of sale of Common Stock subject to Option Rights are to be
added to the general funds of the Company or to the shares of the
Common Stock held in treasury and used for the Company's corporate
purposes as the Board of Directors shall determine;
3
4
(C) Successive grants may be made to the same Eligible
Employee whether or not any Option Rights previously granted to such
Eligible Employee remain unexercised;
(D) Each grant shall specify the period or periods of
continuous employment by the Participant with the Company or any
Subsidiary which is necessary before the Option Rights or installments
thereof will become exercisable;
(E) The Option Rights may be either (i) options which are
intended to qualify under particular provisions of the Code, as in
effect from time-to-time, including, but not limited to, ISOs, (ii)
options which are not intended to so qualify or (iii) any combination
of separate grants of both (i) and (ii) above;
(F) The aggregate Fair Market Value of the stock (determined
as of the time the option with respect to such stock is granted) for
which any Eligible Employee may be granted options which are intended
to qualify as ISOs and which are exercisable for the first time by such
Participants during any calendar year (under all plans of the Company
and its parent and Subsidiary corporations, if any) shall not exceed
$100,000;
(G) No Option Right shall be exercisable more than ten years
from the Date of Grant;
(H) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer and delivered
to and accepted by the Eligible Employee and containing such terms and
provisions, consistent with the Plan, as the Board of Directors may
approve; and
(I) The maximum number of shares for which Option Rights may
be granted to any Eligible Employee during any calendar year shall not
exceed 1,000,000.
ARTICLE IV
APPRECIATION RIGHTS
4.01 Generally. The Board of Directors may from time-to-time grant
Appreciation Rights in respect of any or all stock options heretofore or
hereafter granted (including stock options simultaneously granted) pursuant to
any stock option plan or employment agreement of the Company now or hereafter in
effect, whether or not such stock options are at such time exercisable, to the
extent that such stock options at such time have not been exercised and have not
been terminated. The Board of Directors may define the terms and provisions of
such Appreciation Rights, subject to the limitations and provisions of the Plan.
The amount which may be due the Participant at the time of the exercise of an
Appreciation Right may be paid by the Company in whole shares of Common Stock
(taken at their fair market value at the time of exercise), in cash or a
combination thereof, as the Board of Directors shall determine.
4
5
4.02 Exercise of Appreciation Rights. An Appreciation Right may be
exercised at any time when the related stock option may be exercised by the
surrender to the Company, unexercised, of the related stock option. Shares
covered by stock options so surrendered shall not be available for the granting
of further stock options under any stock option plan of the Company or a
Subsidiary, anything in such plan to the contrary notwithstanding.
4.03 Limitation on Payments. The amount payable on the exercise of any
Appreciation Rights may not exceed 100% (or such lesser percentage as the Board
of Directors may determine) of the excess of (i) the Fair Market Value of the
shares of Common Stock covered by the related option as determined on the date
such Appreciation Right is exercised over (ii) the aggregate option price
provided for in the related stock option.
4.04 Termination of Appreciation Right. An Appreciation Right shall
terminate and may no longer be exercised upon the earlier of (i) exercise or
termination of the related stock option or (ii) any termination date specified
by the Board of Directors at the time of grant of such Appreciation Right.
4.05 Limitation on Number of Appreciation Rights. The maximum number of
shares for which Appreciation Rights may be granted to any Eligible Employee
during any calendar year shall not exceed 1,000,000.
ARTICLE V
RESTRICTED STOCK
5.01 Authorization and Terms. The Board of Directors may, from
time-to-time and upon such terms and conditions as it may determine, authorize
the granting or sale to Eligible Employees of Restricted Stock. Each grant or
sale may utilize any or all of the authorizations and shall be subject to all of
the following limitations:
(A) Each such grant or sale shall constitute an immediate
transfer of the ownership of shares of Common Stock to the Participant
in consideration of the performance of services and shall entitle such
Participant to voting, dividend and other ownership rights, as the
Board of Directors may determine, subject, however, to a substantial
risk of forfeiture and restrictions on transfer as the Board of
Directors may determine;
(B) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that
is less than the Fair Market Value per share at the Date of Grant;
(C) Each such grant or sale shall provide that the shares of
Restricted Stock covered by such grant or sale are subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of
the Code and the regulations thereunder;
5
6
(D) Each such grant or sale shall provide that during the
period for which the substantial risk of forfeiture is to continue, the
transferability of the Restricted Stock shall be prohibited or
restricted in the manner and to the extent prescribed by the Board of
Directors at the Date of Grant; and
(E) Each grant or sale of Restricted Stock shall be evidenced
by an agreement executed on behalf of the Company by an officer and
delivered to and accepted by the Participant and shall contain such
terms and provisions, consistent with the Plan, as the Board of
Directors may approve.
(F) Each grant or sale shall be subject to a vesting
requirement. The percentage of the number of shares of Restricted Stock
granted to any Participant that such Participant shall be entitled to
receive without restriction shall be based upon a comparison of the
average return on average equity of the Company and a group of other
companies. The number of shares of Restricted Stock which a Participant
shall be entitled to receive without restriction shall be determined in
accordance with the following table:
Average Return on
Average Equity Percentile Ranking
of the Company Compared Percentage of
to Group of Other Companies Shares Vesting
--------------------------- --------------
80th to 100th Percentile ................................................. 100%
75th to 80th Percentile .................................................. 90%
70th to 75th Percentile .................................................. 80%
65th to 70th Percentile .................................................. 70%
60th to 65th Percentile .................................................. 60%
55th to 60th Percentile .................................................. 50%
50th to 55th Percentile .................................................. 40%
Less than 50th Percentile ................................................ 0%
The maximum number of shares of Restricted Stock that may be
granted to any Eligible Employee during any calendar year shall not
exceed 1,000,000.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.01 Generally. The Plan shall be administered by the Board of
Directors, which may from time-to-time delegate all or any part of its authority
under the Plan to a Committee. The members of the Committee shall not be
eligible and shall not have been eligible for a period of at least one year
prior to their appointment, to participate in the Plan. A majority of the Board
of Directors or the Committee, if applicable, shall constitute a quorum, and the
action of the members present at any meeting at which a quorum is present, or
acts unanimously approved in
6
7
writing, shall be the acts of the Board of Directors or the Committee, as
applicable. No Restricted Stock, Option Right or Appreciation Right shall be
granted or sold under the Plan to any member of the Committee so long as his
membership continues.
6.02 Interpretation and Construction. The interpretation and
construction by the Board of Directors of any provision of the Plan or of any
agreement, notification or document evidencing the grant of Restricted Stock,
Option Rights or Appreciation Rights and any determination by the Board of
Directors pursuant to any provision of the Plan or of any such agreement,
notification or document, made in good faith, shall be final and conclusive. No
member of the Board of Directors shall be liable for any such action or
determination made in good faith.
ARTICLE VII
AMENDMENT AND TERMINATION
7.01 Amendment of the Plan. The Plan may be amended from time-to-time
by the Board of Directors without further approval by the shareholders of the
Company unless such amendment (i) increases the maximum number of shares
specified in Article II (except that adjustments authorized by Section 8.02
shall not be limited by this provision), (ii) changes the definition of
"Eligible Employees" or (iii) causes Rule 16b-3 issued under the Securities
Exchange Act of 1934 (or any successor rule to the same effect) to cease to be
applicable to the Plan.
7.02 Amendment of the Agreements. The Board of Directors may cancel or
amend any agreement evidencing Restricted Stock, Option Rights or Appreciation
Rights granted under the Plan provided that the terms and conditions of each
such agreement as amended are not inconsistent with the Plan and provided
further that, except as provided in Section 8.02, the option price per share may
not be increased or decreased following the Date of Grant of the Related Option
Right.
7.03 Automatic Termination. The Plan will terminate at midnight on
February 16, 2003; provided, however, that Option Rights and Appreciation Rights
granted on or before that date may extend beyond that date and restrictions
imposed on Restricted Stock transferred on or before that date may extend beyond
such date.
ARTICLE VIII
MISCELLANEOUS
8.01 Transferability. No Option Right or Appreciation Right shall be
transferable by a Participant other than by will or the laws of descent and
distribution. Option Rights and Appreciation Rights shall be exercisable during
the Participant's lifetime only by the Participant. No right or interest of any
Participant granted under the Plan shall be subject to alienation, anticipation,
encumbrance, garnishment, attachment, any lien, obligation or liability of such
7
8
Participant, or execution or levy of any kind, voluntary or involuntary, except
as provided herein or required by law.
8.02 Adjustments. The Board of Directors may make or provide for such
adjustments in the exercise price, sale price and the number or kind of shares
of the Company's Common Stock or other securities covered by outstanding Option
Rights, Appreciation Rights or Restricted Stock grants as such Board of
Directors in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants that would otherwise result from (i) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, (ii) any merger, consolidation, separation,
reorganization or partial or complete liquidation, or (iii) any other corporate
transaction or event having an effect similar to any of the foregoing. The Board
of Directors may also make or provide for such adjustments in the number or kind
or shares of the Company's Common Stock or other securities which may be sold or
transferred under the Plan and in the maximum number of shares that may be
purchased or received by any person, as such Board of Directors in its sole
discretion, exercised in good faith, may determine is appropriate to reflect any
event of the type described in clauses (i) and/or (ii) of the preceding
sentence.
8.03 Fractional Shares. The Company shall not be required to sell or
transfer any fractional share of Common Stock pursuant to the Plan. The Board of
Directors may provide for the elimination of fractions or for the settlement of
fractions in cash.
8.04 Withholding Taxes. The Company shall have the right to deduct from
any transfer of shares or other payment under this Plan an amount equal to the
Federal, state and local income taxes and employment taxes required to be
withheld by it with respect to such transfer and payment and, if the cash
portion of any such payment is less than the amount of taxes required to be
withheld, to require the Participant or other person receiving such transfer or
payment, to pay to the Company the balance of such taxes so required to be
withheld. Notwithstanding the foregoing, when a Participant is required to pay
to the Company an amount required to be withheld under applicable income and
employment tax laws, the Participant may elect to satisfy the obligation, in
whole or in part, by electing to have withheld, from the shares required to be
delivered to the Participant, shares of Common Stock having a value equal to the
amount required to be withheld (except in the case of Restricted Stock where an
election under Section 83(b) of the Code has been made), or by delivering to the
Company other shares of Common Stock held by such Participant. The shares used
for tax withholding settlement will be valued at an amount equal to the Fair
Market Value of such Common Stock on the Tax Date. Election by a Participant to
have shares withheld or to deliver other shares of Common Stock for this purpose
will be subject to the following restrictions: (i) such election must be made
prior to the Tax Date, (ii) such election will be irrevocable, and (iii) such
election will be subject to the disapproval of the Board of Directors.
8.05 Not an Employment Contract. This Plan shall not confer upon any
Eligible Employee or Participant any right with respect to continuance of
employment with the Company
8
9
or any Subsidiary, nor shall it interfere in any way with any right such
Eligible Employee, Participant, the Company or any Subsidiary would otherwise
have to terminate such Participant or Eligible Employee's employment at any
time.
8.06 Invalidity of Provisions. Should any part of the Plan for any
reason be declared by any court of competent jurisdiction to be invalid, such
decision shall not affect the validity of any remaining portion, which remaining
portion shall continue in full force and effect as if the Plan had been adopted
with the invalid portion hereof eliminated, it being the intention of the
Company that it would have adopted the remaining portion of the Plan without
including any such part, parts or portion which may for any reason be hereafter
declared invalid.
8.07 Effective Date. The Plan became effective at 12:00:01 a.m. on
February 16, 1994 following its approval at the April 28, 1993 Annual Meeting of
Shareholders of the Company by the affirmative vote of the holders of a majority
of the shares of Common Stock present, in person or by proxy, and entitled to
vote thereat. The Plan shall be deemed to have been adopted on the date of such
meeting.
9