-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SeMxgxvntivR3v28u1UkqNBPN+yeVlqs+JV6oD0FOOswv09tva2zUAXTsQ/pcQRB xvZ7WN4rZV+DDVrgJY/3YQ== 0000950152-03-008012.txt : 20030829 0000950152-03-008012.hdr.sgml : 20030829 20030829165112 ACCESSION NUMBER: 0000950152-03-008012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20030531 FILED AS OF DATE: 20030829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RPM INTERNATIONAL INC/DE/ CENTRAL INDEX KEY: 0000110621 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 020642224 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14187 FILM NUMBER: 03874624 BUSINESS ADDRESS: STREET 1: 2628 PEARL RD STREET 2: P O BOX 777 CITY: MEDINA STATE: OH ZIP: 44258 BUSINESS PHONE: 3302735090 MAIL ADDRESS: STREET 1: 2628 PEARL RD STREET 2: P O BOX 777 CITY: MEDINA STATE: OH ZIP: 44258 FORMER COMPANY: FORMER CONFORMED NAME: RPM INTERNATIONAL INC/OH/ DATE OF NAME CHANGE: 20021015 FORMER COMPANY: FORMER CONFORMED NAME: RPM INC/OH/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: REPUBLIC POWDERED METALS INC DATE OF NAME CHANGE: 19711027 10-K 1 l02719ae10vk.txt RPM INTERNATIONAL INC. | FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the fiscal year ended May 31, 2003 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from __________ to ___________ Commission File No. 1-14187 RPM INTERNATIONAL INC. (Exact Name of Registrant as Specified in its Charter) Delaware 02-0642224 - ------------------------------- ---------------------------- (State or Other Jurisdiction of (IRS Employer Identification Incorporation or Organization) No.) P.O. Box 777, 2628 Pearl Road, Medina, Ohio 44258 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (330) 273-5090 Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered - ------------------- ------------------------------------- Common Stock, par value $0.01 New York Stock Exchange Rights to Purchase Shares of Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ] As of August 15, 2003, 115,592,050 shares of Common Stock were outstanding, and the aggregate market value of the Common Stock of the Registrant held by non-affiliates (based upon the closing price of the Common Shares as reported on the New York Stock Exchange on August 15, 2003) was approximately $1,546,398,140. For purposes of this information, the 1,466,726 outstanding shares of Common Stock which were owned beneficially as of May 31, 2003 by executive officers and Directors of the Registrant were deemed to be the shares of Common Stock held by affiliates. Documents Incorporated by Reference Portions of the following documents are incorporated by reference to Parts II, III and IV of this Annual Report on Form 10-K: (i) definitive Proxy Statement to be used in connection with the Registrant's Annual Meeting of Stockholders to be held on October 10, 2003 (the "2003 Proxy Statement") and (ii) the Registrant's 2003 Annual Report to Stockholders for the fiscal year ended May 31, 2003 (the "2003 Annual Report to Stockholders"). Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of May 31, 2003. 2 PART I ITEM 1. BUSINESS. THE COMPANY RPM International Inc. ("RPM" or the "Company") is the successor to the reporting obligations of RPM, Inc., an Ohio corporation, following a statutory merger effective as of 9:00 a.m. (Eastern Time), October 15, 2002, for the purpose of changing RPM, Inc.'s state of incorporation to Delaware. RPM, Inc. was organized in 1947 as an Ohio corporation under the name Republic Powdered Metals, Inc., and, on November 9, 1971, its name was changed to RPM, Inc. The October 2002 reincorporation occurred by merging RPM Merger Sub, a newly formed Ohio corporation and wholly owned subsidiary of RPM International Inc., a newly formed Delaware corporation, with and into RPM, Inc. Each outstanding common share of RPM, Inc. was converted into the right to receive one share of Common Stock of RPM International Inc., with the result that RPM, Inc. became a wholly owned subsidiary of RPM International Inc. In connection with the reincorporation, RPM International Inc. realigned its various operating companies according to their product offerings, served end markets, customer base and operating philosophy. Those operating companies that tend to be entrepreneurial and serve niche markets continue to be owned by RPM, Inc. Operating companies that primarily serve the consumer markets were transferred to RPM Consumer Holding Company, which is wholly owned by RPM International Inc. Ownership of operating companies that primarily serve the industrial markets was transferred to another wholly owned subsidiary of RPM International Inc., RPM Industrial Holding Company. As a result of the reincorporation, RPM International Inc. became the successor issuer to RPM, Inc. under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and succeeded to RPM, Inc.'s reporting obligations thereunder. As used herein, the terms "RPM" and the "Company" refer to RPM International Inc. and its subsidiaries, unless the context indicates otherwise. The Company has its principal executive offices at 2628 Pearl Road, P.O. Box 777, Medina, Ohio 44258, and its telephone number is (330) 273-5090. RECENT DEVELOPMENTS On May 13, 2003, the Company sold approximately $247.5 million in aggregate principal amount at maturity of 2.75 percent senior convertible notes due 2033 to qualified institutional buyers, resulting in approximately $122.5 million gross proceeds to RPM. On May 23, 2003, the Company sold an additional approximately $49.5 million aggregate principal amount at maturity of the senior convertible notes due 2033 (resulting in approximately $24.5 million additional gross proceeds to RPM) to cover the over-allotment option granted by the Company to the initial purchasers in the offering. The offering was made only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Company used the entire net proceeds of the offering to repay existing indebtedness under its $500 million revolving credit facility. 3 Also in May 2003, the Company established a $200 million commercial paper program, under which borrowings are unsecured for terms of 270 days or less. This program currently allows for lower interest cost than that available under the Company's $500 million revolving credit facility. As of May 31, 2003, $51.7 million was outstanding under the commercial paper program, the proceeds of which were used to reduce the outstanding balance of the Company's $500 million revolving credit facility. As previously reported, the insurance available to the Company's Bondex International, Inc. subsidiary for the payment of the indemnity and defense costs associated with its asbestos litigation will be depleted early in the fiscal year ending May 31, 2004. Bondex retained a consulting firm to analyze Bondex's loss history data in order to (i) evaluate whether it would be possible to estimate the cost of disposing of pending claims in light of both past and recent loss history and (ii) assist in determining whether future asbestos-related claims reasonably expected to be filed against Bondex were measurable, given recent applicable changes in state law. In conjunction with its outside consulting firm, the Company concluded that it was not possible to currently estimate the full range of the cost of resolving future asbestos-related claims against Bondex because of various uncertainties associated with those potential future claims and, as a result, Bondex was not able to estimate the liability that may result from all future claims. Subsequently, Bondex increased its reserve to account for the estimated value of its known asbestos claims, as well as to provide for foreseeable future claims which can be reasonably estimated, and took a pre-tax charge of $140 million ($88 million on an after-tax basis) to establish such reserve. BUSINESS RPM manufactures and markets high quality specialty paints, protective coatings and roofing systems, sealants and adhesives, focusing on the maintenance and improvement needs of both the industrial and consumer markets. The Company's family of products includes those marketed under brand names such as CARBOLINE, DAP, DAY-GLO, FLECTO, RUST-OLEUM, STONHARD, TREMCO and ZINSSER. As of May 31, 2003, RPM marketed its products in approximately 130 countries and territories and operated manufacturing facilities in 67 locations in the United States, Argentina, Belgium, Brazil, Canada, China, Colombia, Germany, Italy, Mexico, New Zealand, The Netherlands, Poland, South Africa, the United Arab Emirates and the United Kingdom. Approximately 23% of the Company's sales are generated in international markets through a combination of exports and direct sales by affiliates in foreign countries. For the fiscal year ended May 31, 2003, the Company recorded sales of $2.083 billion. AVAILABLE INFORMATION The Company's Internet website address is www.rpminc.com. The Company makes available free of charge on or through its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. OPERATING SEGMENT INFORMATION The Company has determined that it has two operating segments: industrial and consumer, based on the nature of its business activities, products and services, the structure of 4 management and the structure of information as presented to the Board of Directors. Within each segment, individual operating companies or groups of companies generally address common markets, utilize similar technologies and are able to share manufacturing or distribution capabilities. The industrial segment constitutes approximately 54% of sales and includes maintenance and protection products for roofing and waterproofing systems, flooring, corrosion control and other specialty applications. The consumer segment constitutes approximately 46% of sales and includes rust-preventative, special purpose and decorative paints, caulks, sealants, primers and other branded consumer products. Reference is made to "Segment and Geographic Area Information" on pages 16 and 17 of the Annual Report to Stockholders, incorporated herein by reference, for financial information relating to operating segments. INDUSTRIAL SEGMENT Industrial segment products are sold throughout North America and account for most of the Company's sales in Europe, South America, Asia, South Africa, Australia and the Middle East. The Company's industrial businesses, which account for the vast majority of its international sales, sell directly to distributors, contractors and end-users, such as industrial manufacturing facilities, educational and governmental institutions and commercial establishments. The industrial segment generated $1.118 billion in sales for the fiscal year ended May 31, 2003 and is comprised of the following major product lines: - institutional roofing systems and sealants used in building protection, maintenance and weatherproofing applications marketed under the Company's TREMCO, REPUBLIC, VULKEM and DYMERIC brand names. Recently introduced products include sealants marketed under the DYMERIC 240FC and DYMONIC FC brand names; - high-performance polymer flooring systems for industrial, institutional and commercial facility floor surfaces marketed under the STONHARD brand name. Recently introduced products include flooring systems marketed under the STONBLEND RTZ and STONBLEND ETZ brand names. The Company also manufactures and supplies molded and pultruded fiberglass reinforced plastic gratings used for industrial platforms, staircases and walkways marketed under the FIBERGRATE brand name; - high-performance, heavy-duty corrosion control coatings and a supplier of structural and fireproofing protection products and secondary containment linings for a wide variety of industrial infrastructure applications marketed under the CARBOLINE, NULLIFIRE and PLASITE brand names; - exterior insulating finishing systems, including textured finish coats, sealers and variegated aggregate finishes marketed under the DRYVIT brand name; and - a variety of products for specialized applications, including powder coatings for exterior and interior applications marketed under the TCI brand name, fluorescent colorants and pigments marketed under the DAY-GLO brand name, concrete and masonry additives marketed under the 5 EUCO brand name, commercial carpet and floor cleaning solutions marketed under the CHEMSPEC brand name, specialty processing chemicals for the carpet and textile industries marked under the AMERICAN EMULSIONS brand name, wood and lumber treatments marketed under the KOP-COAT brand name, and pleasure marine coatings marketed under the PETTIT, WOOLSEY and Z-SPAR brand names. CONSUMER SEGMENT The consumer segment manufactures professional use and do-it-yourself ("DIY") products for home maintenance and improvement, automotive and boat repair and maintenance, and hobby and leisure applications. The consumer segment's major manufacturing and distribution operations are located in North America. Consumer segment products are sold throughout north America to mass merchandisers, home centers, hardware stores, paint stores, automotive supply stores and craft shops. The consumer segment generated $0.966 billion in sales in the fiscal year ended May 31, 2003 and is comprised of the following major product lines: - small project rust-preventative, decorative and assorted specialty paints and coatings for the DIY and professional markets through a wide assortment of RUST-OLEUM brand products. In addition to the original line of rust-preventative coatings sold under the STOPS RUST brand name, leading brands within the RUST-OLEUM portfolio include AMERICAN ACCENTS, PAINTER'S TOUCH, TREMCLAD, HARD HAT, FLECTO, VARATHANE and WATCO. Recently introduced brands within the RUST-OLEUM portfolio include SPECIALTY PLASTIC PRIMER, EPOXY SHIELD, ROAD WARRIOR, INDUSTRIAL CHOICE MARKING AEROSOL and AUTOMOTIVE STOPS RUST; - a complete line of caulks and sealants, patch and repair products and adhesives for the home improvement, repair and construction markets through a wide assortment of DAP brand products. Leading brands within the DAP portfolio include ALEX PLUS, KWIK SEAL PLUS with MICROBAN, SIDE WINDER ADVANCED SIDING and WINDOW SEALANT, WELDWOOD, `33' GLAZING and PLASTIC WOOD. Recently introduced products include caulks and related products marketed under the DRYDEX, EASY SOLUTIONS and CRACKSHOT brand names; - a broad line of specialty primers and sealers marketed under the ZINSSER, B-I-N, BULLS EYE 1-2-3, COVER-STAIN and SEALCOAT UNIVERSAL brand names, as well as wallcovering removal and preparation coatings under the principal brands of DIF, PAPERTIGER and SHIELDZ. Recently introduced products include specialty primers marketed under the BULLS EYE WATERBASE and BULLS EYE OIL BASE brand names and wallcovering preparation products marketed under the ZINSSER PLUS MILDEWPROOF COMMERCIAL WALLCOVERING SYSTEM and PREPZ brand names; and 6 - an assortment of other products, including autobody paints and repair products marketed under the BONDO brand name, hobby paints and cements marketed under the TESTORS brand name, wood furniture finishes and touch-up products marketed under the CCI, MOHAWK, CHEMICAL COATINGS and WESTFIELD COATINGS brand names, deck and fence restoration products marketed under the WOLMAN brand name and shellac-based chemicals for industrial uses, edible glazes and food coatings by MANTROSE-HAEUSER under the NATURE SEAL brand name. HISTORICAL RESTRUCTURING ACTIVITY The Company actively pursues initiatives to enhance profitability by lowering its operating costs through focused corporate leadership and broad operating company support. In August 1999, the Company launched a comprehensive restructuring program aimed at permanently reducing its fixed costs by more than $23 million. The major features of the restructuring program included: (i) the closure of 17 facilities to eliminate redundancies in manufacturing, administration and distribution, (ii) a reduction of approximately 10% of the Company's work force and (iii) the consolidation of certain consumer product line distribution and warehousing activities to reduce costs and improve working capital efficiencies. This restructuring program was completed by May 31, 2001, and when combined with additional workforce reductions in response to slower economic conditions during the 2002 fiscal year, is believed by the Company to be generating savings in excess of management's initial objectives. FOREIGN OPERATIONS The Company's foreign manufacturing operations for the fiscal year ended May 31, 2003 accounted for approximately 19% of its total sales (which does not include exports directly from the United States), although it also receives license fees and royalty income from numerous license agreements and also has joint ventures accounted for under the equity method in various foreign countries. The Company has manufacturing facilities in Argentina, Belgium, Brazil, Canada, China, Colombia, Germany, Italy, Mexico, New Zealand, The Netherlands, Poland, South Africa, the United Arab Emirates and the United Kingdom, and sales offices or public warehouse facilities in Australia, Canada, Finland, France, Germany, Hong Kong, Iberia, Mexico, the Philippines, Singapore, Sweden, the United Kingdom and several other countries. Information concerning the Company's foreign operations is set forth in Management's Discussion and Analysis of Results of Operations and Financial Condition, which appears in the Annual Report to Stockholders, incorporated herein by reference. COMPETITION The Company is engaged in highly competitive industries and, with respect to all of its major products, faces competition from local, regional and national firms. The industries are fragmented, and the Company does not face competition from any one company in particular. However, several of the Company's competitors have greater financial resources and sales organizations than the Company. While third-party figures are not necessarily available with respect to the size of the Company's position in the market for each of its products, the Company believes that it is a major producer of roofing systems, aluminum coatings, cement-based paints, hobby paints, pleasure marine coatings, furniture finishing repair products, automotive repair products, industrial corrosion control products, consumer rust-preventative coatings, polymer 7 flooring, fluorescent coatings and pigments, exterior insulation finish systems, molded and pultruded fiberglass reinforced plastic grating and shellac-based coatings. However, the Company does not believe that it has a significant share of the total protective coatings market. The following is a summary of the competition faced by the Company in various markets. Paints, Coatings, Adhesives and Sealants Industry In the market for paints, coatings, adhesives and sealants, the top ten producers account for approximately one-third of the global market. In addition to the Company, leading suppliers tend to focus on coatings while other companies focus on adhesives and sealants. This industry has experienced significant consolidation over the past several decades, however, the market remains fragmented, which creates further consolidation opportunities. Barriers to market entry are relatively high due to the lengthy interval between product development and market acceptance, the importance of brand identity, and the difficulty in establishing a reputation as a reliable supplier in this sector. Like the Company, most of the suppliers in this industry have a portfolio of products that span across the various markets. Consumer Home Improvement. Within the consumer segment, the Company generally serves the home improvement market with products designed for niche architectural, rust-preventative, decorative, special purpose, caulking and sealing applications. Products sold by the Company in this market include, but are not limited to, those sold under the RUST-OLEUM, DAP, ZINSSER and BONDO brand names. Leading manufacturers of home improvement-related coatings, adhesives and sealants market their products to DIY users, professional contractors, industrial contractors, and industrial end-users through a wide range of distribution channels including home improvement centers, mass merchandisers, hardware stores, paint stores and industrial distributors. Competitors in this market generally compete for market share by marketing and building upon brand recognition, providing customer service and developing new products based on customer needs. Special Purpose-- Industrial Maintenance Protective Coatings. Anti-corrosion protective coatings must withstand the destructive elements of nature and other operating processes under harsh environments and conditions. Some of the larger consumers of high-performance protective and corrosion control coatings are the oil and gas, pulp and paper, petrochemical, shipbuilding and public utility industries. In the public sector, corrosion control coatings are used on structures such as bridges and in water and wastewater treatment plants. These markets are highly fragmented. The Company and its competitors gain market share in this industry by supplying a variety of high quality products and offering customized solutions. The Company sells products marketed primarily under the CARBOLINE, PLASITE, and TCI brand names to this market. Roofing Systems Industry In the roofing industry, reroofing applications account for three-quarters of U.S. demand, with the remaining quarter made up by the new roofing segment. The largest manufacturers focus primarily on residential roofing as well as single-ply systems for low-end commercial and institutional applications, competing mainly on price and minimally on service. In contrast, the Company competes primarily in the higher-end, multi-ply and modified bitumen segments of the built-up and low-slope roofing industry. This niche within the larger market tends to exhibit less commodity-market characteristics, with customers valuing the greater protection and longer life provided by these roofing systems, as well as ongoing maintenance, inspection and 8 technical services. Typical customers demanding higher-performance roofing systems include governmental facilities, universities, hospitals and certain manufacturing facilities. The Company markets to this industry primarily under its TREMCO line of products. Construction Chemicals Industry Flooring Systems. Polymer flooring systems are used in industrial, commercial and, to a lesser extent, residential applications to provide a smooth, seamless surface that is impervious to penetration by water and other substances. Polymer flooring systems are based primarily on epoxy resins, although urethane products have experienced significant growth in recent years. Most flooring is applied during new construction, but there is also a significant repair and renovation market. Key performance attributes in polymer flooring systems that distinguish competitors include static control, chemical resistance, contamination control, durability and aesthetics. The Company primarily markets under the STONHARD and FIBERGRATE brand names in this industry. This market is also fragmented. Sealants, Concrete and Masonry Products. Sealants used in a variety of construction applications include urethane and silicone-based products designed for sealing windows and commercial buildings, waterproofing, fireproofing and concrete sealing, among others. In the concrete and masonry additives market, a variety of chemicals can be added to cement, concrete, asphalt and other masonry to improve the processability, performance, or appearance of these products. Chemical cement admixtures are typically grouped according to functional characteristics, such as water-reducers, set controllers, superplasticizers and air-entraining agents. Key attributes that differentiate competitors in these markets include quality assurance, on-the-job consultation and the provision of value-added engineered products. The Company primarily offers products marketed under the EUCO, REPUBLIC, VULKEM, DYMERIC, TUFF-N-DRI and WATCHDOG WATERPROOFING brand names in this industry. INTELLECTUAL PROPERTY The intellectual property portfolios of the subsidiaries of the Company include numerous valuable patents, trade secrets and know-how, domain names, trademarks and trade names. Significant research and technology development continues to be conducted by the subsidiaries. However, no single patent, trademark, name or license, or group of these rights, other than the marks DAY-GLO(R), RUST-OLEUM(R), CARBOLINE(R), DAP(R) and TREMCO(R), are material to the Company's business. Day-Glo Color Corp., a subsidiary of the Company, is the owner of more than 50 trademark registrations of the mark "DAY-GLO(R)" in numerous countries and the United States for a variety of fluorescent products. There are also many other foreign and domestic registrations for other trademarks of the Day-Glo Color Corp., for a total of more than 100 registrations. These registrations are valid for a variety of terms ranging from one year to 20 years, which terms are renewable as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis. Rust-Oleum Brand Company, a subsidiary of the Company, is the owner of more than 50 United States trademark registrations for the mark "RUST-OLEUM(R)" and other trademarks covering a variety of rust-preventative coatings sold by Rust-Oleum Corporation. There are also many foreign registrations for "RUST-OLEUM(R)" and the other trademarks used on products sold by Rust-Oleum Corporation, for a total of nearly 400 registrations. These registrations are valid for 9 a variety of terms ranging from one year to 20 years, which terms are renewable for as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis. Carboline Company, a subsidiary of the Company, is the owner of a United States trademark registration for the mark "CARBOLINE(R)." Carboline Company is also the owner of several other United States registrations for other trademarks. These registrations are maintained and renewed on a regular basis. DAP Brands Company, a subsidiary of the Company, is the owner of more than 150 United States and foreign trademark applications and registrations which include the mark "DAP(R)." DAP Products Inc. is also the owner of many other United States and foreign registrations for other trademarks, including "PUTTY KNIFE(R)." These registrations are maintained and renewed on a regular basis. Tremco Incorporated, a subsidiary of the Company, is the owner of more than 100 registrations for the mark and name "TREMCO(R)" in numerous countries and the United States for a variety of sealants and coating products. There are also many other foreign and domestic registrations for other trademarks of Tremco Incorporated, for a total of more than 800 registrations and applications. The registrations are valid for a variety of terms ranging from one year to 20 years, which terms are renewable as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis. The Company's other principal product trademarks include: ALUMANATION(R), AVALON(R), B-I-N(R), BITUMASTIC(R), BONDO(R), BULLS EYE 1-2-3(R), DRYVIT(R), DYMERIC(R), DYNALITE(R), DYNATRON(R), EASY FINISH(R), FLECTO(R), EPOXSTEEL(R), FIBERGRATE(R), FLOQUIL(R), GEOFLEX(R), MAR-HYDE(R), MOHAWK and DESIGN(R), OUTSULATION(R), PARASEAL(R), PERMAROOF(R), PETTIT(TM), PLASITE(R), SANITILE(R), STONCLAD(R), STONHARD(R), STONLUX(R), TCI(R), TESTORS(R), ULTRALITE(TM), VARATHANE(R), VULKEM(R), WOOLSEY(R), ZINSSER(R) and Z-SPAR(R); and, in Europe, NULLIFIRE(R), RADGLO(R) and MARTIN MATHYS(R). RAW MATERIALS The Company does not have any single source suppliers of raw materials that are material to its business, and the Company believes that alternate sources of supply of raw materials are available to the Company for most of its raw materials. Where shortages of raw materials have occurred, the Company has been able to reformulate products to use more readily available raw materials. Although the Company has been able to reformulate products to use more readily available raw materials in the past, the Company cannot guaranty that it will have the ability to do so in the future. SEASONAL FACTORS The Company's business is dependent on external weather factors. The Company historically experiences strong sales and net income in its first, second and fourth fiscal quarters comprised of the three month periods ending August 31, November 30 and May 31, respectively, with weaker performance in its third fiscal quarter (December through February). 10 CUSTOMERS Eight large consumer segment accounts, such as DIY home centers, represented approximately 23% of the Company's total sales for the fiscal year ended May 31, 2003. Sales to The Home Depot represented 12% of the Company's total sales for the last fiscal year. Except for sales to these customers, the Company's business is not dependent upon any one customer or small group of customers but is rather dispersed over a substantial number of customers. BACKLOG The Company historically has not had a significant backlog of orders, nor was there a significant backlog during the last fiscal year. RESEARCH The Company's research and development work is performed in various laboratory locations throughout the United States. During fiscal years 2003, 2002 and 2001, the Company invested approximately $23.8 million, $20.9 million and $21.8 million, respectively, on research and development activities. In addition to this laboratory work, the Company views its field technical service as being integral to the success of its research activities. The research and development activities and the field technical service costs are both included as part of selling, general and administrative expenses. ENVIRONMENTAL MATTERS The Company is subject to numerous foreign, federal, state and local environmental protection and health and safety laws and regulations governing, among other things: - the sale, export, generation, storage, handling, use and transportation of hazardous materials; - the emission and discharge of hazardous materials into the soil, water and air; and - the health and safety of the Company's employees. The Company is also required to obtain permits from governmental authorities for certain operations. The Company cannot guarantee that it has been or will be at all times in complete compliance with such laws, regulations and permits. If the Company violates or fails to comply with these laws, regulations or permits, it could be fined or otherwise sanctioned by regulators. Certain environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. Persons who arrange for the disposal or treatment of hazardous substances also may be responsible for the cost of removal or remediation of these substances, even if such persons never owned or operated any disposal or treatment facility. Certain of the Company's subsidiaries are involved in various environmental claims, proceedings and/or remedial activities relating to facilities currently or previously owned, operated or used by these subsidiaries, or their predecessors. In addition, the Company or its subsidiaries, together with other parties, have been designated as 11 potentially responsible parties, or PRPs, under federal and state environmental laws for the remediation of hazardous waste at certain disposal sites. In addition to clean-up actions brought by federal, state and local agencies, plaintiffs could raise personal injury, natural resource damage or other private claims due to the presence of hazardous substances on a property. Environmental laws often impose liability even if the owner or operator did not know of, or was not responsible for, the release of hazardous substances. The Company has in the past, and will in the future, incur costs to comply with environmental laws. Environmental laws and regulations are complex, change frequently and have tended to become stringent over time. In addition, costs may vary depending on the particular facts and development of new information. As a result, the Company's operating expenses and continuing capital expenditures may increase. More stringent standards may also limit its operating flexibility. In addition, to the extent hazardous materials exist on or under real property, the value and future use of that real property may be adversely affected. Because the Company's competitors will have similar restrictions, the Company's management believes that compliance with more stringent environmental laws and regulations is not likely to affect the Company's competitive position. However, a significant increase in these costs could adversely affect the Company's business, results of operations, financial condition or cash flows. For information regarding environmental accruals, see Note H (Contingencies and Loss Reserves) of the Notes to Consolidated Financial Statements which appear in the Annual Report to Stockholders, incorporated herein by reference. EMPLOYEES As of May 31, 2003, the Company employed 7,685 persons, of whom 627 were represented by unions under contracts which expire at varying times in the future. The Company believes that its relations with its employees are good. ITEM 2. PROPERTIES. The Company's corporate headquarters and a plant and offices for one subsidiary are located on an 119-acre site in Medina, Ohio, which is owned by the Company. As of May 31, 2003, the Company's operations occupied a total of approximately 7.6 million square feet, with the majority, approximately 6.0 million square feet, devoted to manufacturing, assembly and storage. Of the approximately 7.3 million square feet occupied, 5.2 million square feet are owned and 2.1 million square feet are occupied under operating leases. In addition, approximately 0.3 million owned square feet is associated with property intended to be sold or sublet in conjunction with the Company's restructuring program. Set forth below is a description, as of May 31, 2003, of the Company's principal manufacturing facilities which management believes are material to the Company's operations: 12
APPROXIMATE SQUARE FEET BUSINESS/ OF LOCATION SEGMENT FLOOR SPACE LEASED OR OWNED -------- ------- ----------- --------------- Pleasant Rust-Oleum 303,200 Owned Prairie, (Consumer) Wisconsin Toronto, Tremco 207,200 Owned Ontario, (Industrial) Canada Cleveland, Ohio Euclid 173,000 Owned Chemical (Industrial) Cleveland, Ohio Tremco 160,300 Owned (Industrial) Cleveland, Ohio Day-Glo 147,200 Owned (Industrial) Baltimore, DAP 144,200 Owned Maryland (Consumer) Tipp City, Ohio DAP 140,000 Owned (Consumer) Lake Charles, Carboline 114,300 Owned Louisiana (Industrial) LaSage, West Zinsser 112,000 Owned Virginia (Consumer) Somerset, New Zinsser 110,000 Owned Jersey (Consumer) Maple Shade, Stonhard 77,500 Owned New Jersey (Industrial)
The Company leases certain of its properties under long-term leases. Some of the leases provide for increased rent based on an increase in the cost-of-living index. For information concerning the Company's rental obligations, see Note E (Leases) of Notes to Consolidated Financial Statements which appear in the Annual Report to Stockholders, incorporated herein by reference. Under all of its leases, the Company is obligated to pay certain varying insurance costs, utilities, real property taxes and other costs and expenses. The Company believes that its manufacturing plants and office facilities are well maintained and suitable for the operations of the Company. 13 ITEM 3. LEGAL PROCEEDINGS. EIFS LITIGATION As previously reported, Dryvit is a defendant or co-defendant in numerous exterior insulated finish systems ("EIFS") related lawsuits. As of May 31, 2003, Dryvit was a defendant or co-defendant in approximately 500 single family residential EIFS cases, the majority of which are pending in the Southeastern region of the U.S. Dryvit is also defending EIFS lawsuits involving commercial structures, townhouses and condominiums. The vast majority of Dryvit's EIFS lawsuits seek monetary relief for water intrusion related property damages, although some claims in certain lawsuits allege personal injuries from exposure to mold. As previously reported, Dryvit settled the North Carolina class action styled Ruff, et al. v. Parex, Inc., et al. ("Ruff"). As of August 4, 2003, a cumulative total of 726 claims had been submitted to the Ruff claims administrator for verification and validation since the January 17, 2000 notice to the Ruff class. Of these 726 claims, 154 claims were rejected and 363 claims were paid in the aggregate amount of approximately $5.4 million pursuant to funding arrangements with Dryvit's insurers. The claim period for filing claims in the Ruff class action expired on January 17, 2003. The remaining submitted claims are at various stages of investigation, review and validation by the Ruff claims administrator. Based on the funding commitments in place to cover the Ruff claims, Dryvit does not expect the costs of resolving the residual claims to be material. As previously reported, Dryvit is a defendant in an attempted state class action filed on November 14, 2000 in Jefferson County, Tennessee styled Bobby R. Posey, et al. v. Dryvit Systems, Inc. (formerly styled William J. Humphrey, et al. v. Dryvit Systems, Inc.) (Case No. 17,715-IV) ("Posey"). As previously reported, a preliminary approval order was entered on April 8, 2002 in the Posey case for a proposed nationwide class action settlement covering, "All Persons who, as of June 5, 2002, in any State other than North Carolina, in whole or in part, with Dryvit EIFS installed after January 1, 1989, except persons who (1) prior to June 5, 2002, have settled with Dryvit, providing a release of claims relating to Dryvit EIFS; or (2) have not obtained a judgment against Settling Defendant for a Dryvit EIFS claim, or had a judgment entered against them on such a claim in Settling Defendants' favor; and (3) any employees of Dryvit." Nationwide notice to all eligible class members began on or about June 13, 2002. Any person who wished to be excluded from the Posey settlement was provided an opportunity to individually "opt out" and thus not be bound by the final Posey order. A fairness hearing was held on October 1, 2002 (which continued on December 16, 2002), for the court to determine whether the proposed settlement is fair, reasonable and adequate. An order and judgment granting final approval of the settlement was entered on January 14, 2003. Subsequent to the Final Order, two class members filed motions to amend or alter the Final Order. These motions were denied by the Posey trial court on March 7, 2003. By virtue of the filing of these motions, the time period for filing any notices of appeal was extended until April 8, 2003. Several notices of appeal have been filed by class members and/or persons seeking to intervene many of whom Dryvit believes have no standing to complain about the settlement. Dryvit intends to vigorously challenge any appeals and expects that the Final Order will be upheld. 14 Dryvit's insurers have paid or are currently paying a portion of Dryvit's defense costs in the class actions, and individual commercial and residential EIFS lawsuits. Dryvit, the Company's wholly-owned captive insurer, First Colonial Insurance Company, and certain of Dryvit's umbrella insurers have been parties to cost-sharing agreements the terms of which are subject to periodic renegotiation. Under the current cost-sharing agreements and funding obtained from one of Dryvit's historical carriers, Dryvit's insurers have covered a substantial portion of Dryvit's indemnity and defense costs and Dryvit expects that its future EIFS litigation costs will continue to be substantially covered by insurance; however, Dryvit will be assuming a greater share of the costs in certain types of cases depending on the applicable date of construction. Dryvit has secured sufficient funding commitments to cover a substantial portion of the anticipated costs of the Posey settlement. Since Dryvit does not presently have sufficient claims experience under the proposed Posey settlement, it is possible that the rate of actual claims may, at some point in the future, exceed management's current expectations. In addition, based on consultation with counsel, management believes that to the extent some of the Posey settlement costs are not covered by existing funding commitments, such amounts will not have a material adverse effect on the Company's consolidated financial condition, results of operations or cash flows. ASBESTOS LITIGATION As previously reported, certain of the Company's wholly-owned subsidiaries, principally Bondex International, Inc. (collectively referred to as "the Subsidiaries"), are defendants in various asbestos-related bodily injury lawsuits filed in various state courts with the vast majority of current claims pending in four states - Illinois, Ohio, Mississippi and Texas. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposures to asbestos-containing products previously manufactured by one of the Company's Subsidiaries. The Company's Subsidiaries vigorously defend these asbestos-related lawsuits and in many cases, the plaintiffs are unable to demonstrate that any injuries they have incurred, in fact, resulted from exposure to one of our Subsidiaries' products. In such cases, the Subsidiary is generally dismissed without payment. With respect to those cases where compensable disease, exposure and causation are established with respect to one of our Subsidiaries' products, the Subsidiary generally settles for amounts that reflect the confirmed disease, the particular jurisdiction, applicable law, the number and solvency of other parties in the case and various other factors which may influence the settlement value each party assigns to a particular case at the time. As of May 31, 2003, the Company had a total of 2,002 active asbestos cases compared to a total of 1,784 cases as of May 31, 2002. For the fiscal year ended May 31, 2003, the Company's dismissals and/or settlements covered 1,846 cases for a total of $5.44 million, net of insurer payments and defense costs. For the comparable period ended May 31, 2002, the Company's dismissals and/or settlements covered 396 cases for a total of $2.49 million, net of insurer payments and defense costs. For the fourth quarter ended May 31, 2003, the Company secured dismissals and/or settlements of 503 cases, the total cost of which collectively to the Company, net of insurer payments and defense costs, amounted to $1.9 million. The Company secured dismissals and/or settlements for 236 cases for $1.36 million, net of insurer payments and defense costs, for the prior year fourth quarter ended May 31, 2002. In some jurisdictions, the dismissal or settlement of a case may involve more than one individual plaintiff. 15 Beginning in the fourth quarter of fiscal 2002 continuing into fiscal 2003, the Company's Subsidiaries (principally Bondex), incurred higher settlement and defense costs resulting from higher settlement demands in certain jurisdictions due primarily to the insolvency of other co-defendants in the asbestos litigation which, in many cases, disproportionately increased our Subsidiaries' share of the alleged liability. The Company expects that it will continue to experience these higher settlement and defense costs during the current fiscal year. The federal legislative initiative aimed at the establishment of a trust fund coupled with recent state tort law changes could significantly alter future settlement values and claim rates. Based on the significant increase in asbestos claims and the inequitable impact of joint and several liability laws on Bondex, as previously reported, our undisputed third-party insurance was depleted during the first quarter of 2004. Prior to this sudden and precipitous increase in claims and settlement values, the combination of reserves and available insurance was expected to adequately cover our asbestos claims for the foreseeable future. As previously disclosed, during the fourth quarter of fiscal 2003, the Company engaged an outside advisor to assist its Subsidiaries in evaluating their asbestos-related liabilities. Estimating the future cost of these asbestos related contingent liabilities is subject to many uncertainties, including (i) the ultimate number of claims filed against the Subsidiaries, (ii) the cost of resolving both current known and future unknown claims, (iii) the amount of insurance available to cover such claims, (iv) future earnings and cash flow of the Company's Subsidiaries, (v) the impact of bankruptcies of other companies whose share of liability may be imposed on the Company's Subsidiaries under certain state liability laws, (vi) the unpredictable aspects of the litigation process including the scheduling of trial dates and the jurisdictions in which trials are scheduled, (vii) the lack of specific information in many cases concerning exposure to the Subsidiaries' products and the claimants' diseases, and (viii) potential changes in applicable federal and/or state law. Recently adopted state tort law changes have created significant uncertainty with respect to future defense strategies, settlement values and, over time, are expected to impact claim frequency and severity. The changes generally provide for liability to be determined on a proportional cause basis. These state law changes are not expected to have an impact on asbestos litigation until the latter part of fiscal 2004. Therefore, at this time, the Company has concluded that the potential liability that may result from all known and future unknown claims is not presently estimable. The Company has, however, established a reserve for those pending cases that have progressed to a stage where the cost to dispose of these cases can reasonably be estimated. For those claims for which the Company has been able to develop estimates, it has done so in consultation with its outside advisor and defense counsel taking into account both historical and current settlement values. The reserve was established by taking an asbestos charge in fiscal 2003 of $140,000,000 for measurable known claims and a provision for those foreseeable future claims that can presently be estimated. We believe this asbestos reserve will be sufficient to cover our Subsidiaries' asbestos-related cash flow requirements for approximately three years. The Company recognizes that future facts, events and legislation (both state and/or federal) may alter its estimates of both its pending and future claims. The Company cannot estimate possible liabilities in excess of those accrued because it cannot predict the number of additional claims that may be filed against its Subsidiaries in the future, the grounds for such claims, the damages that may be demanded in such claims or the probable outcome of such claims. The Company, in conjunction with outside advisors, will continue to study its Subsidiaries' asbestos-related exposures, and regularly evaluate the adequacy of this reserve and the related cash flow 16 implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation. As previously disclosed, the Company's Subsidiaries' undisputed third party insurance coverage was depleted during the first quarter of the 2004 fiscal year. Since the third quarter of fiscal 2003, the Company's Subsidiaries have been in the process of reviewing their known (and searching for any additional unknown) insurance policies to determine whether or not other insurance limits may be available to cover its asbestos liabilities. On July 3, 2003, certain of the Company's Subsidiaries filed a complaint for declaratory judgment, breach of contract and bad faith in the U.S. Federal District Court (Northern District of Ohio, Eastern Division) against several of their third party insurers who had issued liability insurance policies that provided various types of primary and excess coverage during various policy periods between 1968 and 1984. Under the liability insurance policies, these insurers had provided defense and/or indemnity coverage to certain of the Company's Subsidiaries for asbestos bodily injury claims. This coverage action was filed when these insurers ceased providing defense and/or indemnity coverage to certain of the Company's Subsidiaries and wrongfully claimed that aggregate limits of liability of their respective insurance policies have been exhausted. The Company is unable at the present time to predict the outcome of this recently filed action. ENVIRONMENTAL PROCEEDINGS As previously reported, several of the Company's Subsidiaries are, from time to time, identified as a "potentially responsible party" under the Comprehensive Environmental Response, Compensation and Liability Act and similar state environmental statutes. In some cases, the Company's Subsidiaries are participating in the cost of certain clean-up efforts or other remedial actions. The Company's share of such costs, however, has not been material and management believes that these environmental proceedings will not have a material adverse effect on the Company's consolidated financial condition or results of operations. See also "Item 1-Business-Environmental Matters" included in this Annual Report on Form 10-K. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT*. The name, age and positions of each executive officer of the Company as of August 1, 2003 are as follows:
Name Age Position and Offices with the Company - ---- --- ------------------------------------- Frank C. Sullivan 42 President and Chief Executive Officer Ronald A. Rice 40 Senior Vice President - Administration and Assistant Secretary P. Kelly Tompkins 46 Senior Vice President, General Counsel and Secretary Dennis F. Finn 50 Vice President - Environmental and Regulatory Affairs Glenn R. Hasman 49 Vice President - Finance and Communications
17
Name Age Position and Offices with the Company - ---- --- ------------------------------------- Paul G. P. Hoogenboom 43 Vice President - Operations and Chief Information Officer Stephen J. Knoop 38 Vice President - Corporate Development Robert L. Matejka 60 Vice President, Chief Financial Officer and Controller Keith R. Smiley 41 Vice President, Treasurer and Assistant Secretary
- ----------------------- * Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K. Frank C. Sullivan was elected Chief Executive Officer on October 11, 2002 and President on August 5, 1999. From October 2001 to October 2002, Mr. Sullivan served as the Company's Chief Operating Officer. From October 1995 to August 1999 he served as Executive Vice President, and was Chief Financial Officer from October 1993 to August 1999. Mr. Sullivan served as a Vice President from October 1991 to October 1995. Prior thereto, he served as Director of Corporate Development of the Company from February 1989 to October 1991. Mr. Sullivan served as Regional Sales Manager, from February 1988 to February 1989, and as a Technical Service Representative, from February 1987 to February 1988, of AGR Company, an Ohio General Partnership formerly owned by the Company. Prior thereto, Mr. Sullivan was employed by First Union National Bank from 1985 to 1986 and Harris Bank from 1983 to 1985. Mr. Sullivan is employed as President and Chief Executive Officer under an employment agreement that provides for automatic annual renewal. Mr. Sullivan is the son of Thomas C. Sullivan, Chairman of the Board of Directors of the Company. Ronald A. Rice was elected Senior Vice President-Administration on October 11, 2002 and Assistant Secretary on August 5, 1999. From October 2001 to October 2002, he served as Vice President-Administration. From August 1999 to October 2001, Mr. Rice served as the Company's Vice President-Risk Management and Benefits. From 1997 to August 1999, he served as Director of Risk Management and Employee Benefits, and from 1995 to 1997 he served as Director of Benefits. From 1985 to 1995, Mr. Rice served in various capacities with the Wyatt Company, most recently he served as Senior Account Manager from 1992 to 1995. Mr. Rice is employed as Senior Vice President-Administration under an employment agreement that provides for automatic annual renewal. Mr. Rice is also an Assistant Secretary of the Company. P. Kelly Tompkins was elected Senior Vice President of the Company on October 11, 2002. He has served as General Counsel and Secretary since June 1998, and served as Vice President from June 1998 to October 2002. From June 1996 to June 1998, Mr. Tompkins served as Assistant General Counsel. From 1987 to 1995, Mr. Tompkins was employed by Reliance Electric Company in various positions including Senior Corporate Counsel, Director of Corporate Development and Director of Investor Relations. From 1985 to 1987, Mr. Tompkins was employed as a litigation attorney by Exxon Corporation. Mr. Tompkins is employed as Senior Vice President, General Counsel and Secretary under an employment agreement that provides for automatic annual renewal. Dennis F. Finn was elected Vice President-Environmental and Regulatory Affairs on October 12, 2001. Prior to joining the Company in November 2000 as director of environmental and regulatory affairs, Mr. Finn served for 10 years as director of environmental health and safety at 18 Day-Glo Color Corp., one of the Company's operating companies. He also held various positions with Nalco Chemical Company and IIT Research Institute. Glenn R. Hasman was elected Vice President-Finance and Communications on August 1, 2000. Mr. Hasman served as Vice President-Controller from August 1999 to August 2000, as Vice President-Financial Operations from October 1997 to August 1999, as Vice President-Administration from October 1993 to October 1997 and as Controller from July 1990 to October 1993. From September 1982 through July 1990, Mr. Hasman served in a variety of management capacities, most recently Vice President-Operations and Finance, Chief Financial Officer and Treasurer, with a former wholly-owned subsidiary of the Company. From 1979 to 1982, Mr. Hasman served as RPM's Director of Internal Audit and from 1976 to 1979 he was associated with Ciulla, Smith & Dale, LLP, independent accountants. Mr. Hasman is employed as Vice President-Finance and Communications under an employment agreement that provides for automatic annual renewal. Paul G. P. Hoogenboom was elected Vice President-Operations on August 1, 2000 and as Chief Information Officer on October 11, 2002. Mr. Hoogenboom served as Vice President and General Manager of the Company's e-commerce subsidiary, RPM-e/c, Inc., in 1999. From 1998 to 1999, Mr. Hoogenboom was a Director of Cap Gemini, a computer systems and technology consulting firm. During 1997, Mr. Hoogenboom was employed as a strategic marketing consultant for Xylan Corporation, a network switch manufacturer. From 1994 to 1997, Mr. Hoogenboom was Director of Corporate I.T. and Communications for A.W. Chesterton Company, a manufacturer of fluid sealing systems. Mr. Hoogenboom is employed as Vice President-Operations and Chief Information Officer under an employment agreement that provides for automatic annual renewal. Stephen J. Knoop was elected Vice President-Corporate Development on August 5, 1999. From June 1996 to August 1999, Mr. Knoop served as Director of Corporate Development of the Company. From 1990 to May 1996, Mr. Knoop was an attorney at Calfee, Halter & Griswold LLP. Mr. Knoop is employed as Vice President-Corporate Development under an employment agreement that provides for automatic annual renewal. Robert L. Matejka was elected Chief Financial Officer on October 12, 2001 and Vice President-Controller on August 1, 2000. From 1995 to 1999, he served as Vice President-Finance of the motor and drive systems businesses of Rockwell International Corporation. From 1973 to 1995, Mr. Matejka served in various capacities with Reliance Electric Company, most recently as its Assistant Controller. From 1965 to 1973, he was an Audit Supervisor with Ernst & Young. Mr. Matejka is employed as Chief Financial Officer and Vice President-Controller under an employment agreement that provides for automatic annual renewal. Keith R. Smiley was elected Vice President and Assistant Secretary on August 5, 1999, and has served as Treasurer of the Company since February 1997. From October 1993 to February 1997, he served as Controller of the Company. From January 1992 until February 1997, Mr. Smiley also served as the Company's Internal Auditor. Prior thereto, he was associated with Ciulla, Smith & Dale, LLP. Mr. Smiley is employed as Vice President, Treasurer and Assistant Secretary under an employment agreement that provides for automatic annual renewal. 19 PART II ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. RPM shares of Common Stock are traded on the New York Stock Exchange under the symbol RPM. The high and low sales prices for the shares of Common Stock, and the cash dividends paid on the Common Stock, for each quarter of the two most recent fiscal years is set forth in the table below. RANGE OF SALES PRICES AND DIVIDENDS PAID
Dividends Paid Per Fiscal 2003 High Low Share ----------- ---- --- ----- 1st Quarter $ 16.59 $ 11.58 $0.125 2nd Quarter 16.01 12.90 $0.130 3rd Quarter 15.90 9.29 $0.130 4th Quarter 12.50 9.10 $0.130
Dividends Paid Per Fiscal 2002 High Low Share ----------- ---- --- ----- 1st Quarter $ 11.15 $ 8.02 $0.125 2nd Quarter 15.05 7.91 $0.125 3rd Quarter 17.08 12.90 $0.125 4th Quarter 17.87 14.15 $0.125
- -------------------- Source: The Wall Street Journal Cash dividends are payable quarterly, upon authorization of the Board of Directors. Regular payment dates are approximately the 30th day of July, October, January and April. RPM maintains a Dividend Reinvestment Plan whereby cash dividends, and a maximum of an additional $5,000 per month, may be invested in RPM Common Stock purchased in the open market at no commission cost to the participant. The number of holders of record of RPM Common Stock as of August 15, 2003 was approximately 38,684. RECENT SALES OF UNREGISTERED SECURITIES. On May 13, 2003, the Company sold approximately $247.5 million in aggregate principal amount at maturity of 2.75 percent senior convertible notes due 2033 to qualified institutional buyers, resulting in approximately $122.5 million gross proceeds to RPM. On May 23, 2003, the Company sold an additional approximately $49.5 million aggregate principal amount at maturity of the senior convertible notes due 2033 (resulting in approximately $24.5 million additional gross proceeds to RPM) to cover the over-allotment option granted by the Company to the initial purchasers in the offering. Each note was issued at a price of $505.19 and is convertible into the 20 Company's Common Stock at a conversion ratio of 27.0517 shares per $1,000 principal amount at maturity of the notes, subject to certain adjustments. The offering was made only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Company used the net proceeds of the offering to repay existing indebtedness under its $500 million revolving credit facility. The securities have not been registered under the Securities Act of 1933 or any state securities laws, and unless so registered may not be offered or sold in the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933 and applicable state securities laws. Pursuant to a Registration Rights Agreement between the Company and the initial purchasers, the Company is required to prepare and file a registration statement to register the notes and underlying Common Stock under the Securities Act of 1933. ITEM 6. SELECTED FINANCIAL DATA. The following table sets forth selected consolidated financial data of the Company for each of the five years during the period ended May 31, 2003. The data was derived from the annual Consolidated Financial Statements of the Company which have been audited by Ciulla, Smith & Dale, LLP, independent accountants.
FISCAL YEARS ENDED MAY 31, ---------------------------------------------------------- 2003 2002* 2001 2000 1999 ---- ----- ---- ---- ---- (Amounts in thousands, except per share and percentage data) Net sales $2,083,489 $1,986,126 $2,007,762 $1,962,410 $1,720,628 Income before income taxes 47,853 154,124 101,487 71,761 159,597 Net income 35,327 101,554 62,961 40,992 94,546 Return on sales % 1.7% 5.1% 3.1% 2.1% 5.5% Basic earnings per share 0.31 0.97 0.62 0.38 0.87 Diluted earnings per share 0.30 0.97 0.62 0.38 0.86 Stockholders' equity 877,008 858,106 639,710 645,724 742,876 Stockholders' equity per 7.61 8.22 6.26 6.02 6.83 share Return on stockholders' 4.1% 13.6% 9.8% 5.9% 14.4% equity % Average shares outstanding 115,294 104,418 102,202 107,221 108,731 Cash dividends paid 59,139 52,409 50,605 51,901 50,446 Cash dividends per share 0.5150 0.5000 0.4975 0.4850 0.4645 Retained earnings 385,791 409,603 360,458 348,102 359,011 Working capital 500,444 479,041 443,652 408,890 402,870 Total assets 2,247,211 2,078,844 2,078,490 2,099,203 1,737,236 Long-term debt 724,846 707,921 955,399 959,330 582,109 Depreciation and amortization 58,674 56,859 81,494 79,150 62,135
Note: Acquisitions made by the Company during the periods presented may impact comparability from year to year. For information concerning acquisitions for fiscal year 2003, see Note A of Notes to Consolidated Financial Statements, which appear in the Annual Report to Stockholders, incorporated herein by reference. 21 *Reflects the adoption of SFAS No. 142 regarding "Goodwill and Other Intangible Assets". See Note A to Notes to Consolidated Financial Statements, which appear in the Annual Report to Stockholders, incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item is set forth at pages 16 through 25 of the 2003 Annual Report to Stockholders, incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates since it funds its operations through long-and short-term borrowings and denominates its business transactions in a variety of foreign currencies. A summary of the Company's primary market risk exposures is presented below. Interest Rate Risk The Company's primary interest rate risk exposure results from floating rate debt including various revolving credit and other lines of credit. At May 31, 2003, approximately 51% of the Company's total long-term debt consisted of floating rate debt. If interest rates were to increase 100 basis points (1%) from May 31, 2003 rates, and assuming no changes in long-term debt from the May 31, 2003 levels, the additional annual expense would be approximately $3.7 million on a pre-tax basis. The Company currently does not hedge its exposure to this floating rate interest rate risk. Foreign Currency Risk The Company's foreign sales and results of operations are subject to the impact of foreign currency fluctuations. As most of the Company's foreign operations are in countries with fairly stable currencies, such as the United Kingdom, Belgium and Canada, this effect has not been material. In addition, foreign debt is denominated in the respective foreign currency, thereby eliminating any related translation impact on earnings. If the U.S. dollar continues to weaken, the Company's foreign results of operations would be positively impacted, but the effect would not be expected to be material. A 10% change in foreign currency exchange rates would not have resulted in a material impact on the Company's net income for the fiscal year ended May 31, 2003. The Company does not currently hedge against the risk of exchange rate fluctuations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item is set forth at pages 26 through 45 of the 2003 Annual Report to Stockholders, which information is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 22 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information required by this item as to the Directors of the Company appearing under the caption "Proposal One - Election of Directors" in the Company's 2003 Proxy Statement is incorporated herein by reference. Information required by this item as to the Executive Officers of the Company is included as Item 4A of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation S-K is set forth in the 2003 Proxy Statement under the heading "Proposal One - Section 16(a) Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is set forth in the 2003 Proxy Statement under the heading "Proposal One - Executive Compensation," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by this item is set forth in the 2003 Proxy Statement under the headings "Share Ownership of Principal Holders and Management" and "Proposal One - Equity Compensation Plan Information," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is set forth in the 2003 Proxy Statement under the heading "Proposal One - Election of Directors," which information is incorporated herein by reference. ITEM 14. CONTROLS AND PROCEDURES (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14) as of May 31, 2003 (the "Evaluation Date"), have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. (b) CHANGES IN INTERNAL CONTROLS. There were no changes in the Company's internal controls that occurred during the fiscal quarter ended May 31, 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls. 23 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this 2003 Annual Report on Form 10-K: 1. Financial Statements. The following consolidated financial statements of the Company and its subsidiaries and the report of independent auditors thereon, included in the 2003 Annual Report to Stockholders on pages 26 through 45, are incorporated by reference in Item 8: Independent Auditors' Report Consolidated Balance Sheets - May 31, 2003 and 2002 Consolidated Statements of Income - years ended May 31, 2003, 2002 and 2001 Consolidated Statements of Stockholders' Equity - years ended May 31, 2003, 2002 and 2001 Consolidated Statements of Cash Flows - years ended May 31, 2003, 2002 and 2001 Notes to Consolidated Financial Statements (including Unaudited Quarterly Financial Information) 2. Financial Statement Schedules. The following consolidated financial statement schedule of the Company and its subsidiaries and the report of independent auditors thereon are filed as part of this Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements of the Company and its subsidiaries included in the 2003 Annual Report to Stockholders:
Schedule Page No. -------- -------- Independent Auditors' Report ...................... S-1 Schedule II - Valuation and Qualifying Accounts and Reserves ............................. S-2
All other schedules have been omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto. 24 3. Exhibits. See the Index to Exhibits at page E-1 of this Annual Report on Form 10-K. (b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K on April 14, 2003 to report that it had issued a press release dated the same date, announcing the Company's third quarter earnings. The Company filed a Current Report on Form 8-K on April 30, 2003 to report the mailing of its Nine-Month Report to its Stockholders. The Company filed a Current Report on Form 8-K on May 9, 2003 related to a press release disclosing information regarding the Company's private offering of senior convertible notes. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RPM INTERNATIONAL INC. Date: August 29, 2003 By: /s/ Frank C. Sullivan ------------------------------ Frank C. Sullivan President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature and Title /s/ Frank C. Sullivan President and Chief Executive Officer - ------------------------ and a Director Frank C. Sullivan (Principal Executive Officer) /s/ Robert L. Matejka Vice President, Chief Financial Officer - ------------------------ and Controller Robert L. Matejka (Principal Financial Officer) /s/ Thomas C. Sullivan Chairman and a Director - ------------------------ Thomas C. Sullivan /s/ Dr. Max D. Amstutz Director - ------------------------ Dr. Max D. Amstutz /s/ Edward B. Brandon Director - ------------------------ Edward B. Brandon /s/ Bruce A. Carbonari Director - ------------------------ Bruce A. Carbonari /s/ E. Bradley Jones Director - ------------------------ E. Bradley Jones
26 /s/ James A. Karman Director - ------------------------ James A. Karman /s/ Donald K. Miller Director - ------------------------ Donald K. Miller /s/ William A. Papenbrock Director - ------------------------- William A. Papenbrock /s/ Albert B. Ratner Director - ------------------------ Albert B. Ratner /s/ Jerry Sue Thornton Director - ------------------------ Jerry Sue Thornton /s/ Joseph P. Viviano Director - ------------------------ Joseph P. Viviano
Date: August 29, 2003 27 RPM INTERNATIONAL INC. EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Agreement and Plan of Merger, dated as of August 29, 2002, by and among, RPM, Inc., the Company and RPM Merger Company, which is incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, as filed with the Commission on October 15, 2002. 3.1 Amended and Restated Certificate of Incorporation of the Company, which is incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. 3.2 Amended and Restated By-Laws of the Company, which is incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. 4.1 Specimen Certificate of common stock, par value $0.01 per share, of the Company, which is incorporated herein by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. 4.2 Specimen Note Certificate for 7.0% Senior Notes Due 2005, which is incorporated herein by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-4 as filed with the Commission on August 3, 1995. 4.3 Specimen Note Certificate of Liquid Asset Notes with Coupon Exchange ("LANCEs(SM)") Due 2008, which is incorporated herein by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998 (File No. 001-14187). 4.4 Specimen Note Certificate for Senior Convertible Notes Due 2033. (x) 4.5 Rights Agreement by and between the Company (as successor to RPM, Inc.) and Harris Trust and Savings Bank dated as of April 28, 1999, which is incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement on Form 8-A as filed with the Commission on May 11, 1999. 4.5.1 Amendment to Rights Agreement dated as of December 18, 2000 by and among the Company (as successor to RPM, Inc.), Computershare Investor Services (formerly Harris Trust and Savings Bank) and National City Bank, which is incorporated herein by reference to Exhibit 4.4.1 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001.
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EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.5.2 Second Amendment to Rights Agreement, dated as of October 15, 2002, among RPM, Inc., National City Bank (as successor rights agent to Computershare Investor Services, formerly Harris Trust and Savings Bank) and the Company, which is incorporated herein by reference to Exhibit 4.4.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. 4.6 Indenture, dated as of June 1, 1995, between RPM, Inc. and The First National Bank of Chicago, as trustee, with respect to the 7.0% Senior Notes Due 2005, which is incorporated herein by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-4 as filed with the Commission on August 3, 1995. 4.7 First Supplemental Indenture, dated as of March 5, 1998 to the Indenture dated as of June 1, 1995, between RPM, Inc. and the First National Bank of Chicago, as trustee, with respect to the Liquid Asset Notes with Coupon Exchange ("LANCEs(SM)") due 2008, which is incorporated herein by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998 (File No. 001-14187). 4.8 Second Supplemental Indenture, dated as of August 26, 2002, by and among the Company, RPM, Inc. and Bank One, N.A. (f/k/a The First National Bank of Chicago) as Trustee, relating to the Indenture, dated as of June 1, 1995, by and between the Company and the Trustee, which is incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 2002. 4.9 Indenture, dated as of May 13, 2003 between the Company, as issuer, and The Bank of New York, as trustee, with respect to the Senior Convertible Notes due 2033. (x) 4.10 Registration Rights Agreement, dated as of May 13, 2003, among the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and each of the other Initial Purchasers named in Schedule A to the Purchase Agreement, for whom Merrill Lynch is acting as Representative, with respect to the Senior Convertible Notes due 2033. (x) *10.1 Succession and Post-Retirement Consulting Letter Agreement, dated April 12, 2002, by and between RPM, Inc. and Thomas C. Sullivan, which is incorporated herein by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002. *10.1.2 Letter of Amendment to Employment Agreement and Consulting Letter Agreement, dated as of October 14, 2002, by and between RPM, Inc., the Company and Thomas C. Sullivan, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.2 Succession and Post-Retirement Consulting Letter Agreement, dated April 12, 2002, by and between RPM, Inc. and James A. Karman, which is incorporated herein by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
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EXHIBIT NO. DESCRIPTION - ----------- ----------- *10.2.1 Letter of Amendment to Employment Agreement and Consulting Letter Agreement, dated as of October 14, 2002, by and between RPM, Inc., the Company and James A. Karman, which is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.3 Form of Employment Agreement entered into by and between the Company and each of P. Kelly Tompkins, Senior Vice President, General Counsel and Secretary, Glenn R. Hasman, Vice President - Finance and Communications, Stephen J. Knoop, Vice President - Corporate Development, Robert L. Matejka, Chief Financial Officer and Vice President - Controller, Ronald A. Rice, Senior Vice President - Administration and Assistant Secretary, Keith R. Smiley, Vice President, Treasurer and Assistant Secretary and Paul G. Hoogenboom, Vice President-Operations and Chief Information Officer, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2001. *10.3.1 Form of Letter of Amendment to Employment Agreements entered into by and between RPM, Inc., the Company and each of P. Kelly Tompkins, Senior Vice President, General Counsel and Secretary, Ronald A. Rice, Senior Vice President - Administration and Assistant Secretary, Glenn R. Hasman, Vice President - Finance and Communications, Stephen J. Knoop, Vice President - Corporate Development, Robert L. Matejka, Chief Financial Officer and Vice President - Controller, Keith R. Smiley, Vice President, Treasurer and Assistant Secretary and Paul G. Hoogenboom, Vice President-Operations and Chief Information Officer, which is incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.4 Amended and Restated Employment Agreement between the Company and Frank C. Sullivan - Chief Executive Officer and President, which is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.4.1 Employment Agreement between the Company and Dennis F. Finn - Vice President - Environmental & Regulatory Affairs, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003. *10.5 RPM International Inc. 1989 Stock Option Plan, as amended, and form of Stock Option Agreements to be used in connection therewith, which is incorporated herein by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001. *10.5.1 Amendment No. 3 to RPM International Inc. 1989 Stock Option Plan, as amended, which is incorporated herein by reference to Exhibit 4.5.1 to the Company's Registration Statement on Form S-8 (Registration No. 033-32794), as filed with the Commission on November 27, 2002.
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EXHIBIT NO. DESCRIPTION - ----------- ----------- *10.6 RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration No. 333-60104), as filed with the Commission on November 27, 2002. *10.6.1 Amendment No. 1 to RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to Exhibit 10.7.1 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998 (File No. 001-14187). *10.6.2 Amendment to RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.3.1 to the Company's Registration Statement on Form S-8 as filed with the Commission on May 3, 2001. *10.6.3 Amendment No. 3 to RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.5.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-60104), as filed with the Commission on November 27, 2002. *10.6.4 Form of Stock Option Agreement to be used in connection with the RPM International Inc. 1996 Stock Option Plan, as amended, which is incorporated herein by reference to Exhibit 10.6.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.7 RPM International Inc. 401(k) Trust and Plan, as amended, which is incorporated herein by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. *10.7.1 Amendment No. 1 to RPM International Inc. 401(k) Trust and Plan, which is incorporated herein by reference to Exhibit 4.5.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. *10.7.2 Amendment No. 2 to RPM International Inc. 401(k) Trust and Plan, as amended, which is incorporated by reference to Exhibit 4.5.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. *10.8 RPM International Inc. Union 401(k) Retirement Savings Trust and Plan, dated as of August 27, 2002, which is incorporated herein by reference to Exhibit 4.6. to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. *10.8.1 Amendment No. 1 to RPM International Inc. Union 401(k) Retirement Savings Trust and Plan, dated as of August 27, 2002, which is incorporated herein by reference to Exhibit 4.6.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002.
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EXHIBIT NO. DESCRIPTION - ----------- ----------- *10.8.2 Amendment No. 2 to RPM International Inc. Union 401(k) Retirement Savings Trust and Plan, as amended, which is incorporated herein by reference to Exhibit 4.6.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002. *10.9 RPM International Inc. Benefit Restoration Plan, which is incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001. *10.9.1 Amendment No. 1 to the RPM International Inc. Benefit Restoration Plan, which is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003. *10.9.2 Amendment No. 2 to RPM International Inc. Benefit Restoration Plan, which is incorporated herein by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.10 RPM International Inc. Deferred Compensation Plan, which is incorporated herein by reference to Exhibit 10.8.1 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002. *10.10.1 Master Trust Agreement for RPM International Inc. Deferred Compensation Plan, which is incorporated herein by reference to Exhibit 10.8.1 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002. *10.10.2 Amendment No. 1 to RPM International Inc. Deferred Compensation Plan, which is incorporated herein by reference to Exhibit 4.5.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101512), as filed with the Commission on November 27, 2002. *10.11 RPM International Inc. Incentive Compensation Plan, which is incorporated herein by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001. *10.11.1 Amendment No. 1 to RPM International Inc. Incentive Compensation Plan, which is incorporated herein by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.12 1997 RPM International Inc. Restricted Stock Plan, and Form of Acceptance and Escrow Agreement to be used in connection therewith, which is incorporated herein by reference to Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.12.1 First Amendment to the RPM, Inc. 1997 Restricted Stock Plan, effective as of October 1, 1998, which is incorporated herein by reference to Exhibit 10.10.1 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
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EXHIBIT NO. DESCRIPTION - ----------- ----------- *10.12.2 Second Amendment to the RPM International Inc. 1997 Restricted Stock Plan, dated as of May 22, 2002, which is incorporated herein by reference to Exhibit 10.10.2 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002. *10.12.3 Third Amendment to 1997 RPM International Inc. Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.12.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. *10.12.4 Fourth Amendment to the 1997 RPM International Inc. Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003. *10.13 2002 RPM International Inc. Performance Accelerated Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003. *10.13.1 Amendment No. 1 to the RPM International Inc. Performance Accelerated Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003. *10.14 Form of Indemnification Agreement entered into by and between the Company and each of its Directors and Executive Officers, which is incorporated herein by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. 10.15 Five-Year $500,000,000 Credit Agreement, dated as of July 14, 2000, among the Company, The Chase Manhattan Bank, as Administrative Agent and Chase Securities Inc., which is incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2000. 10.15.1 Amendment No. 1, dated July 31, 2001, to the 364-Day Credit Agreement and the Five-Year Credit Agreement among the Company, the Lenders party thereto and The Chase Manhattan Bank, as Administrative Agent, which is incorporated by referred to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2001. 10.15.2 Amendment No. 2 to Five-Year Credit Agreement, dated as of July 12, 2002, by and among the Company, the Lender parties thereto and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as administrative agent, which is incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 2002.
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EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.15.3 Assignment, Assumption and Release Agreement, related to the Five-Year Credit Agreement, dated as of October 15, 2002, between RPM, Inc. and the Company, which is incorporated herein by reference to Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. 10.16 Receivables Sale Agreement among certain subsidiaries of the Company, the Company and RPM Funding Corporation, dated June 6, 2002, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 2002. 10.17 Receivables Purchase Agreement, among certain subsidiaries of the Company, RPM Funding Corporation and Bank One and Wachovia Bank, NA, as co-agents and administrative agents, dated June 6, 2002, which is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 2002. 10.18 Omnibus Amendment No. 1 to the Receivables Sale Agreement and the Receivables Purchase Agreement, by and among RPM, Inc., the Company, certain subsidiaries of the Company, RPM Funding Corporation and Bank One, dated as of October 15, 2002, which is incorporated herein by reference to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. 10.19 Performance Undertaking related to the Bank One, NA Receivables Sale Agreement and Receivables Purchase Agreement, dated June 6, 2002, which is incorporated herein by reference to Exhibit 10.16.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002. 10.20 Note Purchase Agreement, dated as of November 15, 2001, between the Company and the Purchasers thereto with respect to the sale of $15 million principal amount of 6.12% Senior Notes, Series A, due November 15, 2004, $10 million principal amount of 6.61% Senior Notes, Series B, due November 15, 2006, and $30 million principal amount of 7.3% Senior Notes, Series C, due November, 2003, which is incorporated herein by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2001. 10.20.1 Assignment, Assumption and Amendment Agreement, dated as of August 23, 2002, between the Company, RPM International Inc. and the holders of the Notes under the Private Placement Note Purchase Agreement, dated as of November 15, 2001, as the same may be amended or supplemented from time to time, between the Company and certain institutional investors named therein, which is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 2002. 10.21 Commercial Paper Dealer Agreement between the Company, as Issuer, and U.S. Bancorp Piper Jaffray Inc., as Dealer, dated as of April 21, 2003. (x)
E-7
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.22 Issuing and Paying Agent Agreement between U.S. Bank Trust National Association and the Company, dated as of April 21, 2003. (x) 10.23 Note Purchase Agreement, dated as of May 8, 2003, among the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and each of the other Initial Purchasers named in Schedule A to the Purchase Agreement, for whom Merrill Lynch is acting as Representative. (x) 11.1 Computation of Net Income per share of Common Stock. (x) 13.1 Financial Information contained in 2003 Annual Report to Stockholders. (x) 21.1 Subsidiaries of the Company. (x) 23.1 Consent of Independent Certified Public Accountants. (x) 31.1 Rule 13a-14(a) Certification of the Company's Chief Financial Officer. (x) 31.2 Rule 13a-14(a) Certification of the Company's Chief Executive Officer. (x) 32.1 Section 1350 Certification of the Company's Chief Financial Officer. (x) 32.2 Section 1350 Certification of the Company's Chief Executive Officer. (x)
- ------------- (x) Filed herewith. * Management contract or compensatory plan or arrangement identified pursuant to Item 14(c) of this Form 10-K. E-8 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To The Board of Directors and Shareholders RPM International Inc. and Subsidiaries Medina, Ohio The audits referred to in our report to the Board of Directors and Shareholders of RPM International Inc. and Subsidiaries dated July 7, 2003, relating to the consolidated financial statements of RPM International Inc. and Subsidiaries included the audit of the schedule listed under Item 14 of Form 10-K for each of the three years in the period ended May 31, 2003. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits. In our opinion such financial statement schedule presents fairly, in all material respects, the information set forth therein. /s/ Ciulla, Smith & Dale, LLP Ciulla, Smith & Dale, LLP S-1 RPM INTERNATIONAL INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES SCHEDULE II (IN THOUSANDS)
ADDITIONS CHARGED TO BALANCE AT ADDITIONS SELLING, ACQUISITIONS BALANCE BEGINNING CHARGED TO GENERAL AND (DISPOSALS) AT END OF PERIOD COST OF SALES ADMINISTRATIVE OF BUSINESSES DEDUCTIONS OF PERIOD --------- ------------- -------------- ------------- ---------- --------- YEAR ENDED MAY 31, 2003 ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 15,844 $ -- $ 5,609 $ 212 $ 4,408(1) $ 17,297 ============ ============ ============ ============ ============ ============ ACCRUED LOSS RESERVES - CURRENT $ 48,537 $ -- $ 15,271 $ 335 $ (87)(2) $ 64,230 ============ ============ ============ ============ ============ ============ ASBESTOS-RELATED LIABILITIES- CURRENT $ 3,377 $ -- $ 43,650 $ -- $ 5,444(2) $ 41,583 ============ ============ ============ ============ ============ ============ ACCRUED WARRANTY RESERVES - LONG-TERM $ 9,655 $ -- $ (609) $ 603 $ 1,868(2) $ 7,781 ============ ============ ============ ============ ============ ============ ASBESTOS-RELATED LIABILITIES - NONCURRENT $ -- $ -- $ 103,000 $ -- $ -- $ 103,000 ============ ============ ============ ============ ============ ============ YEAR ENDED MAY 31, 2002 ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 17,705 $ -- $ 7,156 $ -- $ 8,977(1) $ 15,884 ============ ============ ============ ============ ============ ============ ACCRUED LOSS RESERVES - CURRENT $ 52,495 $ -- $ 21,144 $ (100) $ 25,002(2) $ 48,537 ============ ============ ============ ============ ============ ============ ASBESTOS-RELATED LIABILITIES - CURRENT $ 3,117 $ -- $ 2,754 $ -- $ 2,494(2) $ 3,377 ============ ============ ============ ============ ============ ============ ACCRUED WARRANTY RESERVES - LONG-TERM $ 11,959 $ -- $ (235) $ -- $ 2,069(2) $ 9,655 ============ ============ ============ ============ ============ ============ YEAR ENDED MAY 31, 2001 ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 16,248 $ -- $ 8,817 $ 10 $ 7,370(1) $ 17,705 ============ ============ ============ ============ ============ ============ ACCRUED LOSS RESERVES - CURRENT $ 62,765 $ -- $ 12,991 $ -- $ 23,261(2) $ 52,495 ============ ============ ============ ============ ============ ============ ASBESTOS-RELATED LIABILITIES - CURRENT $ 1,630 $ -- $ 2,338 $ -- $ 851(2) $ 3,117 ============ ============ ============ ============ ============ ============ ACCRUED WARRANTY RESERVES - LONG-TERM $ 13,740 $ -- $ (209) $ -- $ 1,572(2) $ 11,959 ============ ============ ============ ============ ============ ============ ACCRUED RESTRUCTURING RESERVES $ 13,540 $ -- $ -- $ -- $ 13,540(3) $ -- ============ ============ ============ ============ ============ ============
(1) UNCOLLECTIBLE ACCOUNTS WRITTEN OFF, NET OF RECOVERIES (2) PRIMARILY CLAIMS PAID DURING THE YEAR, NET OF INSURANCE CONTRIBUTIONS (3) RESTRUCTURING INITIATIVES COMPLETED DURING THE YEAR EX-4.4 3 l02719aexv4w4.txt EX-4.4 SPECIMAN NOTE CERTIFICATE EXHIBIT 4.4 THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE ISSUE PRICE OF THIS SECURITY IS $505.19 PER $1,000 OF PRINCIPAL AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS INDETERMINABLE AS OF THE ISSUE DATE; THE ISSUE DATE OF THIS SECURITY IS MAY 13, 2003; AND THE YIELD TO MATURITY FOR THE PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 5.05% PER ANNUM, CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER (X) THE LATER OF THE LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) THE LAST DATE ON WHICH RPM INTERNATIONAL INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT AN AFFILIATE OF THE COMPANY AFTER THE RESALE RESTRICTION TERMINATION DATE. THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE. RPM INTERNATIONAL INC. SENIOR CONVERTIBLE NOTE DUE 2033 No. A-1 CUSIP: 749 685 AJ 2 Issue Date: May 13, 2003 Issue Price: $505.19 Original Issue Discount: $494.81 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) RPM INTERNATIONAL INC., a Delaware corporation (herein called the "Company"), promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of TWO HUNDRED FORTY SEVEN MILLION FIVE HUNDRED AND FOURTEEN THOUSAND DOLLARS ($247,514,000) on May 13, 2033. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. RPM INTERNATIONAL INC. By:__________________________ Title: By:__________________________ Title: Dated: May , 2003 TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By:___________________________________ Authorized Signatory [REVERSE SIDE OF SECURITY] SENIOR CONVERTIBLE NOTES DUE 2033 1. Interest. The Company promises to pay interest in cash on the Principal Amount at Maturity of this Note at the rate per annum of 1.389% from the Issue Date, or from the most recent date to which interest has been paid or provided for, until May 13, 2008. During such period, the Company will pay cash interest semiannually in arrears on May 13 and November 13 of each year (each an "Interest Payment Date") to Holders of record at the close of business on each April 28 and October 29 (whether or not a business day) (each a "Regular Record Date") immediately preceding such Interest Payment Date. Cash interest on the Securities will accrue from the most recent date to which interest has been paid or duly provided or, if no interest has been paid, from the Issue Date. Cash interest will be computed on the basis of a 360-day year of twelve 30-day months. After May 13, 2008, this Security shall not bear interest, except as specified in this paragraph or in paragraphs 5 and 11 hereof. If the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Redemption Price pursuant to paragraph 6 hereof, upon the date set for payment of the Purchase Price or Change in Control Purchase Price pursuant to paragraph 7 hereof or upon the Stated Maturity of this Security) or if cash interest (including semiannual or Contingent Cash Interest, if any) due hereon or any portions of such cash interest is not paid when due in accordance with paragraphs 5 or 11 hereof, then in each such case the overdue amount shall, to the extent permitted by law, bear interest at the rate of 2.75% per annum, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount or cash interest. Original Issue Discount (the difference between the Issue Price and the Principal Amount at Maturity of the Security), in the period during which a Security remains outstanding, shall accrue at 2.75% per annum beginning on May 13, 2008, on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months. 2. Method of Payment. Subject to the terms and conditions of the Indenture, the Company will make payments in respect of Redemption Prices, Purchase Prices, Change in Control Purchase Prices and at Stated Maturity to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. In addition, the Company will pay cash interest from the Issue Date until May 13, 2008, as more fully described in paragraph 1 hereof. The Company will pay any cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may make such cash payments by check payable in such money. 3. Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar or Bid Solicitation Agent without notice, other than notice to the Trustee except that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar. None of the Company, any of its Subsidiaries or any of their Affiliates shall act as Bid Solicitation Agent. 4. Indenture. The Company issued the Securities pursuant to an Indenture dated as of May 13, 2003 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured and unsubordinated obligations, of the Company, limited to $297,000,000 aggregate Principal Amount at Maturity (subject to Section 2.07 of the Indenture). The Indenture does not limit other indebtedness of the Company, secured or unsecured. 5. Contingent Cash Interest. Subject to the conditions of the Indenture and the accrual and record date provisions specified in this paragraph 5, the Company shall pay Contingent Cash Interest to the Securityholders during any Semiannual Period, with the initial six-month period commencing on May 14, 2008, if, but only if, the Average Security Market Price for the five Trading Days ending on the third Trading Day immediately preceding the first day of the applicable Semiannual Period equals 120% or more of the Relevant Value of such Security. Contingent Cash Interest, if any, will accrue and be payable to holders of this Security as of the Contingent Cash Interest Record Date. Original Issue Discount will continue to accrue at 2.75% whether or not Contingent Cash Interest is paid. The amount of Contingent Cash Interest payable per $1,000 Principal Amount at Maturity hereof in respect of any quarterly period of the applicable Contingent Cash Interest Period shall equal the annual rate of 1.0% of the Average Security Market Price for the five Trading Day measuring period. Upon determination that Securityholders will be entitled to receive Contingent Cash Interest during a Semiannual Period, the Company shall issue a press release and publish such information on its web site or through such other public medium it may use at the time. 6. Redemption at the Option of the Company. No sinking fund is provided for the Securities. The Securities are redeemable for cash as a whole, or from time to time in part, at any time at the option of the Company in accordance with the Indenture at the Redemption Prices set forth below; provided, that the Securities are not redeemable prior to May 13, 2008. The table below shows Redemption Prices of a Security per $1,000 Principal Amount at Maturity on the dates shown below and at Stated Maturity, which prices reflect accrued Original Issue Discount calculated to each such date. The Redemption Price of a Security redeemed between such dates shall include an additional amount reflecting the additional Original Issue Discount accrued since the immediately preceding date in the table to, but not including, the Redemption Date. [Remainder of page intentionally left blank]
(3) (2) Redemption (1) Accrued Original Price Redemption Date Note Issue Price Issue Discount (1) + (2) - --------------- ---------------- -------------- --------- May 13, 2008..................... $505.19 $ 0.00 $ 505.19 2009..................... 505.19 13.99 519.18 2010..................... 505.19 28.36 533.55 2011..................... 505.19 43.14 548.33 2012..................... 505.19 58.32 563.51 2013..................... 505.19 73.92 579.11 2014..................... 505.19 89.96 595.15 2015..................... 505.19 106.44 611.63 2016..................... 505.19 123.37 628.56 2017..................... 505.19 140.78 645.97 2018..................... 505.19 158.66 663.85 2019..................... 505.19 177.05 682.24 2020..................... 505.19 195.94 701.13 2021..................... 505.19 215.35 720.54 2022..................... 505.19 235.30 740.49 2023..................... 505.19 255.81 761.00 2024..................... 505.19 276.88 782.07 2025..................... 505.19 298.53 803.72 2026..................... 505.19 320.79 825.98 2027..................... 505.19 343.66 848.85 2028..................... 505.19 367.16 872.35 2029..................... 505.19 391.32 896.51 2030..................... 505.19 416.14 921.33 2031..................... 505.19 441.65 946.84 2032..................... 505.19 467.87 973.06 At stated maturity....... 505.19 494.81 1,000.00
If this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Redemption Price will be equal to the Restated Principal Amount plus accrued and unpaid interest from the date of such conversion to but not including the Redemption Date; but in no event will this Security be redeemable before May 13, 2008. 7. Purchase by the Company at the Option of the Holder. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Securities held by such Holder on the following Purchase Dates and at the following Purchase Prices, plus accrued and unpaid cash interest, if any, per $1,000 Principal Amount at Maturity, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the day immediately preceding such Purchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture. Purchase Date Price Purchase ------------- -------------- May 13, 2008 $505.19 May 13, 2013 $579.11 May 13, 2018 $663.85 May 13, 2023 $761.00 May 13, 2028 $872.35 The Purchase Price (equal to the Issue Price plus accrued Original Issue Discount to the Purchase Date) may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock of the Company, or in any combination thereof in accordance with the Indenture. If prior to a Purchase Date this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Purchase Price will be equal to the Restated Principal Amount plus accrued and unpaid cash interest from the date of conversion to the Purchase Date as provided in the Indenture. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Securities held by such Holder no later than 30 Business Days after the occurrence of a Change in Control of the Company, but in no event prior to the date on which such a Change in Control occurs, for a Change in Control Purchase Price equal to the Issue Price plus accrued Original Issue Discount and accrued and unpaid cash interest, including Contingent Cash Interest, if any, to but not including the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash. If prior to a Change in Control Purchase Date this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Change in Control Purchase Price shall be equal to the Restated Principal Amount plus accrued cash interest from the date of conversion to the Change in Control Purchase Date. A third party may make the offer and purchase of the Securities in lieu of the Company in accordance with the Indenture. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or securities if permitted under the Indenture) sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, of all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, Original Issue Discount or cash interest (including semiannual and Contingent Cash Interest), if any, shall cease to accrue on such Securities (or portions thereof) on such Purchase Date or Change in Control Purchase Date, as the case may be, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, if any, upon surrender of such Security). 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of, and accrued and unpaid cash interest, if any, with respect to, all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, on such Redemption Date, Original Issue Discount or cash interest (including semiannual and Contingent Cash Interest), if any, shall cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of Principal Amount at Maturity may be redeemed in part but only in integral multiples of $1,000 of Principal Amount at Maturity. 9. Conversion. Conversion Based on Sale Price of Common Stock. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition to conversion described below has not been satisfied, Holders may convert the Securities into Common Stock on a Conversion Date in any fiscal quarter commencing after May 31, 2003, if, as of the last day of the preceding fiscal quarter, the Sale Price of the Common Stock for at least 20 Trading Days in a period of 30 consecutive Trading Days ending on the last Trading Day of the most recently ended fiscal quarter, is greater than the conversion trigger price per share. The "conversion trigger price" for any fiscal quarter shall be 120% of the accreted conversion price per share (calculated without giving effect to accrued cash interest, if any) of Common Stock on the last day of such fiscal quarter. If the foregoing condition is satisfied, then the Securities will be convertible at any time at the option of the Holder, through their maturity. The "accreted conversion price per share" of Common Stock as of any day equals the quotient of: - the Issue Price and accrued Original Issue Discount, if any, to that day, divided by - the number of shares of Common Stock issuable upon conversion of $1,000 Principal Amount at Maturity of Securities on that day pursuant to this paragraph 9 and Article 11 of the Indenture. Conversion Based on Credit Ratings Downgrade. Subject to the provisions of this paragraph 9 and the Indenture and notwithstanding the fact that any other condition to conversion has not been satisfied, the Securities shall be convertible into Common Stock at the election of a Holder on a Conversion Date at any time that (a) the credit rating assigned to the Securities by Moody's Investors Service Inc. and its successors ("Moody's") is Ba3 or lower or the credit rating assigned to the Securities by Standard & Poor's Credit Market Services, a division of the McGraw-Hill Companies Inc. and its successors ("Standard & Poor's") is BB or lower, or (b) the Securities are no longer rated by either or both of Moody's or Standard & Poor's, or (c) either or both of Moody's or Standard & Poor's have suspended or withdrawn their ratings of the Securities. Conversion upon Redemption. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition described herein to conversion has not been satisfied, a Holder may convert into Common Stock a Security or portion of a Security which has been called for redemption pursuant to paragraph 6 hereof, but such Securities may be surrendered for conversion only until the close of business on the second Business Day immediately preceding the Redemption Date. Conversion Upon Certain Distributions. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition to conversion has not been satisfied, in the event that the Company declares a dividend or distribution described in Section 11.07 of the Indenture, or a dividend or a distribution described in Section 11.08 of the Indenture and, in the case of a dividend or distribution described in Section 11.08 of the Indenture, the sum of (a) the fair market value, per share, of such dividend or distribution per share of Common Stock, and (b) the quotient of (1) the amount of Contingent Cash Interest paid on the Securities during the Ex-Dividend Measurement Period divided by (2) the number of shares of Common Stock issuable upon conversion of Securities at the Conversion Rate in effect at the Ex-Dividend Time, as determined in the Indenture, exceeds 15% of the Sale Price of the Common Stock on the Business Day immediately preceding the date of declaration for such dividend or distribution, the Securities may be surrendered for conversion beginning on the date the Company gives notice to the Holders of such right, which shall not be less than 20 days prior to the Ex-Dividend Time for such dividend or distribution, and Securities may be surrendered for conversion at any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such dividend or distribution will not take place. Conversion Upon Occurrence of Certain Corporate Transactions. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition described herein to conversion has not been satisfied, in the event the Company is a party to a consolidation, merger or binding share exchange pursuant to which the Common Stock would be converted into cash, securities or other property as set forth in Section 11.14 of the Indenture, the Securities may be surrendered for conversion at any time from and after the date which is 15 days prior to the date announced by the Company as the anticipated effective time until 15 days after the actual effective date of such transaction, and at the effective time of such transaction the right to convert a Security into Common Stock will be deemed to have changed into a right to convert it into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its Security immediately prior to the transaction. A Security in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. The initial Conversion Rate is 27.0517 shares of Common Stock per $1,000 Principal Amount at Maturity, subject to adjustment in the case of certain events described in the Indenture. The Company will deliver cash or a check in lieu of any fractional share of Common Stock. The ability to surrender Securities for conversion will expire at the close of business on May 11, 2033. In the event the Company exercises its option pursuant to Section 10.01 of the Indenture to have interest in lieu of Original Issue Discount or cash interest accrue on the Security following a Tax Event, the Holder will be entitled on conversion to receive the same number of shares of Common Stock such Holder would have received if the Company had not exercised such option. Accrued and unpaid interest in lieu of Original Issue Discount and cash interest, including Contingent Cash Interest, if any, will not be paid on Securities that are converted following a Tax Event; provided, however, that Securities surrendered for conversion during the period, in the case of interest in lieu of Original Issue Discount, from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date, shall be entitled to receive such interest, in lieu of Original Issue Discount, payable on such Securities on the corresponding Interest Payment Date and (except Securities with respect to which the Company has mailed a notice of redemption) Securities surrendered for conversion during such periods must be accompanied by payment of an amount equal to the interest in lieu of Original Issue Discount with respect thereto that the registered Holder is to receive. To convert a Security, a Holder must (a) complete and manually sign the conversion notice (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (b) surrender the Security to the Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (d) pay any transfer or similar taxes, if required. A Holder may convert a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Stock except as provided in the Indenture. On conversion of a Security, accrued Original Issue Discount and any accrued and unpaid cash interest (or interest if the Company has exercised its option provided for in paragraph 11 hereof), including Contingent Cash Interest, attributable to the period from the Issue Date (or, if the Company has exercised the option referred to in paragraph 11 hereof, the later of (x) the date of such exercise and (y) the date on which interest was last paid) through the Conversion Date shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through the delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the terms hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for Original Issue Discount and any accrued and unpaid cash interest (or interest, if the Company has exercised its option provided for in paragraph 11 hereof), including Contingent Cash Interest, accrued through the Conversion Date, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. The Conversion Rate will be adjusted in accordance with Article 11 of the Indenture for dividends or distributions on Common Stock payable in Common Stock or other Capital Stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase Common Stock for a period expiring within 60 days of the Issue Date at less than the Sale Price of the Common Stock at the Time of Determination; and distributions to such holders of assets or debt securities of the Company or certain rights to purchase securities of the Company (excluding certain cash dividends or distributions) and certain rights pursuant to shareholder rights plans. The Company from time to time may voluntarily increase the Conversion Rate. If the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of its assets, or upon certain distributions described in the Indenture, the right to convert a Security into Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another person. 10. [INTENTIONALLY OMITTED.] 11. Tax Event. (a) From and after (i) the date (the "Tax Event Date") of the occurrence of a Tax Event and (ii) the date the Company exercises the option provided for in this paragraph 11, whichever is later (the "Option Exercise Date"), at the option of the Company, interest in lieu of future Original Issue Discount shall accrue at the rate of 2.75% per annum on a principal amount per Note (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued through the Option Exercise Date and shall be payable semiannually on May 13 and November 13 of each year (each an "Interest Payment Date") to Holders of record at the close of business on each April 28 and October 29, respectively, (each a "Regular Record Date") immediately preceding such Interest Payment Date. Interest will be computed on a semiannual bond equivalent basis using a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Option Exercise Date. (b) Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Security is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose. Each installment of interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States. 12. Defaulted Interest. Except as otherwise specified with respect to the Securities, any Defaulted Interest on any Security shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date or accrual date, as the case may be, and such Defaulted Interest shall be paid by the Company as provided for in Section 12.02 of the Indenture. 13. Denominations; Transfer; Exchange. The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount at Maturity and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. 14. Persons Deemed Owners. The registered Holder of this Security may be treated as the owner of this Security for all purposes. 15. Unclaimed Money or Securities. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property laws. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 16. Amendment; Waiver. Subject to certain exceptions set forth in the Indenture, (a) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding and (b) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 or Section 11.14 of the Indenture, to secure the Company's obligations under this Security or to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred, to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, or as necessary in connection with the registration of the Securities under the Securities Act or to make any change that does not adversely affect the rights of any Holders. 17. Defaults and Remedies. Under the Indenture, Events of Default include (a) default in payment of any cash interest (including any interest which becomes payable after the Securities have been converted to notes paying semiannual interest following the occurrence of a Tax Event) or any Contingent Cash Interest and such default continues for 30 days; (b) default in payment of the Principal Amount at Maturity (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount), Issue Price plus accrued Original Issue Discount or cash interest, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, in respect of the Securities when the same becomes due and payable; (c) failure by the Company to comply with other agreements in the Indenture or the Securities, subject to notice and lapse of time; (d) default in the payment of any principal when due or resulting in acceleration of other indebtedness of the Company or any Subsidiary for borrowed money where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $50,000,000, and such acceleration has not been rescinded or annulled within a period of 10 days after receipt by the Company of a Notice of Default, subject to notice and lapse of time; provided, however, that if any such default shall be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; (e) certain events of bankruptcy or insolvency; and (f) final unsatisfied judgments not covered by insurance aggregating in excess of $100,000,000 rendered against the Company or any Subsidiary and not stayed, bonded or discharged within 60 days. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding, may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Issue Price plus Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest) on the Securities becoming due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of amounts specified in clause (a) or (b) above) if it determines that withholding notice is in their interests. 18. Trustee Dealings with the Company. Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 19. No Recourse Against Others. A director, officer, employee, agent, representative, stockholder or equity holder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 20. Authentication. This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 21. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 22. GOVERNING LAW. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ---------------------- The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: RPM International Inc. P.O. Box 777 2628 Pearl Road Medina, Ohio 44528 Attention: General Counsel
ASSIGNMENT FORM CONVERSION NOTICE To assign this Security, fill in the form To convert this Security into Common Stock below: of the Company, check the box: [ ] I or we assign and transfer this Security to To convert only part of this Security, state the Principal Amount at Maturity to be ____________________________________________ converted (which must be $1,000 or an integral multiple of $1,000): ____________________________________________ $___________________________________________ (Insert assignee's soc. sec. or tax ID no.) If you want the stock certificate made out in ____________________________________________ another person's name, fill in the form below: ____________________________________________ ____________________________________________ ____________________________________________ (Print or type assignee's name, address and ____________________________________________ zip code) (Insert other person's soc. sec. or tax ID no.) and irrevocably appoint ____________________________________________ _____________________ agent to transfer ____________________________________________ this Security on the books of the Company. The agent may substitute another to act for ____________________________________________ him. ____________________________________________ (Print or type other person's name, address and zip code)
________________________________________________________________________________ Date: _____________________ Your Signature:_____________________________________ ________________________________________________________________________________ (Sign exactly as your name appears on the other side of this Security) EX-4.9 4 l02719aexv4w9.txt EX-4.9 INDENTURE EXHIBIT 4.9 EXECUTION COPY ---------------------------------------------------------- RPM INTERNATIONAL INC., ISSUER AND THE BANK OF NEW YORK, TRUSTEE Senior Convertible Notes due 2033 ---------------------------------------------------------- INDENTURE Dated as of May 13, 2003 ---------------------------------------------------------- CROSS REFERENCE TABLE* TIA Section................................................... Indenture Section 310(a)(1)..................................................... 7.10 (a)(2)..................................................... 7.10 (a)(3)..................................................... N.A. (a)(4)..................................................... N.A. (b)........................................................ 7.08; 7.10 (c)........................................................ N.A. 311(a)........................................................ 7.11 (b)........................................................ 7.11 (c)........................................................ N.A. 312(a)........................................................ 2.05 (b)........................................................ 15.03 (c)........................................................ 15.03 313(a)........................................................ 7.06 (b)(1)..................................................... N.A. (b)(2)..................................................... 7.06 (c)........................................................ 15.02 (d)........................................................ 7.06 314(a)........................................................ 4.02; 4.03; 15.02 (b)........................................................ N.A. (c)(1)..................................................... 15.04 (c)(2)..................................................... 15.04 (c)(3)..................................................... N.A. (d)........................................................ N.A. (e)........................................................ 15.05 (f)........................................................ N.A. 315(a)........................................................ 7.01 (b)........................................................ 7.05; 15.02 (c)........................................................ 7.01 (d)........................................................ 7.01 (e)........................................................ 6.11 316(a) (last sentence)........................................ 2.08 (a)(1)(A).................................................. 6.05 (a)(1)(B).................................................. 6.04 (a)(2)..................................................... N.A. (b)........................................................ 6.07 317(a)(1)..................................................... 6.08 (a)(2)..................................................... 6.09 (b)........................................................ 2.04 318(a)........................................................ 15.01
N.A. means Not Applicable. - ---------------------- * Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS*
Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions................................................................. 5 SECTION 1.02 Other Definitions........................................................... 11 SECTION 1.03 Incorporation by Reference of the TIA....................................... 12 SECTION 1.04 Rules of Construction....................................................... 12 SECTION 1.05 Acts of Holders............................................................. 13 ARTICLE 2 THE SECURITIES SECTION 2.01 Form and Dating............................................................. 14 SECTION 2.02 Execution and Authentication................................................ 16 SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent........ 16 SECTION 2.04 Paying Agent to Hold Money and Securities in Trust.......................... 17 SECTION 2.05 Securityholder Lists........................................................ 17 SECTION 2.06 Transfer and Exchange....................................................... 17 SECTION 2.07 Replacement Securities...................................................... 19 SECTION 2.08 Outstanding Securities; Determinations of Holders' Action................... 20 SECTION 2.09 Temporary Securities........................................................ 21 SECTION 2.10 Cancellation................................................................ 21 SECTION 2.11 Persons Deemed Owners....................................................... 21 SECTION 2.12 Global Securities........................................................... 21 SECTION 2.13 CUSIP Numbers............................................................... 26 ARTICLE 3 REDEMPTION AND PURCHASES SECTION 3.01 Right to Redeem; Notices to Trustee......................................... 26 SECTION 3.02 Selection of Securities to Be Redeemed...................................... 27 SECTION 3.03 Notice of Redemption........................................................ 27 SECTION 3.04 Effect of Notice of Redemption.............................................. 28 SECTION 3.05 Deposit of Redemption Price................................................. 28 SECTION 3.06 Securities Redeemed in Part................................................. 29 SECTION 3.07 Conversion Arrangement on Call for Redemption............................... 29 SECTION 3.08 Purchase of Securities at Option of the Holder.............................. 29 SECTION 3.09 Purchase of Securities at Option of the Holder upon Change in Control....... 36 SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase Notice.............. 39 SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase Price............... 40 SECTION 3.12 Securities Purchased in Part................................................ 41
- ---------------------- * Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. i SECTION 3.13 Repayment to the Company.................................................... 41 ARTICLE 4 COVENANTS SECTION 4.01 Payment of Securities....................................................... 41 SECTION 4.02 SEC and Other Reports....................................................... 42 SECTION 4.03 Compliance Certificate...................................................... 42 SECTION 4.04 Further Instruments and Acts................................................ 42 SECTION 4.05 Maintenance of Office or Agency............................................. 42 SECTION 4.06 Delivery of Certain Information............................................. 44 SECTION 4.07 Covenant to Comply With Securities Laws Upon Purchase of Securities......... 44 SECTION 4.08 Waiver of Compliance........................................................ 44 SECTION 4.09 Calculation of Original Issue Discount...................................... 44 SECTION 4.10 Liquidated Damages Notice................................................... 44 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When Company May Merge or Transfer Assets................................... 45 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default........................................................... 46 SECTION 6.02 Acceleration................................................................ 47 SECTION 6.03 Other Remedies.............................................................. 48 SECTION 6.04 Waiver of Past Defaults..................................................... 48 SECTION 6.05 Control by Majority......................................................... 49 SECTION 6.06 Limitation on Suits......................................................... 49 SECTION 6.07 Rights of Holders to Receive Payment........................................ 50 SECTION 6.08 Collection Suit by Trustee.................................................. 50 SECTION 6.09 Trustee May File Proofs of Claim............................................ 50 SECTION 6.10 Priorities.................................................................. 51 SECTION 6.11 Undertaking for Costs....................................................... 51 SECTION 6.12 Waiver of Stay, Extension or Usury Laws..................................... 51 ARTICLE 7 TRUSTEE SECTION 7.01 Duties of Trustee........................................................... 52 SECTION 7.02 Rights of Trustee........................................................... 53 SECTION 7.03 Individual Rights of Trustee................................................ 54 SECTION 7.04 Trustee's Disclaimer........................................................ 54 SECTION 7.05 Notice of Defaults.......................................................... 55 SECTION 7.06 Reports by Trustee to Holders............................................... 55 SECTION 7.07 Compensation and Indemnity.................................................. 55 SECTION 7.08 Replacement of Trustee...................................................... 56
ii SECTION 7.09 Successor Trustee by Merger................................................. 57 SECTION 7.10 Eligibility; Disqualification............................................... 57 SECTION 7.11 Preferential Collection of Claims Against Company........................... 57 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.01 Discharge of Liability on Securities........................................ 58 SECTION 8.02 Repayment to the Company.................................................... 58 ARTICLE 9 AMENDMENTS SECTION 9.01 Without Consent of Holders.................................................. 58 SECTION 9.02 With Consent of Holders..................................................... 59 SECTION 9.03 Compliance with TIA......................................................... 60 SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions...................... 60 SECTION 9.05 Notation on or Exchange of Securities....................................... 60 SECTION 9.06 Trustee to Sign Supplemental Indentures..................................... 60 SECTION 9.07 Effect of Supplemental Indentures........................................... 60 ARTICLE 10 SPECIAL TAX EVENT CONVERSION SECTION 10.01 Optional Conversion to Semiannual Coupon Note upon Tax Event................ 60 ARTICLE 11 CONVERSION SECTION 11.01 Conversion Privilege........................................................ 61 SECTION 11.02 Conversion Procedure........................................................ 63 SECTION 11.03 Fractional Shares........................................................... 64 SECTION 11.04 Taxes on Conversion......................................................... 64 SECTION 11.05 Company to Provide Stock.................................................... 65 SECTION 11.06 Adjustment for Change in Capital Stock...................................... 65 SECTION 11.07 Adjustment for Rights Issue................................................. 66 SECTION 11.08 Adjustment for Other Distributions.......................................... 67 SECTION 11.09 When Adjustment May Be Deferred............................................. 70 SECTION 11.10 When No Adjustment Required................................................. 70 SECTION 11.11 Notice of Adjustment........................................................ 71 SECTION 11.12 Voluntary Increase.......................................................... 71 SECTION 11.13 Notice of Certain Transactions.............................................. 71 SECTION 11.14 Reorganization of Company; Special Distributions............................ 71 SECTION 11.15 Company Determination Final................................................. 73 SECTION 11.16 Trustee's Adjustment Disclaimer............................................. 73 SECTION 11.17 Simultaneous Adjustments.................................................... 73 SECTION 11.18 Successive Adjustments...................................................... 73 SECTION 11.19 Rights Issued in Respect of Common Stock Issued Upon Conversion............. 73
iii ARTICLE 12 PAYMENT OF INTEREST SECTION 12.01 Interest Payments........................................................... 73 SECTION 12.02 Defaulted Interest.......................................................... 74 SECTION 12.03 Interest Rights Preserved................................................... 75 ARTICLE 13 CONTINGENT CASH INTEREST SECTION 13.01 Contingent Cash Interest.................................................... 75 SECTION 13.02 Payment of Contingent Cash Interest; Contingent Cash Interest Rights Preserved................................................................... 76 SECTION 13.03 Bid Solicitation Agent...................................................... 76 ARTICLE 14 TAX MATTERS SECTION 14.01 Tax Treatment............................................................... 76 SECTION 14.02 Comparable Yield and Projected Payment Schedule............................. 77 ARTICLE 15 MISCELLANEOUS SECTION 15.01 TIA Controls................................................................ 78 SECTION 15.02 Notices..................................................................... 78 SECTION 15.03 Communication by Holders with Other Holders................................. 79 SECTION 15.04 Certificate and Opinion as to Conditions Precedent.......................... 79 SECTION 15.05 Statements Required in Certificate or Opinion............................... 79 SECTION 15.06 Separability Clause......................................................... 80 SECTION 15.07 Rules by Trustee, Paying Agent, Conversion Agent and Registrar.............. 80 SECTION 15.08 Calculations................................................................ 80 SECTION 15.09 Legal Holidays.............................................................. 80 SECTION 15.10 GOVERNING LAW............................................................... 80 SECTION 15.11 No Recourse Against Others.................................................. 80 SECTION 15.12 Successors.................................................................. 80 SECTION 15.13 Multiple Originals.......................................................... 80
Appendix 1 Projected Payment Schedule Exhibit A-1 Form of Face of Global Security Exhibit A-2 Form of Certificated Security Exhibit B-1 Transfer Certificate Exhibit B-2 Form of Letter to be Delivered by Accredited Investors iv INDENTURE dated as of May 13, 2003 by and among RPM INTERNATIONAL INC., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of Senior Convertible Notes due 2033 (collectively, the "Securities" and each, individually, a "Security") having the terms, tenor, amount and other provisions hereinafter set forth, and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when the Securities are duly executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions. "144A Global Security" means a permanent Global Security in the form of the Security attached hereto as Exhibit A-1, and that is deposited with and registered in the name of the Depositary, representing Securities sold in reliance on Rule 144A under the Securities Act. "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Average Sale Price" means the average of the Sale Prices of the Common Stock for the shorter of: 5 (a) 30 consecutive Trading Days ending on the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated, or (b) the period (x) commencing on the date next succeeding the first public announcement of (i) the issuance of rights, warrants or options or (ii) the distribution, in each case, in respect of which the Average Sale Price is being calculated and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not Trading Days), or (c) the period, if any, (x) commencing on the date next succeeding the Ex-Dividend Time with respect to the next preceding (i) issuance of rights, warrants or options or (ii) distribution, in each case, for which an adjustment is required by the provisions of Section 11.06(c), 11.07 or 11.08 hereof and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not Trading Days). In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 11.06(a), (b), (d) or (e) hereof applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a manner determined by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of the Common Stock during such period. "Bankruptcy Law" means title 11, United States Code, or any similar Federal or state law for the relief of debtors. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of such board. "Business Day" means each day of the year other than a Saturday or a Sunday or other day on which banking institutions in The City of New York are required or authorized to close. "Capital Stock" for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock or other equity issued by that corporation. "Certificated Securities" means any of the Securities that are in the form of the Securities attached hereto as Exhibit A-2. 6 "Common Stock" shall mean the shares of Common Stock, $.01 par value per share, of the Company as it exists on the date of this Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed. "Company" means the party named as the "Company" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any two Officers. "Contingent Cash Interest" shall mean such cash interest payable, as described in Article 13 hereof. "Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street - 8W, New York, NY 10286, Attention: Corporate Trust Administration or such other address as the Trustee may designate from time to time by notice to the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Company). "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. "Debt" means with respect to any Person at any date, without duplication, obligations (other than nonrecourse obligations) for borrowed money or evidenced by bonds, debentures, notes or similar instruments. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Ex-Dividend Time" means with respect to stockholders of the Company entitled to receive rights, warrants or options or a distribution, the time immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on Nasdaq or such other national or regional exchange or market on which the Common Stock is then listed or quoted. "Global Securities" means any of the Securities that are in the form of the Securities attached hereto as Exhibit A-1, and to the extent that such Securities are required to bear the Legend required by Section 2.06 hereof, such Securities will be in the form of a 144A Global Security. "Holder" or "Securityholder" means a person in whose name a Security is registered on the Registrar's books. 7 "Indenture" means this instrument, as amended or supplemented from time to time in accordance with the terms hereof, including, if applicable, the provisions of the TIA that are deemed to be a part hereof. "Institutional Accredited Investor Security" means a Security in the form of the Security attached hereto as Exhibit A-2, representing Securities sold to Institutional Accredited Investors. "Issue Date" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security. "Issue Price" of any Security means, in connection with the original issuance of such Security, the initial issue price at which the Security is sold as set forth on the face of the Security. "Nasdaq" means the Nasdaq Stock Market's National Market. "NYSE" means the New York Stock Exchange. "Officer" means the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of the Company. "Officers' Certificate" means a written certificate signed in the name of the Company by any two Officers, and delivered to the Trustee. An Officers' Certificate given pursuant to Section 4.03 hereof shall be signed by the principal executive, financial or accounting Officer of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee. "Original Issue Discount" of any Security means the difference between the Issue Price and the Principal Amount at Maturity of the Security as set forth on the face of the Security, which shall accrue as set forth in the form of Security. "person" or "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Principal Amount at Maturity" of a Security means the principal amount at maturity as set forth on the face of the Security. "Record Date" means either a Regular Record Date or a Contingent Cash Interest Record Date. 8 "Redemption Date" or "redemption date" means the date specified for redemption of the Securities in accordance with the terms of the Securities and this Indenture. "Redemption Price" or "redemption price" shall have the meaning set forth in paragraph 6 of the Securities. "Regular Cash Dividends" means quarterly or other periodic cash dividends on the Common Stock as declared by the Board of Directors as part of its cash dividend payment practices that are not designated by the Board of Directors as extraordinary or special or other non-recurring dividends. "Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Security" means a Security required to bear the restrictive legend set forth in the form of Security set forth in Exhibits A-1 and A-2 of this Indenture. "Rule 144" means Rule 144 under the Securities Act (or any successor rule having substantially similar provisions), as it may be amended from time to time. "Rule 144A" means Rule 144A under the Securities Act (or any successor rule having substantially similar provisions), as it may be amended from time to time. "Sale Price" of Capital Stock on any date means (a) the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in the composite transactions for the principal United States securities exchange on which the Capital Stock is traded or, if the Capital Stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated or (b) in the absence of such quotation, such price as the Company shall reasonably determine on the basis of such quotations as most accurately reflecting the price that a fully-informed buyer, acting on his own accord, would pay to a fully-informed seller, acting on his own accord in an arms-length transaction, for a share of such Capital Stock. "SEC" means the United States Securities and Exchange Commission. "Security" or "Securities" means any of the Company's Senior Convertible Notes due 2033, as amended or supplemented from time to time, issued under this Indenture. "Securityholder" or "Holder" means a person in whose name a Security is registered on the Registrar's books. 9 "Stated Maturity", when used with respect to any Security, means the date specified in such Security as the fixed date on which an amount equal to the Principal Amount at Maturity of such Security is due and payable. "Subsidiary" means (a) a corporation, a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly owned by the Company, by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, (b) a partnership in which the Company or a Subsidiary of the Company holds a majority interest in the equity capital or profits of such partnership, or (c) any other person (other than a corporation or a partnership) in which the Company, a Subsidiary of the Company or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or other governing body of such person. "Tax Event" means that the Company shall have received an opinion from independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application (including through litigation or a settlement involving the Company) of such laws or regulations by any legislative body, court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, there is more than an insubstantial risk that accrued Original Issue Discount payable on the Securities either (i) would not be deductible on a current accrual basis or (ii) would not be deductible under any other method, in either case in whole or in part, by the Company (by reason of deferral, disallowance, or otherwise) for United States federal income tax purposes. "TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Time of Determination" means the time and date of the earlier of (a) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 11.07 or 11.08 hereof applies and (b) the Ex-Dividend Time. "Trading Day" means a day during which trading in securities generally occurs on the NYSE or, if the Common Stock is not listed on the NYSE, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Common Stock is then traded. "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, 10 thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. SECTION 1.02 Other Definitions.
Defined in Term Section - ---- ------- "Act"................................................................................ 1.05(a) "Agent Members"...................................................................... 2.12(e) "Associate".......................................................................... 3.09(a) "Average Security Market Price"...................................................... 13.01 "beneficial owner"................................................................... 3.09(a) "Bid Solicitation Agent"............................................................. 2.03 "cash"............................................................................... 3.08(b) "Change in Control".................................................................. 3.09(a) "Change in Control Purchase Date".................................................... 3.09(a) "Change in Control Purchase Notice".................................................. 3.09(c) "Change in Control Purchase Price"................................................... 3.09(a) "Common Stock Record Date"........................................................... 13.01 "Company Notice"..................................................................... 3.08(e) "Company Notice Date"................................................................ 3.08(c) "Contingent Cash Interest Payment Date".............................................. 13.02 "Contingent Cash Interest Record Date"............................................... 13.02 "Conversion Agent"................................................................... 2.03 "Conversion Date".................................................................... 11.02 "Conversion Rate".................................................................... 11.01 "Defaulted Interest"................................................................. 12.02 "Depositary"......................................................................... 2.01(a) "DTC"................................................................................ 2.01(a) "Event of Default"................................................................... 6.01 "Ex-Dividend Measurement Period"..................................................... 11.08 "Exchange Act"....................................................................... 3.08(d) "Extraordinary Cash Dividend"........................................................ 11.08 "Five-Trading-Day Measurement Period"................................................ 13.01 "Institutional Accredited Investors"................................................. 2.01(b) "Interest Payment Date".............................................................. 10.01 "Legal Holiday"...................................................................... 15.09 "Legend"............................................................................. 2.06(f) "Liquidated Damages Notice".......................................................... 4.10 "Market Price"....................................................................... 3.08(d) "Notice of Default".................................................................. 6.01 "Option Exercise Date"............................................................... 10.01 "Paying Agent"....................................................................... 2.03 "Protected Purchaser"................................................................ 2.07 "Purchase Date"...................................................................... 3.08(a) "Purchase Notice".................................................................... 3.08(a)
11 "Purchase Price"..................................................................... 3.08(a) "QIBs"............................................................................... 2.01(a) "Registrar".......................................................................... 2.03 "Registration Rights Agreement"...................................................... 4.10 "Regular Record Date"................................................................ 10.01 "Relevant Cash Dividends"............................................................ 11.08 "Relevant Value"..................................................................... 13.01 "Restated Principal Amount".......................................................... 10.01 "Rights"............................................................................. 11.19 "Rights Agreement"................................................................... 11.19 "Rule 144A Information".............................................................. 4.06 "Securities Act"..................................................................... 3.08(d) "Semiannual Period".................................................................. 13.01 "Special Record Date"................................................................ 12.02 "Tax Event Date"..................................................................... 10.01 "Tax Original Issue Discount"........................................................ 14.02
SECTION 1.03 Incorporation by Reference of the TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04 Rules of Construction. Unless the context otherwise requires: (a) a defined term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles as in effect from time to time; 12 (c) "or" is not exclusive; (d) "including" means including, without limitation; and (e) words in the singular include the plural, and words in the plural include the singular. SECTION 1.05 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent (either of which may be in electronic form) shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing or delivering such instrument or writing acknowledged to such officer the execution thereof. When such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the register maintained by the Registrar. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of the Board of Directors, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of 13 business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided, that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture within six months after the record date. ARTICLE 2 THE SECURITIES SECTION 2.01 Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1 and A-2 attached hereto, which are a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. (a) 144A Global Securities. Securities offered and sold within the United States to "qualified institutional buyers" as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued initially in the form of a 144A Global Security, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for the Depositary and registered in the name of The Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any successor thereto, and any such nominee being hereinafter referred to as the "Depositary") duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate Principal Amount at Maturity of the 144A Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary as hereinafter provided. (b) Institutional Accredited Investor Securities. Except as provided in Section 2.12(a)(i) and in this Section 2.01 or 2.06, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of Certificated Securities. Securities offered and sold within the United States to institutional "accredited investors" as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act ("Institutional Accredited Investors") shall be issued, if in the form of Certificated Securities, initially in the form of an Institutional Accredited Investor Security, duly executed by the Company and authenticated by the Trustee as hereinafter provided. (c) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate Principal Amount at Maturity of outstanding Securities from time to time endorsed thereon and that the aggregate Principal Amount at Maturity of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and conversions. Any adjustment of the aggregate Principal Amount at Maturity of a Global Security to reflect the amount of any increase or decrease in the Principal Amount at Maturity of 14 outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary. (d) Book-Entry Provisions. This Section 2.01(d) shall apply only to Global Securities deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(d), authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depositary, (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Trustee as custodian for such Depositary and (iii) shall bear legends substantially to the following effect: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS, IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (e) Certificated Securities. Securities not issued as interests in the Global Securities will be issued in certificated form substantially in the form of Exhibit A-2 attached hereto. (f) U.S. Tax Legend. All Securities shall bear the following legend: THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE ISSUE PRICE OF THIS SECURITY IS $505.19 PER $1,000 OF PRINCIPAL AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS INDETERMINABLE AS OF THE ISSUE DATE; THE ISSUE DATE OF THIS SECURITY IS MAY 13, 2003; AND THE YIELD TO MATURITY FOR THE 15 PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 5.05% PER ANNUM, CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS. SECTION 2.02 Execution and Authentication. The Securities shall be executed on behalf of the Company by any Officer. The signature of the Officer on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of an individual who was at the time of the execution of the Securities the proper Officer of the Company shall bind the Company, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Securities or did not hold such office at the date of such Securities. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory of the Trustee and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee shall authenticate and deliver Securities for original issue in an aggregate Principal Amount at Maturity of up to $297,000,000 upon a Company Order without any further action by the Company. The aggregate Principal Amount at Maturity of Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence, except as provided in Section 2.07 hereof The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of Principal Amount at Maturity and any integral multiple thereof. The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing Holders. SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Company shall also appoint a bid solicitation agent (the "Bid Solicitation Agent") to act pursuant to Article 13. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 4.05 hereof. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.05 hereof. The Company shall enter into an appropriate agency agreement with any Registrar or co-registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent (other than 16 the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07 hereof. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar. None of the Company or any Subsidiary or any Affiliate of the Company or any Subsidiary may act as Bid Solicitation Agent. The Company initially appoints the Trustee as Registrar, Conversion Agent, Paying Agent and Bid Solicitation Agent in connection with the Securities. SECTION 2.04 Paying Agent to Hold Money and Securities in Trust. Except as otherwise provided herein, not later than 10:00 a.m., New York City time, on each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or Common Stock sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money and Common Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Common Stock so held in trust. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money and Common Stock held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money and Common Stock held by it to the Trustee and to account for any funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or Common Stock. SECTION 2.05 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on April 28 and October 29 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06 Transfer and Exchange. Subject to Section 2.12 hereof, (a) Upon surrender for registration of transfer of any Security, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at the office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.03 hereof, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company or the Trustee may require 17 payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the registration of transfer or exchange of the Securities from the Securityholder requesting such registration of transfer or exchange. At the option of the Holder, Certificated Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be purchased in part, the portion thereof not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. (b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.12 hereof and this Section 2.06(b). Transfers of a Global Security shall be limited to transfers of such Global Security in whole, or in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (c) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities. (d) Any Registrar appointed pursuant to Section 2.03 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon registration of transfer or exchange of Securities. (e) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made. (f) If Securities are issued upon the registration of transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the form of Security attached hereto as Exhibits A-1 and A-2 setting forth such restrictions (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which shall include an Opinion of Counsel, as may be reasonably required by the Company and the 18 Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 or that such Securities are not "restricted" within the meaning of Rule 144. Upon (i) provision of such satisfactory evidence, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, upon receipt of a Company Order, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by an Affiliate of the Company, the Company shall use its best efforts to reinstate the Legend. The Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.07 Replacement Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser within the meaning of Article 8 of the Uniform Commercial Code (a "Protected Purchaser"), the Company shall execute and upon receipt of a Company Order, the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount at Maturity, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be. Upon the issuance of any new Securities under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. 19 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.08 Outstanding Securities; Determinations of Holders' Action. Securities outstanding at any time are all the Securities authenticated by the Trustee, except for those cancelled by it, those paid pursuant to Section 2.07 or 2.10 hereof and delivered to it for cancellation and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount at Maturity of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9). If a Security is replaced pursuant to Section 2.07 hereof, the replaced Security ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to each of them that the replaced Security is held by a Protected Purchaser unaware that such Security has been replaced, in which case the replacement security shall be deemed not to be outstanding. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following the Purchase Date or a Change in Control Purchase Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then immediately after such Redemption Date, Purchase Date, Change in Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and Original Issue Discount and interest (including Contingent Cash Interest), if any, or cash interest on such Securities shall cease to accrue; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture. If a Security is converted in accordance with Article 11, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and Original Issue Discount and interest (including Contingent Cash Interest), if any, or cash interest shall cease to accrue on such Security. 20 SECTION 2.09 Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon a Company Order, the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.03, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and upon Company Order the Trustee shall authenticate and deliver in exchange therefor a like Principal Amount at Maturity of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.10 Cancellation. All Securities surrendered for payment, purchase by the Company pursuant to Article 3 hereof, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 11 hereof. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee's customary procedures. SECTION 2.11 Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of the Security or the payment of any Redemption Price, Purchase Price or Change in Control Purchase Price in respect thereof and interest (including Contingent Cash Interest), if any, or cash interest thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 2.12 Global Securities. Notwithstanding any other provisions of this Indenture or the Securities, (i) transfers of a Global Security, in whole or in part, shall be made only in accordance with Sections 2.06 and 2.12(a)(i) hereof, (ii) transfer of a beneficial interest in a Global Security for a Certificated Security shall comply with Sections 2.06 and 2.12(a)(i) hereof, and (iii) transfers of a Certificated Security shall comply with Sections 2.06 21 and 2.12(a)(ii) hereof and transfer of a Certificated Security for a Beneficial Interest in a Global Security shall comply with Sections 2.06 and 2.12(a)(iii) hereof. (a) Transfer of Global Security. A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided, that this Section 2.12(a) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Nothing in this Section 2.12(a) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Security effected in accordance with the other provisions of this Section 2.12(a). (i) Restrictions on Transfer of a Beneficial Interest in a Global Security for a Certificated Security. A beneficial interest in a Global Security may not be exchanged for a Certificated Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a request for transfer of a beneficial interest in a Global Security in accordance with Applicable Procedures for a Certificated Security in the form satisfactory to the Trustee, together with: (A) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1 attached hereto, and, if requested by the Company or the Registrar, certification in the form set forth in Exhibit B-2 attached hereto, that such beneficial interest in the Global Security is being transferred to an Institutional Accredited Investor that satisfies the definitions set forth in subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act; (B) written instructions to the Trustee to make, or direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect a decrease in the aggregate Principal Amount at Maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such decrease; and (C) if the Company or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Legend, then the Trustee shall cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate Principal Amount at Maturity of Securities represented by the Global Security to be decreased by the aggregate Principal Amount at Maturity of the Certificated Security to be issued, shall authenticate and deliver such Certificated Security and shall debit or cause to be debited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the Principal Amount at Maturity of the Certificated Security so issued. 22 (ii) Transfer and Exchange of Certificated Securities. When Certificated Securities are presented to the Registrar with a request: (x) to register the transfer of such Certificated Securities; or (y) to exchange such Certificated Securities for an equal Principal Amount at Maturity of Certificated Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Securities surrendered for registration of transfer or exchange: (A) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (B) so long as such Securities are Restricted Securities, such Securities are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or, if being transferred pursuant to clause (1), (2) or (3) of this Section 2.12(a)(ii)(B), are accompanied by the additional information and documents specified in each such clause, as applicable: (1) if such Certificated Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (2) if such Certificated Securities are being transferred to the Company, a certification to that effect; or (3) if such Certificated Securities are being transferred pursuant to an exemption from registration (1) a certification to that effect (in the form set forth in Exhibit B-1 and B-2 attached hereto, if applicable) and (2) if the Company or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Legend. (iii) Restrictions on Transfer of a Certificated Security for a Beneficial Interest in a Global Security. A Certificated Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: 23 (A) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1 attached hereto, that such Certificated Security is being transferred to a QIB in accordance with Rule 144A; and (B) written instructions directing the Trustee to make, or to direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate Principal Amount at Maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase; and then the Trustee shall cancel such Certificated Security and cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate Principal Amount at Maturity of Securities represented by the Global Security to be increased by the aggregate Principal Amount at Maturity of the Certificated Security to be exchanged, and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the Principal Amount at Maturity of the Certificated Security so cancelled. If no Global Securities are then outstanding, the Company shall issue and the Trustee, upon receipt of a Company Order, shall authenticate a new Global Security in the appropriate Principal Amount at Maturity. (b) Subject to the succeeding paragraph, every Security shall be subject to the restrictions on transfer provided in the Legend including the requirement of the delivery of an Opinion of Counsel, if so provided. Whenever any Restricted Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B-1 attached hereto, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate. (c) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 or, if earlier, upon the expiration of the holding period applicable to sales thereof under paragraph (k) of Rule 144. Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144, by an Opinion of Counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company, the Trustee and the Registrar and in form acceptable to the Company, to the effect that the transfer of such Security has been made in compliance with Rule 144), be exchanged for a new Security, of like tenor and aggregate Principal Amount at Maturity, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee and the 24 Registrar shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned Opinion of Counsel or registration statement. (d) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security. (e) The provisions of clauses (i), (ii), (iii), (iv) and (v) of this Section 2.12(e) shall apply only to Global Securities: (i) Notwithstanding any other provisions of this Indenture or the Securities, except as provided in Section 2.12(a)(i) hereof, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof; provided, that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (A) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days; (B) the Company elects to discontinue use of the system of book-entry transfer through DTC (or any successor depositary); or (C) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clause (A) of this sub-section shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (B) of this sub-section may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided, that any such Security so issued that is registered in the name of a person other than the Depositary or a nominee thereof shall not be a Global Security. (ii) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate Principal Amount at Maturity equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Registrar. With regard to any Global Security to be exchanged in part, to give effect to any conversion, redemption or other disposition of such part or otherwise, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the Principal Amount at Maturity thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof. (iii) Subject to the provisions of clause (v) of this Section 2.12(e), the registered Holder may grant proxies and otherwise authorize any Person, including Agent 25 Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities. (iv) In the event of the occurrence of any of the events specified in clause (i) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons. (v) Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security. SECTION 2.13 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE 3 REDEMPTION AND PURCHASES SECTION 3.01 Right to Redeem; Notices to Trustee. The Company, at its option, may redeem the Securities in accordance with the provisions of paragraphs 6 and 8 of the Securities. Prior to May 13, 2008, the Company may not redeem the Securities. Beginning on May 13, 2008, the Company may redeem the Securities for cash in whole at any time, or in part from time to time. If the Company elects to redeem Securities pursuant to paragraph 6 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Principal Amount at Maturity of Securities to be redeemed, the Redemption Price and the amount of accrued and unpaid cash interest, if any, payable on the Redemption Date. The Company shall give the notice to the Trustee provided for in this Section 3.01 by a Company Order, at least 45 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). If fewer than all the Securities are to be redeemed, the record date 26 relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall not be less than ten days after the date of notice to the Trustee. SECTION 3.02 Selection of Securities to Be Redeemed. If less than all the outstanding Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by any other method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed). The Trustee shall make the selection at least 30 days but not more than 60 days before the Redemption Date from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the Principal Amount at Maturity of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in Principal Amounts at Maturity of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall promptly notify the Company in writing of the Securities or portions of Securities to be redeemed. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. SECTION 3.03 Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price, or if then not ascertainable, the manner of calculation thereof, and accrued and unpaid cash interest, if any, or the amount of Contingent Cash Interest, if any, payable on the Redemption Date; (c) the Conversion Rate; (d) the name and address of the Paying Agent and Conversion Agent; (e) that Securities called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date, even if not otherwise convertible at such time; (f) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities; 27 (g) if applicable, the election of the Company (which, subject to the provisions of Article 11 of the Indenture, shall be irrevocable) to deliver shares of Common Stock or to pay cash in lieu of delivery of such shares with respect to any Security that may be converted after mailing of such notice prior to the Redemption Date; (h) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and accrued and unpaid cash interest, if any, or the Redemption Price and Contingent Cash Interest, if any; (i) if fewer than all the outstanding Securities are to be redeemed, the certificate number and Principal Amounts at Maturity of the particular Securities to be redeemed; (j) that, unless the Company defaults in making payment of such Redemption Price and any cash interest which is due and payable, Original Issue Discount or cash interest, including Contingent Cash Interest and semiannual interest, will cease to accrue on and after the Redemption Date; (k) the CUSIP number of the Securities; and (l) any other information the Company desires, in its own discretion, to present. At the Company's request, the Trustee shall give the notice of redemption to Holders in the Company's name and at the Company's expense; provided, that the Company makes such request at least seven Business Days (unless a shorter period shall be satisfactory to the Trustee) prior to the date such notice of redemption must be mailed. SECTION 3.04 Effect of Notice of Redemption. Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price (together with accrued and unpaid cash interest, if any, or together with any Contingent Cash Interest, if any, to but not including the Redemption Date) stated in the notice except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price (together with accrued and unpaid cash interest, if any, or together with any Contingent Cash Interest, if any, to but not including the Redemption Date) stated in the notice. SECTION 3.05 Deposit of Redemption Price. Prior to 10:00 a.m. New York City time, on any Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of, and any accrued and unpaid interest (either cash interest or Contingent Cash Interest, if any) to but not including the Redemption Date with respect to, all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Securities pursuant to Article 11 hereof. If such money is then 28 held by the Company in trust and is not required for such purpose it shall be discharged from such trust. SECTION 3.06 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in Principal Amount at Maturity to the unredeemed portion of the Security surrendered. SECTION 3.07 Conversion Arrangement on Call for Redemption. In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment banks or other purchasers to purchase such Securities by paying to the Trustee in trust for the Securityholders, on or prior to 10:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Company for the redemption of such Securities, is not less than the Redemption Price of, and any accrued and unpaid interest (either cash interest or Contingent Cash Interest) with respect to, such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Prices of such Securities shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 11) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the second Business Day prior to the Redemption Date, subject to payment of the above amount as aforesaid. The Trustee shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Securities. Without the Trustee's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. SECTION 3.08 Purchase of Securities at Option of the Holder. (a) General. Securities shall be purchased by the Company pursuant to paragraph 7 of the Securities as of May 13, 2008, 2013, 2018, 2023 and 2028 (each, a "Purchase Date"), at the purchase price of $505.19 per $1,000 of Principal Amount at Maturity as of May 13, 2008, of $579.11 per $1,000 of Principal Amount at Maturity as of May 13, 2013, of $663.85 per $1,000 of Principal Amount at Maturity as of May 13, 2018, of $761.00 per $1,000 Principal Amount at Maturity as of May 13, 2023, and of $872.35 per $1,000 Principal Amount at Maturity as of May 13, 2028, in each case plus accrued and unpaid cash interest, if any, to the 29 Purchase Date (each, a "Purchase Price", as applicable), at the option of the Holder thereof, upon: (i) delivery to the Paying Agent, by the Holder, of a written notice of purchase (a "Purchase Notice") at any time from the opening of business on the date that is 20 Business Days prior to a Purchase Date until the close of business on such Purchase Date stating: (A) the certificate number of the Security which the Holder will deliver to be purchased, (B) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be a Principal Amount at Maturity of $1,000 or an integral multiple thereof, (C) that such Security shall be purchased as of the Purchase Date pursuant to the terms and conditions specified in paragraph 7 of the Securities and in this Indenture, and (D) in the event the Company elects, pursuant to Section 3.08(b) hereof, to pay the Purchase Price to be paid as of such Purchase Date, in whole or in part, in shares of Common Stock but such portion of the Purchase Price shall ultimately be payable to such Holder entirely in cash because any of the conditions to payment of the Purchase Price in Common Stock is not satisfied prior to the close of business on such Purchase Date, as set forth in Section 3.08(d) hereof, whether such Holder elects (1) to withdraw such Purchase Notice as to some or all of the Securities to which such Purchase Notice relates (stating the Principal Amount at Maturity and certificate numbers of the Securities as to which such withdrawal shall relate), or (2) to receive cash in respect of the entire Purchase Price for all Securities (or portions thereof) to which such Purchase Notice relates; and (ii) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.08 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company. If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 3.10 hereof, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 3.08(a)(i) hereof, such Holder shall be deemed to have elected to receive cash in respect of the Purchase Price for all Securities subject to such Purchase Notice in the circumstances set forth in such clause (D). 30 The Company shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder (together with accrued and unpaid cash interest, if any, or together with any Contingent Cash Interest, if any,) promptly following the later of the Purchase Date and the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Business Day prior to the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price. The Securities to be purchased pursuant to Section 3.08(a) hereof may be paid for, at the election of the Company, in U.S. legal tender ("cash") or Common Stock, or in any combination of cash and Common Stock, subject to the conditions set forth in Sections 3.08(c) and (d) hereof. The Company shall designate, in the Company Notice delivered pursuant to Section 3.08(e) hereof, whether the Company will purchase the Securities for cash or Common Stock, or, if a combination thereof, the percentages or amounts of the Purchase Price of Securities in respect of which it will pay in cash or Common Stock; provided, that the Company will pay cash for fractional interests in Common Stock. For purposes of determining the existence of potential fractional interests, all Securities subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Securities are purchased pursuant to this Section 3.08 shall receive the same percentage of cash or Common Stock in payment of the Purchase Price for such Securities, except (i) as provided in Section 3.08(d) hereof with regard to the payment of cash in lieu of fractional shares of Common Stock and (ii) in the event that the Company is unable to purchase the Securities of a Holder or Holders for Common Stock because any necessary qualifications or registrations of the Common Stock under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Securityholders except pursuant to this Section 3.08(b) or pursuant to Section 3.08(d) hereof in the event of a failure to satisfy, prior to the close of business on the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in Common Stock. At least three Business Days before the Company Notice Date, the Company shall deliver an Officers' Certificate to the Trustee specifying: 31 (i) the manner of payment selected by the Company, (ii) the information required by Section 3.08(e) hereof, (iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in Common Stock, that the conditions to such manner of payment set forth in Section 3.08(d) hereof have been or will be complied with, and (iv) whether the Company desires the Trustee to give the Company Notice required by Section 3.08(e) hereof. (c) Purchase with Cash. On each Purchase Date, at the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) hereof has been given, or a specified percentage thereof, may be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. If the Company elects to purchase Securities with cash, the Company Notice, as provided in Section 3.08(e) hereof, shall be sent to the Trustee and the Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company Notice Date"). (d) Payment by Issuance of Common Stock. On each Purchase Date, at the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) hereof has been given, or a specified percentage thereof, may be paid by the Company by the issuance of a number of shares of Common Stock equal to the quotient obtained by dividing (i) the amount of cash to which the Securityholders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Securities in cash by (ii) the Market Price of a share of Common Stock, subject to the next succeeding paragraph. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay cash for the current market value of the fractional share. The current market value of a fraction of a share shall be determined by multiplying the Market Price by such fraction and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Security purchased, the number of shares of Common Stock shall be based on the aggregate amount of Securities to be purchased. Upon a payment by Common Stock pursuant to the terms hereof, that portion of accrued Original Issue Discount, cash interest or Contingent Cash Interest, if any, attributable to the period from the Issue Date to the Purchase Date with respect to the purchased Security shall not be cancelled, extinguished or forfeited but rather shall be deemed paid in full to the Holder through the delivery of the Common Stock in exchange for the Security being purchased pursuant to the terms hereof, and the fair market value of such Common Stock (together with any cash payments in lieu of fractional shares of Common Stock) shall be treated as issued, to the extent thereof, first in exchange for the accrued Original Issue Discount, cash interest or Contingent Cash Interest, if any, through the Purchase Date, and the balance, if any, of the fair market value of such shares of Common Stock shall be treated as issued in exchange for the 32 Issue Price of the Security being purchased pursuant to the provisions hereof. If the Company elects to purchase the Securities by the issuance of shares of Common Stock, the Company Notice, as provided in Section 3.08(e) hereof, shall be sent to the Holders (and to beneficial owners as required by applicable law) not later than the Company Notice Date. The Company's right to exercise its election to purchase the Securities pursuant to this Section 3.08 through the issuance of shares of Common Stock shall be conditioned upon: (i) the Company's not having given its Company Notice of an election to pay entirely in cash and its giving of timely Company Notice of election to purchase all or a specified percentage of the Securities with Common Stock as provided herein; (ii) the shares of Common Stock having been admitted for listing or admitted for listing subject to notice of issuance on the principal United States securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a national or regional securities exchange, as quoted on the National Association of Securities Dealers Automated Quotation System; (iii) the registration of the shares of Common Stock to be issued in respect of the payment of the Purchase Price under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case, if required; (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of the Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Purchase Price in respect of the Securities, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights under law or material contracts, and, in the case of such Officers' Certificate, stating that conditions (i), (ii), (iii) and (iv) above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that conditions (ii) and (iii) above have been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 Principal Amount at Maturity of Securities and the Sale Price of a share of Common Stock on each Trading Day during the period for which the Market Price is calculated. The Company may pay the Purchase Price (or any portion thereof) in Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Purchase Date and the Company has elected to purchase the Securities pursuant to this Section 3.08 through the issuance of shares of 33 Common Stock, the Company shall pay the entire Purchase Price of the Securities of such Holder or Holders in cash. The "Market Price" of the Common Stock means the average of the Sale Prices of the Common Stock for the five Trading Day period ending on the third Business Day (if the third Business Day prior to the applicable Purchase Date is a Trading Day or, if not, then on the last Trading Day prior to such Business Day) prior to the applicable Purchase Date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such Purchase Date, of any event described in Section 11.06, 11.07 or 11.08 hereof; subject, however, to the conditions set forth in Sections 11.09 and 11.10 hereof. (e) Notice of Election. The Company's notice of election to purchase with cash or Common Stock or any combination thereof shall be sent to the Trustee and to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 15.02 hereof at the time specified in Section 3.08(c) or (d) hereof, as applicable (the "Company Notice"). Such Company Notice shall state the manner of payment elected and shall contain the following information: In the event the Company has elected to pay the Purchase Price (or a specified percentage thereof) with Common Stock, the Company Notice shall: (i) state that each Holder will receive Common Stock with a Market Price determined as of a specified date prior to the Purchase Date equal to such specified percentage of the Purchase Price of the Securities held by such Holder (except any cash amount to be paid in lieu of fractional shares); (ii) set forth the method of calculating the Market Price of the Common Stock; and (iii) state that because the Market Price of Common Stock will be determined prior to the Purchase Date, Holders will bear the market risk with respect to the value of the Common Stock to be received from the date such Market Price is determined to the Purchase Date. In any case, each Company Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state: (i) the Purchase Price, the Conversion Rate and accrued and unpaid cash interest, including Contingent Cash Interest, if any, that will be accrued and payable with respect to the Securities as of the Purchase Date; (ii) whether the Company will pay the Purchase Price in cash or in Common Stock or any combination thereof, specifying the percentage of each; (iii) the name and address of the Paying Agent and the Conversion Agent; 34 (iv) that Securities as to which a Purchase Notice has been given may be converted pursuant to Article 11 hereof only if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (v) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price and accrued and unpaid cash interest (or accrued and unpaid Contingent Cash Interest), if any; (vi) that the Purchase Price for any Security as to which a Purchase Notice has been given and not withdrawn, together with any cash interest payable or any Contingent Cash Interest payable with respect thereto, will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in (v); (vii) the procedures the Holder must follow to exercise rights under this Section 3.08 and a brief description of those rights; (viii) briefly, the conversion rights of the Securities and that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities; (ix) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.08(a)(i)(D) or Section 3.10 hereof); (x) that, unless the Company defaults in making payment of such Purchase Price and cash interest, if any, Original Issue Discount and cash interest, including Contingent Cash Interest, if any, on Securities surrendered for purchase will cease to accrue on and after the Purchase Date; and (xi) the CUSIP number of the Securities. At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of such Company Notice shall be prepared by the Company. Upon determination of the actual number of shares of Common Stock to be issued for each $1,000 Principal Amount at Maturity of Securities, the Company will issue a press release and publish such determination on the Company's web site on the World Wide Web or through such other public medium as the Company may use from time to time. (f) Covenants of the Company. All shares of Common Stock delivered upon purchase of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim created by the Company. The Company shall use its reasonable efforts to list or cause to have quoted any shares of Common Stock to be issued to purchase Securities on the principal United States securities exchange or over-the-counter or other domestic market on which any other shares of 35 the Common Stock are then listed or quoted. The Company will promptly inform the Trustee in writing of any such listing and of any delisting thereof. (g) Procedure upon Purchase. The Company shall deposit cash (in respect of a cash purchase under Section 3.08(c) hereof or for fractional interests as applicable) or shares of Common Stock, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.11 hereof, sufficient to pay the aggregate Purchase Price of, and any accrued and unpaid interest or any Contingent Cash Interest, with respect to all Securities to be purchased pursuant to this Section 3.08. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive Common Stock through the Paying Agent, a certificate for the number of full shares of Common Stock issuable in payment of the Purchase Price and cash in lieu of any fractional interests. The person in whose name the certificate for Common Stock is registered shall be treated as a holder of record of shares of Common Stock on the Business Day following the Purchase Date. Subject to Section 3.08(d) hereof, no payment or adjustment will be made for dividends on the Common Stock the record date for which occurred on or prior to the Purchase Date. (h) Taxes. If a Holder of a Security is paid in Common Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of shares of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the shares of Common Stock to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. SECTION 3.09 Purchase of Securities at Option of the Holder upon Change in Control. (a) If there shall have occurred a Change in Control, Securities shall be purchased by the Company, at the option of the Holder thereof, at a purchase price specified in paragraph 7 of the Securities (the "Change in Control Purchase Price"), as of the date that is no later than 30 Business Days after the occurrence of the Change in Control but in no event prior to the date on which such Change in Control occurs (the "Change in Control Purchase Date"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.09(c) hereof. A "Change in Control" shall be deemed to have occurred at such time as either of the following events shall occur: (i) there is a report filed on Schedule 13D or Schedule TO (or any successor schedule, form or report under the Exchange Act) disclosing that any "person" including its Affiliates or Associates (for the purposes of this Section 3.09 only, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more 36 of the voting power of the Common Stock or other Capital Stock into which the Common Stock is reclassified or changed; provided, however, that a person shall not be deemed beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or (ii) there shall be consummated any share exchange, consolidation or merger of the Company pursuant to which the Common Stock would be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the share exchange, consolidation or merger have, directly or indirectly, less than a majority of the total voting power in the aggregate of all classes of Capital Stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger. Notwithstanding the foregoing provisions of this Section 3.09, a Change in Control shall not be deemed to have occurred by virtue of the Company, any Subsidiary, any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary, or any person holding Common Stock for or pursuant to the terms of any such employee benefit plan, filing or becoming obligated to file a report under or in response to Schedule 13D or Schedule TO (or any successor schedule, form or report under the Exchange Act) disclosing beneficial ownership by it of shares of Common Stock, whether in excess of 50% or otherwise. "Associate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. (b) Within 15 days after the occurrence of a Change in Control, the Company shall mail a written notice of Change in Control by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Securityholder and shall state: (i) briefly, the events causing a Change in Control and the date of such Change in Control; (ii) the date by which the Change in Control Purchase Notice pursuant to this Section 3.09 must be given; (iii) the Change in Control Purchase Date; (iv) the Change in Control Purchase Price and any accrued and unpaid cash interest payable with respect to the Securities as of the Change in Control Purchase Date; 37 (v) the name and address of the Paying Agent and the Conversion Agent; (vi) the Conversion Rate and any adjustments thereto resulting from the Change in Control; (vii) that Securities as to which a Change in Control Purchase Notice has been given may be converted pursuant to Article 11 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (viii) that Securities must be surrendered to the Paying Agent to collect payment of the Change in Control Purchase Price and accrued and unpaid cash interest, if any; (ix) that the Change in Control Purchase Price for any Security as to which a Change in Control Purchase Notice has been duly given and not withdrawn, together with any accrued and unpaid cash interest payable with respect thereto, will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Security as described in Section 3.09(b)(viii) hereof; (x) briefly, the procedures the Holder must follow to exercise rights under this Section 3.09; (xi) briefly, the conversion rights of the Securities; (xii) the procedures for withdrawing a Change in Control Purchase Notice; (xiii) that, unless the Company defaults in making payment of such Change in Control Purchase Price and cash interest, if any on Securities surrendered for purchase, Original Issue Discount and any cash interest on Securities surrendered for purchase will cease to accrue on and after the Change in Control Purchase Date; and (xiv) the CUSIP number of the Securities. (c) A Holder may exercise its rights specified in Section 3.09(a) hereof upon delivery of a written notice of purchase (a "Change in Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the Business Day prior to the Change in Control Purchase Date, stating: (i) the certificate number or numbers of the Security or Securities which the Holder will deliver to be purchased; (ii) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and (iii) that such Security shall be purchased pursuant to the terms and conditions specified in paragraph 7 of the Securities. 38 The delivery of such Security to the Paying Agent at any time after the delivery of the Change in Control Purchase Notice (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase Price shall be so paid pursuant to this Section 3.09 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.09, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.09 shall be consummated by the delivery of the consideration to be received by the Holder (together with accrued and unpaid cash interest, if any) promptly following the later of the Change in Control Purchase Date and the time of delivery of the Security to the Paying Agent in accordance with this Section 3.09. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 3.09(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Business Day prior to the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. The Company shall not be required to comply with this Section 3.09 if a third party mails a written notice of Change in Control in the manner, at the times and otherwise in compliance with this Section 3.09 and repurchases all Securities for which a Change in Control Purchase Notice shall be delivered and not withdrawn. SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c) hereof, as applicable, the Holder of the Security in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid cash interest, with respect to such Security. Such Purchase Price or Change in Control Purchase Price which price reflects the Issue Price plus accrued Original Issue Discount and accrued and unpaid cash interest, including Contingent Cash Interest, if any, shall be paid to such Holder, subject to receipt of funds and/or securities by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Security (provided that the conditions in Section 3.08(a) or Section 3.09(c) hereof, as applicable, have been satisfied) and (y) the time of delivery of such Security to the 39 Paying Agent by the Holder thereof in the manner required by Section 3.08(a) or Section 3.09(c) hereof, as applicable. Securities in respect of which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 11 hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice, as the case may be, unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs. A Purchase Notice or Change in Control Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the Business Day prior to the Purchase Date or the Change in Control Purchase Date, as the case may be, specifying: (a) the certificate number or numbers of the Security or Securities in respect of which such notice of withdrawal is being submitted, (b) the Principal Amount at Maturity of the Security or Securities with respect to which such notice of withdrawal is being submitted, and (c) the Principal Amount at Maturity, if any, of such Security which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. A written notice of withdrawal of a Purchase Notice may be in the form set forth in the preceding paragraph or may be in the form of a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.08(a)(i)(D) hereof. There shall be no purchase of any Securities pursuant to Section 3.08 hereof (other than through the issuance of Common Stock in payment of the Purchase Price, including cash in lieu of fractional shares) or 3.09 hereof if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Purchase Notice or Change in Control Purchase Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid cash interest or Contingent Cash Interest with respect to such Securities). The Paying Agent will promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid cash interest or Contingent Cash Interest with respect to such Securities) in which case, upon such return, the Purchase Notice or Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase Price. Prior to 10:00 a.m., New York City time, on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit 40 with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04 hereof) an amount of money (in immediately available funds if deposited on such Business Day) or Common Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and any accrued and unpaid cash interest and Contingent Cash Interest, if any, with respect to all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be. SECTION 3.12 Securities Purchased in Part. Any Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate Principal Amount at Maturity equal to, and in exchange for, the portion of the Principal Amount at Maturity of the Security so surrendered which is not purchased. SECTION 3.13 Repayment to the Company. The Trustee and the Paying Agent shall promptly return to the Company any cash or shares of Common Stock that remain unclaimed as provided in paragraph 15 of the Securities, together with interest or dividends, if any, thereon (subject to the provisions of Section 7.01(f) hereof), held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, or Contingent Cash Interest, if any; provided, however, that to the extent that the aggregate amount of cash or shares of Common Stock deposited by the Company pursuant to Section 3.11 hereof exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and the accrued and unpaid Contingent Cash Interest with respect to, the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, whether as a result of withdrawal or otherwise, then promptly after the second Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon (subject to the provisions of Section 7.01(f) hereof). ARTICLE 4 COVENANTS SECTION 4.01 Payment of Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts to be given to the Trustee or Paying Agent, shall be deposited with the Trustee or Paying Agent by 10:00 a.m., New York City time, by the Company. Principal Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, cash interest and Contingent Cash Interest, if any, shall be considered paid on the applicable date due if on such date (or, in the case of a Purchase Price or Change in Control Purchase Price, on the Business Day following the applicable Purchase Date or Change in Control Purchase Date, as 41 the case may be) the Trustee or the Paying Agent holds, in accordance with this Indenture, money or securities, if permitted hereunder, sufficient to pay all such amounts then due. The Company shall, to the extent permitted by law, pay cash interest on overdue amounts at the rate per annum set forth in paragraph 1 of the Securities, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount. SECTION 4.02 SEC and Other Reports. The Company shall deliver to the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of the same shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.03 Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on May 31, 2003) an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 4.04 Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.05 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The office of the Trustee, located at 101 Barclay Street - 8W, New York, NY 10286 (Attention: Corporate Trust Administration), shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices 42 and demands may be made or served at the address of the Trustee set forth in Section 15.02 hereof. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. 43 SECTION 4.06 Delivery of Certain Information. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or any beneficial holder of Securities or shares of Common Stock which are restricted securities issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or any beneficial holder of Securities or holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.07 Covenant to Comply With Securities Laws Upon Purchase of Securities. In connection with any offer to purchase or purchase of Securities under Section 3.08 or 3.09 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall to the extent applicable (a) comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (b) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (c) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Sections 3.08 and 3.09 hereof to be exercised in the time and in the manner specified in Sections 3.08 and 3.09 hereof. SECTION 4.08 Waiver of Compliance. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 4.02 to 4.07, inclusive, if before the time for such compliance the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding shall notify the Company that they elect to either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. SECTION 4.09 Calculation of Original Issue Discount. The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Original Issue Discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such Original Issue Discount as may then be relevant under the United States Internal Revenue Code of 1986, as amended from time to time. SECTION 4.10 Liquidated Damages Notice. In the event that the Company is required to pay any Liquidated Damages Amount (as such term is defined in the Registration Rights Agreement, dated as of May 13, 2003 (the "Registration Rights Agreement"), between the Company and the Initial Purchasers named therein) to holders of Securities pursuant to the Registration Rights Agreement, the Company will provide written notice ("Liquidated Damages Notice") to the Trustee of its obligation to pay any Liquidated Damages Amount no later than 15 days prior to the Damages Payment Date (as such term is defined in the Registration Rights Agreement), and the Liquidated Damages Notice shall set 44 forth the amount of any Liquidated Damages Amount to be paid by the Company on such payment date. ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease all or substantially all of its properties and assets to any person, nor will the Company permit any Subsidiary to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis to any other person or persons, unless: (a) either (i) the Company or such Subsidiary shall be the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company or such Subsidiary is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company or such Subsidiary substantially as an entirety (A) shall be organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (B) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Company or such Subsidiary under the Securities and this Indenture; (b) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (c) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries (other than to the Company or another Subsidiary), which, if such assets were owned by the Company, would constitute all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The successor person formed by such consolidation or into which the Company or the applicable Subsidiary is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the applicable Subsidiary under this Indenture with the same effect as if such successor had been named as the Company or the applicable Subsidiary herein; and thereafter, except in the case of a lease and any obligations the Company or the applicable Subsidiary may have under a supplemental indenture pursuant to Section 11.14 hereof, the Company or the applicable Subsidiary shall be discharged from all obligations and covenants under this Indenture 45 and the Securities. Subject to Section 9.06 hereof, the Company, the applicable Subsidiary, the Trustee and the successor person shall enter into a supplemental indenture to evidence the succession and substitution of such successor person and such discharge and release of the Company and the applicable Subsidiary. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default. An "Event of Default" occurs if: (a) the Company defaults in payment of any cash interest (including interest which becomes payable after the Securities have been converted to semiannual coupon notes following the occurrence of a Tax Event) or any Contingent Cash Interest and such default continues for 30 days; (b) the Company defaults in the payment of the Principal Amount at Maturity (or, if the Securities have been converted to semiannual coupon notes following a Tax Event pursuant to Section 10.01 hereof, the Restated Principal Amount), Issue Price plus accrued Original Issue Discount and any cash interest, including any Contingent Cash Interest, Redemption Price, Purchase Price or Change in Control Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise; (c) the Company fails to comply with any of its agreements in the Security or this Indenture (other than those referred to in clauses (a) and (b) above) and such failure continues for 60 days after receipt by the Company of a Notice of Default; (d) (i) the Company or any Subsidiary defaults in the scheduled payment of principal of any Debt (after giving effect to any applicable grace period) and the aggregate principal amount of such payment defaults at such time exceeds $50,000,000, or (ii) the Company or any Subsidiary defaults under any Debt, whether such Debt now exists or is created later, which default results in such Debt being accelerated or declared due and payable, and the aggregate principal amount of all Debt so accelerated or so declared due and payable, exceeds $50,000,000, and such acceleration or declaration has not been rescinded or annulled within a period of 10 days after receipt by the Company of a Notice of Default from the Trustee; provided, however, that if any such default specified in (i) or (ii) shall be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; (e) the Company pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it; 46 (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; (iv) makes a general assignment for the benefit of its creditors; (v) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or (vi) consents to the filing of such petition or the appointment of or taking possession by a Custodian; (f) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company in an involuntary case or proceeding, or adjudicates the Company insolvent or bankrupt; (ii) appoints a Custodian of the Company or for any substantial part of its property; or (iii) orders the winding up or liquidation of the Company; and such order or decree remains unstayed and in effect for 60 days; or (g) the entry of one or more judgments, orders or decrees for the payment of money in excess of $100,000,000, either individually or in the aggregate (net of amounts covered by insurance, bond, surety or similar instrument), against the Company or any Subsidiary, or any of their respective properties, which judgment, order or decree shall not be discharged and either (i) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree or (ii) such judgment, order or decree shall remain unstayed and in effect for a period of 60 consecutive days. A Default under clause (c) or (d)(ii) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (c) or (d)(ii) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 20 Business Days after it becomes aware of the occurrence of any event which with the giving of notice or the lapse of time, or both, would become an Event of Default under clause (c), (d) or (g) above, an Officers' Certificate setting forth the details of such occurrence, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02 Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(e) or (f) in respect of the Company) occurs and is 47 continuing, the Trustee by written Notice to the Company, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest (or if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest), through the date of declaration on all the Securities to be immediately due and payable. Upon such a declaration, such Issue Price plus accrued Original Issue Discount, and such accrued and unpaid cash interest, if any, or any Contingent Cash Interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(e) or (f) occurs in respect of the Company and is continuing, the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest), on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest), that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.07 hereof have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest, (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest), on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. Except as set forth in Section 2.07 hereof, no remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 Waiver of Past Defaults. Subject to Section 6.02, the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences except (a) an Event of Default described in Section 6.01(a) or (b), (b) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected or (c) a Default which constitutes a failure to convert any Security in accordance with the terms of Article 11. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any 48 consequent right. This Section 6.04 shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded from this Indenture, as permitted by the TIA. SECTION 6.05 Control by Majority. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. This Section 6.05 shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the TIA. SECTION 6.06 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (b) the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, costs, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and (e) the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder. 49 SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the Principal Amount at Maturity (or if the Securities have been converted to semiannual coupon notes following a Tax Event pursuant to Article 10 hereof, the Restated Principal Amount, plus accrued and unpaid cash interest), Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, or cash interest, including Contingent Cash Interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities or any Redemption Date, and to convert the Securities in accordance with Article 11 hereof, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder. SECTION 6.08 Collection Suit by Trustee. If an Event of Default described in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.07 hereof. SECTION 6.09 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, Redemption Price, Purchase Price, Change in Control Purchase Price shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of the Principal Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, if any, Redemption Price, Purchase Price or Change in Control Purchase Price (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest), as the case may be, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.07 hereof) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. 50 Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; SECOND: to Securityholders for amounts due and unpaid on the Securities for the Principal Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, if any, Redemption Price, Purchase Price or Change in Control Purchase Price (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued and unpaid cash interest), as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and THIRD: the balance, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and the amount to be paid. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate Principal Amount at Maturity of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA. SECTION 6.12 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the Principal Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, if any, Redemption Price, Purchase Price or Change in Control Purchase Price (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued 51 and unpaid interest), as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. 52 Subparagraphs (c)(i), (ii) and (iii) of this Section 7.01 shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01. (e) No provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company. SECTION 7.02 Rights of Trustee. Subject to its duties and responsibilities under the provisions of Section 7.01 hereof, and, except as expressly excluded from this Indenture pursuant to said Section 7.01 hereof, subject also to its duties and responsibilities under the TIA: (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; (c) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (d) the Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith which it believes to be authorized or within its rights or powers conferred under this Indenture; (e) the Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; 53 (f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; (g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a resolution of the Board of Directors; (h) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; (k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded; and (l) the permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. SECTION 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 hereof. SECTION 7.04 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for 54 the Company's use or application of the proceeds from the Securities, it shall not be responsible for any statement in the registration statement for the Securities under the Securities Act or in the Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.05 Notice of Defaults. If a Default occurs and if it is known to a Responsible Officer of the Trustee, the Trustee shall give to each Securityholder notice of the Default within 90 days after such Responsible Officer obtains knowledge of such Default unless such Default shall have been cured or waived before the giving of such notice. Except in the case of a Default described in Section 6.01(a) or (b) hereof, the Trustee may withhold the notice if and so long as a Responsible Officer in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default. SECTION 7.06 Reports by Trustee to Holders. Within 60 days after each April 15 beginning with the April 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such April 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and with each securities exchange, if any, on which the Securities are listed. The Company agrees to promptly notify the Trustee whenever the Securities become listed on any securities exchange and of any delisting thereof. SECTION 7.07 Compensation and Indemnity. The Company agrees: (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee and its agents for, and to hold them harmless against, any loss, liability or expense (including reasonable attorney's fees and expenses and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other 55 Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.07, the Holders shall have been deemed to have granted to the Trustee a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, cash interest or Contingent Cash Interest, if any, as the case may be, on particular Securities. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(e) or (f) hereof, the expenses including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08 Replacement of Trustee. The Trustee may resign by so notifying the Company; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged bankrupt or insolvent; (c) a receiver or public officer takes charge of the Trustee or its property; or (d) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07 hereof. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee. 56 If the Trustee fails to comply with Section 7.10 hereof, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. SECTION 7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Nothing herein contained shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of TIA Section 310(b). SECTION 7.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. 57 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.01 Discharge of Liability on Securities. When (a) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07 hereof) for cancellation or (b) all outstanding Securities have become due and payable and the Company irrevocably deposits with the Trustee, the Paying Agent (if the Paying Agent is not the Company or any of its Affiliates) or the Conversion Agent cash or, if expressly permitted by the terms of the Securities or the Indenture, Common Stock sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.07 hereof), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, upon a Company Order, subject to Section 7.07 hereof, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company. SECTION 8.02 Repayment to the Company. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Securityholders with respect to such money or securities for that period commencing after the return thereof. ARTICLE 9 AMENDMENTS SECTION 9.01 Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without the consent of any Securityholder: (a) to cure any ambiguity, omission, defect or inconsistency; (b) to comply with Article 5 or Section 11.14 hereof; (c) to secure the Company's obligations under the Securities and this Indenture; (d) to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred upon the Company; (e) to make any change to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, or as necessary in connection with the registration of the Securities under the Securities Act; or (f) to make any change that does not adversely affect the rights of any Holders (it being understood that any amendment described in clause (a) of this Section 9.01 made solely to conform this Indenture to the final offering memorandum provided to 58 investors in connection with the initial offering of the Securities will be deemed not to adversely affect the rights or interests of Holders). SECTION 9.02 With Consent of Holders. With the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, the Company and the Trustee may amend this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment to this Indenture or the Securities may not: (a) reduce the percentage in Principal Amount at Maturity of Securities whose Holders must consent to an amendment; (b) make any change in the manner or rate of accrual of Original Issue Discount or cash interest, including Contingent Cash Interest, reduce the rate of cash interest, including Contingent Cash Interest, referred to in paragraph 1 of the Securities, reduce the rate of interest referred to in Section 10.01 hereof upon the occurrence of a Tax Event or extend the time for payment of Original Issue Discount or cash interest, including Contingent Cash Interest, if any, on any Security; (c) reduce the Principal Amount at Maturity, Restated Principal Amount, Issue Price, accrued Original Issue Discount or cash interest, with respect to any Security, or extend the Stated Maturity of any Security; (d) reduce the Redemption Price, Purchase Price or Change in Control Purchase Price of any Security; (e) make any Security payable in money or securities other than that stated in the Security; (f) make any change in Article 10 hereof, or this Section 9.02, except to increase any percentage set forth therein; (g) make any change that adversely affects the right to convert any Security; (h) make any change that adversely affects the right to require the Company to purchase the Securities in accordance with the terms thereof and this Indenture; (i) change the provisions of this Indenture that relate to modifying or annexing this Indenture; or (j) impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, the Securities. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. 59 After an amendment under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. SECTION 9.03 Compliance with TIA. Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA. SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions. Until an amendment, consent, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the amendment, consent, waiver or other action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date as of which the amendment, consent, waiver or action is made effective. After an amendment, consent, waiver or action becomes effective, it shall bind every Securityholder. SECTION 9.05 Notation on or Exchange of Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities. SECTION 9.06 Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 15.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. ARTICLE 10 SPECIAL TAX EVENT CONVERSION SECTION 10.01 Optional Conversion to Semiannual Coupon Note upon Tax Event. From and after (a) the date of the occurrence of a Tax Event (the "Tax Event Date") and (b) the date the Company exercises the option provided for in this Section 10.01, whichever is later (the "Option Exercise Date"), at the option of the Company, interest in lieu of future 60 Original Issue Discount or cash interest shall accrue at the rate of 2.75% per annum, calculated on a semiannual bond equivalent basis, on a Restated Principal Amount, per $1,000 original Principal Amount at Maturity (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued through the Option Exercise Date and shall be payable semiannually on May 13 and November 13 of each year (each an "Interest Payment Date") to Holders of record at the close of business on each April 28 and October 29, respectively, (each a "Regular Record Date") immediately preceding such Interest Payment Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Option Exercise Date. Within 15 days of the occurrence of a Tax Event, the Company shall deliver a written notice of such Tax Event by facsimile and first-class mail to the Trustee and within 15 days of its exercise of such option the Company shall deliver a written notice of the Option Exercise Date by facsimile and first-class mail to the Trustee and by first class mail to the Holders of the Securities. From and after the Option Exercise Date, (a) the Company shall be obligated to pay at Stated Maturity, in lieu of the Principal Amount at Maturity of a Security, the Restated Principal Amount thereof plus accrued and unpaid interest on such Security, (b) "Issue Price and accrued Original Issue Discount," "Issue Price plus Original Issue Discount" or similar words, as used herein, shall mean Restated Principal Amount plus accrued and unpaid interest with respect to any Security and (c) Contingent Cash Interest will cease to accrue on the Securities. Securities authenticated and delivered after the Option Exercise Date may, and shall if required by the Trustee, bear a notation in a form approved by the Trustee as to the conversion of the Securities to semiannual coupon notes. No other changes to this Indenture shall result as a result of the events described in this Section 10.01. ARTICLE 11 CONVERSION SECTION 11.01 Conversion Privilege. A Holder of a Security may convert such Security into shares of Common Stock at any time prior to the close of business on May 13, 2033, subject to the provisions of this Article 11 and paragraph 9 of the Securities. Upon determination that Holders are or will be entitled to convert their Securities into Common Stock in accordance with paragraph 9 of the Securities, the Company will issue a press release and publish such determination on the Company's website or through such other public medium as the Company may use at that time. The number of shares of Common Stock issuable upon conversion of a Security per $1,000 of Principal Amount at Maturity thereof (the "Conversion Rate") shall be determined in accordance with the provisions of paragraph 9 of the Securities. A Holder may convert a portion of the Principal Amount at Maturity of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. The Holders' rights to convert Securities into shares of Common Stock is subject to the Company's right to elect instead to pay each such Holder the amount of cash set forth in the next succeeding sentence, in lieu of delivering such shares of Common Stock, subject to the last sentence of this paragraph. The amount of cash to be paid pursuant to Section 11.02 hereof for each $1,000 Principal Amount at Maturity of a Security upon conversion shall be equal to the Average Sale Price of the Common Stock for the five consecutive Trading Days immediately 61 following (i) the date of the Company's notice of its election to deliver cash upon conversion, if the Company shall not have given a notice of redemption pursuant to Section 3.03 hereof, or (ii) the Conversion Date, in the case of a conversion following such a notice of redemption specifying an intent to deliver cash upon conversion, in either case multiplied by the Conversion Rate in effect on such Conversion Date. The Company shall not pay cash in lieu of delivering shares of Common Stock upon the conversion of any Security pursuant to the terms of this Article 11 (other than cash in lieu of fractional shares pursuant to Section 11.03 hereof) if there has occurred (prior to, on or after, as the case may be, the Conversion Date or the date on which the Company delivers its notice of whether such Security shall be converted into Common Stock or cash pursuant to Section 3.02 hereof) and is continuing an Event of Default (other than a default in a cash payment upon conversion of such Security). 62 SECTION 11.02 Conversion Procedure. To convert a Security, a Holder must satisfy the requirements in paragraph 9 in the Securities. The date on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). The Conversion Agent shall notify the Company of the Conversion Date within one Business Day following the Conversion Date. Within two Business Days following the Conversion Date, the Company shall deliver to the Holder, through the Trustee, written notice of whether such Security shall be converted into shares of Common Stock or paid in cash, unless the Company shall have previously delivered a notice of redemption pursuant to Section 3.03 hereof. If the Company shall have notified the Holder that all of such Security shall be converted into shares of Common Stock, the Company shall deliver to the Holder through the Conversion Agent, as promptly as practicable but in any event no later than the fifth Business Day following the Conversion Date a certificate for the number of full shares of Common Stock deliverable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 11.03 hereof. Except as provided in the last sentence in the third paragraph of Section 11.01 hereof, if the Company shall have notified the Holder that all or a portion of such Security shall be paid in cash, the Company shall deliver to the Holder surrendering such Security the amount of cash payable with respect to such Security no later than the tenth Business Day following such Conversion Date, together with a certificate for the number of full shares of Common Stock deliverable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 11.03 hereof. Except as provided in the last sentence in the third paragraph of Section 11.01 hereof, the Company may not change its election with respect to the consideration to be delivered upon conversion of a Security once the Company has notified the Holder in accordance with this paragraph. If shares of Common Stock are delivered as consideration, then the person in whose name the certificate representing such shares is registered shall be treated as a stockholder of record on and after the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the Conversion Rate in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends on, or other distributions with respect to, any Common Stock except as provided in this Article 11. On conversion of a Security, that portion of accrued Original Issue Discount and cash interest, including Contingent Cash Interest, if any, attributable to the period from the Issue Date of the Security through but not including the Conversion Date, with respect to the converted Security shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the provisions hereof (except to the extent that semiannual and Contingent Cash Interest are paid in cash as provided in paragraph 9 of the Securities); and such cash, if any, and/or the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as delivered, to the extent thereof, first in exchange for accrued Original Issue Discount 63 and cash interest, including Contingent Cash Interest, if any, accrued through the Conversion Date, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment in lieu of fractional shares) shall be treated as issued in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. Notwithstanding the foregoing, accrued cash interest will be payable upon conversion of Securities made concurrently with or after acceleration of Securities following an Event of Default. If the Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the total Principal Amount at Maturity of the Securities converted. If the last day on which a Security may be converted is a Legal Holiday, the Security may be surrendered on the next succeeding day that is not a Legal Holiday. A Security surrendered for conversion based on (a) the Common Stock price may be surrendered for conversion at any time during the applicable fiscal quarter, (b) the Security being called for redemption may be surrendered for conversion at any time prior to the close of business on the second Business Day immediately preceding the Redemption Date, even if it is not otherwise convertible at such time, (c) a credit downgrade may be surrendered for conversion until the close of business on any Business Day during the period of the continuance of the credit downgrade as more fully described in paragraph 9 of the Security, and (d) upon the occurrence of certain corporate transactions more fully described in paragraph 9 of the Security may be surrendered for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of such transaction until 15 days after the actual date of such transaction, and if such day is not a Business Day, the next occurring Business Day following such day; but in each of (a), (b), (c) and (d) above, in no event later than the close of business on May 11, 2033. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in Principal Amount at Maturity to the unconverted portion of the Security surrendered. SECTION 11.03 Fractional Shares. The Company will not issue a fractional share of Common Stock upon conversion of a Security. Instead, the Company will deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined, to the nearest 1/1,000th of a share, by multiplying the per share Sale Price of the Common Stock, on the last Trading Day prior to the Conversion Date, by the fractional amount and rounding the product to the nearest whole cent. SECTION 11.04 Taxes on Conversion. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name and any income tax which is imposed on the Holder as a result of the conversion. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum 64 sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude the Company from any tax withholding or directing the withholding of any tax required by law or regulations. SECTION 11.05 Company to Provide Stock. The Company shall, prior to issuance of any Securities under this Article 11, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Securities. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim created by the Company. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. SECTION 11.06 Adjustment for Change in Capital Stock. Except as set forth in Section 11.14 hereof, if, after the Issue Date of the Securities, the Company: (a) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock or other Capital Stock; (b) subdivides its outstanding shares of Common Stock into a greater number of shares; (c) combines its outstanding shares of Common Stock into a smaller number of shares; or (d) issues by reclassification of its Common Stock any shares of its Capital Stock (other than rights, warrants or options for its Capital Stock); then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted may receive the number of shares or other units of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Security immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to 65 any such class of Capital Stock as is contemplated by this Article 11 with respect to the Common Stock, on terms comparable to those applicable to Common Stock in this Article 11. SECTION 11.07 Adjustment for Rights Issue. Except as set forth in Sections 11.14 and 11.19 hereof, if after the Issue Date, the Company distributes any rights, warrants or options to all holders of its Common Stock entitling them, for a period expiring within 60 days of the issue date for each distribution to purchase shares of Common Stock at a price per share less than the Sale Price of the Common Stock as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula: R' = R (O + N) ----------------- (O + [(N x P)/M]) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 11.07 is being applied. N = the number of additional shares of Common Stock offered pursuant to the distribution. P = the offering price per share of the additional shares. M = the Average Sale Price, minus, in the event that there occurs (i) a distribution to which Section 11.06(d) applies or (ii) a distribution to which Section 11.08 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 11.07 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 11.07 applies, the fair market value (on the record date for the distribution to which this Section 11.07 applies) of the (1) Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 11.06(d) distribution or (2) assets of the Company or debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 11.08 distribution, as the case may be. The Board of Directors shall determine fair market values for the purposes of this Section 11.07. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this 66 Section 11.07 applies. If all of the shares of Common Stock subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options. No adjustment shall be made under this Section 11.07 if the application of the formula stated above in this Section 11.07 would result in a value of R' that is equal to or less than the value of R. SECTION 11.08 Adjustment for Other Distributions. (a) If, after the Issue Date of the Securities, the Company distributes to all holders of its Common Stock any of its assets, excluding distributions of Capital Stock or equity interests referred to in Section 11.08(b), or debt securities or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 11.06 and distributions of rights, warrants or options referred to in Section 11.07 and (y) cash dividends or other cash distributions that are paid out of consolidated current net earnings or earnings retained in the business as shown on the books of the Company unless such cash dividends or other cash distributions are Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to the provisions of Section 11.08(c), in accordance with the formula: R' = R x M ----- M - F where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Average Sale Price, minus, in the event that there occurs a distribution to which Section 11.06(d) applies, for which (i) the record date shall occur on or before the record date for the distribution to which this Section 11.08(a) applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 11.08(a) applies, the fair market value (on the record date for the distribution to which this Section 11.08(a) applies) of any Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 11.06(d) distribution. F = the fair market value (on the record date for the distribution to which this Section 11.08(a) applies) of the assets, securities, rights, warrants or options to be distributed in respect of each share of Common Stock in the distribution to which this Section 11.08(a) is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). 67 The Board of Directors shall determine fair market values for the purposes of this Section 11.08(a). The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 11.08(a) applies. For purposes of this Section 11.08, the term "Extraordinary Cash Dividend" shall mean any cash dividend or distribution with respect to the Common Stock the amount of which, together with the aggregate amount of cash dividends on the Common Stock to be aggregated with such cash dividend in accordance with the provisions of this paragraph, equals or exceeds the threshold percentage set forth in item (i) below. For purposes of item (i) below, the "Measurement Period" with respect to a cash dividend on the Common Stock shall mean the 365 consecutive day period ending on the date prior to the Ex-Dividend Time with respect to such cash dividend, and the "Relevant Cash Dividends" with respect to a cash dividend on the Common Stock shall mean the cash dividends on the Common Stock with Ex-Dividend Times occurring in the Measurement Period. (i) If, upon the date prior to the Ex-Dividend Time with respect to a cash dividend on the Common Stock, the aggregate amount of such cash dividend together with the amounts of all Relevant Cash Dividends equals or exceeds on a per share basis the sum of (a) 5% of the Sale Price of the Common Stock on the last Trading Day preceding the date of declaration by the Board of Directors of the cash dividend or distribution with respect to which this provision is being applied, and (b) the quotient of the amount of any Contingent Cash Interest paid on a Security during the Ex-Dividend Measurement Period and divided by the number of shares of Common Stock issuable upon conversion of a Security pursuant to Article 11 at the Conversion Rate in effect on the payment date or such relevant Contingent Cash Interest Payment Date, then such cash dividend together with all Relevant Cash Dividends shall be deemed to be an Extraordinary Cash Dividend, and for purposes of applying the formula set forth in this Section 11.08(a), the value of "F" shall be equal to (y) the aggregate of the amount of such cash dividend together with the amount of all Relevant Cash Dividends, minus (z) the aggregate amount of all Relevant Cash Dividends for which a prior adjustment in the Conversion Rate was previously made under this Section 11.08. (ii) In making the determination required by item (i) above, the amount of cash dividends paid on a per share basis and the amount of any Relevant Cash Dividends specified in item (i) above, shall be appropriately adjusted to reflect the occurrence during such period of any event described in Section 11.06 hereof. (b) If, after the Issue Date of the Securities, the Company pays a dividend or makes a distribution to all holders of its Common Stock consisting of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company, the Conversion Rate shall be adjusted in accordance with the formula: R' = Rx (1 + F/M) 68 where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the average of the Post-Distribution Prices of the Common Stock for the 10 Trading Days commencing on and including the fifth Trading Day after the date on which "ex-dividend trading" commences for such dividend or distribution on the principal United States exchange or market which such securities are then listed or quoted (the "Ex-Dividend Date"). F = the fair market value of the securities distributed in respect of each share of Common Stock in the distribution to which this Section 11.08(b) applies, which shall be determined by multiplying the number of securities distributed in respect of each share of Common Stock in the distribution by the average of the Post-Distribution Prices of those securities for the 10 Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Date. "Post-Distribution Price" of Capital Stock or any similar equity interest on any date means the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "when issued" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated; provided that if on any date such units have not traded on a "when issued" basis, the Post-Distribution Price shall be the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "regular way" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. In the absence of such quotation, the Company shall be entitled to determine the Post-Distribution Price on the basis of such quotations which reflect the post-distribution value of the Capital Stock or equity interests as it considers appropriate. (c) In the event that, with respect to any distribution to which Section 11.08 would otherwise apply, the difference "M-F" as defined in the formula set forth in Section 11.08 is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by Section 11.08 shall not be made and in lieu thereof the provisions of Section 11.14 shall apply to such distribution. 69 SECTION 11.09 When Adjustment May Be Deferred. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment and all adjustments that are made and carried forward shall be taken in the aggregate in order to determine if the 1% threshold is met. All calculations under this Article 11 shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be. SECTION 11.10 When No Adjustment Required. No adjustment need be made for a transaction referred to in Section 11.06, 11.07, 11.08 or 11.14 hereof if Securityholders may participate in the transaction. Such participation by Securityholders may include participation without conversion or upon conversion; provided, that if such participation is upon conversion, an adjustment shall be made at such time as the Securityholders are no longer entitled to participate. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. Unless otherwise required by a provision of this Article 11, no adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Securities become convertible pursuant to this Article 11 into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. No adjustment will be made pursuant to this Article 11 that would result, through the application of two or more provisions hereof, in the duplication of any adjustment. 70 SECTION 11.11 Notice of Adjustment. Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. Upon receipt by it of such notice, and at the written request of the Company, the Conversion Agent will promptly mail such notice to Securityholders at the Company's expense. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. SECTION 11.12 Voluntary Increase. The Company from time to time may increase the Conversion Rate by any amount for any period of time. Whenever the Conversion Rate is increased, the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 11.06, 11.07 or 11.08 or 11.14 hereof. SECTION 11.13 Notice of Certain Transactions. If: (a) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 11.06, 11.07 or 11.08 hereof (unless no adjustment is to occur pursuant to Section 11.10 hereof); or (b) the Company takes any action that would require a supplemental indenture pursuant to Section 11.14; or (c) there is a liquidation or dissolution of the Company; then the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 11.14 Reorganization of Company; Special Distributions. If the Company is a party to a transaction subject to Article 5 hereof (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of Common Stock immediately prior to such transaction do not receive securities, cash, property or other assets of the Company or any other Person) or a merger or binding share exchange which reclassifies or changes its outstanding Common Stock, the Person obligated to deliver securities, cash or other assets upon conversion of Securities shall, no later than the closing date of such transaction, enter into a supplemental indenture. If the issuer of securities deliverable upon 71 conversion of Securities is an Affiliate of the successor Company, that issuer shall, no later than the closing date of such transaction, join in the supplemental indenture. The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Security immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder was not a constituent Person or an Affiliate of a constituent Person to such transaction. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article 11. The successor Company shall mail to Securityholders a notice briefly describing the supplemental indenture. If this Section applies, neither Section 11.06 nor 11.07 hereof applies. If the Company makes a distribution to all holders of its Common Stock of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 11.08 hereof, then, from and after the record date for determining the holders of Common Stock entitled to receive the distribution, a Holder of a Security that converts such Security in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Common Stock into which the Security is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution. 72 SECTION 11.15 Company Determination Final. Any determination that the Company or the Board of Directors must make pursuant to Section 11.03, 11.06, 11.07, 11.08, 11.09, 11.10, 11.14 or 11.17 hereof is conclusive. SECTION 11.16 Trustee's Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article 11 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 11.14 hereof need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article 11. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 11.16 as the Trustee. SECTION 11.17 Simultaneous Adjustments. In the event that this Article 11 requires adjustments to the Conversion Rate under more than one of Sections 11.06, 11.07 or 11.08 hereof, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 11.06 hereof, second, the provisions of Section 11.08 hereof and, third, the provisions of Section 11.07 hereof. SECTION 11.18 Successive Adjustments. After an adjustment to the Conversion Rate under this Article 11, any subsequent event requiring an adjustment under this Article 11 shall cause an adjustment to the Conversion Rate as so adjusted. SECTION 11.19 Rights Issued in Respect of Common Stock Issued Upon Conversion. Each share of Common Stock issued upon conversion of Securities pursuant to this Article 11 shall be entitled to receive the appropriate number of common stock or preferred stock purchase rights, as the case may be (the "Rights"), if any, that all shares of Common Stock are entitled to receive and the certificates representing the Common Stock issued upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any shareholder rights agreement adopted by the Company, as the same may be amended from time to time (in each case, a "Rights Agreement"). If such Rights Agreement requires that each share of Common Stock issued upon conversion of Securities at any time prior to the distribution of separate certificates representing the Rights be entitled to receive such Rights, then, notwithstanding anything else to the contrary in the foregoing sections of this Article 11, there shall not be any adjustment to the conversion privilege or Conversion Rate or any other term or provision of the Securities as a result of the issuance of Rights, the distribution of separate certificates representing the Rights, the exercise or redemption of such Rights in accordance with any such Rights Agreement, or the termination or invalidation of such Rights. ARTICLE 12 PAYMENT OF INTEREST SECTION 12.01 Interest Payments. Semiannual, cash or Contingent Cash Interest on any Security that is payable in cash, and is punctually paid or duly provided for, on any applicable payment date shall be paid to the person in whose name that Security is registered 73 at the close of business on the Record Date or accrual date, as the case may be, for such interest at the office or agency of the Company maintained for such purpose. Each installment of semiannual or cash interest or Contingent Cash Interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States, if the Trustee shall have received proper wire transfer instructions from such payee not later than the related Record Date or accrual date, as the case may be, or, if no such instructions have been received, by check mailed to the payee at its address set forth on the Registrar's books. In the case of a permanent Global Security, semiannual or cash interest or Contingent Cash Interest payable on any applicable payment date will be paid to the Depositary, with respect to that portion of such permanent Global Security held for its account by Cede & Co. for the purpose of permitting such party to credit the interest received by it in respect of such permanent Global Security to the accounts of the beneficial owners thereof. SECTION 12.02 Defaulted Interest. Except as otherwise specified with respect to the Securities, any semiannual or cash interest or Contingent Cash Interest on any Security that is payable, but is not punctually paid or duly provided for, within 30 days following any applicable payment date (herein called "Defaulted Interest", which term shall include any accrued and unpaid interest that has accrued on such defaulted amount in accordance with paragraph 1 of the Securities), shall be paid by the Company, at its election in each case (x) to the Holder as of Special Record Date, as determined in accordance with clause (a) below, or (y) in the manner set forth in clause (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Securities are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date (the "Special Record Date") for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities at his address as it appears on the list of Securityholders maintained pursuant to Section 2.05 hereof not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b) of this Section 12.02. 74 (b) The Company may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. SECTION 12.03 Interest Rights Preserved. Subject to the foregoing provisions of this Article 12 and Section 2.06 hereof, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to semiannual or cash and Contingent Cash Interest accrued and unpaid, and to accrue, which were carried by such other Security. ARTICLE 13 CONTINGENT CASH INTEREST SECTION 13.01 Contingent Cash Interest. The Company shall make Contingent Cash Interest payments to the Holders of Securities, as set forth in Section 13.02 below, during any six month period from May 14 and November 13 and from November 14 to May 13, beginning with the six-month period commencing on May 14, 2008 (each, a "Semiannual Period") if, but only if, the Average Security Market Price for the five Trading Days ending on the third Trading Day immediately preceding the first day of the applicable Semiannual Period equals 120% or more of the Relevant Value of such Security. During any Semiannual Period when Contingent Cash Interest is payable pursuant to this section, each Contingent Cash Interest payment due and payable on each $1,000 Principal Amount at Maturity shall be calculated for the applicable Semiannual Period, and in each instance shall equal the annual rate of 1.0% of the Average Security Market Price for the five Trading Day measuring period. Contingent Cash Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. As used in this Article 13, "Relevant Value" means the sum of the Issue Price, the accrued Original Issue Discount and accrued cash interest, if any, on such Security to the day immediately preceding the first day of the applicable Semiannual Period. "Average Security Market Price" means, as of any date of determination, the average of the secondary market bid quotations per $1,000 Principal Amount at Maturity of Securities obtained by the Bid Solicitation Agent for $5,000,000 Principal Amount at Maturity of Securities at approximately 4:00 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers (none of which shall be an Affiliate of the Company) selected by the Company; provided, however, that if (a) at least three such bids are not obtained by the Bid Solicitation Agent or (b) in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities as of such determination date, then the Average Security Market Price for such determination date shall equal the product of (i) the Conversion Rate in effect as of such determination date multiplied by (ii) the Average Sale Price of the Common Stock for the five Trading Days ending on such determination date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such 75 determination date, of any event described in Section 11.06, 11.07 or 11.08 hereof (subject to the conditions set forth in Sections 11.08 and 11.10 hereof). The Original Issue Discount of the Securities will continue to accrue whether or not Contingent Cash Interest payments are made. SECTION 13.02 Payment of Contingent Cash Interest; Contingent Cash Interest Rights Preserved. If payable, Contingent Cash Interest on a Security shall be paid to the Person who is the Holder of that Security on the 15th day preceding the last day of such Semiannual Period (the "Contingent Cash Interest Record Date"). Such payments shall be paid on the last day of the Semiannual Period (in each case, a "Contingent Cash Interest Payment Date"). Each payment of Contingent Cash Interest on any Security shall be paid (A) if such Security is held in the form of a Global Note, in the same-day funds by transfer to an account maintained by the payee located inside the United States, or (B) if such Security is held in the form of a Certificated Note, by check, mailed to the address of such Holder as set forth in the Security Register. In the case of a Global Note, interest payable on any Contingent Cash Interest Payment Date will be paid to the Depositary for the purpose of permitting DTC to credit the interest received by it in respect of such Global Note to the accounts of the beneficial owners thereof. Upon determination that Holders of Securities will be entitled to receive Contingent Cash Interest during a Semiannual Period, prior to the start of such Semiannual Period, the Company will issue a press release and publish such information on its website or through such other public medium as the Company may use at the time. The Company may unilaterally increase the amount of Contingent Cash Interest it is required to pay or pay interest or other amounts it is not obligated to pay but will have no obligation to do so. SECTION 13.03 Bid Solicitation Agent. The Bid Solicitation Agent shall solicit bids from securities dealers which the Company indicates that it believes are willing to bid for the Securities. The Company initially appoints the Trustee to act as the Bid Solicitation Agent. The Company may change the Bid Solicitation Agent at its discretion; provided, however, that the Bid Solicitation Agent may not be an Affiliate of the Company. ARTICLE 14 TAX MATTERS SECTION 14.01 Tax Treatment. The parties hereto hereby agree, and each Holder and any beneficial holder of a Security by its purchase of a Security hereby agrees (in the absence of administrative pronouncement or judicial ruling to the contrary): (a) to treat the Securities as indebtedness of the Company for all United States federal income tax purposes; (b) to treat the Securities as debt instruments that are subject to U.S. Treasury Regulation section 1.1275-4(b); and 76 (c) to treat any payment to and receipt by a Holder of Common Stock upon conversion of a Security, or upon a purchase by the Company at the option of the Holder of a Security where the Company elects to pay in Common Stock, as a contingent payment under U.S. Treasury Regulation section 1.1275-4(b). Notwithstanding any other provision of this Indenture, from the commencement of discussions with respect to the transactions contemplated hereby, each party (and each employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure (as such terms are used in Sections 6011, 6111 and 6112 of the United States Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder) of the transactions contemplated by this Indenture and all materials of any kind (including opinions or other tax analyses) that are provided relating to such tax treatment and tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws, and the ability of the Company, its subsidiaries and their respective representatives, affiliates, employees, officers, directors or other agents to consult any tax advisor, including an independent tax advisor, regarding the tax treatment or tax structure of the transactions hereunder (and any transactions related thereto) shall not be restricted or limited in any manner. SECTION 14.02 Comparable Yield and Projected Payment Schedule. Solely for purposes of applying U.S. Treasury Regulation section 1.1275-4 to the Notes: (a) for United States Federal income tax purposes, the Company shall accrue interest with respect to outstanding Securities as tax original issue discount ("Tax Original Issue Discount") according to the "noncontingent bond method," as set forth in U.S. Treasury Regulation section 1.1275-4(b) using a comparable yield of 5.05%, compounded semiannually, and the projected payment schedule attached as Annex 1 to this Indenture; (b) the Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Tax Original Issue Discount for United States federal income tax purposes (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such Tax Original Issue Discount that the Company determines to be relevant under the Internal Revenue Code of 1986, as amended from time to time, including the amount of any adjustment made under the noncontingent bond method to account for the amount of any difference between the amount of an actual payment and the amount of a projected payment; and (c) the Company acknowledges and agrees, and each Holder and any beneficial holder of a Security, by its purchase of a Security shall be deemed to acknowledge and agree, that (i) the comparable yield means the annual yield the Company would pay, as of the Issue Date, on a fixed rate, nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the Securities, (ii) the projected payment schedule is determined on the basis of an assumption of linear growth of stock price and a constant growth in dividend yield, (iii) the comparable yield and the projected payment schedule are not determined for any 77 purpose other than for the purpose of applying U.S. Treasury Regulation section 1.1275-4(b)(4) to the Security and (iv) the comparable yield and the projected payment schedule do not constitute a projection or representation regarding the actual amounts payable on the Securities. ARTICLE 15 MISCELLANEOUS SECTION 15.01 TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 15.02 Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or delivery by courier guaranteeing overnight delivery or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers: if to the Company: RPM International Inc. P.O. Box 777 2628 Pearl Road Medina, Ohio 44528 Attention: General Counsel Telephone: (330) 273-8883 Facsimile: (330) 225-6574 with a copy of any notice given pursuant to Article 6 hereof to: Calfee, Halter & Griswold LLP 1400 McDonald Investment Center 800 Superior Avenue Attention: Edward W. Moore Telephone: (216) 622-8217 Facsimile: (216) 241-0816 if to the Trustee: The Bank of New York 101 Barclay Street - 8W New York, New York 10286 Attention: Corporate Trust Administration Telephone: (212) 815-2498 Facsimile: (212) 815-5707 The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications. 78 Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar. SECTION 15.03 Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 15.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent as set forth in Section 15.05, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, such actions are authorized or permitted by this Indenture and that all such conditions precedent have been complied with. SECTION 15.05 Statements Required in Certificate or Opinion. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include to the extent required by the Trustee: (a) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (c) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement that, in the opinion of such person, such covenant or condition has been complied with. 79 SECTION 15.06 Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 15.07 Rules by Trustee, Paying Agent, Conversion Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, Conversion Agent and the Paying Agent may make reasonable rules for their functions. SECTION 15.08 Calculations. The calculation of the Purchase Price, Change in Control Purchase Price, Liquidated Damages Amount, Conversion Rate, Market Price, Sale Price of the Common Stock and each other calculation to be made hereunder shall be the obligation of the Company. All calculations made by the Company as contemplated pursuant to this Section 15.08 shall be final and binding on the Company and the Holders absent manifest error. The Trustee, Paying Agent and Conversion Agent shall not be obligated to recalculate, recompute or confirm any such calculations. SECTION 15.09 Legal Holidays. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no Original Issue Discount or interest, if any, shall accrue for the intervening period. SECTION 15.10 GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 15.11 No Recourse Against Others. A director, officer, employee, agent, representative, stockholder or equity holder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 15.12 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 15.13 Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 80 IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. RPM INTERNATIONAL INC. By: /s/ P. KELLY TOMPKINS --------------------------------------- Name: P. KELLY TOMPKINS Title: Senior Vice President, General Counsel and Secretary THE BANK OF NEW YORK, as Trustee By: /s/ Joseph A. Lloret --------------------------------------- Name: JOSEPH A. LLORET Title: Assistant Treasurer ANNEX 1 PROJECTED PAYMENT SCHEDULE*
Projected Interest Payment per $1,000 Principal Amount at Maturity of Period Ending Notes* November 13, 2003 6.95 May 13, 2004 6.95 November 13, 2004 6.95 May 13, 2005 6.95 November 13, 2005 6.95 May 13, 2006 6.95 November 13, 2006 6.95 May 13, 2007 6.95 November 13, 2007 6.95 May 13, 2008 6.95 November 13, 2008 0.00 May 13, 2009 0.00 November 13, 2009 0.00 May 13, 2010 0.00 November 13, 2010 0.00 May 13, 2011 0.00 November 13, 2011 0.00 May 13, 2012 0.00 November 13, 2012 0.00 May 13, 2013 0.00 November 13, 2013 0.00 May 13, 2014 0.00 November 13, 2014 0.00 May 13, 2015 0.00 November 13, 2015 0.00 May 13, 2016 0.00 November 13, 2016 0.00 May 13, 2017 0.00 November 13, 2017 0.00 May 13, 2018 0.00 November 13, 2018 0.00 May 13, 2019 0.00 November 13, 2019 0.00 May 13, 2020 4.19 November 13, 2020 4.30 May 13, 2021 4.42 November 13, 2021 4.55 May 13, 2022 4.67 November 13, 2022 4.80 May 13, 2023 4.94
Annex 1-1
Projected Interest Payment per $1,000 Principal Amount at Maturity of Period Ending Notes* November 13, 2023 5.08 May 13, 2024 5.22 November 13, 2024 5.37 May 13, 2025 5.52 November 13, 2025 5.67 May 13, 2026 5.83 November 13, 2026 5.99 May 13, 2027 6.16 November 13, 2027 6.33 May 13, 2028 6.51 November 13, 2028 6.69 May 13, 2029 6.88 November 13, 2029 7.07 May 13, 2030 7.27 November 13, 2030 7.47 May 13, 2031 7.68 November 13, 2031 7.89 May 13, 2032 8.12 November 13, 2032 8.34 Terminal Value at Maturity 1,771.63
* The comparable yield and the schedule of projected payments are determined on the basis of an assumption of linear growth of the stock price and a constant growth in dividend yield and are not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes. The comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on Securities. Annex 1-2 EXHIBIT A-1 [FORM OF FACE OF GLOBAL SECURITY] THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE ISSUE PRICE OF THIS SECURITY IS $505.19 PER $1,000 OF PRINCIPAL AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS INDETERMINABLE AS OF THE ISSUE DATE; THE ISSUE DATE OF THIS SECURITY IS MAY 13, 2003; AND THE YIELD TO MATURITY FOR THE PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 5.05% PER ANNUM, CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER (X) THE LATER OF THE LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) THE LAST DATE ON WHICH RPM INTERNATIONAL INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS A-1-1 SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT AN AFFILIATE OF THE COMPANY AFTER THE RESALE RESTRICTION TERMINATION DATE. THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE. A-1-2 RPM INTERNATIONAL INC. SENIOR CONVERTIBLE NOTE DUE 2033 No. A-1 CUSIP: 749 685 AJ 2 Issue Date: May 13, 2003 Issue Price: $505.19 Original Issue Discount: $494.81 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) RPM INTERNATIONAL INC., a Delaware corporation (herein called the "Company"), promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of TWO HUNDRED FORTY SEVEN MILLION FIVE HUNDRED AND FOURTEEN THOUSAND DOLLARS ($247,514,000) on May 13, 2033. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. RPM INTERNATIONAL INC. By: _________________________________ Title: By: _________________________________ Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By: ________________________ Authorized Signatory A-1-3 [FORM OF REVERSE SIDE OF ALL SECURITIES] SENIOR CONVERTIBLE NOTES DUE 2033 1. Interest. The Company promises to pay interest in cash on the Principal Amount at Maturity of this Note at the rate per annum of 1.389% from the Issue Date, or from the most recent date to which interest has been paid or provided for, until May 13, 2008. During such period, the Company will pay cash interest semiannually in arrears on May 13 and November 13 of each year (each an "Interest Payment Date") to Holders of record at the close of business on each April 28 and October 29 (whether or not a business day) (each a "Regular Record Date") immediately preceding such Interest Payment Date. Cash interest on the Securities will accrue from the most recent date to which interest has been paid or duly provided or, if no interest has been paid, from the Issue Date. Cash interest will be computed on the basis of a 360-day year of twelve 30-day months. After May 13, 2008, this Security shall not bear interest, except as specified in this paragraph or in paragraphs 5 and 11 hereof. If the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Redemption Price pursuant to paragraph 6 hereof, upon the date set for payment of the Purchase Price or Change in Control Purchase Price pursuant to paragraph 7 hereof or upon the Stated Maturity of this Security) or if cash interest (including semiannual or Contingent Cash Interest, if any) due hereon or any portions of such cash interest is not paid when due in accordance with paragraphs 5 or 11 hereof, then in each such case the overdue amount shall, to the extent permitted by law, bear interest at the rate of 2.75% per annum, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount or cash interest. Original Issue Discount (the difference between the Issue Price and the Principal Amount at Maturity of the Security), in the period during which a Security remains outstanding, shall accrue at 2.75% per annum beginning on May 13, 2008, on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months. 2. Method of Payment. Subject to the terms and conditions of the Indenture, the Company will make payments in respect of Redemption Prices, Purchase Prices, Change in Control Purchase Prices and at Stated Maturity to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. In addition, the Company will pay cash interest from the Issue Date until May 13, 2008, as more fully described in paragraph 1 hereof. The Company will pay any cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may make such cash payments by check payable in such money. A-1-4 3. Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar or Bid Solicitation Agent without notice, other than notice to the Trustee except that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar. None of the Company, any of its Subsidiaries or any of their Affiliates shall act as Bid Solicitation Agent. 4. Indenture. The Company issued the Securities pursuant to an Indenture dated as of May 13, 2003 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured and unsubordinated obligations, of the Company, limited to $297,000,000 aggregate Principal Amount at Maturity (subject to Section 2.07 of the Indenture). The Indenture does not limit other indebtedness of the Company, secured or unsecured. 5. Contingent Cash Interest. Subject to the conditions of the Indenture and the accrual and record date provisions specified in this paragraph 5, the Company shall pay Contingent Cash Interest to the Securityholders during any Semiannual Period, with the initial six-month period commencing on May 14, 2008, if, but only if, the Average Security Market Price for the five Trading Days ending on the third Trading Day immediately preceding the first day of the applicable Semiannual Period equals 120% or more of the Relevant Value of such Security. Contingent Cash Interest, if any, will accrue and be payable to holders of this Security as of the Contingent Cash Interest Record Date. Original Issue Discount will continue to accrue at 2.75% whether or not Contingent Cash Interest is paid. The amount of Contingent Cash Interest payable per $1,000 Principal Amount at Maturity hereof in respect of any quarterly period of the applicable Contingent Cash Interest Period shall equal the annual rate of 1.0% of the Average Security Market Price for the five Trading Day measuring period. Upon determination that Securityholders will be entitled to receive Contingent Cash Interest during a Semiannual Period, the Company shall issue a press release and publish such information on its web site or through such other public medium it may use at the time. A-1-5 6. Redemption at the Option of the Company. No sinking fund is provided for the Securities. The Securities are redeemable for cash as a whole, or from time to time in part, at any time at the option of the Company in accordance with the Indenture at the Redemption Prices set forth below; provided, that the Securities are not redeemable prior to May 13, 2008. The table below shows Redemption Prices of a Security per $1,000 Principal Amount at Maturity on the dates shown below and at Stated Maturity, which prices reflect accrued Original Issue Discount calculated to each such date. The Redemption Price of a Security redeemed between such dates shall include an additional amount reflecting the additional Original Issue Discount accrued since the immediately preceding date in the table to, but not including, the Redemption Date. [Remainder of page intentionally left blank] A-1-6
(3) (2) Redemption (1) Accrued Original Price Redemption Date Note Issue Price Issue Discount (1) + (2) - --------------- ---------------- -------------- --------- May 13, 2008..................... $ 505.19 $ 0.00 $ 505.19 2009..................... 505.19 13.99 519.18 2010..................... 505.19 28.36 533.55 2011..................... 505.19 43.14 548.33 2012..................... 505.19 58.32 563.51 2013..................... 505.19 73.92 579.11 2014..................... 505.19 89.96 595.15 2015..................... 505.19 106.44 611.63 2016..................... 505.19 123.37 628.56 2017..................... 505.19 140.78 645.97 2018..................... 505.19 158.66 663.85 2019..................... 505.19 177.05 682.24 2020..................... 505.19 195.94 701.13 2021..................... 505.19 215.35 720.54 2022..................... 505.19 235.30 740.49 2023..................... 505.19 255.81 761.00 2024..................... 505.19 276.88 782.07 2025..................... 505.19 298.53 803.72 2026..................... 505.19 320.79 825.98 2027..................... 505.19 343.66 848.85 2028..................... 505.19 367.16 872.35 2029..................... 505.19 391.32 896.51 2030..................... 505.19 416.14 921.33 2031..................... 505.19 441.65 946.84 2032..................... 505.19 467.87 973.06 At stated maturity....... 505.19 494.81 1,000.00
If this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Redemption Price will be equal to the Restated Principal Amount plus accrued and unpaid interest from the date of such conversion to but not including the Redemption Date; but in no event will this Security be redeemable before May 13, 2008. 7. Purchase by the Company at the Option of the Holder. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Securities held by such Holder on the following Purchase Dates and at the following Purchase Prices, plus accrued and unpaid cash interest, if any, per $1,000 Principal Amount at Maturity, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the A-1-7 day immediately preceding such Purchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture.
Purchase Date Price Purchase - ------------- -------------- May 13, 2008 $ 505.19 May 13, 2013 $ 579.11 May 13, 2018 $ 663.85 May 13, 2023 $ 761.00 May 13, 2028 $ 872.35
The Purchase Price (equal to the Issue Price plus accrued Original Issue Discount to the Purchase Date) may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock of the Company, or in any combination thereof in accordance with the Indenture. If prior to a Purchase Date this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Purchase Price will be equal to the Restated Principal Amount plus accrued and unpaid cash interest from the date of conversion to the Purchase Date as provided in the Indenture. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Securities held by such Holder no later than 30 Business Days after the occurrence of a Change in Control of the Company, but in no event prior to the date on which such a Change in Control occurs, for a Change in Control Purchase Price equal to the Issue Price plus accrued Original Issue Discount and accrued and unpaid cash interest, including Contingent Cash Interest, if any, to but not including the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash. If prior to a Change in Control Purchase Date this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Change in Control Purchase Price shall be equal to the Restated Principal Amount plus accrued cash interest from the date of conversion to the Change in Control Purchase Date. A third party may make the offer and purchase of the Securities in lieu of the Company in accordance with the Indenture. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or securities if permitted under the Indenture) sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, of all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, Original Issue Discount or A-1-8 cash interest (including semiannual and Contingent Cash Interest), if any, shall cease to accrue on such Securities (or portions thereof) on such Purchase Date or Change in Control Purchase Date, as the case may be, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, if any, upon surrender of such Security). 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of, and accrued and unpaid cash interest, if any, with respect to, all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, on such Redemption Date, Original Issue Discount or cash interest (including semiannual and Contingent Cash Interest), if any, shall cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of Principal Amount at Maturity may be redeemed in part but only in integral multiples of $1,000 of Principal Amount at Maturity. 9. Conversion. Conversion Based on Sale Price of Common Stock. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition to conversion described below has not been satisfied, Holders may convert the Securities into Common Stock on a Conversion Date in any fiscal quarter commencing after May 31, 2003, if, as of the last day of the preceding fiscal quarter, the Sale Price of the Common Stock for at least 20 Trading Days in a period of 30 consecutive Trading Days ending on the last Trading Day of the most recently ended fiscal quarter, is greater than the conversion trigger price per share. The "conversion trigger price" for any fiscal quarter shall be 120% of the accreted conversion price per share (calculated without giving effect to accrued cash interest, if any) of Common Stock on the last day of such fiscal quarter. If the foregoing condition is satisfied, then the Securities will be convertible at any time at the option of the Holder, through their maturity. The "accreted conversion price per share" of Common Stock as of any day equals the quotient of: - the Issue Price and accrued Original Issue Discount, if any, to that day, divided by - the number of shares of Common Stock issuable upon conversion of $1,000 Principal Amount at Maturity of Securities on that day pursuant to this paragraph 9 and Article 11 of the Indenture. Conversion Based on Credit Ratings Downgrade. Subject to the provisions of this paragraph 9 and the Indenture and notwithstanding the fact that any other condition to conversion has not been satisfied, the Securities shall be convertible into Common Stock at the election of a Holder on a Conversion Date at any time that (a) the credit rating assigned to the Securities by Moody's Investors Service Inc. and its successors ("Moody's") is Ba3 or lower or A-1-9 the credit rating assigned to the Securities by Standard & Poor's Credit Market Services, a division of the McGraw-Hill Companies Inc. and its successors ("Standard & Poor's") is BB or lower, or (b) the Securities are no longer rated by either or both of Moody's or Standard & Poor's, or (c) either or both of Moody's or Standard & Poor's have suspended or withdrawn their ratings of the Securities. Conversion upon Redemption. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition described herein to conversion has not been satisfied, a Holder may convert into Common Stock a Security or portion of a Security which has been called for redemption pursuant to paragraph 6 hereof, but such Securities may be surrendered for conversion only until the close of business on the second Business Day immediately preceding the Redemption Date. Conversion Upon Certain Distributions. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition to conversion has not been satisfied, in the event that the Company declares a dividend or distribution described in Section 11.07 of the Indenture, or a dividend or a distribution described in Section 11.08 of the Indenture and, in the case of a dividend or distribution described in Section 11.08 of the Indenture, the sum of (a) the fair market value, per share, of such dividend or distribution per share of Common Stock, and (b) the quotient of (1) the amount of Contingent Cash Interest paid on the Securities during the Ex-Dividend Measurement Period divided by (2) the number of shares of Common Stock issuable upon conversion of Securities at the Conversion Rate in effect at the Ex-Dividend Time, as determined in the Indenture, exceeds 15% of the Sale Price of the Common Stock on the Business Day immediately preceding the date of declaration for such dividend or distribution, the Securities may be surrendered for conversion beginning on the date the Company gives notice to the Holders of such right, which shall not be less than 20 days prior to the Ex-Dividend Time for such dividend or distribution, and Securities may be surrendered for conversion at any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such dividend or distribution will not take place. Conversion Upon Occurrence of Certain Corporate Transactions. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition described herein to conversion has not been satisfied, in the event the Company is a party to a consolidation, merger or binding share exchange pursuant to which the Common Stock would be converted into cash, securities or other property as set forth in Section 11.14 of the Indenture, the Securities may be surrendered for conversion at any time from and after the date which is 15 days prior to the date announced by the Company as the anticipated effective time until 15 days after the actual effective date of such transaction, and at the effective time of such transaction the right to convert a Security into Common Stock will be deemed to have changed into a right to convert it into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its Security immediately prior to the transaction. A Security in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. A-1-10 The initial Conversion Rate is 27.0517 shares of Common Stock per $1,000 Principal Amount at Maturity, subject to adjustment in the case of certain events described in the Indenture. The Company will deliver cash or a check in lieu of any fractional share of Common Stock. The ability to surrender Securities for conversion will expire at the close of business on May 11, 2033. In the event the Company exercises its option pursuant to Section 10.01 of the Indenture to have interest in lieu of Original Issue Discount or cash interest accrue on the Security following a Tax Event, the Holder will be entitled on conversion to receive the same number of shares of Common Stock such Holder would have received if the Company had not exercised such option. Accrued and unpaid interest in lieu of Original Issue Discount and cash interest, including Contingent Cash Interest, if any, will not be paid on Securities that are converted following a Tax Event; provided, however, that Securities surrendered for conversion during the period, in the case of interest in lieu of Original Issue Discount, from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date, shall be entitled to receive such interest, in lieu of Original Issue Discount, payable on such Securities on the corresponding Interest Payment Date and (except Securities with respect to which the Company has mailed a notice of redemption) Securities surrendered for conversion during such periods must be accompanied by payment of an amount equal to the interest in lieu of Original Issue Discount with respect thereto that the registered Holder is to receive. To convert a Security, a Holder must (a) complete and manually sign the conversion notice (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (b) surrender the Security to the Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (d) pay any transfer or similar taxes, if required. A Holder may convert a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Stock except as provided in the Indenture. On conversion of a Security, accrued Original Issue Discount and any accrued and unpaid cash interest (or interest if the Company has exercised its option provided for in paragraph 11 hereof), including Contingent Cash Interest, attributable to the period from the Issue Date (or, if the Company has exercised the option referred to in paragraph 11 hereof, the later of (x) the date of such exercise and (y) the date on which interest was last paid) through the Conversion Date shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through the delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the terms hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for Original Issue Discount and any accrued and unpaid cash interest (or interest, if the Company has exercised its option provided for in paragraph 11 hereof), including Contingent Cash Interest, accrued through the Conversion Date, and the balance, if any, of such fair market value of such A-1-11 Common Stock (and any such cash payment) shall be treated as issued in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. The Conversion Rate will be adjusted in accordance with Article 11 of the Indenture for dividends or distributions on Common Stock payable in Common Stock or other Capital Stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase Common Stock for a period expiring within 60 days of the Issue Date at less than the Sale Price of the Common Stock at the Time of Determination; and distributions to such holders of assets or debt securities of the Company or certain rights to purchase securities of the Company (excluding certain cash dividends or distributions) and certain rights pursuant to shareholder rights plans. The Company from time to time may voluntarily increase the Conversion Rate. If the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of its assets, or upon certain distributions described in the Indenture, the right to convert a Security into Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another person. 10. [INTENTIONALLY OMITTED.] 11. Tax Event. (a) From and after (i) the date (the "Tax Event Date") of the occurrence of a Tax Event and (ii) the date the Company exercises the option provided for in this paragraph 11, whichever is later (the "Option Exercise Date"), at the option of the Company, interest in lieu of future Original Issue Discount shall accrue at the rate of 2.75% per annum on a principal amount per Note (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued through the Option Exercise Date and shall be payable semiannually on May 13 and November 13 of each year (each an "Interest Payment Date") to Holders of record at the close of business on each April 28 and October 29, respectively, (each a "Regular Record Date") immediately preceding such Interest Payment Date. Interest will be computed on a semiannual bond equivalent basis using a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Option Exercise Date. (b) Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Security is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose. Each installment of interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States. 12. Defaulted Interest. Except as otherwise specified with respect to the Securities, any Defaulted Interest on any Security shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date or accrual date, as the case may be, and such Defaulted Interest shall be paid by the Company as provided for in Section 12.02 of the Indenture. A-1-12 13. Denominations; Transfer; Exchange. The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount at Maturity and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. 14. Persons Deemed Owners. The registered Holder of this Security may be treated as the owner of this Security for all purposes. 15. Unclaimed Money or Securities. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property laws. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 16. Amendment; Waiver. Subject to certain exceptions set forth in the Indenture, (a) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding and (b) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 or Section 11.14 of the Indenture, to secure the Company's obligations under this Security or to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred, to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, or as necessary in connection with the registration of the Securities under the Securities Act or to make any change that does not adversely affect the rights of any Holders. 17. Defaults and Remedies. Under the Indenture, Events of Default include (a) default in payment of any cash interest (including any interest which becomes payable after the Securities have been converted to notes A-1-13 paying semiannual interest following the occurrence of a Tax Event) or any Contingent Cash Interest and such default continues for 30 days; (b) default in payment of the Principal Amount at Maturity (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount), Issue Price plus accrued Original Issue Discount or cash interest, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, in respect of the Securities when the same becomes due and payable; (c) failure by the Company to comply with other agreements in the Indenture or the Securities, subject to notice and lapse of time; (d) default in the payment of any principal when due or resulting in acceleration of other indebtedness of the Company or any Subsidiary for borrowed money where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $50,000,000, and such acceleration has not been rescinded or annulled within a period of 10 days after receipt by the Company of a Notice of Default, subject to notice and lapse of time; provided, however, that if any such default shall be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; (e) certain events of bankruptcy or insolvency; and (f) final unsatisfied judgments not covered by insurance aggregating in excess of $100,000,000 rendered against the Company or any Subsidiary and not stayed, bonded or discharged within 60 days. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding, may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default which will result in the Issue Price plus Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest) on the Securities becoming due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of amounts specified in clause (a) or (b) above) if it determines that withholding notice is in their interests. 18. Trustee Dealings with the Company. Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 19. No Recourse Against Others. A director, officer, employee, agent, representative, stockholder or equity holder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases A-1-14 all such liability. The waiver and release are part of the consideration for the issue of the Securities. 20. Authentication. This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 21. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 22. GOVERNING LAW. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ---------------------- A-1-15 The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: RPM International Inc. P.O. Box 777 2628 Pearl Road Medina, Ohio 44528 Attention: General Counsel A-1-16 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to _____________________________________________ _____________________________________________ (Insert assignee's soc. sec. or tax ID no.) _____________________________________________ _____________________________________________ _____________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _____________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. CONVERSION NOTICE To convert this Security into Common Stock of the Company, check the box: [ ] To convert only part of this Security, state the Principal Amount at Maturity to be converted (which must be $1,000 or an integral multiple of $1,000): $____________________________________________ If you want the stock certificate made out in another person's name, fill in the form below: _______________________________________________ _______________________________________________ (Insert other person's soc. sec. or tax ID no.) _______________________________________________ _______________________________________________ _______________________________________________ _______________________________________________ (Print or type other person's name, address and zip code) A-1-17 ________________________________________________________________________________ Date: _____________________ Your Signature: ____________________________________ ________________________________________________________________________________ (Sign exactly as your name appears on the other side of this Security) A-1-18 EXHIBIT A-2 [FORM OF FACE OF CERTIFICATED SECURITY] THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE ISSUE PRICE OF THIS SECURITY IS $505.19 PER $1,000 OF PRINCIPAL AMOUNT AT MATURITY; THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS INDETERMINABLE AS OF THE ISSUE DATE; THE ISSUE DATE OF THIS SECURITY IS MAY 13, 2003; AND THE YIELD TO MATURITY FOR THE PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 5.05% PER ANNUM, CALCULATED ON A SEMIANNUAL BOND EQUIVALENT BASIS. [INCLUDE IF SECURITY IS A CERTIFICATED SECURITY TO BE HELD BY AN INSTITUTIONAL ACCREDITED INVESTOR--IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOLLOWING RESTRICTIONS.] THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF (X) THE LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) AND THE LAST DATE ON WHICH RPM INTERNATIONAL INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN A-2-1 CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT AN AFFILIATE OF THE COMPANY AFTER THE RESALE RESTRICTION TERMINATION DATE. THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE. A-2-2 RPM INTERNATIONAL INC. SENIOR CONVERTIBLE NOTE DUE 2033 No. A-1 CUSIP: 749 685 AJ 2 Issue Date: May 13, 2003 Issue Price: $505.19 Original Issue Discount: $494.81 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) RPM INTERNATIONAL INC., a Delaware corporation (herein called the "Company"), promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of TWO HUNDRED FORTY SEVEN MILLION FIVE HUNDRED AND FOURTEEN THOUSAND DOLLARS ($247,514,000) on May 13, 2033. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. RPM INTERNATIONAL INC. By: _______________________________ Title: By: _______________________________ Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By: ________________________ Authorized Signatory A-2-3 [FORM OF REVERSE SIDE OF CERTIFICATED SECURITY IS THE SAME THE FORM OF REVERSE SIDE OF GLOBAL SECURITY] A-2-4 EXHIBIT B-1 TRANSFER CERTIFICATE In connection with any transfer of any of the Securities within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) (or any successor provision) under the Securities Act of 1933, as amended (the "Securities Act"), the undersigned registered owner of this Security hereby certifies with respect to $__________ Principal Amount at Maturity of the above-captioned securities presented or surrendered on the date hereof (the "Surrendered Securities") for registration of transfer, or for exchange or conversion where the securities issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below: [ ] The transfer of the Surrendered Securities is made to the Company or any subsidiaries; or [ ] The transfer of the Surrendered Securities complies with Rule 144A under the Securities Act; or [ ] The transfer of the Surrendered Securities is to an institutional accredited investor, as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to another available exemption from the registration requirement of the Securities Act. and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Securities are not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act (an "Affiliate"). [ ] The transferee is an Affiliate of the Company. DATE: _____________________ ________________________________________ Signature(s) (If the registered owner is a corporation, partnership or fiduciary, the title of the Person signing on behalf of such registered owner must be stated.) B-1-1 EXHIBIT B-2 FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS RPM International Inc. P.O. Box 777 2628 Pearl Road Medina, Ohio 44258 Attention: Chief Financial Officer The Bank of New York 101 Barclay Street - 8W New York, New York 10286 Attention: Corporate Trust Administration Dear Sirs: We are delivering this letter in connection with the proposed transfer of $_________ Principal Amount at Maturity of the Senior Convertible Notes due 2033 (the "Securities") issued by RPM International Inc. (the "Company"), which are convertible into shares of the Company's Common Stock, $.01 par value per share (the "Common Stock"). We hereby confirm that: (i) we are an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor"); (ii) the purchase of Securities by us is for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring Securities as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; (iii) we will acquire Securities having a minimum principal amount at maturity of not less than $[ ] for our own account or for any separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Securities; and (v) we are not acquiring Securities with a view to distribution thereof or with any present intention of offering or selling Securities or the Common Stock issuable upon conversion thereof, except as permitted below; provided, that the disposition of our B-2-1 property and property of any accounts for which we are acting as fiduciary shall remain at all times within our control. We understand that the Securities were originally offered and sold in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Securities and the Common Stock issuable upon conversion thereof (the Securities and such Common Stock hereinafter referred to as the "Securities") have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Securities, that if in the future we decide to resell or otherwise transfer such Securities prior to the date (the "Resale Restriction Termination Date") which is two years after the later of the last day the Securities of this issue were issued and the last date on which the Company or an affiliate of the Company was the owner of the Security, such Securities may be resold or otherwise transferred only (i) to RPM International Inc. or any subsidiary thereof, or (ii) for as long as the Securities are eligible for resale pursuant to Rule 144A, to a person it reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) that purchases for its own account or for the account of a qualified institutional buyer to which notice is given that the transfer is being made in reliance on Rule 144A, or (iii) to an Institutional Accredited Investor that is acquiring the Security for its own account, or for the account of such Institutional Accredited Investor for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, or (iv) pursuant to another available exemption from registration under the Securities Act (if applicable), or (v) pursuant to a registration statement which has been declared effective under the Securities Act and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction and in accordance with the legends set forth on the Securities. We further agree to provide any person purchasing any of the Securities from us other than pursuant to clause (v) above a notice advising such purchaser that resales of such securities are restricted as stated herein. We understand that the trustee or the transfer agent, as the case may be, for the Securities will not be required to accept for registration of transfer any Securities pursuant to (iii) or (iv) above except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that any Securities will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph other than certificates representing Securities transferred pursuant to clause (v) above. We acknowledge that the Company, others and you will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. B-2-2 THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. _______________________________________ (Name of Purchaser) By: ___________________________________ Name: Title: Address: EX-4.10 5 l02719aexv4w10.txt EX-4.10 REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.10 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of May 13, 2003 by and among RPM International Inc., a Delaware corporation ("the Company"), and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in Schedule A to the Purchase Agreement (as defined below) (collectively, the "Initial Purchasers"), for whom Merrill Lynch is acting as representative (in such capacity, the "Representative") pursuant to the Purchase Agreement, dated May 8, 2003 (the "Purchase Agreement"), among the Company and the Initial Purchasers. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in the Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The Company agrees with the Initial Purchasers, (i) for their benefit as Initial Purchasers and (ii) for the benefit of the beneficial owners (including the Initial Purchasers) from time to time of the Notes (as defined herein), and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of Notes (each of the foregoing a "Holder" and together the "Holders"), as follows: SECTION 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. In addition to the terms that are defined elsewhere in this Agreement, the following terms shall have the following meanings: "Affiliate" with respect to any specified person, has the meaning specified in Rule 144. "Applicable Conversion Price" means, as of any date of determination, the Applicable Principal Amount per $1,000 principal amount at maturity of Notes as of such date of determination divided by the Conversion Rate in effect as of such date of determination or, if no Notes are then outstanding, the Conversion Rate that would be in effect were Notes then outstanding. "Applicable Principal Amount" means, as of any date of determination, (1) with respect to each $1,000 principal amount at maturity of Notes means the sum of the initial issue price of such Notes ($505.19) plus accrued original issue discount and any accrued cash interest with respect to such Notes through such date of determination, (2) if the Notes have been converted to Semi-Annual Coupon Notes upon a Tax Event, the Restated Principal Amount with respect to the Notes, or (3) if no Notes are then outstanding, such sum calculated in accordance with clause (1) hereof as if such Notes were then outstanding. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Common Stock" means any shares of the common stock, $0.01 par value, of the Company and any other shares of common stock as may constitute "Common Stock" for purposes of the Indenture, including the Underlying Common Stock. "Conversion Rate" has the meaning assigned to such term in the Indenture. "Damages Accrual Period" has the meaning specified in Section 2(e) hereof. "Damages Payment Date" means each May 13 and November 13. "Deferral Notice" has the meaning specified in Section 3(i) hereof. "Deferral Period" has the meaning specified in Section 3(i) hereof. "Effectiveness Deadline Date" has the meaning specified in Section 2(a) hereof. "Effectiveness Period" means the period of two years from the Issue Date or such shorter period ending on the date that all Registrable Securities have ceased to be Registrable Securities. "Event" has the meaning specified in Section 2(e) hereof. "Event Termination Date" has the meaning specified in Section 2(e) hereof. "Event Date" has the meaning specified in Section 2(e) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Filing Deadline Date" has the meaning specified in Section 2(a) hereof. "Holder" has the meaning specified in the second paragraph of this Agreement. "Indenture" means the Indenture dated as of the date hereof between the Company and the Trustee, as trustee, pursuant to which the Notes are being issued. "Initial Purchasers" shall have the meaning set forth in the preamble to this Agreement. "Initial Shelf Registration Statement" has the meaning specified in Section 2(a) hereof. "Issue Date" means May 13, 2003. "Liquidated Damages Amount" has the meaning specified in Section 2(e) hereof. "Losses" has the meaning specified in Section 6 hereof. "Material Event" has the meaning specified in Section 3(i) hereof. 2 "Notes" means the Senior Convertible Notes due 2033 of the Company to be purchased pursuant to the Purchase Agreement. "Notice and Questionnaire" means a written notice delivered to the Company containing substantially the information called for by the Selling Security Holder Notice and Questionnaire attached as Annex A to the Offering Memorandum of the Company dated May 8, 2003 relating to the Notes. "Notice Holder" means on any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 415 promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus. "Purchase Agreement" has the meaning specified in the first paragraph of this Agreement. "Record Holder" means with respect to any Damages Payment Date relating to any Note or shares of Underlying Common Stock as to which any Liquidated Damages Amount has accrued, the registered holder of such Note or such shares of Underlying Common Stock, as the case may be, on the 15th day immediately prior to the next succeeding Damages Payment Date. "Registrable Securities" means the Notes and the Underlying Common Stock until such securities have been converted or exchanged and, at all times subsequent to any such conversion or exchange, any securities into or for which such securities have been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split, merger or similar event until, in the case of any such security, the earliest of (i) its effective registration under the Securities Act and resale in accordance with the Registration Statement covering it, (ii) expiration of the holding period that would be applicable thereto under Rule 144(k) were it not held by an Affiliate of the Company, or (iii) its sale to the public pursuant to Rule 144. "Registration Expenses" has the meaning specified in Section 5 hereof. "Registration Statement" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement. "Restated Principal Amount" has the meaning assigned to such term in the Indenture. "Restricted Securities" has the meaning assigned to such term in Rule 144. 3 "Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule. "Rule 144A" means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder. "Semi-Annual Coupon Notes" has the meaning assigned to such term in the Indenture. "Shelf Registration Statement" has the meaning specified in Section 2(a) hereof. "Subsequent Shelf Registration Statement" has the meaning specified in Section 2(b) hereof. "Tax Event" has the meaning assigned to such term in the Indenture. "TIA" means the Trust Indenture Act of 1939, as amended. "Trustee" means the Bank of New York (or any successor entity), the Trustee under the Indenture. "Underlying Common Stock" means the Common Stock into which the Notes are convertible or issued upon any such conversion. SECTION 2. Shelf Registration. (a) The Company shall prepare and file or cause to be prepared and filed with the SEC no later than a date which is one-hundred and twenty (120) days after the Issue Date (the "Filing Deadline Date") a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration Statement") registering the resale from time to time by Holders of all of the Registrable Securities (the "Initial Shelf Registration Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution reasonably elected by the Holders and set forth in the Initial Shelf Registration Statement; provided that in no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company. The Company shall use reasonable best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act no later than the date (the "Effectiveness Deadline Date") that is one-hundred and eighty (180) days after the Issue Date, and to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement) continuously effective under the 4 Securities Act until the expiration of the Effectiveness Period. Each Holder that became a Notice Holder on or prior to the date ten (10) Business Days prior to the time that the Initial Shelf Registration Statement became effective shall be named as a selling security holder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with the Securities Act and applicable state securities laws generally applicable to all such Holders. Notwithstanding the foregoing, no Holder shall be entitled to have the Registrable Securities held by it covered by such Shelf Registration Statement unless such Holder has provided a Notice and Questionnaire in accordance with Section 2(d) and is in compliance with Section 4. The Company shall not permit any of its security holders (other than the Holders of Registrable Securities) to include any of the Company's securities in the Shelf Registration Statement. (b) If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period, the Company shall use reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected by the Company to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, the Company shall use reasonable efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is reasonably practicable after such filing or, if filed during a Deferral Period, after the expiration of such Deferral Period, and to keep such Registration Statement (or subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period. (c) The Company shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement, if required by the Securities Act or, to the extent to which the Company does not reasonably object, as reasonably requested by the Initial Purchasers or by the Trustee on behalf of the registered Holders. (d) Each Holder of Registrable Securities agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(d) and Section 3(i) and Section 4. Each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least five (5) Business Days prior to any intended distribution of Registrable Securities under the Shelf Registration Statement. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as is reasonably practicable after the date a Notice and Questionnaire is delivered, (i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other document required by the SEC so that the Holder delivering such Notice and Questionnaire is 5 named as a selling security holder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with the Securities Act and applicable state securities laws and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is reasonably practicable; (ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as is reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(i), provided further, that if under applicable law the Company has more than one option as to the type or manner of making any such filing, it will make the required filing or filings in the manner or of a type that is reasonably expected to result in the earliest availability of the Prospectus for effecting resales of Registrable Securities. Notwithstanding anything contained herein to the contrary, the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling security holder in any Registration Statement or related Prospectus; provided, however, that any Holder that becomes a Notice Holder pursuant to the provisions of Section 2(d) of this Agreement (whether or not such Holder was a Notice Holder at the time the Registration Statement was initially declared effective) shall be named as a selling security holder in the Registration Statement or related Prospectus subject to and in accordance with the requirements of this Section 2(d). (e) The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if (i) the Initial Shelf Registration Statement has not been filed on or prior to the Filing Deadline Date, (ii) the Initial Shelf Registration Statement has not been declared effective under the Securities Act on or prior to the Effectiveness Deadline Date, or (iii) the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(i) hereof (each of the events of a type described in any of the foregoing clauses (i) through (iii) are individually referred to herein as an "Event," and the Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date in the case of clause (ii), and the date on which the aggregate duration of Deferral Periods in any period exceeds the number of days permitted by Section 3(i) hereof in the case of clause (iii), being referred to herein as an "Event Date"). Events shall be deemed to continue until the "Event Termination Date," which shall be the following dates with respect to the respective types of Events: the date the Initial Shelf Registration Statement is filed in the case of an Event of the type described in clause (i), the date the Initial Shelf Registration Statement is declared effective under the Securities Act in the case of an Event of the type described in clause (ii), termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods in a period set forth in Section 3(i) to be exceeded in the case of the commencement of an Event of the type described in clause (iii). Accordingly, commencing on (and including) any Event Date and ending on (but excluding) the next date after an Event Termination Date (a "Damages Accrual Period"), the Company agrees to pay, as liquidated damages and not as a penalty, an amount (the "Liquidated 6 Damages Amount"), payable on the Damages Payment Dates to Record Holders of then outstanding Notes that are Registrable Securities or of then outstanding shares of Underlying Common Stock issued upon conversion of Notes that are Registrable Securities, as the case may be, accruing, for each portion of such Damages Accrual Period beginning on and including a Damages Payment Date (or, in respect of the first time that the Liquidation Damages Amount is to be paid to Holders on a Damages Payment Date as a result of the occurrence of any particular Event, from the Event Date) and ending on but excluding the first to occur of (A) the date of the end of the Damages Accrual Period or (B) the next Damages Payment Date, at a rate per annum equal to one-quarter of one percent (0.25%) for the first 90-day period from the Event Date, and thereafter at a rate per annum equal to one-half of one percent (0.5%) of the aggregate Applicable Principal Amount of such Notes, the aggregate Applicable Conversion Price of the shares of Underlying Common Stock and the Restated Principal Amount of the Semi-Annual Coupon Notes, as the case may be, in each case determined as of the Business Day immediately preceding the next Damages Payment Date; provided that any Liquidated Damages Amount accrued with respect to any Note or portion thereof called for redemption on a redemption date or converted into Underlying Common Stock on a conversion date or to Semi-Annual Coupon Notes prior to the Damages Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Note or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion). Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) expiration of the Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with respect to any period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence of multiple concurrent Events. Following the cure of all Events requiring the payment by the Company of Liquidated Damages Amounts to the Holders of Registrable Securities pursuant to this Section, the accrual of Liquidated Damages Amounts will cease (without in any way limiting the effect of any subsequent Event requiring the payment of the Liquidated Damages Amount by the Company). The Trustee, subject to the applicable provisions of the Indenture, shall be entitled, on behalf of Holders of Notes, Underlying Common Stock or Semi-Annual Coupon Notes, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Liquidated Damages Amount. Notwithstanding the foregoing, the parties agree that the sole monetary damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages. Nothing shall preclude a Notice Holder or Holder of Registrable Securities from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement. All of the Company's obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 8(k)). The parties hereto agree that the liquidated damages provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of 7 Registrable Securities by reason of the failure of the Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof. SECTION 3. Registration Procedures. In connection with the registration obligations of the Company under Section 2 hereof, the Company shall: (a) Before filing any Registration Statement or Prospectus or any amendments or supplements (other than amendments or supplements that do nothing more substantive than name one or more Notice Holders as selling security holders) thereto with the SEC, furnish to the Initial Purchasers copies of all such documents proposed to be filed and use reasonable efforts to reflect in each such document when so filed with the SEC such comments as the Initial Purchasers reasonably shall propose within three (3) Business Days of the delivery of such copies to the Initial Purchasers. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period specified in Section 2(a); cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use reasonable efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or such Prospectus as so supplemented. (c) As promptly as reasonably practicable give notice to the Notice Holders and the Initial Purchasers (i) when any Prospectus, Prospectus supplement, Registration Statement or post-effective amendment to a Registration Statement has been filed with the SEC and, with respect to a Registration Statement or any post-effective amendment, when the same has been declared effective (provided, however, that the Company shall not be required by this clause (i) to notify (A) the Initial Purchasers of the filing of a Prospectus supplement that does nothing more substantive than name one or more Notice Holders as selling security holders or (B) any Notice Holder of the filing of a Prospectus supplement that does nothing more substantive than name one or more other Notice Holders as selling security holders), (ii) of any request, following the effectiveness of the Initial Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order or injunction suspending or enjoining the use of any Prospectus or the effectiveness of any Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the occurrence of (but not the nature of or details concerning) a Material Event (provided, however, that no notice by the Company shall be required pursuant to this clause (v) in the event that the Company either promptly files a Prospectus supplement to update the 8 Prospectus or a Current Report on Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which, in either case, contains the requisite information with respect to such Material Event that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading) and (vi) of the determination by the Company that a post-effective amendment to a Registration Statement will be filed with the SEC, which notice may, at the discretion of the Company (or as required pursuant to Section 3(i)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(i) shall apply. (d) Use reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in either case at the earliest possible moment or, if any such order or suspension is made effective during any Deferral Period, at the earliest possible moment after the expiration of such Deferral Period. (e) If reasonably requested by the Initial Purchasers or any Notice Holder, as promptly as reasonably practicable incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information as the Initial Purchasers or such Notice Holder shall, on the basis of a written opinion of nationally-recognized counsel experienced in such matters (which opinion shall also be addressed to the Company), determine to be required to be included therein by applicable law and make any required filings of such Prospectus supplement or such post-effective amendment; provided that the Company shall not be required to take any actions under this Section 3(e) that are not, in the reasonable opinion of counsel for the Company, in compliance with applicable law. (f) As promptly as reasonably practicable after the filing of such documents with the SEC furnish to each Notice Holder and the Initial Purchasers, upon their request and without charge, at least one (1) conformed copy of the Registration Statement and any amendment thereto, including financial statements, but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder or the Initial Purchasers, as the case may be). (g) During the Effectiveness Period, deliver to each Notice Holder in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein. (h) Subject to Section 3(i), prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use reasonable efforts to cooperate 9 with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire), it being agreed that no such registration or qualification will be made unless so requested; prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with such Notice Holder's offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things necessary to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the relevant Registration Statement and the related Prospectus; provided that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it is not otherwise qualified or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject. (i) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact (a "Material Event") as a result of which any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (including, in any such case, as a result of the non-availability of financial statements), or (C) the occurrence or existence of any pending corporate development that, in the discretion of the Company, makes it appropriate to suspend the availability of the Shelf Registration Statement and the related Prospectus, (i) in the case of clause (B) above, subject to the next sentence, as promptly as practicable prepare and file a post-effective amendment to such Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and Prospectus so that such Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, subject to the next sentence, use reasonable efforts to cause it to be declared effective as promptly as is reasonably practicable, and (ii) give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Registration Statement until such Notice Holder's receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company 10 that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company will use reasonable efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as reasonably practicable thereafter and (z) in the case of clause (C) above, as soon as, in the discretion of the Company, such suspension is no longer appropriate. So long as the period during which the availability of the Registration Statement and any Prospectus is suspended (the "Deferral Period") does not exceed forty-five (45) days during any three (3) month period or one hundred and twenty (120) days during any twelve (12) month period, the Company shall not incur any obligation to pay liquidated damages pursuant to Section 2(e). (j) If reasonably requested in writing in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make reasonably available for inspection during normal business hours by a representative for the Notice Holders of such Registrable Securities and any broker-dealers, attorneys and accountants retained by such Notice Holders, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the appropriate executive officers, directors and designated employees of the Company and its subsidiaries to make reasonably available for inspection during normal business hours all relevant information reasonably requested by such representative for the Notice Holders or any such broker-dealers, attorneys or accountants in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any Prospectus referred to in this Agreement), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person on a non-confidential basis from a source other than the Company and such source is not bound by a confidentiality agreement; and provided further, that the foregoing inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of all the Notice Holders and the other parties entitled thereto by the counsel referred to in Section 5. (k) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of a Registration Statement, which statements shall cover said 12-month periods. 11 (l) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to a Registration Statement, and cause such Registrable Securities to be in such denominations as are permitted by the Indenture and registered in such names as such Notice Holder may request in writing at least five Business Days prior to any sale of such Registrable Securities. (m) Provide a CUSIP number for all Registrable Securities covered by each Registration Statement not later than the effective date of such Registration Statement and provide the Trustee for the Notes and the transfer agent for the Common Stock with certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company. (n) Make reasonable effort to provide such information as is required for any filings required to be made with the National Association of Securities Dealers, Inc. (o) Upon (i) the filing of the Initial Shelf Registration Statement and (ii) the effectiveness of the Initial Shelf Registration Statement, announce the same, in each case by release to Businesswire, Reuters Economic Services, Bloomberg Business News or any other means of dissemination reasonably expected to make such information known publicly. (p) Take all actions necessary, or reasonably requested by the Holders of a majority of the Registrable Securities being sold, in order to expedite or facilitate disposition of such Registrable Securities; provided that the Company shall not be required to take any action in connection with an underwritten offering without its consent; and (q) Cause the Indenture to be qualified under the TIA not later than the effective date of any Registration Statement; and in connection therewith, cooperate with the Trustee to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. SECTION 4. Holder's Obligations. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading, any other information regarding such Notice Holder and the distribution of such Registrable Securities as may be required to be disclosed in the Registration Statement under applicable law or pursuant to SEC comments and any information otherwise required by the Company to comply with applicable law or regulations. Each Holder further agrees, following termination of the Effectiveness Period, to notify the Company within ten (10) Business Days of a request, of the amount of Registrable Securities sold pursuant to the 12 Registration Statement and, in the absence of a response, the Company may assume that all of the Holder's Registrable Securities were so sold. SECTION 5. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance by the Company of its obligations under Sections 2 and 3 of this Agreement whether or not any of the Registration Statements are declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal and state securities or Blue Sky laws to the extent such filings or compliance are required pursuant to this Agreement (including, without limitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as the Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration Statement may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company in connection with the Shelf Registration Statement, and (v) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock. In addition, the Company shall bear or reimburse the Notice Holders for the reasonable fees and disbursements of one firm of legal counsel for the Holders, which shall, upon the written consent of the Initial Purchasers (which shall not be unreasonably withheld), be another nationally recognized law firm experienced in securities law matters designated by the Company. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which the same securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company. SECTION 6. Indemnification; Contribution. (a) The Company agrees to indemnify and hold harmless each Initial Purchaser and each Holder of Registrable Securities and each person, if any, who controls any Initial Purchaser or any Holder of Registrable Securities within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or 13 necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 6(d) below) any such settlement is effected with the prior written consent of the Company; and (iii) subject to Section 6(c) below, against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchasers through Merrill Lynch, such Holder of Registrable Securities (which also acknowledges the indemnity provisions herein) or any person, if any, who controls an Initial Purchaser or any such Holder of Registrable Securities expressly for use in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); provided further, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense (1) arising from an offer or sale of Registrable Securities occurring during a Deferral Period, if a Deferral Notice was given to such Notice Holder in accordance with Section 8(c), or (2) if the Holder fails to deliver at or prior to the written confirmation of sale, the most recent Prospectus, as amended or supplemented, and such Prospectus, as amended or supplemented, would have corrected such untrue statement or omission or alleged untrue statement or omission of a material fact and the delivery thereof was required by law. (b) In connection with any Shelf Registration in which a Holder, including, without limitation, the Initial Purchasers, of Registrable Securities is participating, in furnishing information relating to such Holder of Registrable Securities to the Company in writing expressly for use in such Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto, the Holders of such Registrable Securities agree, severally and not jointly, to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and the Company, and each person, if any, who controls the Company within the meaning of either such Section, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment 14 thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder of Registrable Securities (which also acknowledges the indemnity provisions herein) or any person, if any, who controls any such Holder of Registrable Securities expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). The Initial Purchasers agree to indemnify and hold harmless the Company, the Holders of Registrable Securities, and each person, if any, who controls the Company or any Holder of Registrable Securities within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company or on behalf of by the Initial Purchasers expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of these indemnity provisions. The indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain a separate firm as its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the reasonable fees and expenses of more than one firm (in addition to any local counsel) for the Initial Purchasers, Holders of Registrable Securities, and all persons, if any, who control an Initial Purchaser or Holders of Registrable Securities within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (b) the reasonable fees and expenses of more than one firm (in addition to any local counsel) for the Company, its directors, and each person, if any, who controls the Company within the meaning of either such Section, and that all such reasonable fees and expenses shall be reimbursed as they are incurred. In the event a separate firm is retained for the Initial Purchasers Holders of Registrable Securities, and control persons of the Initial Purchasers and Holders of Registrable Securities, such firm shall be designated in writing by the Initial Purchasers. In the event a 15 separate firm is retained for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement; provided that an indemnifying party shall not be liable for any such settlement effected without its consent if such indemnifying party (1) reimburses such indemnified party in accordance with such request to the extent it considers such request to be reasonable and (2) provides written notice to the indemnified party describing any unpaid balance it believes is unreasonable and the reasons therefor, in each case prior to the date of such settlement. (e) If the indemnification to which an indemnified party is entitled under this Section 6 is for any reason unavailable to or insufficient although applicable in accordance with its terms to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and the Holders of the Registrable Securities or the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holder of the Registrable Securities or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this 16 Section 6(e). The aggregate amount of losses, liabilities, claims, damages, and expenses incurred by an indemnified party and referred to above in this Section 6(e) shall be deemed to include any out-of-pocket legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 6, neither the Holder of any Registrable Securities nor an Initial Purchaser, shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such Holder of Registrable Securities or by the Initial Purchaser, as the case may be, and distributed to the public were offered to the public exceeds the amount of any damages that such Holder of Registrable Securities or the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6(e), each person, if any, who controls an Initial Purchaser or any Holder of Registrable Securities within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchaser or such Holder, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. SECTION 7. Information Requirements. The Company covenants that, if at any time before the end of the Effectiveness Period the Company is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder of Registrable Securities and take such further reasonable action as any Holder of Registrable Securities may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations of Rule 144 and Rule 144A under the Securities Act and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in the Company's most recent report required to be filed and filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities under any section of the Exchange Act. SECTION 8. Miscellaneous. (a) No Conflicting Agreements. The Company is not, as of the date hereof, a party to, nor shall they, on or after the date of this Agreement, enter into, any agreement with 17 respect to the Company's securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement. The Company represents and warrants that the rights granted to the Holders of Registrable Securities hereunder do not in any way conflict with the rights granted to the holders of the Company's securities under any other agreements. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the then outstanding Underlying Common Stock constituting Registrable Securities (with Holders of Notes or Semi-Annual Coupon Notes deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of Underlying Common Stock into which such Notes or Semi-Annual Coupon Notes are or would be convertible or exchangeable as of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(b), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the parties as follows: (A) if to a Holder of Registrable Securities that is not a Notice Holder, at the address for such Holder then appearing in the Registrar (as defined in the Indenture); (B) if to a Notice Holder, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto; if to the Company, to: RPM International Inc. P.O. Box 777 2628 Pearl Road Medina, Ohio 44258 18 Telephone No. (330) 273-5090 Facsimile No. (330) 225-6574 Attention: General Counsel and Calfee, Halter & Griswold LLP 800 Superior Avenue, Suite 1400 Cleveland, Ohio 44114 Telephone No. (216) 622-8200 Facsimile No. (216) 241-0816 Attention: Edward W. Moore and if to the Initial Purchasers, to: Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center New York, New York 10080 Attention: Syndicate Department Telecopier: (212) 738-1069 or to such other address as such person may have furnished to the other persons identified in this Section 8(c) in writing in accordance herewith. (d) Approval of Holders. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than the Initial Purchasers or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be such affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and, without requiring any express assignment, shall inure to the benefit of and be binding upon each Holder of any Registrable Securities. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 19 (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and the registration rights granted by the Company with respect to the Registrable Securities. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and undertakings among the parties with respect to such registration rights. (k) Termination. This Agreement and the obligations of the parties hereunder shall terminate upon the end of the Effectiveness Period, except for any liabilities or obligations under Sections 4, 5 or 6 hereof, the obligations to make payments of and provide for liquidated damages under Section 2(e) hereof to the extent such damages accrue prior to the end of the Effectiveness Period, each of which shall remain in effect in accordance with its terms. 20 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. Very truly yours, RPM INTERNATIONAL INC. By /s/ P. KELLY TOMPKINS ----------------------------------------- Name: P. KELLY TOMPKINS Title: Senior Vice President, General Counsel and Secretary Accepted as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Purna R. Saggurti ------------------------------------- Name: PURNA R. SAGGURTI Title: Managing Director For itself and the other several Initial Purchasers named in Schedule A to the Purchase Agreement. EX-10.21 6 l02719aexv10w21.txt EX-10.21 COMMERCIAL PAPER DEALER AGREEMENT EXHIBIT 10.21 COMMERCIAL PAPER DEALER AGREEMENT [ 4(2) Program ] Between: RPM INTERNATIONAL INC., AS ISSUER and U.S. BANCORP PIPER JAFFRAY INC., AS DEALER Concerning short-term promissory notes (the "Notes") to be issued pursuant to an Issuing and Paying Agency Agreement dated as of April 21, 2003 between the Issuer and U.S. Bank Trust National Association as Issuing and Paying Agent. Dated as of: April 21, 2003. COMMERCIAL PAPER DEALER AGREEMENT [ 4(2) PROGRAM ] This Commercial Paper Dealer Agreement (the "Agreement") sets forth the understandings between the Issuer and the Dealer in connection with the issuance and sale by the Issuer of the Notes through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. 1. Offers, Sales and Resales of Notes. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased or sold by the Dealer in reliance on the representations, warranties, covenants and agreements of the Issuer contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, and in addition to the limitations contained in Section 1.7 hereof, the Issuer shall not, without the consent of the 1 Dealer, offer, solicit or accept offers to purchase, or sell, any Notes except (a) in transactions with one or more dealers which may from time to time after the date hereof become dealers with respect to the Notes by executing with the Issuer one or more agreements which contain provisions substantially identical to those contained in Section 1 of this Agreement, of which the Issuer hereby undertakes to provide the Dealer prompt notice or (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer which contain provisions substantially identical to Section 1 of this Agreement contemporaneously herewith. In no event shall the Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly on its own behalf in transactions with persons other than broker-dealers as specifically permitted in this Section 1.2. 1.3 The Notes shall be in a minimum denomination of $250,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer, shall have a maturity not exceeding 270 days from the date of issuance (exclusive of days of grace) and shall not contain any provision for extension, renewal or automatic "rollover." 1.4 The authentication and issuance of, and payment for, the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement, and the Notes shall be either individual physical certificates or book-entry notes evidenced by a Master Note registered in the name of DTC or its nominee, in the form or forms annexed to the Issuing and Paying Agency Agreement. 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Notes arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuing and Paying Agent, for the account of the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 2 1.6 The Dealer and the Issuer hereby establish and agree to observe the following procedures in connection with offers, sales and subsequent resales or other transfers of the Notes; (a) Offers and sales of the Notes by or through the Dealer shall be made only to: (i) investors reasonably believed by the Dealer to be Qualified Institutional Buyers, Institutional Accredited Investors or Sophisticated Individual Accredited Investors and (ii) non-bank fiduciaries or agents that will be purchasing Notes for one or more accounts, each of which is reasonably believed by the Dealer to be an Institutional Accredited Investor or Sophisticated Individual Accredited Investor. (b) Resales and other transfers of the Notes by the holders thereof shall be made only in accordance with the restrictions in the legend described in clause (e) below. (c) No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of the Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (d) No sale of Notes to any one purchaser shall be for less than $250,000 principal or face amount, and no Note shall be issued in a smaller principal or face amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom such purchaser is acting must purchase at least $250,000 principal or face amount of Notes. (e) Offers and sales of the Notes by the Issuer through the Dealer acting as agent for the Issuer shall be made in accordance with Rule 506 under the Securities Act, and shall be subject to the restrictions described in the legend appearing on Exhibit A hereto. A legend substantially to the effect of such Exhibit A shall appear as part of the CP Memorandum used in connection with offers and sales of Notes hereunder, as well as on each individual certificate representing a Note and each Master Note representing book-entry Notes offered and sold pursuant to this Agreement. (f) The Dealer shall furnish or shall have furnished to each purchaser of Notes for which it has acted as the Dealer a copy of the then-current CP Memorandum unless such purchaser has previously received a copy of the CP Memorandum as then in effect. The CP Memorandum shall expressly state that any person to whom Notes are offered shall have an opportunity to ask questions of, and receive information from, the Issuer and the 3 Dealer and shall provide the names, addresses and telephone numbers of the persons from whom information regarding the Issuer may be obtained. (g) The Issuer agrees, for the benefit of the Dealer and each of the holders and prospective purchasers from time to time of the Notes that, if at any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request and at its expense, to the Dealer and to holders and prospective purchasers of Notes information required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d). (h) In the event that any Note offered or to be offered by the Dealer would be ineligible for resale under Rule 144A, the Issuer shall immediately notify the Dealer (by telephone, confirmed in writing) of such fact and shall promptly prepare and deliver to the Dealer an amendment or supplement to the CP Memorandum describing the Notes that are ineligible, the reason for such ineligibility and any other relevant information relating thereto. (i) Dealer acknowledges that during the period of time the Notes are outstanding the Issuer may issue commercial paper in the United States market in reliance upon, and in compliance with, the exemption provided by Section 3(a)(3) of the Securities Act. In that connection, the Issuer agrees that (a) the proceeds from the sale of the Notes will be segregated from the proceeds of the sale of any such commercial paper by being placed in a separate account; (b) the Issuer will institute appropriate corporate procedures to ensure that the offers and sales of notes issued by the Issuer pursuant to the Section 3(a)(3) exemption are not integrated with offerings and sales of Notes hereunder; and (c) the Issuer will comply with each of the requirements of Section 3(a)(3) of the Act in selling commercial paper or other short-term debt securities other than the Notes in the United States. 1.7 The Issuer hereby represents and warrants to the Dealer, in connection with offers, sales and resales of Notes, as follows: (a) Issuer hereby confirms to the Dealer that (except as permitted by Section 1.6(i)) within the preceding six months neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof acting on behalf of the Issuer has offered or sold any Notes, or any substantially similar security of the Issuer (including, without limitation, medium-term notes issued by the Issuer), to or solicited offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof. The Issuer also agrees that (except as permitted by Section 1.6(i)), as long as the Notes are being offered for sale 4 by the Dealer and the other dealers referred to in Section 1.2 hereof as contemplated hereby and until at least six months after the offer of Notes hereunder has been terminated, neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof (except as contemplated by Section 1.2 hereof) will offer the Notes or any substantially similar security of the Issuer for sale to, or solicit offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof, it being understood that such agreement is made with a view to bringing the offer and sale of the Notes within the exemption provided by Section 4(2) of the Securities Act and Rule 506 thereunder and shall survive any termination of this Agreement. (b) The Issuer represents and agrees that the proceeds of the sale of the Notes are not currently contemplated to be used for the purpose of buying, carrying or trading securities within the meaning of Regulation T and the interpretations thereunder by the Board of Governors of the Federal Reserve System. In the event that the Issuer determines to use such proceeds for the purpose of buying, carrying or trading securities, whether in connection with an acquisition of another company or otherwise, the Issuer shall give the Dealer at least five business days' prior written notice to that effect. The Issuer shall also give the Dealer prompt notice of the actual date that it commences to purchase securities with the proceeds of the Notes. Thereafter, in the event that the Dealer purchases Notes as principal and does not resell such Notes on the day of such purchase, to the extent necessary to comply with Regulation T and the interpretations thereunder, the Dealer will sell such Notes either (i) only to offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are acting for other QIBs, in each case in accordance with Rule 144A or (ii) in a manner which would not cause a violation of Regulation T and the interpretations thereunder. 2. Representations and Warranties of Issuer. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency 5 and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.3 The Notes have been duly authorized, and when issued as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The offer and sale of Notes in the manner contemplated hereby will constitute exempt transactions under the Securities Act and, accordingly registration of the Notes under the Securities Act will not be required, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended. 2.5 The Notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.6 No consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to authorize, or is otherwise required in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.7 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or a default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which breach or default might have a material adverse effect on the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to 6 perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 Except as disclosed in the Company Information, there is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might result in a material adverse change in the condition (financial or otherwise), operations or business of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.9 The Issuer is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.10 Neither the CP Memorandum (excluding any information furnished by the Dealer for inclusion therein) nor the Company Information contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 2.11 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the CP Memorandum shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance and after giving effect to such amendment or supplement, (i) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (iii) in the case of an issuance of Notes, since the date of the most recent CP Memorandum, there has been no material adverse change in the condition (financial or otherwise), operations or business of the Issuer which has not been disclosed to the Dealer in writing. 7 3. Covenants and Agreements of Issuer. The Issuer covenants and agrees that: 3.1 The Issuer will provide the Dealer written notice of any amendment to, modification of or waivers with respect to, the Notes or the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's condition (financial or otherwise), operations or business or any development or occurrence in relation to the Issuer that would be material to holders of the Notes or potential holders of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer of such change, development or occurrence. 3.3 The Issuer will provide the Dealer any press releases or material public information provided by the Issuer to any national securities exchange. 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky laws; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer will not be in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at any time that any of the Notes are outstanding. 3.6 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, and certified by the Secretary or similar officer of the Issuer, authorizing execution and delivery by the Issuer of this Agreement, the Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer of the transactions contemplated hereby and thereby, and (d) prior to the issuance 8 of any Notes represented by a book-entry note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC. 3.7 The Issuer shall reimburse the Dealer for all of the Dealer's out-of-pocket expenses related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the CP Memorandum), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel. 3.8 Without limiting any obligation of the Issuer pursuant to this Agreement to provide the Dealer with credit and financial information, the Issuer hereby acknowledges and agrees that the Dealer may share the Company Information and any other information or matters relating to the Issuer or the transactions contemplated hereby with affiliates of the Dealer, including, but not limited, to U.S. Bank, National Association, and that such affiliates may likewise share information relating to the Issuer or such transactions with the Dealer. 3.9 The Issuer shall maintain one or more legally committed, immediately available credit facilities under which draws are allowable to repay outstanding commercial paper, such credit facilities (i) being in an aggregate amount equal to or greater than the aggregate amount of the Notes outstanding and having an expiration date later than the last maturity date of any of the Notes issued and outstanding and (ii) having undrawn, available commitments in an aggregate amount equal to or greater than the aggregate amount equal to any of the Notes issued and outstanding. 4. Disclosure. 4.1 The CP Memorandum and its contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The CP Memorandum shall contain a statement expressly offering an opportunity for each prospective purchaser to ask questions of, and receive answers from, the Issuer concerning the offering of Notes and to obtain relevant additional information which the Issuer possesses or can acquire without unreasonable effort or expense. 4.2 The Issuer agrees to promptly furnish the Dealer the Company Information as it becomes available. 4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause 9 the Company Information then in existence to include an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (b) In the event that the Issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, the Issuer agrees promptly to supplement or amend the CP Memorandum so that the CP Memorandum, as amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a), (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the CP Memorandum in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the CP Memorandum, and made such amendment or supplement available to the Dealer. 5. Indemnification and Contribution. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, reasonable fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Indemnitees arising out of or based upon (i) any allegation that the CP Memorandum, the Company Information or any written information provided by the Issuer to the Dealer included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading . This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information. In addition, and subject thereto, Dealer shall indemnify and hold the Issuer harmless to the same extent as provided above in the event that any claim 10 arises from or is based upon the information of Dealer contained in the last two paragraphs of the CP Memorandum. 5.2 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit B to this Agreement. 5.3 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided, however, that such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. 6. Definitions. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the CP Memorandum together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, and if not included in item (i) above, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, and if not included in item (i) or (ii) above, (iii) any other information or disclosure prepared pursuant to Section 4.3 hereof. 6.3 "CP Memorandum" shall mean offering materials prepared in accordance with Section 4 (including materials referred to therein or incorporated by reference therein) provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later amendment or supplement). 6.4 "Dealer Information" shall mean material concerning the Dealer provided by the Dealer in writing expressly for inclusion in the CP Memorandum. 11 6.5 "DTC" shall mean The Depository Trust Company. 6.6 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended. 6.7 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.8 "Institutional Accredited Investor" shall mean an institutional investor that is an accredited investor within the meaning of Rule 501 under the Securities Act and that has such knowledge and experience in financial and business matters that it is capable of evaluating and bearing the economic risk of an investment in the Notes, including, but not limited to, a bank, as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity. 6.9 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.10 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement, or any successor thereto in accordance with the Issuing and Paying Agency Agreement. 6.11 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of the Securities Act. 6.12 "Qualified Institutional Buyer" shall have the meaning assigned to that term in Rule 144A under the Securities Act. 6.13 "Rule 144A" shall mean Rule 144A under the Securities Act. 6.14 " Regulation D" shall mean Regulation D (Rules 501 et seq.) under the Securities Act. 6.15 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. 6.17 "Sophisticated Individual Accredited Investor" shall mean an individual who is an accredited investor within the meaning of Rule 501 under the 12 Securities Act and who has such knowledge and experience in financial and business matters that he or she is capable of evaluating and bearing the economic risk of an investment in the Notes. 7. General 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to its conflict of laws provisions. 7.3 The Issuer and Dealer agree that any suit, action or proceeding brought in in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes may only be brought in either the United States federal courts located in Minneapolis, Minnesota or Cleveland, Ohio. Each of the Dealer and the Issuer waives its right to trial by jury in any suit, action or proceeding with respect to this Agreement or the transactions contemplated hereby. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business day's prior notice to such effect to the Dealer, or by the Dealer upon one business day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.7, 5 and 7.3 hereof or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that (a) the Dealer may assign its rights and obligations under this Agreement to any affiliate of the Dealer upon written notice to the Issuer. 7.6 This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 7.7 This Agreement is for the exclusive benefit of the parties hereto, and their respective permitted successors and assigns hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. RPM International Inc., as Issuer By: /s/ Keith R. Smiley ------------------------------------------------ Name: Keith R. Smiley ------------------------------------------------ Title: Vice President - Treasurer ----------------------------------------------- U.S. Bancorp Piper Jaffray Inc., as Dealer By: /s/ Lou Martine ------------------------------------------------ Name: Lou Martine ------------------------------------------------ Title: Managing Director ----------------------------------------------- 14 ADDENDUM The following additional clauses shall apply to the Agreement and be deemed a part thereof: 1. The other dealer(s) referred to in clause (b) of Section 1.2 of the Agreement is (are):___________________________________________________. 2. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: FOR THE ISSUER: RPM International Inc. Address: 2628 Pearl Road P.O. Box 777 Medina, OH 44258 Attention: Keith Smiley, Vice President and Treasurer Telephone: (330) 273-8837 Fax number: (330) 225-6574 With copy to: P. Kelly Tompkins Senior Vice President, General Counsel and Secretary RPM International Inc. 2628 Pearl Road Medina, Ohio 44258 Edward W. Moore, Esq. Calfee, Halter & Griswold LLP 1400 McDonald Investment Center 800 Superior Avenue Cleveland, Ohio 44114-2688 FOR THE DEALER: U.S. Bancorp Piper Jaffray Inc. Address: 111 SW Fifth Avenue, Suite 1900 Portland, OR 97204 Attention: Corporate Finance Telephone: (503) 275-4920 Fax number: (503) 275-3490 EXHIBIT A FORM OF LEGEND FOR CP MEMORANDUM AND NOTES THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR OR SOPHISTICATED INDIVIDUAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR", RESPECTIVELY) AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO U.S. BANCORP INVESTMENTS INC. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR, SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000. EXHIBIT B Further Provisions Relating to Indemnification (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve the Issuer from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer, and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional release of each Indemnitee from all liability arising out of such Claim. EX-10.22 7 l02719aexv10w22.txt EX-10.22 ISSUING AND PAYING AGENT AGREEMENT EXHIBIT 10.22 ISSUING AND PAYING AGENT AGREEMENT THIS ISSUING AND PAYING AGENT AGREEMENT (the "Agreement") is entered into as of April 21, 2003 by and between U.S. Bank Trust National Association (the "Bank") with offices at 100 Wall Street, Suite 1600, New York, New York 10005 and RPM International Inc. (the "Company") regarding the following commercial paper program of the Company: the RPM International Inc. 4(2) Commercial Paper Program (hereinafter referred to as the "Program") WITNESSETH: WHEREAS, at the request of the Company, the Bank is prepared to act (a) as depositary for the safekeeping of certain notes of the Company which may be issued and sold in the United States commercial paper market under the Program (the "Commercial Paper Notes"; such Commercial Paper Notes when issued in book-entry form being hereinafter referred to as "Book-Entry Commercial Paper Notes" and when issued in the form of certificated promissory notes being hereinafter referred to as "Certificated Commercial Paper Notes"), (b) as issuing agent on behalf of the Company in connection with the issuance of the Commercial Paper Notes, (c) as paying agent to undertake certain obligations to make payments in respect of the Commercial Paper Notes, and (d) as depositary to receive certain funds on behalf of the Company, as set forth herein, and WHEREAS, this Agreement will govern the Bank's rights, powers and duties as such depositary, issuing agent and paying agent for the Commercial Paper Notes and the Company's rights and obligations in connection therewith. NOW THEREFORE, for good and valuable consideration, the parties hereto agree as follows: 1. APPOINTMENT OF BANK. The Company hereby appoints the Bank and the Bank hereby agrees to act, on the terms and conditions specified herein, as depositary, and issuing and paying agent for the Commercial Paper Notes issued under the Program. The Commercial Paper Notes will be sold through such commercial paper dealers and/or placement agents as the Company shall have notified the Bank in writing from time to time (collectively, the "Dealers"). The Dealer is currently U.S. Bancorp Piper Jaffray. 2. LETTER OF REPRESENTATIONS. The Company will promptly deliver to the Bank an executed version of the form of Letter of Representations (the "Letter of Representations") provided by The Depository Trust Company ("DTC"). The Company understands and agrees that such Letter of Representations when executed by the Company, the Bank and DTC shall supplement the provisions of this Agreement and that the Company, the Bank, and DTC shall be bound by the terms and provisions of the Letter of Representations, including any procedures and operational arrangements applicable thereunder. 3. SUPPLY OF COMMERCIAL PAPER NOTES. (a) The Company will from time to time furnish the Bank with an adequate supply of Commercial Paper Notes, which shall be Book-Entry Commercial Paper Notes and/or Certificated Commercial Paper Notes, as the Company in its sole and absolute discretion considers appropriate. If Certificated Commercial Paper Notes are to be issued, they shall be in the form provided by the Company, shall be serially numbered and shall have been executed by manual or facsimile signature of an Authorized Representative (as hereafter defined), but shall otherwise be uncompleted. Book-Entry Commercial Paper Notes shall be substantially in the forms attached to the Letter of Representations and shall be represented by one or more master notes ("Master Note" or "Master Notes") which shall be executed by manual or facsimile signature by an Authorized Representative in accordance with the Letter of Representations. Pending receipt of instructions pursuant to this Agreement, the Bank will hold the Certificated Commercial Paper Notes and Master Note(s) in safekeeping for the account of the Company or DTC, as the case may be, in accordance with the Bank's customary practice. (b) Each Certificated Commercial Paper Note or Master Note delivered to the Bank shall be accompanied by a letter from the Company, as the case may be, identifying the Certificated Commercial Paper Note or Master Note(s) transmitted therewith, and the Bank shall acknowledge receipt of such Certificated Commercial Paper Note(s) or Master Note(s) on the copy of such letter or pursuant to some other form of written receipt deemed appropriate by the Bank at the time of delivery to the Bank of such Certificated Commercial Paper Note(s) or Master Note(s). Pending the issuance of Certificated Commercial Paper Notes as provided in Section 5 hereof, all Certificated Commercial Paper Notes and Master Note(s) delivered to the Bank shall be held by the Bank for the account of the Company or DTC, as the case may be, for safekeeping in accordance with the Bank's customary practice. 4. AUTHORIZED REPRESENTATIVES. With the delivery of this Agreement, the Company is furnishing to the Bank, and from time to time thereafter may furnish to the Bank, and shall furnish to the Bank upon the Bank's request, certificates ("Incumbency Certificates") of a responsible officer (a "Responsible Officer") of the Company certifying the incumbency and specimen signatures of officers or agents of the Company authorized to execute Commercial Paper Notes on behalf of the Company by manual or facsimile signature and/or to take other action hereunder on behalf of the Company (each an "Authorized Representative"); such Incumbency Certificate shall also specify the names of employees of Dealers who are authorized to give notices and/or issuance instructions to the Bank as provided herein (a "Dealer Representative"). Until the Bank receives a subsequent Incumbency Certificate of the Company, the Bank is entitled to rely on the last such Incumbency Certificate delivered to the Bank for purposes of determining the Authorized Representatives and Dealer Representatives. The Bank shall not have any responsibility to the Company to determine by whom or by what means a facsimile signature may have been affixed on the Commercial Paper Notes, or to determine whether any facsimile or manual signature resembles the specimen signature(s) filed with the Bank by a duly authorized officer of the Company. Any Commercial Paper Notes bearing the manual or facsimile signature of a person who is an Authorized Representative on the date such signature is affixed shall be binding on the Company after the authentication thereof by the Bank notwithstanding that such person shall have died or shall have otherwise ceased to hold his office on the date such Commercial Paper Note is countersigned or delivered to the Bank. 5. COMPLETION, AUTHENTICATION AND DELIVERY OF COMMERCIAL PAPER NOTES. (a) In the case of Certificated Commercial Paper Notes, from time to time during the term of this Agreement and subject to the terms and conditions hereof, and upon the Bank's timely receipt of written, telecopy or telex instructions or telephonic instructions (promptly confirmed in writing by telecopy or electronic transmission) or notice transmitted directly to the Bank's computers or in such other manner as the Bank then employs as the Bank's normal business practice, not later than 12:30 pm New York City time on a day on which the Bank is open for business (a "Business Day"), from an Authorized Representative or a Dealer Representative, on the date of issuance of any Certificated Commercial Paper Notes (in the case of instructions from an Authorized Representative, a copy of such instructions shall be sent to the Dealer Representative by said Authorized Representative), the Bank shall withdraw the respective Certificated Commercial Paper Notes from safekeeping and in accordance with the instructions so received, take the following actions with respect to each such Certificated Commercial Paper Note: i. date each such Certificated Commercial Paper Note the date of issuance thereof (which shall be a Business Day) and insert the maturity date thereof (provided that the Authorized Representative or Dealer Representative shall ensure that such date is a Business Day and that it shall not be more than 270 days from the date of issue) and the face amount (provided that Authorized Representative or the Dealer Representative shall ensure that such face amount is $250,000 or integral multiples of $1,000 in excess thereof) thereof in figures; ii. authenticate (by countersigning) each such Certificated Commercial Paper Note in the appropriate space provided thereon; -2- iii. deliver in the Borough of Manhattan south of Chambers Street each such Certificated Commercial Paper Note to the Dealer, or the consignee, if any, designated by such Authorized Representative or Dealer Representative for the account of the Dealer; and iv. Insert the interest rate and applicable discount amount. (b) In the case of Book-Entry Commercial Paper Notes, from time to time during the term of this Agreement and subject to the terms and conditions hereof, and upon the Bank's timely receipt of written, telecopy or telex instructions or telephonic instructions (promptly confirmed in writing by telecopy or electronic transmission) or notice transmitted directly to the Bank's computers or in such other a manner as the Bank then employs as the Bank's normal business practices, not later than 2:00 pm New York City time on a Business Day, from an Authorized Representative or a Dealer Representative, on the date of issuance of any Book-Entry Commercial Paper Notes (in the case of instructions from an Authorized Representative, a copy of such instructions shall be sent to the Dealer Representative by said Authorized Representative), the Bank shall give issuance instructions for the issuance of Book-Entry Commercial Paper Notes to DTC in a manner set forth in, and take other actions as are required by, the Letter of Representations. Instructions for the issuance of Book-Entry Commercial Paper Notes shall include the following information with respect to each Book-Entry Commercial Paper Note: i. the date of issuance of each such Book-Entry Commercial Paper Note (which shall be a Business Day); ii. the maturity date of each such Book-Entry Commercial Paper Note (provided that the Representative or Dealer Representative shall ensure that such date is a Business Day and that it shall not be more than 270 days from the date of issue); iii. the face amount (provided that the Authorized Representative or the Dealer Representative shall ensure that such face amount is $250,000 or integral multiples of $1,000 in excess thereof) in figures; and iv. the interest rate and applicable discount amount. (c) The Company understands that although the Bank has been instructed to deliver Commercial Paper Notes against payment, delivery of Commercial Paper Notes will, in accordance with the custom prevailing in the commercial paper market, be made before receipt of payment in immediately available funds. Therefore, once the Bank has delivered a Commercial Paper Note to a Dealer or its agent as provided herein, the Company shall bear the risk that a Dealer or its agent fails to remit payment for the Commercial Paper Note to the Bank. The Bank shall have no liability to the Company for any failure or inability on the part of the Dealer to make payment for Commercial Paper Notes. Nothing in this Agreement shall require the Bank to purchase any Commercial Paper Note or expend the Bank's own funds for the purchase price of a Commercial Paper Note or Commercial Paper Notes. (d) Except as may otherwise be provided in the Letter of Representations, if at any time the Company instructs the Bank to cease issuing Certificated Commercial Paper Notes and to issue only Book-Entry Commercial Paper Notes, the Bank agrees that all Commercial Paper Notes will be issued as Book-Entry Commercial Paper Notes and that no Certificated Commercial Paper Notes shall be exchanged for Book-Entry Commercial Paper Notes unless and until the Bank has received written instructions from an Authorized Representative (any such instructions from a Dealer Representative shall not be sufficient for this purpose) to the contrary. (e) It is understood that the Bank is not under any obligation to assess or review the financial condition or creditworthiness of any person to or for whose account the Bank delivers a Commercial Paper Note pursuant to instructions from an Authorized Representative or Dealer Representative or advise the Company as to the results of any such appraisal or investigation the Bank may have conducted on its own or of any adverse information concerning any such person that may in any way have come to the Bank's attention. -3- (f) It is understood that DTC may request the delivery of Certificated Commercial Paper Notes in exchange for Book-Entry Commercial Paper Notes upon the termination of DTC's services pursuant to the DTC Letter of Representations. Accordingly, upon such termination, the Bank is authorized to complete and deliver Certificated Commercial Paper Notes in partial or complete substitution for Book-Entry Commercial Paper Notes of the same face amount and maturity as requested by DTC. Upon the completion or delivery of any such Certificated Commercial Paper Note, the Bank shall annotate the Bank's records regarding the Master Note with respect to such Book-Entry Commercial Paper Notes to reflect a corresponding reduction in the face amount of the outstanding Book-Entry Commercial Paper Notes. The Bank's authority to so complete and deliver such Certificated Commercial Paper Notes shall be irrevocable at all times from the time a Book-Entry Commercial Paper Note is purchased until the indebtedness evidenced thereby is paid in full. (g) If the Bank shall receive written or telecopy instructions (confirmed in writing in accordance with this Agreement) or telephonic instructions (promptly confirmed in writing by telecopy or electronic transmission) from the Company not to issue or deliver Commercial Paper Notes, until revoked in writing or superseded by further written instructions from the Company, the Bank shall not issue or deliver Commercial Paper Notes, provided, however, that notwithstanding contrary instructions from the Company, the Bank shall be required to deliver Commercial Paper Notes with respect to agreements for the sale of Commercial Paper Notes concluded by an Authorized Representative or Dealer Representative prior to receipt by the Authorized Representative or Dealer Representative of notice of such instructions from the Company, which the Authorized Representative or Dealer Representative shall be required to confirm to the Bank in writing prior to the Bank's delivery of the Commercial Paper Notes. For purposes of the preceding provision, the Bank may rely on written notice given or delivered to the Bank by an Authorized Representative or Dealer Representative as to whether any particular Commercial Paper Notes are to be issued in respect of such agreements concluded by such Authorized Representative or Dealer Representative, and the Bank shall have no obligation to make any other or further investigation. 6. PROCEEDS OF SALE OF THE COMMERCIAL PAPER NOTES. Contemporaneously with the execution and delivery of this Agreement, and for the purposes of this Agreement, the Bank will establish an account designated as the RPM International Inc. Note Account (the "Note Account"). On each day on which a Dealer or its agent receives Commercial Paper Notes (whether through the facilities of DTC in the manner set forth in the Letter of Representations or by delivery in accordance with the provisions of this Agreement), all proceeds received by the Bank in connection with such sale shall be credited in immediately available funds to the Note Account. From time to time upon written instructions received by the Bank from an Authorized Representative, the Bank agrees to transfer immediately available funds from the Note Account to any bank or trust company in the United States for the Company's account. If the Bank chooses, in its sole discretion, to credit the Company's account before the Bank has collected funds for delivery of Commercial Paper Notes, it is understood that such credit shall be an advance to the Company to be promptly repaid to the Bank from the proceeds of sale of Commercial Paper Notes. If any such advance is not repaid on the day it is used, the Company shall repay such advance on the next business day together with interest thereon at the rate charged by the Bank for such advance (which rate shall be no less than the "Prime Rate"). As used in this Agreement, "Prime Rate" means the rate of per annum interest which U.S. Bank National Association ("USBNA") announces publicly or otherwise makes available to the public from time to time as its "prime rate" (currently calculated on the basis of the actual number of days elapsed over a year of 360 days) with any change in the "prime rate" to be effective on and as of the date of any change in said "prime rate". The Prime Rate and the calculation thereof may be established by USBNA in its sole discretion and is not necessarily the lowest rate of interest offered by USBNA to its most creditworthy customers. The Prime Rate is a variable or fluctuating rate which increases or decreases from time to time. 7. PAYMENT OF MATURED COMMERCIAL PAPER NOTES. (a) By 1:00 pm, New York time, on the date that any Commercial Paper Notes are scheduled to mature, the Company shall ensure that there shall have been transferred to the Bank for deposit in the Note Account immediately available funds at least equal to the amount of Commercial Paper Notes maturing on such date. When any matured Commercial Paper Note is presented to the Bank for payment by the holder thereof (which may, in the case of Book-Entry Commercial Paper Notes, be DTC or a nominee of DTC), payment shall be made from and charged to the Note Account to the extent funds are available in said account. -4- (b) Each Commercial Paper Note presented to the Bank for payment at or prior to 2:15 pm, New York City time, on any Business Day at or after the maturity date of such Commercial Paper Note shall be paid by the Bank on the same day as such presentation (or if presented after 2:15 pm, New York City time on any such Business Day, then on the next succeeding Business Day) to the extent funds are available in the Note Account. 8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby warrants and represents to the Bank, and, each request to issue Commercial Paper Notes shall constitute the Company's continuing warranty and representation, as follows: (a) This Agreement is, and all Commercial Paper Notes delivered to the Bank pursuant to this Agreement will be, duly authorized, executed and delivered by the Company. The Bank's appointment to act for the Company hereunder is duly authorized by the Company. (b) The issuance and delivery of the Commercial Paper Notes will not violate any state or federal law and the Commercial Paper Notes do not require registration under the Securities Act of 1933, as amended. (c) This Agreement constitutes, and the Commercial Paper Notes, when completed, countersigned, and delivered pursuant hereto, will constitute, the Company's legal, valid and binding obligations enforceable against the Company in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity. (d) The Company is a corporation duly organized and validly existing under the laws of Delaware and no liquidation, dissolution, bankruptcy, windup or similar proceedings have been instituted with respect to the Company. (e) The Company has, and at all relevant times has had, all necessary power and authority to execute, deliver and perform this Agreement and to issue the Commercial Paper Notes. (f) The Company has taken all actions which are required for the authorization of the issuance of the Commercial Paper Notes, and for the authorization, execution, delivery and performance of this Agreement, and such actions do not require the approval or consent of any holder or trustee of any indebtedness or obligations of the Company. (g) The issuance of Commercial Paper Notes by the Company (i) does not and will not contravene any provision of any governmental law, regulation or rule applicable to the Company, and (ii) does not and will not conflict with, breach or contravene the provisions of any material contract or other instrument binding upon the Company, except with respect to both clauses (i) and (ii) where such conflicts, breaches or contraventions would not, singularly or in the aggregate, have a material adverse effect on the consolidated financial condition, results of operation or business of the Company and its subsidiaries, taken as a whole. 9. RELIANCE ON INSTRUCTIONS. Except as otherwise set forth herein, the Bank shall incur no liability to the Company in acting hereunder upon telephonic or other instructions contemplated hereby which the Bank reasonably believed in good faith to have been given by an Authorized Representative or a Dealer Representative, as the case may be. In the event a discrepancy exists with respect to such instructions, the telephonic instructions as understood by the Bank will be deemed the controlling and proper instructions, unless such instructions are required by this Agreement to be in writing. 10. CANCELLATION OF COMMERCIAL PAPER NOTES. Upon payment by the Bank of Certificated Commercial Paper Note(s) presented for payment, the Bank shall mark such Certificated Commercial Paper Note(s) as paid and (i) in due course cancel Certificated Commercial Paper Note(s) presented for payment and from time to time return such canceled Certificated Commercial Paper Notes to the Company, or (ii) destroy such Certificated Commercial Paper Notes(s) and deliver to the Company from time to time a destruction certificate identifying all Certificated Commercial Paper Notes destroyed since the issuance of the prior destruction certificate. After payment of any matured Book-Entry Commercial Paper Notes, the Bank shall annotate the Bank's records to reflect -5- the face amount of Book-Entry Commercial Paper Notes outstanding in accordance with the Letter of Representations. Promptly upon the written request of the Company, the Bank agrees to cancel and return to the Company all unissued Certificated Commercial Paper Notes in the Bank's possession at the time of such request. 11. NOTICES; ADDRESSES. (a) All communications to the Bank by or on behalf of the Company or a Dealer, by writing, telecopy, telex or telephone, and which relates to the completion, delivery or payment of the Commercial Paper Note(s), are to be directed to Commercial Paper Operations at the address indicated in Section 11(b) below. (b) Notices and other communications hereunder shall (except to the extent otherwise expressly provided) be in writing (which may be by facsimile) and shall be addressed as follows, or to such other address as the party receiving such notice shall have previously specified to the party sending such notice: if to the Company, at: RPM International Inc. 2628 Pearl Road P.O. Box 777 Medina, OH 44258 Attention: Keith Smiley, Vice President and Treasurer Facsimile No.: (330) 225-6574 Telephone No.: (330) 273-8837 With a copy to: P. Kelly Tompkins Senior Vice President, General Counsel and Secretary RPM International Inc. 2628 Pearl Road P.O. Box 777 Medina, OH 44258 Edward W. Moore Calfee, Halter & Griswold LLP 1400 McDonald Investment Center 800 Superior Avenue Cleveland, OH 44114-2688 if to the Bank, CONCERNING THE DAILY ISSUANCE OF COMMERCIAL PAPER NOTES: U.S. Bank Trust National Association 100 Wall Street, Suite 1600 New York, NY 10005 Attention: Commercial Paper Operations Facsimile No.: (212) 509-4529 Telephone No.: (212) 361-3841 CONCERNING ALL OTHER MATTERS: U.S. Bank Trust National Association 100 Wall Street, Suite 1600 New York, NY 10005 Attention: Corporate Trust Administration -6- Facsimile No.: (212) 509-3384 Telephone No.: (212) 361-2894 (c) In any case where it is provided in this Agreement that a copy of any instruction, demand or other notice is to be delivered to a Dealer, such copy shall be delivered to the Dealer at the address set forth below by the same means as the original thereof shall have been given, provided that the failure of such copy to be given to any Dealer shall not invalidate or adversely affect the original thereof: Dealer: U.S. Bancorp Piper Jaffray 111 S.W. Fifth Avenue, 19th Floor Portland, OR 97204-3604 Notices shall be deemed delivered when received at the address specified above. For purposes of this Section 11, "when received" shall mean actual receipt (i) of an electronic communication by telecopier or issuance system specified in or pursuant to this Agreement; or (ii) of a written communication hand-delivered at the office specified in or pursuant to this Agreement. 12. LIABILITY. Neither the Bank nor the Bank's agents shall be liable for any act or omission hereunder, except in the case of bad faith, gross negligence or willful misconduct as described in Section 13 herein. The Bank's duties and obligations shall be determined by the express provisions of this Agreement, and the Letter of Representations (including the documents referred to therein), and the Bank and the Bank's agents shall be responsible for the performance of only such duties and obligations as are specifically set forth herein and therein, and no implied covenants shall be read into any such document against the Bank or the Bank's agents. Neither the Bank nor the Bank's agents shall be required to ascertain whether any issuance or sale of Commercial Paper Note(s) (or any amendment or termination of this Agreement) has been duly authorized or is in compliance with any other agreement to which the Company is a party (whether or not the Bank or any such agent is a party to such other agreement). 13. INDEMNITY. The Company agrees to indemnify and hold the Bank, the Bank's employees and any and all of the Bank's officers and agents harmless from and against any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, damages, costs and expenses of any nature (including, without limitation, attorneys' fees and expenses) arising out of or resulting from this Agreement or the transactions or activities contemplated hereby or the exercise of the Bank's rights and/or the performance of the Bank's duties (or those of the Bank's agents and employees) hereunder; provided, however that the Company shall not be liable to indemnify or pay the Bank or any of the Bank's officers or employees with respect to any loss, liability, action, suit, judgment, demand, damage, cost or expense that results from or is attributable to the Bank's bad faith, gross negligence or willful misconduct or that of the Bank's officers or employees. The foregoing indemnity includes, but is not limited to, (a) any action taken or omitted to be taken by the Bank or any of the Bank's officers or employees upon written, telecopy, telephonic or other electronically transmitted instructions (each as authorized herein) received by the Bank from, or believed by the Bank in good faith to have been given by, the proper person or persons, (b) the Bank's improperly executing or failing to execute any instruction because of unclear instructions, failure of communications media or any other circumstances beyond the Bank's control, and (c) the actions or inactions of DTC. The provisions of this Section 13 shall survive (i) the Bank's resignation or removal hereunder and (ii) the termination of this Agreement. In no event shall the Bank be liable for special, indirect or consequential damages. 14. TERMINATION. (a) This Agreement may be terminated at any time by either the Bank or the Company by 15 days' prior written notice to the other, provided that the Bank agrees to continue acting as issuing and paying agent hereunder until such time as the Bank's successor has been selected and has entered into an agreement with the Company to that effect. Such termination shall not affect the respective liabilities of the parties hereunder arising prior to such termination. -7- (b) If no successor has been appointed within 30 days, then the Bank have the right to petition a court of competent jurisdiction for the appointment of a successor issuing and paying agent hereunder. The Bank shall be reimbursed for any and all expenses in connection with any such petition and appointment. (c) On the Business Day following the date of termination of this Agreement, the Bank shall destroy all Certificated Commercial Paper Notes in the Bank's possession and shall transfer to the Company all funds, if any, then on deposit in the Note Account. The Bank shall promptly notify the Company of all Certificated Commercial Paper Notes so destroyed. 15. AMENDMENTS AND MODIFICATIONS. No amendment, modification or waiver of any provision of this Agreement, nor any consent to any departure by any party from any provision hereof binding upon such party, shall be effective unless the same shall be in writing and signed by all the parties hereto. 16. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors, including successors by merger, and assigns; provided, however, that no party hereto may assign any of its rights or obligations hereunder, except with the prior written consent of all the other parties hereto. 17. GOVERNING LAW. (a) This Agreement shall be governed and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and, to the extent applicable, operating circulars of the Federal Reserve Bank, federal laws and regulations as amended, New York Clearing House rules and, to the extent not otherwise inconsistent with this Agreement, general commercial bank practices applicable to commercial paper issuance and payment. (b) Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the United States Federal courts located in the Borough of Manhattan and the courts of the State of New York located in the Borough of Manhattan. 18. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts; each counterpart, when so executed and delivered, shall be deemed to be an original; and all of which counterparts, taken together, shall constitute one and the same agreement. 19. HEADINGS. Section headings used in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. 20. COMPENSATION AND EXPENSES. The Company shall pay the Bank from time to time following the execution of this Agreement reasonable compensation for all services rendered by the Bank hereunder as agreed between the Bank and the Company. The Company shall reimburse the Bank upon the Bank's request for all expenses, disbursements and advances incurred or made by the Bank in accordance with any provision of this Agreement (including the reasonable compensation and the expenses and disbursements of the Bank's agents and counsel) except any expense or disbursement attributable to the Bank's bad faith, gross negligence or willful misconduct. 21. MISCELLANEOUS. (a) No implied covenants or obligations of or against the Bank are to read into this Agreement or any other agreement. No provision of this Agreement shall require the Bank to risk the Bank's own funds or otherwise incur any financial liability in the performance of any of the Bank's duties hereunder or in the exercise of any of the Bank's duties hereunder or in the exercise of any of the Bank's rights and powers hereunder. (b) The Bank may consult with counsel, and any advice or written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by the -8- Bank, in the absence of bad faith, gross negligence or willful misconduct on the Bank's part, in reliance on such advice or opinion. (c) The Bank shall not be accountable for the use or application by any person of disbursements properly made by the Bank in conformity with the provisions of this Agreement. (d) The Bank may rely and shall be protected in acting upon any document or writing presented to the Bank hereunder and in good faith reasonably believed by the Bank to be genuine and to have been signed and presented by an authorized person or persons. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first above written. RPM INTERNATIONAL INC. /s/ Keith R. Smiley --------------------------------------- Authorized Officer's Signature Name: Keith R. Smiley ------------------------------ Title: Vice President - Treasurer ------------------------------ Date: April 21, 2003 ------------------------------ U.S. BANK TRUST NATIONAL ASSOCIATION /s/ Rouba Fakih --------------------------------------- Authorized Officer's Signature Name: Rouba Fakih ------------------------------ Title: Vice President ------------------------------ Date: April 21, 2003 ------------------------------ -9- SAMPLE CERTIFICATE (ISSUER'S NAME) SECRETARY'S CERTIFICATE I, _____________________________, the duly elected, qualified and acting Secretary/Assistant Secretary of_______________________________________ (the "Issuer") do hereby certify that appearing below as Item "A" is a true and correct copy of the resolutions duly adopted by the Board of Directors of the Issuer on _________________, 19____ and that said resolutions have not been amended, modified or revoked, and are in full force and effect on the date hereof; and furthermore that such resolutions are the only resolutions adopted by the Issuer's Board of Directors or any committee thereof governing the subject matter described there in. I do hereby further certify that appearing below as "Item B" is an original list with the specimen signature and true and correct title of each of the officers of the Issuer empowered to act as a "Responsible Officer" under the resolution appearing in Item "A" and that said list has not been amended, modified or revoked and is in full force and effect on the date thereof. ITEM "A" BE IT RESOLVED by the Board of Directors of ___________________________ hereafter referred to as (the "Issuer") as follows: RESOLVED that any single (titles) of the Issuer (the "Responsible Officer(s)") be and they hereby are authorized to execute and deliver for and behalf of the Issuer an Issuing and Paying Agent Agreement (the "Agreement") (a) appointing U.S. Bank Trust National Association as an issuing and paying agent and depository of the Issuer, and (b) providing for the safekeeping, completion, countersignature, issuance, delivery and payment of commercial paper. RESOLVED that any one of the Responsible Officer(s) may, in connection with the foregoing, make, execute, and deliver in the name of the Issuer, under the Issuer's corporate seal or otherwise, any documents or other instruments and to take any and all such further actions as such Responsible Officer(s) may, in their discretion, deem necessary or appropriate to effect the foregoing transactions including, but not limited to, designating one or more of the employees or agents of the Issuer as Authorized Representatives under the Agreement and one or more employees of a dealer as Dealer Representatives under the Agreement ITEM "B" Responsible Officer(s) of the Issuer
Name Title Signature ---- ----- --------- ________________________ _____________________ ____________________ ________________________ _____________________ ____________________ ________________________ _____________________ ____________________
IN WITNESS WHEREOF, I have hereunto signed my name. ________________________________________________________ Signature of Issuer's Secretary/Assistant Secretary SAMPLE INCUMBENCY CERTIFICATE OF RESPONSIBLE OFFICER OF ______________________________ (Company's Name) RESPONSIBLE OFFICER'S CERTIFICATE I, _______________________________, the duly elected, qualified and acting ________________________________ of _____________________________ do hereby certify and designate to U.S. Bank Trust National Association (the "Bank") that appearing below or attached to this certificate is: (a) A list with the specimen signature, names, and titles of each of the officers or agents (each an "Authorized Representative") of the above mentioned Company who are authorized to execute Commercial Paper Notes on behalf of the Company by manual or facsimile signature and/or to take other actions under the Issuing and Paying Agent Agreement between the Company and the Bank, and (b) A list of employees of Dealers ("Dealer Representatives") who are authorized to give notices and/or issuance instructions, to the Bank in writing or via electronic communication link, such list containing the names and specimen signature of each of such Dealer Representatives. (1) List of Authorized Representatives:
Name Title Specimen Signature _____________________ __________________________ _______________________ _____________________ __________________________ _______________________ _____________________ __________________________ _______________________ _____________________ __________________________ _______________________
(2) List of Dealer Representatives:
Name Signature ________________________ ___________________________ ________________________ ___________________________ ________________________ ___________________________ ________________________ ___________________________
IN WITNESS WHEREOF, I have hereunto signed by name. Name of Responsible Officer:_________________________ Title of Responsible Officer:________________________ EX-10.23 8 l02719aexv10w23.txt EX-10.23 NOTE PURCHASE AGREEMENT EXHIBIT 10.23 EXECUTION COPY ================================================================================ RPM INTERNATIONAL INC. (a Delaware corporation) Senior Convertible Notes due 2033 PURCHASE AGREEMENT Dated: May 8, 2003 ================================================================================ TABLE OF CONTENTS
Page SECTION 1. Representations and Warranties..................................................................... 3 (a) Representations and Warranties by the Company................................................ 3 (i) Offering Memorandum............................................................... 3 (ii) Incorporated Documents............................................................ 3 (iii) Independent Accountants........................................................... 3 (iv) Financial Statements.............................................................. 3 (v) No Material Adverse Change in Business............................................ 3 (vi) Good Standing of the Company...................................................... 4 (vii) Good Standing of Subsidiaries..................................................... 4 (viii) Capitalization.................................................................... 4 (ix) Authorization of this Agreement................................................... 5 (x) Authorization of the Indenture.................................................... 5 (xi) Authorization of the Registration Rights Agreement................................ 5 (xii) Authorization of the Securities................................................... 5 (xiii) Description of the Securities, the Indenture and the Registration Rights Agreement 5 (xiv) Authorization and Description of Common Stock..................................... 6 (xv) Authorization of the Rights Agreement............................................. 6 (xvi) Absence of Defaults and Conflicts................................................. 6 (xvii) Absence of Labor Dispute.......................................................... 7 (xviii) Absence of Proceedings............................................................ 7 (xix) Possession of Intellectual Property............................................... 7 (xx) Absence of Further Requirements................................................... 7 (xxi) Investment Company Act............................................................ 8 (xxii) Good and Marketable Title......................................................... 8 (xxiii) Environmental Laws................................................................ 8 (xxiv) ERISA............................................................................. 9 (xxv) Insurance......................................................................... 9 (xxvi) Taxes............................................................................. 9 (xxvii) Internal Controls................................................................. 9 (xxviii) No Unlawful Payments.............................................................. 10 (xxix) No Brokerage Commission; Finder's Fee............................................. 10 (xxx) Dividend Payments................................................................. 10 (xxxi) Similar Offering.................................................................. 10 (xxxii) Rule 144A......................................................................... 10 (xxxiii) No General Solicitation or General Advertising.................................... 10 (xxxiv) No Registration Required.......................................................... 10 (xxxv) Reporting Company................................................................. 11 (b) Officer's Certificates....................................................................... 11 SECTION 2. Sale and Delivery to Initial Purchasers; Closing................................................... 11 (a) Initial Securities........................................................................... 11 (b) Option Securities............................................................................ 11 (c) Payment...................................................................................... 11
i (d) Denominations; Registration.................................................................. 12 SECTION 3. Covenants of the Company........................................................................... 12 (a) Offering Memorandum.......................................................................... 12 (b) Notice and Effect of Material Events......................................................... 12 (c) Amendments to Offering Memorandum and Supplements............................................ 13 (d) Qualifications of Securities for Offer and Sale.............................................. 13 (e) Use of Proceeds.............................................................................. 13 (f) Rating of Securities......................................................................... 13 (g) Listing on Securities Exchange............................................................... 14 (h) Restriction on Sale of Securities............................................................ 14 (i) PORTAL Designation........................................................................... 14 (j) DTC.......................................................................................... 14 (k) Reporting Requirements....................................................................... 14 SECTION 4. Payment of Expenses................................................................................ 14 (a) Expenses..................................................................................... 14 (b) Termination of Agreement..................................................................... 15 SECTION 5. Conditions of Initial Purchasers' Obligations...................................................... 15 (a) Opinions of Counsel for the Company.......................................................... 15 (b) Opinion of Counsel for Initial Purchasers.................................................... 15 (c) Officers' Certificate........................................................................ 16 (d) Accountant's Comfort Letter.................................................................. 16 (e) Bring-down Comfort Letter.................................................................... 16 (f) Maintenance of Rating........................................................................ 16 (g) Lock-up Agreements........................................................................... 16 (h) Indenture and Registration Rights Agreement.................................................. 16 (i) Conditions to Purchase of Option Securities.................................................. 17 (i) Officers' Certificate............................................................. 17 (ii) Opinions of Counsel for the Company............................................... 17 (iii) Opinion of Counsel for Initial Purchasers......................................... 17 (iv) Bring-down Comfort Letter......................................................... 17 (j) Additional Documents......................................................................... 17 (k) PORTAL Market................................................................................ 17 (l) Termination of Agreement..................................................................... 17 SECTION 6. Subsequent Offers and Resales of the Securities.................................................... 18 (a) Offer and Sale Procedures.................................................................... 18 (i) Offers and Sales to Qualified Institutional Buyers................................ 18 (ii) No General Solicitation........................................................... 18 (iii) Purchases by Non-Bank Fiduciaries................................................. 18 (iv) Subsequent Purchaser Notification................................................. 18 (v) Restriction on Transfer........................................................... 18 (b) Covenants of the Company..................................................................... 19 (i) Integration....................................................................... 19 (ii) Rule 144A Information............................................................. 19 (iii) Restriction on Purchases.......................................................... 19 (c) Qualified Institutional Buyer................................................................ 19 SECTION 7. Indemnification.................................................................................... 19
ii (a) Indemnification of Initial Purchasers........................................................ 19 (b) Indemnification of the Company............................................................... 20 (c) Actions against Parties; Notification........................................................ 20 (d) Settlement without Consent if Failure to Reimburse........................................... 21 SECTION 8. Contribution................................................................................... 21 SECTION 9. Representations, Warranties and Agreements to Survive Delivery................................. 22 SECTION 10. Termination of Agreement....................................................................... 22 (a) Termination; General......................................................................... 23 (b) Liabilities.................................................................................. 23 SECTION 11. Default by One or More of the Initial Purchasers............................................... 23 SECTION 12. Notices........................................................................................ 24 SECTION 13. Parties........................................................................................ 24 SECTION 14. GOVERNING LAW AND TIME......................................................................... 24 SECTION 15. Effect of Headings............................................................................. 24 SECTION 16. Counterparts................................................................................... 24
SCHEDULES Schedule A List of Initial Purchasers Schedule B RPM International Inc. - Senior Convertible Notes Due 2033 Schedule C List of Material Subsidiaries Schedule D List of Significant Subsidiaries Schedule E Signatories of the Lock-Up Letter Agreement EXHIBITS Exhibit A Form of Registration Rights Agreement Exhibit B Form of Opinion of P. Kelly Tompkins, General Counsel of the Company, to be Delivered Pursuant to Section 5(a) Exhibit C Form of Opinion of Calfee, Halter & Griswold LLP, United States Counsel for the Company, to be Delivered Pursuant to Section 5(a) Exhibit D Form of Lock-Up Letter Agreement iii RPM INTERNATIONAL INC. $247,514,000 Senior Convertible Notes due 2033 PURCHASE AGREEMENT May 8, 2003 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated As Representative of the several Initial Purchasers c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center New York, New York 10080 Ladies and Gentlemen: RPM International Inc., a Delaware corporation (the "Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in Schedule A hereto (collectively, the "Initial Purchasers," which term shall also include any initial purchaser substituted as hereinafter provided in Section 11 hereof), for whom Merrill Lynch is acting as representative (in such capacity, the "Representative"), with respect to the issue and sale by the Company and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts at maturity set forth in said Schedule A of $247,514,000 aggregate principal amount at maturity of the Company's Senior Convertible Notes due 2033 (the "Notes"), and with respect to the grant by the Company to the Initial Purchasers, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of an additional $49,486,000 aggregate principal amount at maturity of Notes to cover over-allotments, if any. The aforesaid $247,514,000 aggregate principal amount at maturity of Notes (the "Initial Securities") to be purchased by the Initial Purchasers and all or any part of the $49,486,000 aggregate principal amount at maturity of Notes subject to the option described in Section 2(b) hereof (the "Option Securities") are hereinafter called, collectively, the "Securities." The Securities are to be issued pursuant to an indenture, to be dated as of the Closing Time (as defined in Section 2(c)) (the "Indenture"), between the Company and The Bank of New York, as trustee (the "Trustee"). The Securities are convertible, subject to certain conditions, at the option of the holder prior to maturity (unless previously redeemed or otherwise purchased) into shares of common stock, par value $.01 per share, of the Company (the "Common Stock") in accordance with the terms of the Securities and the Indenture, as described in Schedule B hereto. The shares of Common Stock will have attached thereto rights (the "Rights") to purchase one-tenth of a share of Common Stock. The Rights are to be issued pursuant to a Rights Agreement, dated as of April 28, 1999 (the "Rights Agreement"), between the Company and National City Bank, as successor Rights Agent to Computershare Investor Services (formerly Harris Trust and Savings Bank), as the same may be amended from time to time. Securities issued in book-entry form will be issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing Time (as defined in Section 2(c)), among the Company, the Trustee and DTC. The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and agrees that the Initial Purchasers may initially resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers ("Subsequent Purchasers") at any time after this Agreement has been executed and delivered. The Securities are to be sold to the Initial Purchasers and offered and resold by the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act (including the exemption afforded by Rule 144A ("Rule 144A") of the rules and regulations of the Securities and Exchange Commission (the "Commission") under the 1933 Act (the "1933 Act Regulations"). On or prior to the Closing Time, the Company will enter into with the Initial Purchasers an agreement (the "Registration Rights Agreement"), in substantially the form attached hereto as Exhibit A, with such changes as shall be agreed to by the parties hereof, pursuant to which, subject to the conditions set forth therein, the Company is required to file and use its reasonable efforts to have declared effective a registration statement (the "Registration Statement") under the 1933 Act to register resales of the Securities and the shares of Common Stock issuable upon conversion thereof. The Company has prepared and will deliver to the Initial Purchasers, on the date hereof or the next succeeding day, copies of an offering memorandum dated May 8, 2003 (the "Offering Memorandum") to be used by each Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Securities. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum delivered by the Company to the Initial Purchasers (whether the Offering Memorandum, or any amendment or supplement to such document), including exhibits thereto and any documents incorporated therein by reference, which has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of purchases of, or offering of, the Securities. All references in this Agreement to financial statements and schedules and other information which is "contained," "included," "stated" or "described" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934, as amended (the "1934 Act"), which is incorporated by reference in the Offering Memorandum. 2 SECTION 1. Representations and Warranties. (a) Representations and Warranties by the Company. The Company represents and warrants to each Initial Purchaser as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows: (i) Offering Memorandum. The Offering Memorandum does not, and at the Closing Time referred to in Section 2 (and, if any Option Securities are purchased, at each Date of Delivery) will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties in this subsection shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser through Merrill Lynch expressly for use in the Offering Memorandum. (ii) Incorporated Documents. The Offering Memorandum as delivered from time to time shall incorporate by reference the most recent Annual Report of the Company on Form 10-K filed with the Commission and each Quarterly Report of the Company on Form 10-Q filed with the Commission and each Current Report of the Company on Form 8-K filed (not furnished) with the Commission and such other reports as specifically incorporated by reference in the Offering Memorandum. The documents incorporated by reference in the Offering Memorandum (the "Incorporated Documents"), at the time they were or hereafter are filed with the Commission, or if amended, as so amended, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"). (iii) Independent Accountants. The accountants who certified the financial statements and supporting schedules incorporated by reference in the Offering Memorandum are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iv) Financial Statements. The financial statements, together with the related schedules and notes, incorporated by reference into the Offering Memorandum present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of income, shareholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules incorporated by reference into the Offering Memorandum present fairly in accordance with GAAP the information required to be stated therein. (v) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendment thereto), except as otherwise stated therein, (A) there has been no material adverse 3 change in the condition, financial or otherwise, or in the earnings, business or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its Material Subsidiaries (as defined below), other than those in the ordinary course of business, which are material with respect to the Company and its Material Subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the Common Stock in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vi) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under, or as contemplated by, this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (vii) Good Standing of Subsidiaries. Each subsidiary of the Company listed on Schedule C hereto (collectively, the "Material Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum. Each Material Subsidiary is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect. All of the issued and outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable, and except for directors' qualifying shares and third party interests in joint ventures in which the Company invests, are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. The subsidiaries of the Company listed on Schedule D hereto are the only subsidiaries of the Company which meet the criteria in the definition of "significant subsidiary" pursuant to Rule 1-02(w) of Regulation S-X under the 1933 Act. (viii) Capitalization. The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Offering Memorandum in the column entitled "Actual" under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements, employee benefit plans referred to in the Offering Memorandum or pursuant to the exercise of convertible securities or options referred to in the Offering Memorandum). The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of any preemptive or other similar rights of any 4 securityholder of the Company. Other than as disclosed in the Offering Memorandum, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding. (ix) Authorization of this Agreement. This Agreement has been duly authorized, executed and delivered by the Company. (x) Authorization of the Indenture. The Indenture has been duly authorized by the Company and, when executed and delivered by the Company and the Trustee, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (xi) Authorization of the Registration Rights Agreement. The Registration Rights Agreement has been authorized by the Company and, when executed and delivered by the Company and the Initial Purchasers, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (xii) Authorization of the Securities. The Securities have been duly authorized and, at the Closing Time, will have been duly executed by the Company and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. (xiii) Description of the Securities, the Indenture and the Registration Rights Agreement. As of the Closing Time, the Securities, the Indenture and the Registration Rights Agreement will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum. 5 (xiv) Authorization and Description of Common Stock. The Common Stock conforms to all descriptions relating thereto set forth in the Offering Memorandum, and such description conforms to the rights set forth in the instruments defining the same (including the rights associated with the Rights Agreement). Upon issuance and delivery of the Securities in accordance with this Agreement and the Indenture, the Securities will be convertible at the option of the holder thereof into shares of Common Stock (including the rights associated with the Rights Agreement) in accordance with the terms of the Securities and the Indenture; the shares of Common Stock issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion by all necessary corporate action and such shares, when issued upon such conversion, will be validly issued and will be fully paid and non-assessable; no holder of such shares will be subject to personal liability by reason of being such a holder; and the issuance of such shares upon such conversion will not be subject to the preemptive or other similar rights of any securityholder of the Company. (xv) Authorization of the Rights Agreement. The Rights Agreement has been duly authorized, executed and delivered by the Company; the Rights have been duly authorized by the Company and, when issued upon issuance of the Common Stock issuable upon conversion of the Securities, will be validly issued, and the Common Stock have been duly authorized by the Company and validly reserved for issuance upon the exercise of the Rights in accordance with the terms of the Rights Agreement, and when issued, such Common Stock will be validly issued, fully paid and non-assessable. (xvi) Absence of Defaults and Conflicts. Neither the Company nor any of its Material Subsidiaries is in violation of its charter or by-laws or other constituting or organizational document or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its Material Subsidiaries is a party or by which the Company or any of its Material Subsidiaries may be bound, or to which any of the property or assets of the Company or any of its Material Subsidiaries is subject (collectively, "Agreements and Instruments") except for such defaults that would not reasonably be expected to result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Indenture and the Securities and the consummation of the transactions contemplated herein and in the Offering Memorandum (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use of Proceeds" and the issuance of the shares of Common Stock issuable upon conversion of the Securities) and compliance by the Company with its obligations hereunder and under the Indenture, the Registration Rights Agreement and the Securities do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that, singly or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect), nor will such 6 action result in any violation of (i) the provisions of the charter or by-laws or other constituting or organizational document of the Company or any of its Material Subsidiaries or (ii) any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations, except in the case of clause (ii), for such violation that would not result in a Material Adverse Effect. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment prior to the stated maturity or date of mandatory redemption or repayment thereof of all or a portion of such indebtedness by the Company or any of its subsidiaries. (xvii) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its Material Subsidiaries exists or, to the knowledge of the Company, is imminent which might be expected to have a Material Adverse Effect. (xviii) Absence of Proceedings. Except as disclosed in the Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, which, singly or in the aggregate, if determined adversely, would reasonably be expected to result in a Material Adverse Effect. (xix) Possession of Intellectual Property. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, and to the Company's knowledge, neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xx) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder or under the Registration Rights Agreement or the Indenture, in connection with the offering, issuance or sale of the Securities hereunder, the issuance of shares of Common Stock upon conversion of Securities or the consummation of the transactions contemplated by this Agreement or the Offering Memorandum, or for the due execution, delivery or performance by the Company of this Agreement, the Registration Rights Agreement or the Indenture, or for the valid 7 authorization, issuance, sale and delivery of the Securities, except such as have been already obtained and or as may be required under the 1933 Act or the 1933 Act Regulations or state securities laws in connection with the transactions contemplated in the Registration Rights Agreement and except for the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act") and the listing of the Common Stock issued upon conversion of the Securities on the NYSE. (xxi) Investment Company Act. Neither the Company nor any of its subsidiaries is, nor upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Offering Memorandum will be, an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xxii) Good and Marketable Title. The Company and each of its Material Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except such as are described in the Offering Memorandum, and all assets held under lease by the Company and its Material Subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as have not had and would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (xxiii) Environmental Laws. There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of, and the Company or any of its subsidiaries has no liability under, any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or could not be reasonably likely to have, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Company or any of its subsidiaries have knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not have or would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect. The terms "hazardous wastes," "toxic wastes," "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. 8 In the ordinary course of its business, the Company conducts a periodic review of the effect of any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws") on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities have not had and would not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (xxiv) ERISA. The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (A) Title IV of ERISA with respect to the termination of, or withdrawal from, any "pension plan" or (B) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (xxv) Insurance. The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties. (xxvi) Taxes. The Company has filed all federal, state and local income and franchise tax returns required to be filed through the date hereof and has paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had, nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, might have, a Material Adverse Effect. (xxvii) Internal Controls. The Company (A) makes and keeps accurate books and records and (B) maintains internal accounting controls which provide reasonable assurance that (i) transactions are executed in accordance with management's authorization, (ii) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (iii) access to its assets is permitted only in accordance with management's authorization and (iv) the reported accountability for its assets is compared with existing assets at reasonable intervals. 9 (xxviii) No Unlawful Payments. To the best of the Company's knowledge after due inquiry, neither the Company nor any of its subsidiaries, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (xxix) No Brokerage Commission; Finder's Fee. To the best of the Company's knowledge after due inquiry, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Initial Purchaser for a brokerage commission, finder's fee or other like payment in connection with this offering. (xxx) Dividend Payments. No Material Subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such Material Subsidiary's capital stock or from repaying to the Company any loans or advances to such Material Subsidiary from the Company. (xxxi) Similar Offering. Neither the Company nor any of its affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the 1933 Act. (xxxii) Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer quotation system. (xxxiii) No General Solicitation or General Advertising. None of the Company, its Affiliates or any person acting on its or any of their behalf (other than the Initial Purchasers and their respective Affiliates, as to whom the Company makes no representation) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under Regulation D of the 1933 Act. (xxxiv) No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties and the procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and the initial resale by the Initial Purchasers to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum 10 to register the Securities under the 1933 Act or to qualify the Indenture under the 1939 Act. (xxxv) Reporting Company. The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the 1934 Act. (b) Officer's Certificates. Any certificate signed by any officer of the Company delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to the Initial Purchasers as to the matters covered thereby. SECTION 2. Sale and Delivery to Initial Purchasers; Closing. (a) Initial Securities. On the basis of the representations, warranties and agreements herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Company at the price set forth in Schedule B hereto the principal amount at maturity of the Initial Securities set forth opposite the name of such Initial Purchaser in Schedule A plus any additional principal amount at maturity of Initial Securities that such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 11 hereof. (b) Option Securities. In addition, on the basis of the representations, warranties and agreements herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Initial Purchasers, severally and not jointly, to purchase up to an additional $49,486,000 aggregate principal amount at maturity of Option Securities at the same price per Security set forth in Schedule B for the Initial Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Securities as may be modified by subsequent purchases and sales by the Initial Purchasers upon notice by the Representative to the Company setting forth the number of Option Securities as to which the Initial Purchasers are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined, unless otherwise agreed upon by the Initial Purchasers and the Company. If the option is exercised as to all or any portion of the Option Securities, each of the Initial Purchasers, acting severally and not jointly, will purchase that proportion of the principal amount at maturity of Option Securities then being purchased which the principal amount at maturity of Initial Securities set forth opposite the name of such Initial Purchaser in Schedule A bears to the total principal amount at maturity of Initial Securities. (c) Payment. Payment of the purchase price for, and delivery of one or more global certificates for, the Initial Securities shall be made at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or at such other place as shall be agreed upon by the Representative and the Company, at 9:00 A.M. (Eastern time) on the third business day after the date hereof (unless postponed in accordance with the provisions of Section 11 hereof), or at such other time not later than ten business days 11 after such date as shall be agreed upon by the Representative and the Company (such time and date of payment and delivery being herein called the "Closing Time"). In addition, in the event that the Initial Purchasers have exercised their option to purchase all or any of the Option Securities, payment of the purchase price for, and delivery of one or more global certificates for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representative and the Company, on each Date of Delivery as specified in the notice from the Representative to the Company. Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representative for the respective accounts of the Initial Purchasers of the Securities to be purchased by them. It is understood that each Initial Purchaser has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Initial Purchasers, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Initial Purchaser whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Initial Purchaser from its obligations hereunder. (d) Denominations; Registration. Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations ($1,000 or integral multiples thereof) and registered in such names as the Representative may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be; provided that any Securities in global form be registered in the name of Cede & Co. The certificates for the Initial Securities and the Option Securities, if any, will be made available for examination and packaging by the Initial Purchasers in The City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. SECTION 3. Covenants of the Company. The Company covenants with each Initial Purchaser as follows: (a) Offering Memorandum. The Company, as promptly as possible, will furnish to the Initial Purchasers, without charge, such number of copies of the Offering Memorandum and any amendments and supplements thereto and any Incorporated Documents as the Initial Purchasers may reasonably request. (b) Notice and Effect of Material Events. The Company will immediately notify each Initial Purchaser, and confirm such notice in writing, of (x) any filing made by the Company of information relating to the offering of the Securities with any securities exchange or any other securities regulatory body in the United States or any other jurisdiction, and (y) prior to the completion of the placement of the Securities by the Initial Purchasers as evidenced by a notice from the Initial Purchasers to the Company in writing, any material changes in or affecting the 12 condition, financial or otherwise, or the earnings, business or business prospects of the Company and its subsidiaries considered as one enterprise which (i) make any statement in the Offering Memorandum false or misleading or (ii) are not disclosed in the Offering Memorandum. In such event or if during such time any event shall occur as a result of which it is necessary, in the reasonable opinion of any of the Company, its counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement the Offering Memorandum in order that the Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing, the Company will forthwith amend or supplement the Offering Memorandum by preparing and furnishing to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so that, as so amended or supplemented, the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a Subsequent Purchaser, not misleading. (c) Amendments to Offering Memorandum and Supplements. The Company will advise each Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum and will not effect any such amendment or supplement without the consent of the Initial Purchasers. Neither the consent of the Initial Purchasers, nor the Initial Purchasers' delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. (d) Qualifications of Securities for Offer and Sale. The Company will use its best efforts, in cooperation with the Initial Purchasers, to qualify the Securities and the shares of Common Stock issuable upon conversion of Securities for offering and sale under the applicable securities laws of such states and other jurisdictions as the Representative may designate and will maintain such qualification in effect as long as required in connection with the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities or such shares of Common Stock issuable upon conversion of the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for so long as may be required in connection with the distribution of the Securities. (e) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner indicated in the Offering Memorandum under "Use of Proceeds." (f) Rating of Securities. The Company shall take all reasonable action necessary to enable Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. ("S&P") and Moody's Investor Service, Inc. ("Moody's") to provide their respective credit ratings of the Securities. 13 (g) Listing on Securities Exchange. The Company will use its reasonable best efforts to cause all shares of Common Stock issuable upon conversion of the Securities to be listed on the NYSE or listed on a "national securities exchange" registered under Section 6 of the 1934 Act. (h) Restriction on Sale of Securities. During a period of 90 days from the date of the Offering Memorandum, the Company will not, without the prior written consent of Merrill Lynch, (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or securities convertible into or exchangeable or exercisable for or repayable with Common Stock, or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequence of ownership of the Common Stock, or any securities convertible into or exchangeable or exercisable for or repayable with Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or the Common Stock to be delivered upon conversion thereof, (B) the resale registration statement to be filed by the Company pursuant to the Registration Rights Agreement relating to the resale of the Securities and the shares of Common Stock, (C) Common Stock to be issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation benefit plans or pursuant to currently outstanding options, warrants or rights existing on the date hereof and referred to in the Offering Memorandum. (i) PORTAL Designation. The Company will use its best efforts to permit the Securities to be designated as PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to the PORTAL Market. (j) DTC. The Company will cooperate with the Representative and use its best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of DTC. (k) Reporting Requirements. The Company, during the period when the Offering Memorandum is required to be delivered, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing, delivery to the Initial Purchasers and any filing of the Offering Memorandum (including financial statements and any schedules or exhibits and any Incorporated Document) and of each amendment or supplement thereto, (ii) the preparation, printing and delivery to the Initial Purchasers of this Agreement, any Agreement among Initial Purchasers, the Indenture, the Securities, the Registration Rights Agreement and such other documents as may be required in connection with the offer, purchase, sale, issuance or delivery of the Securities or the issuance or delivery of the Common Stock issuable upon conversion thereof, (iii) the preparation, issuance and delivery of the certificates 14 for the Securities to the Initial Purchasers and the certificates for the Common Stock issuable upon conversion thereof including any transfer taxes, any stamp or other duties payable upon the sale, issuance and delivery of the Securities to the Initial Purchasers, the issuance and delivery of the Common Stock issuable upon conversion thereof and any charges of DTC in connection therewith, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities and the shares of Common Stock issuable upon conversion of the Securities under securities laws in accordance with the provisions of Section 3(d), including filing fees and the reasonable fees and disbursements of counsel for the Initial Purchasers in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) any fees of the NASD in connection with the Securities, (vii) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities, (viii) the fees and expenses of any transfer agent or registrar for the Common Stock, (ix) any fees payable in connection with the rating of the Securities, and (x) any fees and expenses payable in connection with the initial and continued designation of the Securities as PORTAL securities under the PORTAL Market Rules pursuant to NASD Rule 5322. (b) Termination of Agreement. If this Agreement is terminated by the Representative in accordance with the provisions of Section 5 or Section 10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchasers. SECTION 5. Conditions of Initial Purchasers' Obligations. The obligations of the several Initial Purchasers hereunder are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Opinions of Counsel for the Company. At the Closing Time, the Initial Purchasers shall have received the opinion of P. Kelly Tompkins, General Counsel of the Company, and the opinion of Calfee, Halter & Griswold LLP, counsel for the Company, each in form and substance satisfactory to counsel for the Initial Purchasers and dated as of the Closing Time, to the effect set forth in Exhibits B and C hereto, respectively. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of the officers of the Company and certificates of public officials. (b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the Initial Purchasers shall have received the opinion, dated as of the Closing Time, of Shearman & Sterling, counsel for the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Initial Purchasers. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and certificates of public officials. 15 (c) Officers' Certificate. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendments or supplements thereto after the date of this Agreement), any material adverse change in the condition, financial or otherwise, or in the earnings, business or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Initial Purchasers shall have received a certificate of the President or a Senior Vice President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) the Company has complied with all of the agreements entered into in connection with the transaction contemplated herein and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) Accountant's Comfort Letter. At the time of the execution of this Agreement, the Initial Purchasers shall have received from Ciulla, Smith & Dale, LLP a letter dated such date, in the form and substance satisfactory to the Initial Purchasers, containing statements and information of the type ordinarily included in accountants' comfort letters to Initial Purchasers with respect to the financial statements and certain financial information contained in the Offering Memorandum. (e) Bring-down Comfort Letter. At the Closing Time, the Initial Purchasers shall have received from Ciulla, Smith & Dale, LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (f) Maintenance of Rating. At the Closing Time, the Securities shall be rated at least BBB with a negative outlook by S&P and Baa3 by Moody's, and the Company shall have delivered to the Initial Purchasers a letter dated the Closing Time, from each such rating agency, or other evidence satisfactory to the Initial Purchasers, confirming that the Securities have such rating. Since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned to the Securities or any of the Company's other securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such security rating organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Securities or any of the Company's other securities. (g) Lock-up Agreements. On or prior to the date of this Agreement, the Initial Purchasers shall have received an agreement substantially in the form of Exhibit D hereto signed by the persons listed in Schedule E hereto. (h) Indenture and Registration Rights Agreement. At or prior to the Closing Time, the Company and the Trustee shall have executed and delivered the Indenture, and the Company, and the Initial Purchasers shall have executed and delivered the Registration Rights Agreement. 16 (i) Conditions to Purchase of Option Securities. In the event that the Initial Purchasers exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the obligations of the Initial Purchasers to purchase such Option Securities is subject to the accuracy as of each Date of Delivery of the representations and warranties of the Company contained in Section 1 or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of their covenants and other obligations hereunder, and at the relevant Date of Delivery, the Initial Purchasers shall have received: (i) Officers' Certificate. A certificate, dated such Date of Delivery, of the President or Senior Vice President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(c) hereof remains true and correct as of such Date of Delivery. (ii) Opinions of Counsel for the Company. The opinion of P. Kelly Tompkins, General Counsel of the Company, and the opinion of Calfee, Halter & Griswold LLP, counsel for the Company, each in form and substance satisfactory to the Initial Purchasers, each dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(a) hereof. (iii) Opinion of Counsel for Initial Purchasers. The opinion of Shearman & Sterling, counsel for the Initial Purchasers, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof. (iv) Bring-down Comfort Letter. A letter from Ciulla, Smith & Dale, LLP, in form and substance satisfactory to the Initial Purchasers and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Initial Purchasers pursuant to Section 5(d) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery. (j) Additional Documents. At the Closing Time and at each Date of Delivery, counsel for the Initial Purchasers shall have been furnished with such documents, certificates and opinions as they may reasonably request for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy and completeness of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Initial Purchasers and counsel for the Initial Purchasers. (k) PORTAL Market. At the Closing Time, the Securities and the Common Stock issuable upon conversion of the Securities shall have been designated for trading on PORTAL. (l) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement (or, in the case of any 17 condition to the purchase of Option Securities, on a Date of Delivery which is after the Closing Time, the obligations of the several Initial Purchasers to purchase the relevant Option Securities on such Date of Delivery) may be terminated by the Initial Purchasers by notice to the Company at any time at or prior to the Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 7, 8 and 9 shall survive any such termination and remain in full force and effect. SECTION 6. Subsequent Offers and Resales of the Securities. (a) Offer and Sale Procedures. Each of the Initial Purchasers and the Company, as the case may be, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities. (i) Offers and Sales to Qualified Institutional Buyers. Offers and sales of the Securities shall only be made to persons whom the offeror or seller reasonably believes to be qualified institutional buyers, as defined in Rule 144A under the 1933 Act ("Qualified Institutional Buyers"). (ii) No General Solicitation. No general solicitation or general advertising (within the meaning of Rule 502(c) under the 1933 Act) shall be used in the United Stated in connection with the offering or sale of the Securities. (iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of Securities acting as a fiduciary for one or more third parties, each third party shall, in the reasonable belief of such Initial Purchaser, be a Qualified Institutional Buyer to whom the notice required in subsection (iv) has been given. (iv) Subsequent Purchaser Notification. Each Initial Purchaser will take reasonable steps to inform, and cause each of its United States Affiliates to take reasonable steps to inform, persons acquiring Securities from such Initial Purchaser or its Affiliate that the Securities (A) have not been and will not be registered under the 1933 Act, (B) are being sold to them without registration under the 1933 Act in reliance on Rule 144A or in accordance with another exemption from registration under the 1933 Act, as the case may be, and (C) may not be offered, sold or otherwise transferred except (1) to the Company, (2) outside the United States in accordance with Regulation S under the 1933 Act or (3) inside the United States in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Securities for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) pursuant to another available exemption from registration under the 1933 Act. (v) Restriction on Transfer. The transfer restrictions and the other provisions set forth in the Offering Memorandum under the caption "Transfer Restrictions," including the legend required thereby, shall apply to the Securities except as otherwise agreed by the Company and the Initial Purchasers. Following the sale of the Securities 18 by the Initial Purchasers to each Subsequent Purchaser pursuant to the terms hereof, the Initial Purchasers shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the 1933 Act, arising from or relating to any subsequent resale or transfer of any Security. (b) Covenants of the Company. The Company covenants with each Initial Purchaser as follows: (i) Integration. The Company agrees that it will not and will cause its Affiliates not to, directly or indirectly, solicit any offer to buy, sell or make any offer or sale of, or otherwise negotiate in respect of, securities of the Company or any Affiliate thereof of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the 1933 Act, such offer and sale would render invalid (for the purpose of (A) the sale of the Securities by the Company to the Initial Purchasers, (B) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers, or (C) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A thereunder or otherwise. (ii) Rule 144A Information. The Company agrees that, in order to render the Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while any of the Securities remain outstanding, it will make available, upon request, to any holder of Securities or prospective purchasers of Securities the information specified in Rule 144A(d)(4), unless the Company furnishes information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act. (iii) Restriction on Purchases. Until the expiration of two years after the original issuance of the Securities, the Company will not, and will cause its "affiliates" (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, purchase or agree to purchase or otherwise acquire any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial owner or otherwise (except as agent on behalf of and for the account of customers in the ordinary course of business as a securities broker in unsolicited broker's transactions) unless, immediately upon any such purchase, the Company or any such affiliate shall submit such Securities to the Trustee for cancellation. (c) Qualified Institutional Buyer. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that it is a Qualified Institutional Buyer. SECTION 7. Indemnification. (a) Indemnification of Initial Purchasers. The Company agrees to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: 19 (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 7(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through Merrill Lynch expressly for use in the Offering Memorandum (or any amendment or supplement thereto). (b) Indemnification of the Company. Each Initial Purchaser severally agrees to indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Initial Purchasers through Merrill Lynch expressly for use in the Offering Memorandum (or any amendment or supplement thereto). (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 7(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 20 7(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 7 or Section 8 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 7(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into, and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 8. Contribution. If the indemnification provided for in Section 7 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total purchase discount received by the Initial Purchasers, bear to the aggregate initial offering price of the Securities. 21 The relative fault of the Company on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 8, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased and sold by it hereunder exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers' respective obligations to contribute pursuant to this Section are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A hereto and not joint. SECTION 9. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or any person who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, or by or on behalf of the Company, and shall survive delivery of the Securities to the Initial Purchasers. SECTION 10. Termination of Agreement. 22 (a) Termination; General. The Representative may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), any material adverse change in the condition, financial or otherwise, or in the earnings, business or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or in the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative, impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NYSE or if trading generally on the NYSE, the American Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, or (iv) if a banking moratorium has been declared by either federal or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 7, 8 and 9 shall survive such termination and remain in full force and effect. SECTION 11. Default by One or More of the Initial Purchasers. If one or more of the Initial Purchasers shall fail at the Closing Time to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Initial Purchasers shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Initial Purchasers, or any other initial purchasers, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Initial Purchasers shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the aggregate principal amount of the Securities to be purchased hereunder, each of the non-defaulting Initial Purchasers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Initial Purchasers, or (b) if the number of Defaulted Securities exceeds 10% of the aggregate principal amount of the Securities to be purchased hereunder, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser. 23 No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Initial Purchasers or the Company shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangements. As used herein, the term "Initial Purchaser" includes any person substituted for an Initial Purchaser under this Section. SECTION 12. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to Merrill Lynch at 4 World Financial Center, New York, New York 10080, attention of Investment Banking Counsel; and notices to the Company shall be directed to them at P.O. Box 777, 2628 Pearl Road, Medina, Ohio 44258, attention of General Counsel (Fax: (330) 225-6574), with a copy to Edward W. Moore at Calfee, Halter & Griswold LLP, 800 Superior Avenue, Suite 1400, Cleveland, Ohio 44114 (Fax: (216) 241-0816). SECTION 13. Parties. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers and the Company and their respective successors and the controlling persons referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers and the Company and their respective successors, and said controlling persons and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from the Initial Purchasers shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 24 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Initial Purchasers and the Company in accordance with its terms. Very truly yours, RPM INTERNATIONAL INC. By: /s/ P. KELLY TOMPKINS ------------------------------------ Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED For itself and the other Initial Purchasers named in Schedule A hereto. By: /s/ PURNA R. SAGGURTI ----------------------------------------------- Authorized Signatory SCHEDULE A
Principal Amount at Maturity of Name of Initial Purchaser Securities ------------------------- ---------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................... $173,260,000 Wachovia Securities, Inc.................................................. 37,129,000 BNY Capital Markets, Inc.................................................. 12,375,000 Banc One Capital Markets, Inc............................................. 12,375,000 McDonald Investments Inc., a KeyCorp Company.............................. 12,375,000 ------------ Total................................................................. $247,514,000 ============
SCH A-1 SCHEDULE B RPM INTERNATIONAL INC. SENIOR CONVERTIBLE NOTES DUE 2033 1. The initial offering price per $1,000 principal amount at maturity of the Securities shall be $505.19, which represents a yield to maturity of 2.75% per annum (computed on a semiannual bond equivalent basis), adjusted for any cash interest. 2. The purchase price to be paid by the Initial Purchasers for the Securities shall be $495.09, being an amount equal to the initial offering price set forth above, less $10.10 per $1,000 principal amount at maturity of Securities. 3. Cash interest on the Securities at the rate of 1.389% per annum on the principal amount at maturity shall be payable semiannually in arrears on May 13 and November 13 of each year, beginning November 13, 2003 until May 13, 2008. 4. Contingent cash interest on the Securities shall be payable during any six-month period commencing after November 13, 2008 if the average market price of the Securities for the five trading days ending on the third trading day immediately preceding the first day of the relevant six-month period equals 120% or more of the sum of the issue price, accrued original issue discount and accrued cash interest, if any, for a Security to the day immediately preceding the relevant six-month period. Contingent cash interest payable per Security in respect of any six-month period in which contingent interest is payable will equal the annual rate of 1.0% of the average market price of a Security for the five trading day measurement period. 5. The Securities shall be convertible into shares of common stock, par value $.01 per share, of the Company at an initial rate of 27.0517 shares of Common Stock per $1,000 principal amount at maturity of Securities. 6. Prior to May 13, 2008, the Securities will not be redeemable. 7. The redemption price shall be $505.19 plus accrued original issue discount or accrued cash interest, if any, as of the applicable redemption date. 8. The purchase dates and the purchase prices included in the Offering Memorandum and correspondingly in the Indenture shall be:
Purchase Date Purchase Price - ------------- -------------- May 13, 2008 $505.19 May 13, 2013 $579.11 May 13, 2018 $663.85 May 13, 2023 $761.00 May 13, 2028 $872.35
SCH B-1 9. Contingent Conversion Triggers: (i) In any fiscal quarter (commencing after May 31, 2003), if, as of the last day of the preceding fiscal quarter, the closing sale price of the Common Stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding fiscal quarter is more than 120% of the accreted conversion price per share of Common Stock (excluding accrued cash interest, if any) on the last day of such quarter; (ii) During any period in which the credit rating assigned to the Securities is below a specified level; (iii) The Securities are called for redemption; and (iv) Corporate transactions specified in the Offering Memorandum have occurred. SCH B-2 SCHEDULE C LIST OF MATERIAL SUBSIDIARIES
Jurisdiction of Subsidiary Corporation ---------- ----------- RPM, Inc............................................... Ohio RPM Industrial Holding Company......................... Delaware RPM Consumer Holding Company........................... Delaware StonCor Group, Inc..................................... Delaware Dryvit Holdings, Inc................................... Rhode Island Rust-Oleum Corporation................................. Illinois Zinsser Co., Inc....................................... New Jersey Tremco Incorporated.................................... Ohio DAP Products Inc....................................... Delaware
SCH C-1 SCHEDULE D LIST OF SIGNIFICANT SUBSIDIARIES
Jurisdiction of Subsidiary Corporation ---------- ----------- StonCor Group, Inc..................................... Delaware Dryvit Holdings, Inc................................... Rhode Island Rust-Oleum Corporation................................. Illinois Zinsser Co., Inc....................................... New Jersey Tremco Incorporated.................................... Ohio DAP Products Inc....................................... Delaware
SCH D-1 SCHEDULE E LIST OF PERSONS SUBJECT TO THE LOCK-UP LETTER AGREEMENT James A. Karman Frank C. Sullivan Dennis F. Finn Glenn R. Hasman Paul G. Hoogenboom Stephen J. Knoop Robert L. Matejka Ronald A. Rice Keith R. Smiley P. Kelly Tompkins Thomas C. Sullivan Dr. Max D. Amstutz E. Bradley Jones Albert B. Ratner Dr. Jerry Sue Thornton Edward B. Brandon William A. Papenbrock Donald K. Miller Joseph P. Viviano Bruce Carbonari SCH E-1 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT Exhibit A-1 EXHIBIT B FORM OF OPINION OF P. KELLY TOMPKINS GENERAL COUNSEL OF THE COMPANY, TO BE DELIVERED PURSUANT TO SECTION 5(a) (i) The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its businesses require such qualification and has all power and authority necessary to own or hold its properties and conduct the businesses in which it is engaged, except where the failure to be so qualified or to be in good standing as a foreign corporation have not had and would not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (ii) Each of the Material Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification and has all power and authority necessary to own or hold its properties and conduct the business in which its is engaged, except where the failure to be so qualified or to be in good standing as a foreign corporation has not and would not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. (iii) All of the issued shares of capital stock of each Material Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. (iv) To the best of such counsel's knowledge after due inquiry and other than as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, singularly or in the aggregate, might have a Material Adverse Effect; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (v) The statements contained in the Offering Memorandum or in the documents incorporated by reference under the captions "Legal Proceedings", "Business--Environmental Matters", "Risk Factors--The chemical and construction products industries we serve inherently expose us to other potential significant litigation-related costs", "Risk Factors-Certain of our subsidiaries, principally Bondex International, Inc., are defendants in numerous asbestos-related personal injury lawsuits. Resolutions of existing and future asbestos related lawsuits may have a material effect on our future consolidated financial condition, operating results and liquidity. We anticipate taking a material charge to our fiscal 2003 earnings", "Risk Factors--Environmental laws and regulations could subject us to significant future liabilities", and "Certain Relationships and Related Transactions" insofar as they describe charter documents, contracts, legal proceedings, federal and state statutes, rules and regulations, constitute a fair summary thereof. Exhibit B-1 (vi) The issue and sale of the Securities and the execution, delivery and compliance by the Company with all of the provisions of the Purchase Agreement, the Indenture, the Registration Rights Agreement and the Securities and the consummation of the transactions contemplated thereby do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other similar agreement or instrument to which the Company or any of its Material Subsidiaries is a party or by which the Company or any of its Material Subsidiaries is bound or to which any of the properties or assets of the Company or any of it Material Subsidiaries is subject, (except for such conflicts, breaches or violations that, singly or in the aggregate, would not result in a Material Adverse Effect), nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its Material Subsidiaries or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its Material Subsidiaries or any of their properties or assets. (vii) Neither the Company nor any of its Material Subsidiaries is in violation of its charter or by-laws or other constituting or organizational document. (viii) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or could not be reasonably likely to have, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Company or any of its subsidiaries have knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which have had and would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect. In rendering such opinion, such counsel may state that their opinion is limited to matters governed by the Federal laws of the United States of America, the General Corporation Law of the State of Ohio and the General Corporation Law of the State of Delaware. Such opinion shall also be to the effect that (x) such counsel has acted as counsel to the Company in connection with the preparation of the Offering Memorandum (and the documents incorporated by reference) and (y) based on the foregoing, no facts have come to the attention of such counsel which lead them to believe that the Offering Memorandum or any amendment or supplement thereto (including the documents incorporated by reference therein) (except for the financial statements and related schedules and other financial data included or incorporated by reference therein, as to which such counsel need express no belief), at the time the Offering Memorandum was issued, at the time any such amended or supplemented Offering Memorandum was issued or Exhibit B-2 at the Closing Time, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing opinion and statement may be qualified by a statement to the effect that such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as set forth in clause (v) above). Exhibit B-3 EXHIBIT C FORM OF OPINION OF Calfee, Halter & Griswold LLP UNITED STATES COUNSEL FOR THE COMPANY, TO BE DELIVERED PURSUANT TO SECTION 5(a) (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) The Company has an authorized capitalization as set forth in the Offering Memorandum. All of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the Offering Memorandum. (iii) Except as described in the Offering Memorandum, there are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of the Common Stock pursuant to the Company's charter or by-laws or any agreement or other instrument filed as an exhibit to the documents incorporated by reference into the Offering Memorandum. (iv) All of the Company's options, warrants and other rights to purchase or exchange any securities for shares of the Company's capital stock have been duly and validly authorized and issued, and conform to the description thereof contained in the documents incorporated by reference therein. (v) The documents incorporated by reference in the Offering Memorandum (other than the financial statements and related schedules therein, as to which such counsel need express no belief), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the 1934 Act Regulations. (vi) The statements contained in the Offering Memorandum or in the documents incorporated by reference therein under the captions, "Description of Notes", "Description of Our Capital Stock", "Description of Our Other Indebtedness" and "Material United States Federal Income Tax Consequences", insofar as they describe charter documents, contracts, legal proceedings, federal and state statutes, rules and regulations and other legal matters, constitute a fair summary thereof. (vii) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (viii) The Rights Agreement has been duly authorized, executed and delivered by the Company; the Rights have been duly authorized by the Company and, when issued upon issuance of the Common Stock issuable upon conversion of the Securities, will be validly issued, and the shares of Common Stock have been duly authorized by the Company and validly reserved for issuance upon the exercise of the Rights in accordance with the terms of the Rights Agreement, and when issued, such shares of Common Stock will be validly issued, fully paid and non-assessable. Exhibit C-1 (ix) The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (x) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (xi) The Securities are in the form contemplated by the Indenture, have been duly authorized, executed, issued and delivered by the Company, and when authenticated by the Trustee in the manner provided in the Indenture, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (xii) Upon issuance and delivery of the Securities in accordance with the Purchase Agreement and the Indenture, the Securities will be convertible at the option of the holder thereof for shares of Common Stock (including the rights associated with the Rights Agreement) in accordance with the terms of the Securities and the Indenture; the shares of Common Stock issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion by all necessary corporate action and such shares, and when issued upon such conversion, will be validly issued and will be fully paid and non-assessable; and to our knowledge, the issuance of such shares upon such conversion will not be subject to the preemptive or other similar rights of any securityholder of the Company. (xiii) The issue and sale of the Securities and the execution, delivery and performance by the Company with all of the provisions of the Purchase Agreement, the Indenture, the Registration Rights Agreement and the Securities and the consummation of the transactions contemplated thereby do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed as an exhibit to any of the documents incorporated by reference to the Offering Memorandum, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company; and no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of the Purchase Agreement, the Registration Rights Agreement or the Indenture or the consummation of the transactions Exhibit C-2 contemplated thereby, except for such consents, approvals, authorizations, orders, filings or registrations as have been obtained or made and or as may be required under the 1933 Act or the 1933 Act Regulations or state securities laws in connection with the transactions contemplated in the Registration Rights Agreement and except for the qualification of the Indenture under the 1939 Act and the listing of the Common Stock issued upon conversion of the Securities on the NYSE. (xiv) It is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and each Subsequent Purchaser in the manner contemplated by the Purchase Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the 1939 Act. (xv) The Company is not, nor as of the Closing Date after giving effect to the offering and sale of the Securities and the application of the net proceeds therefrom will be, an "investment company" as defined in the Investment Company Act of 1940, as amended. (xvi) The Securities, the Common Stock, the Registration Rights Agreement and the Indenture conform in all material respects to the descriptions thereof contained in the Offering Memorandum. In rendering such opinion, such counsel may state that their opinion is limited to matters governed by the Federal laws of the United States of America, the laws of the State of New York, the General Corporation Law of the State of Ohio and the General Corporation Law of the State of Delaware. Such opinion shall also be to the effect that (x) such counsel has acted as counsel to the Company in connection with the preparation of the Offering Memorandum (and the documents incorporated by reference) and (y) based on the foregoing, no facts have come to the attention of such counsel which lead them to believe that the Offering Memorandum or any amendment or supplement thereto (including the documents incorporated by reference therein) (except for the financial statements and related schedules and other financial data included or incorporated by reference therein, as to which such counsel need express no belief), at the time the Offering Memorandum was issued, at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing opinion and statement may be qualified by a statement to the effect that such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as set forth in clauses (vi) and (xvi) above). Exhibit C-3 EXHIBIT D Form of Lock-Up Letter Agreement May ___, 2003 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated As Representative of the several Initial Purchasers named in the within-mentioned Purchase Agreement c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center New York, New York 10080 Re: Proposed Offering by RPM International Inc. of Senior Convertible Notes due 2033 Ladies and Gentlemen: The undersigned understands that you, as Representative of the several Initial Purchasers, propose to enter into a Purchase Agreement (the "Purchase Agreement") with RPM International Inc., a Delaware corporation (the "Company"), providing for the offering (the "Offering"), pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), by the several Initial Purchasers named in Schedule A to the Purchase Agreement (the "Initial Purchasers"), of Senior Convertible Notes due 2033 of the Company (the "Initial Securities") and the grant by the Company to the Initial Purchasers of the option to purchase additional Senior Convertible Notes due 2033 to cover over-allotments, if any (the "Option Securities"). The Initial Securities, together with the Option Securities, are collectively referred to as the "Securities". Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Purchase Agreement. In consideration of the Initial Purchasers' agreement to purchase and make the Offering of the Securities, and for other good and valuable consideration receipt of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of the Representative on behalf of the Initial Purchasers, the undersigned will not, during the period commencing the date hereof and ending 90 days from the date of the Offering Memorandum relating to the Offering, (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or lend or otherwise transfer or dispose of, directly or indirectly, any shares of the Company's common stock, par value $0.01 per share (the "Common Stock") or any securities convertible into or exercisable or exchangeable for or repayable with Common Stock (including without limitation, Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant), other than as bona fide gifts to persons or entities provided that (i) the persons or entities enter Exhibit D-1 into a lock-up letter substantially in the form of this letter, (ii) the Representative receive written notice prior to the transfer and (iii) no filing by any party, including any donor or donee, under Section 16(a) of the Securities Exchange Act of 1934, as amended, shall be required or shall be made voluntarily in connection with such transfer, other than a filing on Form 5, or (2) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Common Stock, or any securities convertible into or exchangeable or exercisable for or repayable with Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. In addition, the undersigned agrees that, without the prior written consent of the Representative on behalf of the Initial Purchasers, it will not, during the period commencing the date hereof and ending 90 days from the date of the Offering Memorandum, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for or repayable with Common Stock. In furtherance of the foregoing, the Company, and any duly appointed transfer agent for the registration or transfer of the securities described herein, are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Letter Agreement. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Letter Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned. The undersigned understands that, if the Purchase Agreement does not become effective, or if the Purchase Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Securities to be sold thereunder, the undersigned shall be released from all obligations under this Letter Agreement. The undersigned understands that the Initial Purchasers are entering into the Purchase Agreement and proceeding with the Offering in reliance upon this Letter Agreement. This lock-up agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof. Very truly yours, Signature:______________________________ Print Name:_____________________________ Exhibit D-2 EX-11.1 9 l02719aexv11w1.txt EX-11.1 COMPUTATION OF NET INCOME RPM INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS Exhibit 11.1 (In thousands except per share amounts)
Year Ended May 31 ---------------------------------------- 2003 2002 2001 -------- -------- -------- Net Income Net income applicable to common shares for basic and diluted earnings per share $ 35,327 $101,554 $ 62,961 ======== ======== ======== Shares Outstanding Weighted average shares for basic earnings per share 115,294 104,418 102,202 Net issuable common share equivalents 692 713 10 -------- -------- -------- Total shares for diluted earnings per share 115,986 105,131 102,212 ======== ======== ======== Basic Earnings Per Common Share $.31 $.97 $.62 ==== ==== ==== Diluted Earnings Per Common Share $.30 $.97 $.62 ==== ==== ====
EX-13.1 10 l02719aexv13w1.txt EX-13.1 2003 ANNUAL REPORT Exhibit 13.1 RPM International Inc. and Subsidiaries MD&A MANAGEMENT'S DISCUSSION AND ANALYSIS of Results of Operations and Financial Condition SEGMENT AND GEOGRAPHIC AREA INFORMATION RPM has two operating segments - industrial and consumer - based on the nature of our business activities, products and services; the structure of management; and the structure of information as presented to the Board of Directors. Within each segment, individual operating companies or groups of companies generally address common markets, utilize similar technologies, and can share manufacturing or distribution capabilities. We evaluate the profit performance of our segments based on earnings before interest and taxes ("EBIT") because interest expense is essentially related to corporate acquisitions, as opposed to segment operations. Industrial segment products are sold throughout North America and account for most of RPM's sales in Europe, South America, Asia, South Africa, Australia and the Middle East. The industrial product line is sold primarily to distributors, contractors and to end users, such as industrial manufacturing facilities, educational and governmental institutions, and commercial establishments. Industrial segment products reach their markets through a combination of direct sales, sales representative organizations, distributor sales and sales of licensees and joint ventures. Consumer segment products are sold throughout North America to mass merchandisers, home centers, hardware stores, paint stores, automotive supply stores and craft shops. Major customers include Ace Hardware Stores, Canadian Tire, Cotter & Company, Do It Best, The Home Depot, Lowe's Home Centers, W. W. Grainger and Wal-Mart. Consumer segment products are sold to retailers through a combination of direct sales, sales representative organizations and distributor sales. The eight largest consumer segment customers represented approximately 23%, 23% and 19% of consolidated net sales and approximately 50%, 49% and 41% of consumer segment sales for 2003, 2002 and 2001, respectively. The Home Depot represented approximately 12% and 11% of consolidated net sales and approximately 25% and 24% of consumer segment sales for the years ended May 31, 2003 and 2002, respectively. We reflect income from our joint ventures on the equity method, and receive royalties from our licensees, both of which minor amounts are reflected as offsets to selling, general and administrative expenses. Export sales were less than 10% of net sales for each of the three years presented. In addition to the two operating segments, there are certain business activities, referred to as corporate/other, that do not constitute an operating segment, including corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets and other expenses not directly associated with either operating segment. Related assets consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters' property and equipment. These corporate and other assets and expenses reconcile operating segment data to total consolidated net sales, earnings before interest and taxes, identifiable assets, capital expenditures, and depreciation and amortization. The following data reflect the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," effective June 1, 2001 (refer to Note A [10]). 16 RPM International Inc. and Subsidiaries SEGMENT AND GEOGRAPHIC INFORMATION (In thousands)
Year Ended May 31 2003 2002 2001 =========================================================================================================== SEGMENT INFORMATION Net Sales Industrial $1,117,877 $1,053,632 $1,100,682 Consumer 965,612 932,494 907,080 Corporate/Other - ----------------------------------------------------------------------------------------------------------- TOTAL $2,083,489 $1,986,126 $2,007,762 =========================================================================================================== Income Before Income Taxes(a) Earnings Before Interest and Taxes ("EBIT")(b) Industrial $ 122,315 $ 107,033 $ 122,034 Consumer 131,384 118,230 62,662 Corporate/Other (179,134)(c) (30,675) (18,006) - ----------------------------------------------------------------------------------------------------------- Total EBIT 74,565 194,588 166,690 Interest Expense, Net 26,712 40,464 65,203 - ----------------------------------------------------------------------------------------------------------- TOTAL $ 47,853 $ 154,124 $ 101,487 =========================================================================================================== Identifiable Assets Industrial $1,067,916 $ 962,742 $1,002,209 Consumer 1,038,350 1,000,928 1,016,067 Corporate/Other 140,945 115,174 60,214 - ----------------------------------------------------------------------------------------------------------- TOTAL $2,247,211 $2,078,844 $2,078,490 =========================================================================================================== Capital Expenditures Industrial $ 18,741 $ 17,743 $ 30,123 Consumer 22,095 20,559 23,629 Corporate/Other 978 1,629 366 - ----------------------------------------------------------------------------------------------------------- TOTAL $ 41,814 $ 39,931 $ 54,118 =========================================================================================================== Depreciation and Amortization Industrial $ 27,537 $ 26,883 $ 38,579 Consumer 29,216 28,605 41,627 Corporate/Other 1,921 1,371 1,288 - ----------------------------------------------------------------------------------------------------------- TOTAL $ 58,674 $ 56,859 $ 81,494 =========================================================================================================== GEOGRAPHIC INFORMATION Net Sales (based on shipping location) United States $1,683,196 $1,615,047 $1,614,112 - ----------------------------------------------------------------------------------------------------------- Foreign Canada 147,063 135,694 140,009 Europe 175,896 158,440 164,517 Other Foreign 77,334 76,945 89,124 - ----------------------------------------------------------------------------------------------------------- Total Foreign 400,293 371,079 393,650 - ----------------------------------------------------------------------------------------------------------- TOTAL $2,083,489 $1,986,126 $2,007,762 =========================================================================================================== Assets Employed United States $1,830,629 $1,706,843 $1,732,238 - ----------------------------------------------------------------------------------------------------------- Foreign Canada 151,771 147,568 128,159 Europe 197,948 160,641 144,619 Other Foreign 66,863 63,792 73,474 - ----------------------------------------------------------------------------------------------------------- Total Foreign 416,582 372,001 346,252 - ----------------------------------------------------------------------------------------------------------- TOTAL $2,247,211 $2,078,844 $2,078,490 ===========================================================================================================
(a) The presentation includes a reconciliation of EBIT to Income Before Income Taxes, a measure defined by Generally Accepted Accounting Principles ("GAAP") in the U.S. (b) EBIT is defined as earnings before interest and taxes. We believe that EBIT provides one of the best comparative measures of pure operating performance, and it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare companies. EBIT is not intended to represent cash flows for the period, nor is it presented as an alternative to operating income or as an indicator of operating performance. EBIT should not be considered in isolation, but with GAAP, and it is not indicative of operating income or cash flow from operations as determined by those principles. Our method of computation may or may not be comparable to other similarly titled measures of other companies. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results. (c) The asbestos charge, reflected in Corporate/Other, relates to our Bondex International, Inc. subsidiary. 17 RPM International Inc. and Subsidiaries CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our Consolidated Financial Statements include accounts of RPM and all majority-owned subsidiaries. Preparation of our financial statements requires the use of estimates and judgments that affect the amounts of our assets, liabilities, revenues and expenses. We continually evaluate these estimates, including those related to allowances for doubtful accounts, inventories, allowances for recoverable taxes, useful lives of property, plant and equipment, goodwill, environmental and other contingent liabilities, income tax valuation allowances, pension plans and the fair value of financial instruments. These estimates form the basis for making judgments about the carrying value of our assets and liabilities. Actual results may differ from these estimates under different assumptions and conditions. We have identified below the accounting policies that are critical to our financial statements. REVENUE RECOGNITION Revenues are recognized when title and risk of loss pass to customers. The Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition," provides guidance on the application of Generally Accepted Accounting Principles (GAAP) in the U.S. to selected revenue recognition issues. We have concluded that our revenue recognition policy is appropriate and in accordance with GAAP and SAB No. 101. TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS AND FOREIGN CURRENCY TRANSACTIONS Our reporting currency is the U.S. dollar. However, the functional currency of all of our foreign subsidiaries is their local currency. We translate the amounts included in the consolidated statements of income of our foreign subsidiaries into U.S. dollars at year-to-date average exchange rates, which we believe are fairly representative of the actual exchange rates on the dates of the transactions. Our foreign subsidiaries' assets and liabilities are translated into U.S. dollars from local currency at the actual exchange rates as of the end of each reporting date, and we record the resulting foreign exchange translation adjustments in our consolidated balance sheets as a component of accumulated other comprehensive income (loss). If we determined that the functional currency of any of our foreign subsidiaries should be the U.S. dollar, our financial statements would be affected. Should this occur, we would adjust our reporting to appropriately account for such change(s). As appropriate, we use permanently invested intercompany loans as a source of capital to reduce the exposure to foreign currency fluctuations in our foreign subsidiaries. These loans are treated as analogous to equity for accounting purposes. Therefore, foreign exchange gains or losses on these intercompany loans are recorded in other comprehensive income (loss). If we were to determine that the functional currency of any of our subsidiaries should be the U.S. dollar, we would no longer record foreign exchange gains or losses on such intercompany loans. GOODWILL We adopted two new accounting standards issued by the Financial Accounting Standards Board in June 2001. Statement of Financial Accounting Standards, or SFAS, No. 141, "Business Combinations," eliminates the pooling method of accounting for all business combinations initiated after June 30, 2001, and addresses the initial recognition and measurement of goodwill and intangible assets acquired in a business combination. Accordingly, we apply the provisions of SFAS No. 141 to all business combinations initiated after its effective date. We also adopted SFAS No. 142, "Goodwill and Other Intangible Assets," effective June 1, 2001 (refer to Note A [10]). Goodwill amortization ceased upon adoption of the standard, and the required initial impairment tests were performed. Results of these and subsequent impairment tests have not generated any impairment loss to date. Prospectively, goodwill will be tested on an annual basis, or more frequently, as impairment indicators arise. Impairment tests, which involve the use of estimates related to the fair market values of the business operations with which goodwill is associated, are performed at the end of the first fiscal quarter. Losses, if any, resulting from impairment tests will be reflected in our income statement. OTHER LONG-LIVED ASSETS We assess for impairment of identifiable non-goodwill intangibles and other long-lived assets whenever events or changes in facts and circumstances indicate the possibility that the carrying value may not be recoverable. Factors considered important that might trigger an impairment evaluation include the following: - - significant under-performance relative to historical or projected future operating results; - - significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and - - significant negative industry or economic trends. When we determine that the carrying value of non-goodwill intangibles and other long-lived assets may not be recoverable based upon the existence of one or more of 18 RPM International Inc. and Subsidiaries the above-described indicators, any impairment will be measured based on projected net cash flows expected from the asset(s), including eventual disposition. CONTINGENCIES (ALSO REFER TO NOTE H) We are party to claims and lawsuits arising in the normal course of business, including the various asbestos-related suits discussed herein and in Note H of our Consolidated Financial Statements. Although we cannot precisely predict the amount of any liability that may ultimately arise with respect to any of these matters, we record provisions when we consider the liability probable and reasonably estimable. The provisions are based on historical experience and legal advice, and are reviewed quarterly and adjusted according to developments. Changes in the amount of these provisions affect our consolidated statements of income. Due to the uncertainties inherent in the loss reserve estimation process, we are unable to estimate an additional range of loss in excess of our accruals. Our environmental-related accruals are similarly established and/or adjusted as information becomes available upon which costs can be reasonably estimated. Actual costs may vary from these estimates because of the inherent uncertainties involved, including the identification of new sites and the development of new information about contamination. Certain sites are still being investigated and, therefore, we have been unable to fully evaluate the ultimate cost for those sites. As a result, reserves have not been taken for some of these sites and for other sites, costs may exceed existing reserves. We have received indemnities for potential environmental issues from purchasers of certain of our properties and businesses and from sellers of properties or businesses we have acquired. We have also purchased insurance to cover potential environmental liabilities at certain sites. If the indemnifying or insuring party fails to, or becomes unable to, fulfill its obligations under those agreements or policies, we may incur environmental costs in addition to any amounts reserved, which may have a material adverse effect on our financial condition, results of operations or cash flows. RESULTS OF OPERATIONS FISCAL 2003 COMPARED WITH FISCAL 2002 NET SALES | Fiscal 2003 net sales grew $97.4 million, or 5%, over fiscal 2002. Organic sales growth amounted to $78.2 million, or 4% growth year over year, from unit volume as opposed to pricing and favorable foreign exchange differences of $19 million. These exchange differences were principally against the euro and the Canadian dollar, net of negative differences from Latin American currencies. Eight smaller acquisitions including Koch Waterproofing Solutions, purchased on April 1, 2003, made up the difference, adding approximately $19 million to sales. Industrial segment sales amounted to 54% of the RPM total, and were ahead year over year by 6%, 5% of which was organic growth and included favorable foreign exchange differences. Five smaller acquisitions accounted for the balance of the sales growth. The organic sales growth resulted primarily from the increased demand for lower-margin maintenance and installation products and services associated primarily with roofing and flooring throughout the year. Aside from growth in these services, commercial construction was down and the industrial manufacturing sectors of the economy generally remained weak throughout the year, continuing the postponement by a number of customers of higher-cost maintenance and replacement projects that call for many RPM industrial products. It remains our belief that this business has not been lost to any competitor, but becomes pent-up demand for those products and services. Furthermore, the fact that our industrial segment has been able to grow organically under a still-weak economic environment strongly suggests, and it is our firm belief, that we have expanded our market share during the year. Consumer segment sales amounted to 46% of the RPM total and were ahead 4% year over year, 3% from organic growth, and included favorable foreign exchange differences, primarily in the euro versus the U.S. dollar. Three smaller acquisitions provided the balance of the sales increase. Consumer demand was solid during the first half of the year but slowed considerably during the second half of the year from a combination of weather factors and inventory reduction efforts at several key accounts, which caused changes in order pattern quantities and frequency. The consumer retail takeaway, otherwise, has remained fairly steady and somewhat healthy throughout the year. GROSS PROFIT MARGIN | The fiscal 2003 gross profit margin of 45.8% compares with 45.9% during fiscal 2002, or nearly flat year over year. The benefits from higher sales volume and some lower raw material costs were slightly more than offset by a mix of lower-margin sales. The industrial segment gross margins declined year over year to 46.2% from 46.9%. The benefits from improved sales levels and a number of lower raw material costs in this segment were more than offset by a change in sales mix created by the strong sales of lower-margin services during 2003, related primarily to roofing and flooring. 19 RPM International Inc. and Subsidiaries The consumer segment gross margin improved year over year to 45.4% from 44.8%. This improvement is the result of positive leverage from the higher sales volume, slightly favorable raw material costs and continued conversion cost-saving initiatives. Manufacturing efficiencies from expanded Class A manufacturing initiatives are being realized in both operating segments, and these efforts will continue. Raw material cost pressures were building during the second half of fiscal 2003, and we believe higher costs in the material cost area may impact the first quarter of fiscal 2004 and, possibly, beyond. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") | Consolidated SG&A expenses improved to 35.5% of net sales in 2003 from 36.1% during fiscal 2002, attributable largely to significant growth in lower-margin services sales in the industrial segment that require relatively much lower SG&A support cost, along with ongoing cost reduction and containment efforts throughout both operating segments. The industrial segment SG&A was 35.2% of net sales in 2003 compared with 36.8% during fiscal 2002. The growth in sales volume, particularly service sales, contributed about half of this improvement. Cost reduction initiatives and cost containment efforts in both periods made up the difference. The consumer segment SG&A improved to 31.8% of net sales from 32.1% during fiscal 2002. This net improvement is a result of the higher sales volume leverage and continuous cost reduction and containment efforts, partly offset by certain increased selling and promotional spending among our primary consumer product lines. Corporate/other costs amounted to $39.1 million in 2003 compared with $30.7 million during fiscal 2002. This change reflects increased product liability costs of $5.1 million and a change in export sales tax legislation that went into effect this fiscal year. While this latter change caused $4.0 million of the increase in corporate/ other costs during 2003, consolidated SG&A was not affected by this tax law change because this increase in corporate/other expense is offset by corresponding reductions of expense in the industrial and consumer operating segments in the amounts of $2.4 million and $1.6 million, respectively. ASBESTOS CHARGE | Certain of our wholly owned subsidiaries, principally Bondex International, Inc. (Bondex), along with many other U.S. companies, are and have been involved in asbestos-related suits filed primarily in state courts during the past two decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products. Asbestos-related suits against Bondex increased in the fourth quarter of 2002 and the first two quarters of 2003, influenced by the bankruptcy filings of numerous other defendants in asbestos-related litigation. Based on the significant increase in asbestos claims and the inequitable impact of joint and several liability laws on Bondex, as previously reported, our third-party insurance will be depleted during the first quarter of 2004. Prior to this sudden precipitous increase in loss rates, the combination of reserves and insurance coverage was expected to adequately cover our asbestos claims for the foreseeable future. We are contesting various of our third-party insurers' claims of exhaustion. During the last seven months of 2003, new state liability laws were enacted in three states where more than 80% of the claims against Bondex are pending. The changes generally provide for liability to be determined on a proportional cause basis. The ultimate impact of these law changes is not expected to be significantly visible until the latter part of fiscal 2004. During the fourth quarter of 2003, a nationally recognized consulting firm was retained to evaluate whether it would be possible to estimate the cost of disposing pending claims and to assist in determining whether future asbestos- related claims were measurable. Bondex has provided the consultants with all relevant data regarding asbestos-related claims filed against Bondex through May 31, 2003. At this time, we cannot estimate the liability that will result from all future claims. We have established a reserve for those pending cases that have progressed to a stage where the cost to dispose of these cases can reasonably be estimated. The reserve was established by taking an asbestos charge to 2003 operations of $140,000,000 for measurable known claims and a provision for future claims that can presently be estimated. We believe this asbestos reserve will be sufficient to cover asbestos-related cash flow requirements for approximately three years. Additionally, Bondex's share of costs (net of then-available third-party insurance) for asbestos-related product liability were $6,700,000, $2,800,000 and $2,300,000 for the years ended May 31, 2003, 2002 and 2001, respectively. Future facts, events and legislation, both state and/or federal, may alter our estimates of both pending and future claims. The 20 RPM International Inc. and Subsidiaries Company cannot estimate possible liabilities in excess of those accrued because we cannot predict the number of additional claims that may be filed in the future, the grounds for such claims, the damages that may be demanded, the probable outcome, or the impact of recent state and pending federal legislation on prospective asbestos claims. In conjunction with our outside advisors, we will continue to study our asbestos-related exposure, and regularly evaluate the adequacy of this reserve and the related cash flow implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation (also refer to Note H). EARNINGS BEFORE INTEREST AND TAXES ("EBIT")| We believe that EBIT best reflects the performance of our operating segments, as interest expense and income taxes are not consistently allocated to operating segments by the various constituencies utilizing our financial statements. Requests for operating performance measures received from research analysts, financial institutions and rating agencies typically focus on EBIT, and we believe EBIT disclosure is responsive to investors. Consolidated EBIT in 2003 of $74.6 million compares with $194.6 million during fiscal 2002, with $140.0 million of this difference representing the asbestos liability charge. Excluding the charge, 2003 EBIT would have been $214.6 million or ahead $20.0 million, or 10%, over fiscal 2002. That represents margin improvement on the 5% sales increase, to 10.3% of net sales from 9.8% during fiscal 2002, the result of the higher sales volume coupled with cost reductions and containments. Industrial segment EBIT grew $15.3 million, or 14%, on 6% sales growth, to 11% of net sales compared with 10% of sales during fiscal 2002. Consumer segment EBIT grew $13.2 million, or 11%, on 4% sales growth to 14% of net sales compared with 13% of net sales during fiscal 2002. These operating EBIT improvements totaling $28.4 million generally are the result of the growth in sales volume, certain lower raw material costs year over year and ongoing cost reductions and containments across both operating segments. NET INTEREST EXPENSE | Net interest expense declined $13.8 million during 2003 (refer to Note A [17]) as a result of much lower average debt levels and lower interest rates. Interest rates on the variable portion of outstanding borrowings, averaging approximately 70% of total debt (refer to Note B), averaged a much lower 3.8% compared with 4.5% during 2002, amounting to savings of $4.8 million in 2003. Total debt levels averaged $202 million lower throughout 2003, accounting for $10.0 million of interest cost saved year over year. After our issuance of 2.75% Senior Convertible Notes in May 2003 (see Financing Activities in "Liquidity and Capital Resources"), the variable rate portion of our total debt structure was down to 51%. During fiscal 2002, there were marketable securities gains of approximately $1.0 million that were not realized again during 2003. INCOME TAX RATE | The effective income tax rate provision this year of 26.2% compares with 34.1% for fiscal 2002 (refer to Note C). This year's much lower rate is the result of the weight of the full tax benefit (37.5%) of the $140.0 million asbestos liability charge, and will not be a recurring rate. Excluding the charge, our tax rate in 2003 would have been 34.6%, up 0.5% from fiscal 2002. As a result of earnings growth, the one-time tax rate benefit from the June 1, 2001 adoption of SFAS No. 142 becomes less and less significant, and this trend is expected to continue. NET INCOME | Fiscal 2003 net income of $35.3 million compares with $101.6 million during fiscal 2002 and reflects the $87.5 million after-tax cost of the 2003 asbestos liability charge. Excluding the charge, 2003 net income would have been $122.8 million, ahead 20.9%, or $21.2 million, from fiscal 2002. The return on sales would have been 5.9% compared with 5.1% for fiscal 2002. During March 2002, we sold 11.5 million common shares (see Financing Activities in "Liquidity and Capital Resources") through a follow-on public equity offering, and this transaction had a dilutive effect of $0.01 per share on fiscal 2003 reported diluted earnings per share. Excluding the impact of the asbestos charge on earnings, the 11.5 million shares sold in March 2002 would have had a $0.07 per share dilutive effect on fiscal 2003 pro forma diluted earnings per share of $1.06. FISCAL 2002 COMPARED WITH FISCAL 2001 NET SALES | Fiscal 2002 net sales were slightly below fiscal 2001 by $21.6 million, or 1%. The $30 million commercial Durabond unit of DAP was divested in March 2001, with sales of $26.3 million to that point in the 2001 fiscal year. Factoring out those sales to be comparable, plus the negative effects from foreign exchange differences of approximately $14 million, principally against the Canadian dollar, year-over-year sales would show a 1% increase. Industrial segment sales amounted to 53% of the 2002 RPM total, and were lower year over year by 3.3% when the negative foreign exchange effect of $11.2 million is 21 RPM International Inc. and Subsidiaries excluded. The industrial economy, including electronics, was generally weak throughout 2002, which caused a number of customers to postpone higher-cost maintenance and replacement projects, particularly flooring. Consumer segment sales amounted to 47% of the 2002 RPM total, and were ahead 6.2% year over year on a comparable basis, after adjusting for the Durabond divestiture and negative foreign exchange effects. Consumer demand was solid throughout 2002, especially for our DAP, Rust-Oleum and Zinsser products. This growth reflected a combination of higher unit volume of approximately 5%, with the balance from slightly higher pricing to counter increased raw material and packaging costs during the 2001 fiscal year. GROSS PROFIT MARGIN | The gross profit margin improved in fiscal 2002, reaching 45.9% compared with 45.1% during fiscal 2001. The industrial gross margin of 46.9% in 2002 was slightly behind the 47.4% realized during fiscal 2001. This was mainly a volume effect as the sales decline, particularly of higher-margin flooring (off $44 million, or 11%), was too great to overcome versus related overhead costs. Restructuring savings and a number of favorable raw material costs partially offset this volume effect. Consumer gross margins, on the other hand, reached 44.8% from 42.5% during 2001. This improvement reflected additional restructuring savings of approximately $21 million during fiscal 2002, plus positive cost leverage from the higher sales volume and a number of favorable raw material costs in this segment as well. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | SG&A expenses improved to 36.1% of sales in 2002 from 36.8% during fiscal 2001. We adopted SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142), as of June 1, 2001, the beginning of the 2002 fiscal year, and that change is reflected in SG&A (refer to Note A [10]). On a pro forma basis, the fiscal 2001 SG&A percentage under SFAS No. 142 would have been $25.1 million lower, or 35.6% of sales. The divested Durabond unit of DAP had carried a lower SG&A percentage, having an approximate negative effect of 0.4% of sales, bringing the fiscal 2001 SG&A percentage, adjusted for both SFAS No. 142 and the divestiture, to approximately 36% of sales. The fiscal 2002 $2.1 million third-quarter charge related to the devaluation of the Argentinean peso amounted to 0.1% of fiscal 2002 sales. Without that charge, the 2002 SG&A percentage would have equaled fiscal 2001's 36%, adjusted for SFAS No. 142 and the divestiture. By segment, industrial SG&A of 36.8% in 2002 compared with 36.3% during fiscal 2001, or 35.2% on a pro forma SFAS No. 142-adjusted basis. This difference was attributable to the much lower sales volume in 2002; increased distribution costs associated with a transition to fewer warehouses; and the Argentinean peso devaluation, all of which were partly offset by solid cost containment efforts throughout the segment. Consumer SG&A of 32.1% in 2002 compared favorably with 35.6% during fiscal 2001, or 34.1% on a pro forma SFAS No. 142-adjusted basis. This significant improvement was attributable to the much higher consumer sales volume; some reduced freight costs, as there were still restructuring-related inefficiencies during fiscal 2001; and solid cost containment efforts throughout this segment. Corporate/other costs were $30.7 million in 2002 compared with $18 million during fiscal 2001. This change reflected a number of increased legal and professional fees associated with terminated acquisition and divestiture efforts; increased product liability costs (including those described under Item 3. Legal Proceedings, Form 10-K); rising health care and other employee benefit costs; management succession costs; and other higher corporate costs. EARNINGS BEFORE INTEREST AND TAXES | EBIT climbed $27.9 million in 2002, reaching $194.6 million. Fiscal 2001 EBIT, adjusted for SFAS No. 142, would have been $191.8 million, leaving 2002 EBIT ahead by $2.8 million, or up 1.5% on a 1% decrease in sales. Industrial EBIT was down $15 million during fiscal 2002, or down $26.9 million after adjusting fiscal 2001 for SFAS No. 142, with this decline being attributable mainly to the lower flooring sales volume. Consumer EBIT nearly doubled year over year, up $55.6 million, or still ahead $42.4 million on a SFAS No. 142-adjusted basis, with that growth almost equally attributable to the restructuring savings and the higher comparable sales volume. NET INTEREST EXPENSE | Net interest expense declined $24.7 million during 2002 (refer to Note A [17]) as a result of lower interest rates and reduced debt levels during the year. Interest rates on the variable rate portion (approximately 75% to 80%) of outstanding borrowings (refer to Note B) were lower in fiscal 2002. The overall effective interest rate of approximately 4.5% in 2002 compares favorably with 6.9% during fiscal 2001, amounting to savings of $20.3 million for 2002. Total debt levels were approximately $63 million lower on average throughout the year, accounting for the remaining $4.4 million of interest costs saved year over year. 22 RPM International Inc. and Subsidiaries Income Tax Rate | The effective income tax rate of 34.1% for 2002 compared favorably with fiscal 2001's 38% rate (refer to Note C). This rate reduction was driven by the adoption of SFAS No. 142, as goodwill is no longer being amortized for financial purposes. Net Income | 2002 net income of $101.6 million, or $0.97 per diluted share, increased 61% and 56%, respectively, from fiscal 2001. On a pro forma basis adjusted for SFAS No. 142, fiscal 2001 net earnings and diluted earnings per share would have been $84.8 million and $0.83 (refer to Note A [10]), respectively, putting 2002 results still ahead by 20% and 17%, respectively. During March 2002, we sold 11.5 million common shares (see Financing Activities in "Liquidity and Capital Resources") through a follow-on public equity offering, and this transaction had a dilutive effect on fiscal 2002 of $0.01 per share. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES Operating activities generated positive cash flow of $160.6 million during fiscal 2003 compared with $191.4 million a year ago, a decrease of $30.8 million. After adding back the $140.0 million ($87.5 million after tax) effect of the asbestos charge, which did not affect cash flow, our adjusted net income of $122.8 million represents a $21.2 million increase over the prior year's $101.6 million. Depreciation and amortization were flat year over year as capital expenditures have remained relatively flat over the past two years and the effects of SFAS No. 142 are no longer a differentiating factor in the yearly comparative results. The most significant movement in cash flow generated from operating assets was in accounts receivable, where a cash usage of $37.3 million was caused mainly by an increase in sales in the fourth quarter versus relatively flat sales in the prior year's quarter-over-quarter sales results; additionally, approximately $14 million of the increase in cash flow used related to receivables is a result of translating our foreign-denominated receivables at higher asset values as the dollar weakened against virtually all major foreign currencies as of May 31, 2003 versus May 31, 2002. Cash flow generated from inventories was $1.3 million as the effect of Class A manufacturing continued to provide benefits over the last two fiscal years. Inventories were negatively affected by approximately $8 million as a result of the translation of foreign-denominated inventories at this year's year-end spot rates versus those of the prior year. The Company continues a strong focus on improving accounts receivable collections and managing inventories lower as a result of strengthened information technology systems and continuous improvements in operating techniques, such as Class A manufacturing, and these efforts will continue. Prepaid and other current assets increased mostly as a result of recording a receivable due from insurance companies of approximately $16.6 million. Accrued loss reserves were increased by $15.4 million, mainly as a result of recording additional loss provisions related to the insurance receivable. As disclosed in the Company's "Critical Accounting Policies and Estimates" and its discussion on asbestos litigation (refer to Note H - "Contingencies and Loss Reserves"), as a result of a significant increase in asbestos claims activity and inequitable joint and several liability determinations against Bondex, our third-party insurance will be depleted within the first quarter of 2004. As a result, the Company will then be required to fund costs presently covered by insurance with its then-existing cash from operations. Cash provided from operations remains our primary source of financing internal growth, with limited use of short-term credit. INVESTING ACTIVITIES Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth through improved production and distribution efficiencies and capacity, and to enhance administration. Capital expenditures in fiscal 2003 of $41.8 million compare with depreciation and amortization of $58.7 million. We are not capital intensive and capital expenditures generally do not exceed depreciation and amortization in a given year. Capital spending is expected to hold at approximately the fiscal 2003 level for the next several years as many larger spending needs have been accomplished in recent years, such as those to accommodate the restructuring program, plus several major information technology platform conversions. We believe there is adequate production capacity to meet our needs for the next several years at normal growth rates. During fiscal 2003, there were investments totaling $66.0 million (refer to Note A [2]) for seven product line acquisitions and one minority interest acquisition. Our captive insurance companies invest in marketable securities in the ordinary course of conducting their operations, and this activity will continue (refer to Note A [7]). Differences in these activities between years are attributable to the timing and performance of their investments. 23 RPM International Inc. and Subsidiaries FINANCING ACTIVITIES During March 2002, we sold 11.5 million common shares through a follow-on public offering at $14.25 per share, closing April 2, 2002. The entire proceeds of the offering, $156 million, were used to permanently pay down the outstanding balance under the $200 million term loan facility, which was then retired. On June 6, 2002, we entered into a $125 million accounts receivable securitization transaction with several banks through June 4, 2005, which is subject to continuation by an annual renewal by the banks. The securitized accounts receivable are owned in their entirety by RPM Funding Corporation, a wholly owned consolidated special-purpose entity (SPE), and are not available to satisfy claims of the Company's creditors until the participating banks' obligations have been paid in full. This securitization is being accomplished by having certain subsidiaries sell various of their accounts receivable to the SPE, and by having the SPE then transfer those receivables to a conduit administered by the banks. This securitization did not constitute a form of off-balance sheet financing, and is fully reflected in our financial statements. The amounts available under this program are subject to changes in the credit ratings of the Company's customers, customer concentration levels and certain characteristics of the underlying accounts receivable. This transaction increases our liquidity and reduces our financing costs by replacing up to $125 million of existing borrowing at lower interest rates. As of May 31, 2003, $91 million was securitized under this agreement, the proceeds of which were used to reduce the outstanding balance under the $500 million revolving credit agreement. On February 12, 2003, the Company announced the authorization of a share repurchase program, allowing the repurchase of up to 10 million shares of RPM common stock over a period of 12 months. As of May 31, 2003, the Company had repurchased 100,000 of its shares at an average price of $11.67 per share. In May 2003, the Company issued $297 million face value at maturity unsecured 2.75% Senior Convertible Notes ("2.75% Notes") due May 13, 2033. The Company generated net proceeds of $150 million from the sale of the 2.75% Notes. The 2.75% Notes are convertible into 8,034,355 shares of the Company's common stock at a price of $18.68 per share, subject to adjustments, during any fiscal quarter for which the closing price of the Company's common stock is greater than $22.41 per share for a defined duration of time. The 2.75% Notes are also convertible during any period in which the credit rating of the Company is below a specified level, or if specified corporate transactions have occurred. The 2.75% Notes are redeemable by the holder for the issuance price plus accrued original issue discount in May 2008, 2013, 2018, 2023, 2028 and 2033. Interest on the 2.75% Notes is payable at a rate of 2.75% beginning November 13, 2003 until May 13, 2008, depending upon the market price of the Notes. After that date, cash interest will only accrete and will not be paid prior to maturity, subject to certain contingencies. In May 2003, the Company established a $200 million non-rated commercial paper ("CP") program under which borrowings are unsecured for terms of 270 days or less. This CP program currently allows for lower interest cost than that available under the Company's $500 million revolving credit facility. The $500 million credit facility is available to back up our CP program to the extent it is not drawn upon. As of May 31, 2003, there was $51.7 million outstanding under this CP program, the proceeds of which were used to reduce the outstanding balance of the revolver mentioned above. Our debt-to-capital ratio was 45% at May 31, 2003, unchanged from May 31, 2002. The table below summarizes our financial obligations and their expected maturities at May 31, 2003, and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.
May 31, 2003 =========================================================================================================================== (In millions) Total Less than 1 Year 1-3 Years After 3 Years =========================================================================================================================== Current portion of long-term debt $ 1.3 $ 1.3 $ -- $ -- - --------------------------------------------------------------------------------------------------------------------------- Long-term debt 724.8 -- 434.6 290.2 Non-cancelable operation lease obligations 72.8 16.8 23.9 32.1 - --------------------------------------------------------------------------------------------------------------------------- $798.9 $18.1 $458.5 $322.3 ===========================================================================================================================
24 RPM International Inc. and Subsidiaries The condition of the U.S. dollar has fluctuated throughout the year, and was moderately weaker at fiscal year end over the previous year end, causing a favorable change in the "Accumulated Other Comprehensive Loss" (refer to Note A [5]) component of stockholders' equity of $39.9 million this year versus $3.4 million last year. This change was offset by a decrease of $5.9 million related to adjustments required to certain foreign subsidiaries' Minimum Pension Liability. We maintain excellent relations with our banks and other financial institutions to provide continual access to financing for future growth opportunities. OFF-BALANCE SHEET FINANCINGS We do not have any off-balance sheet financings, other than the minimum leasing commitments described in Note E. We have no subsidiaries that are not included in our financial statements, nor do we have any interests in or relationships with any special-purpose entities that are not reflected in our financial statements. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates and foreign currency exchange rates because we fund our operations through long- and short-term borrowings and denominate our business transactions in a variety of foreign currencies. A summary of our primary market risk exposures follows. INTEREST RATE RISK Our primary interest rate risk exposure results from our floating rate debt, including various revolving and other lines of credit (refer to Note B). At May 31, 2003, approximately 51% of our total debt was subject to floating interest rates. If interest rates were to increase 100 basis points (1%) from May 31, 2003 rates, and assuming no changes in debt from the May 31, 2003 levels, the additional annual interest expense would amount to approximately $3.7 million on a pre-tax basis. We currently do not hedge our exposure to floating interest rate risk. FOREIGN CURRENCY RISK Our foreign sales and results of operations are subject to the impact of foreign currency fluctuations (refer to Note A [4]). As most of our foreign operations are in countries with fairly stable currencies, such as Belgium, Canada and the United Kingdom, this effect has not generally been material. In addition, foreign debt is denominated in the respective foreign currency, thereby eliminating any related translation impact on earnings. If the U.S. dollar continues to weaken, our foreign results of operations will be positively impacted, but the effect is not expected to be material. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the year ended May 31, 2003. We do not currently hedge against the risk of exchange rate fluctuations. FORWARD-LOOKING STATEMENTS The foregoing discussion includes forward-looking statements relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors (including those specified below) that are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) general economic conditions; (b) the price and supply of raw materials, particularly titanium dioxide, certain resins, aerosols and solvents; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in RPM's construction and chemicals businesses and risks related to the adequacy of our reserves and insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international political, social, economic and regulatory factors; (h) risks and uncertain- ties associated with our ongoing acquisition and divestiture activities; (i) risks inherent in our contingent liability reserves, including asbestos; and other risks detailed in our other reports and statements filed with the Securities and Exchange Commission, including the risk factors set forth in our prospectus and prospectus supplement included as part of our Registration Statement on Form S-3 (File No. 333-77028), as the same may be amended from time to time. 25 RPM International Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
May 31 2003 2002 - ---------------------------------------------------------------------------------- ----------- ----------- ASSETS CURRENT ASSETS Cash and short-term investments (Note A) $ 50,725 $ 42,172 Trade accounts receivable (less allowances of $17,297 in 2003 and $15,884 in 2002) 439,623 397,659 Inventories (Note A) 253,204 251,446 Deferred income taxes (Notes A and C) 51,285 42,441 Prepaid expenses and other current assets 133,257 110,037 ----------- ----------- TOTAL CURRENT ASSETS 928,094 843,755 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT, AT COST (NOTE A) Land 23,401 21,655 Buildings and leasehold improvements 221,954 203,428 Machinery and equipment 468,654 430,758 ----------- ----------- 714,009 655,841 Less allowance for depreciation and amortization 343,220 300,044 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT, NET 370,789 355,797 ----------- ----------- OTHER ASSETS Goodwill (Note A) 631,253 592,329 Other intangible assets, net of amortization (Note A) 282,949 264,530 Other 34,126 22,433 ----------- ----------- TOTAL OTHER ASSETS 948,328 879,292 ----------- ----------- TOTAL ASSETS $ 2,247,211 $ 2,078,844 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 171,956 $ 160,767 Current portion of long-term debt (Note B) 1,282 5,876 Accrued compensation and benefits 77,577 80,530 Accrued loss reserves (Note H) 64,230 48,537 Asbestos-related liabilities (Note H) 41,583 3,377 Other accrued liabilities 59,759 58,144 Income taxes payable (Notes A and C) 11,263 7,483 ----------- ----------- TOTAL CURRENT LIABILITIES 427,650 364,714 ----------- ----------- LONG-TERM LIABILITIES Long-term debt, less current maturities (Note B) 724,846 707,921 Asbestos-related liabilities (Note H) 103,000 Other long-term liabilities 59,951 55,458 Deferred income taxes (Notes A and C) 54,756 92,645 ----------- ----------- TOTAL LONG-TERM LIABILITIES 942,553 856,024 ----------- ----------- TOTAL LIABILITIES 1,370,203 1,220,738 ----------- ----------- STOCKHOLDERS' EQUITY Preferred stock, par value $0.01; authorized 50,000 shares; none issued Common stock, par value $0.01 and without par value with a stated value of $0.015 per share as of May 31, 2003 and 2002, respectively; authorized 300,000 and 200,000 shares, respectively; issued 115,596 and outstanding 115,496 in 2003; issued 122,653 and outstanding 114,696 in 2002 (Note D) 1,156 1,786 Paid-in capital 508,397 585,566 Treasury stock, at cost (Note D) (1,167) (88,364) Accumulated other comprehensive loss (Note A) (17,169) (50,485) Retained earnings 385,791 409,603 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 877,008 858,106 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,247,211 $ 2,078,844 =========== ===========
See Notes to Consolidated Financial Statements 26 RPM International Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
Year Ended May 31 2003 2002 2001 - --------------------------------------------------- ---------- ---------- ---------- NET SALES $2,083,489 $1,986,126 $2,007,762 Cost of Sales 1,128,937 1,073,910 1,101,417 ---------- ---------- ---------- Gross Profit 954,552 912,216 906,345 Selling, General and Administrative Expenses 739,987 717,628 739,655 Asbestos Charge (Note H) 140,000 Interest Expense, Net 26,712 40,464 65,203 ---------- ---------- ---------- Income Before Income Taxes 47,853 154,124 101,487 Provision for Income Taxes (Note C) 12,526 52,570 38,526 ---------- ---------- ---------- NET INCOME $ 35,327 $ 101,554 $ 62,961 ========== ========== ========== Average Shares of Common Stock Outstanding (Note D) Basic 115,294 104,418 102,202 Diluted 115,986 105,131 102,212 Earnings per Common Share Basic $ 0.31 $ 0.97 $ 0.62 Diluted $ 0.30 $ 0.97 $ 0.62 Cash Dividends per Share of Common Stock $ 0.515 $ 0.500 $ 0.498 ========== ========== ==========
See Notes to Consolidated Financial Statements 27 RPM International Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands)
Common Stock Accumulated ------------------------ Other Number Par/ Comprehensive of Shares Stated Paid-in Treasury Loss Retained (Note D) Value Capital Stock (Note A) Earnings Total - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 31, 2000 103,134 $ 1,616 $ 424,077 $ (88,516) $ (39,555) $ 348,102 $ 645,724 --------- Comprehensive income Net income 62,961 62,961 Translation loss and other (13,519) (13,519) --------- Comprehensive income 49,442 Dividends paid (50,605) (50,605) Repurchase of stock (1,157) (11,101) (11,101) Stock option exercises 59 1 101 309 411 Restricted stock awards 175 2 5,837 5,839 - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 31, 2001 102,211 1,619 430,015 (99,308) (53,074) 360,458 639,710 --------- Comprehensive income Net income 101,554 101,554 Translation gain and other 2,589 2,589 --------- Comprehensive income 104,143 Dividends paid (52,409) (52,409) Sale of stock 11,500 167 155,767 155,934 Stock option exercises, net 847 92 9,412 9,504 Restricted stock awards 138 (308) 1,532 1,224 - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 31, 2002 114,696 1,786 585,566 (88,364) (50,485) 409,603 858,106 --------- Comprehensive income Net income 35,327 35,327 Translation gain and other 33,316 33,316 --------- Comprehensive income 68,643 Dividends paid (59,139) (59,139) Treasury stock retired (113) (85,723) 85,836 Repurchase of stock (100) (1,167) (1,167) Stock option exercises, net 300 2 2,015 1,269 3,286 Restricted stock awards 600 5 6,111 1,259 7,375 Par value adjustment and other (524) 428 (96) - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 31, 2003 115,496 $ 1,156 $ 508,397 $ (1,167) $ (17,169) $ 385,791 $ 877,008 ================================================================================================================================
See Notes to Consolidated Financial Statements 28 RPM International Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended May 31 2003 2002 2001 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 35,327 $ 101,554 $ 62,961 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 44,736 43,541 43,035 Amortization of goodwill 19,694 Other amortization 13,938 13,318 18,765 Asset impairment charge, net of gains 3,354 Asbestos charges 146,650 2,754 2,338 (Decrease) in deferred income taxes (46,733) (3,930) (6,432) (Earnings) of unconsolidated affiliates (396) (391) (275) Changes in assets and liabilities, net of effect from purchases and sales of businesses: (Increase) decrease in receivables (37,258) 14,048 (12,255) (Increase) decrease in inventory 1,262 25,929 (37,578) (Increase) in prepaid and other current assets (27,378) (7,464) (8,575) Increase (decrease) in accounts payable 9,156 8,489 (2,812) Increase (decrease) in accrued restructuring (13,540) Increase (decrease) in accrued liabilities 9,991 (8,564) 10,035 Other including exchange rate changes 11,334 2,086 (4,220) --------- --------- --------- Cash from Operating Activities 160,629 191,370 74,495 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (41,814) (39,931) (54,118) Acquisition of businesses, net of cash acquired (65,994) (3,138) (2,645) Purchase of marketable securities (15,145) (15,693) (21,906) Proceeds from marketable securities 11,376 19,495 28,283 Distributions from unconsolidated affiliates 974 16 647 Proceeds from sale of assets and businesses 202 1,553 31,694 --------- --------- --------- Cash (Used for) Investing Activities (110,401) (37,698) (18,045) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term and short-term debt 305,200 236,681 708,850 Reductions of long-term and short-term debt (294,099) (485,662) (710,389) Cash dividends (59,139) (52,409) (50,605) Sale of stock 155,934 Exercise of stock options 3,286 9,504 411 Repurchase of stock (1,167) (11,101) --------- --------- Cash (Used for) Financing Activities (45,919) (135,952) (62,834) --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,244 526 (1,030) --------- --------- --------- NET INCREASE (DECREASE) IN CASH 8,553 18,246 (7,414) CASH AT BEGINNING OF YEAR 42,172 23,926 31,340 --------- --------- --------- CASH AT END OF YEAR $ 50,725 $ 42,172 $ 23,926 ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid during the year for: Interest $ 28,678 $ 50,353 $ 60,027 Income taxes $ 55,479 $ 59,774 $ 35,216 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Shares issued for restricted stock plans $ 7,375 $ 1,224 $ 1,459 Debt from business combination $ 1,230
See Notes to Consolidated Financial Statements 29 RPM International Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS May 31, 2003, 2002, 2001 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (1) PRINCIPLES OF CONSOLIDATION At the Company's annual meeting on October 11, 2002, stockholders approved a plan to change the Company's legal place of incorporation from Ohio to Delaware. Under the plan, a new legal entity, RPM International Inc., was incorporated in Delaware and became, pursuant to a merger, the parent holding company of Ohio-based RPM, Inc. The Consolidated Financial Statements include the accounts of RPM International Inc. and its majority-owned subsidiaries. The Company accounts for its investment in less than majority-owned joint ventures under the equity method. Intercompany accounts, transactions and unrealized profits and losses are eliminated in consolidation. Certain reclassifications have been made to prior-year amounts to conform with the current-year presentation. (2) BUSINESS COMBINATIONS During the year ended May 31, 2003, the Company completed seven product line acquisitions and one minority interest acquisition, all of which have been accounted for as business combinations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the respective dates of acquisition. The Company obtained independent valuation of certain intangible assets.
(In thousands) - -------------- Current assets $ 8,782 Property, plant and equipment 9,213 Other intangible assets Customer relationships 17,222 Other 12,170 Goodwill 25,334 Liabilities assumed (6,079) -------- NET ASSETS ACQUIRED $ 66,642 ========
The operating results of these businesses are reflected in the Company's financial statements from their respective dates of acquisition. Pro forma results of operations for the years ended May 31, 2003 and May 31, 2002 were not materially different from reported results and, consequently, are not presented. (3) ESTIMATES The preparation of financial statements in conformity with Generally Accepted Accounting Principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (4) FOREIGN CURRENCY The functional currency of foreign subsidiaries is their local currency. Accordingly, for the periods presented, assets and liabilities have been translated using exchange rates at year end while income and expense for the periods have been translated using an annual average exchange rate. The resulting translation adjustments have been recorded in accumulated other comprehensive loss, a component of stockholders' equity, and will be included in net earnings only upon the sale or liquidation of the underlying foreign investment, neither of which is contemplated at this time. Transaction gains and losses have been immaterial during the past three fiscal years. 30 RPM International Inc. and Subsidiaries (5) ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive loss (which is shown net of taxes) consists of the following components:
Foreign Minimum Unrealized Currency Pension Gain (Loss) Translation Liability on (In thousands) Adjustments Adjustments Securities Total - -------------- ----------- ----------- ---------- ----- Balance at May 31, 2000 $(38,540) $ -0- $ (1,015) $(39,555) Reclassification adjustments for (gains) losses included in net income 1,015 1,015 Other comprehensive gain (loss) (14,552) (102) 120 (14,534) -------- -------- -------- -------- Balance at May 31, 2001 (53,092) (102) 120 (53,074) Reclassification adjustments for (gains) losses included in net income (120) (120) Other comprehensive gain (loss) 3,411 (151) (551) 2,709 -------- -------- -------- -------- Balance at May 31, 2002 (49,681) (253) (551) (50,485) Reclassification adjustments for (gains) losses included in net income (149) (149) Other comprehensive gain (loss) 39,872 (5,938) (469) 33,465 -------- -------- -------- -------- Balance at May 31, 2003 $ (9,809) $ (6,191) $ (1,169) $(17,169) ======== ======== ======== ========
(6) CASH AND SHORT-TERM INVESTMENTS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company does not believe it is exposed to any significant credit risk on cash and short-term investments. (7) MARKETABLE SECURITIES Marketable securities, all of which are classified as available for sale, totaled $22,073,000 and $19,396,000 at May 31, 2003 and 2002, respectively. The estimated fair values of these securities are included in other current assets and are based on quoted market prices. (8) FINANCIAL INSTRUMENTS The Company's financial instruments recorded on the balance sheet include cash and short-term investments, accounts receivable, notes and accounts payable, and debt. The carrying amount of cash and short-term investments, accounts receivable, and notes and accounts payable approximates fair value because of their short-term maturity. The carrying amount of the Company's debt instruments approximates fair value based on quoted market prices, variable interest rates or borrowing rates for similar types of debt arrangements. (9) INVENTORIES Inventories are stated at the lower of cost or market, cost being determined substantially on a first-in, first-out (FIFO) basis and market being determined on the basis of replacement cost or net realizable value. Inventory costs include raw material, labor and manufacturing overhead. Inventories were composed of the following major classes:
May 31 2003 2002 - ------ ---- ---- (In thousands) Raw material and supplies $ 80,517 $ 75,080 Finished goods 172,687 176,366 -------- -------- TOTAL INVENTORY $253,204 $251,446 ======== ========
31 RPM International Inc. and Subsidiaries (10) GOODWILL AND OTHER INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires the use of the purchase method for all business combinations initiated after June 30, 2001. It also provides guidance on purchase accounting related to the recognition of intangible assets. SFAS No. 142 requires that goodwill and identifiable acquired intangible assets with indefinite useful lives shall no longer be amortized, but tested for impairment annually and whenever events or circumstances occur indicating that goodwill might be impaired. SFAS No. 142 also requires the amortization of identifiable assets with finite useful lives. Identifiable acquired intangible assets, which are subject to amortization, are to be tested for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The adoption of SFAS No. 144 on June 1, 2001 did not have an impact on the Company. The Company elected to adopt the provisions of SFAS No. 142 as of June 1, 2001, and identified its reporting units (components) to be one level below its industrial and consumer operating segments. The Company determined the carrying value of each reporting unit by assigning assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of June 1, 2001. Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 ceased, and intangible assets acquired prior to July 1, 2001 that did not meet the criteria for recognition apart from goodwill under SFAS No. 141 were reclassified to goodwill. In connection with the adoption of SFAS No. 142, the Company was required to perform a transitional goodwill impairment assessment within six months of adoption. The Company completed its transitional goodwill impairment assessment, with no adjustment to the carrying value of its goodwill as of June 1, 2001. Prospectively, the annual impairment test will be performed in the first quarter of the Company's fiscal year and any losses resulting from the test will be reflected in operating income. The annual goodwill impairment assessment involves estimating the fair value of the reporting unit and comparing it with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, additional steps are followed to recognize a potential impairment loss. Calculating the fair value of the reporting units requires significant estimates and assumptions by management. The Company estimates the fair value of its reporting units by applying third-party market value indicators to the reporting unit's projected earnings before interest, taxes, depreciation and amortization. The Company completed its annual impairment tests with no adjustment to the carrying value of its goodwill as of May 31, 2003 and 2002. The changes in the carrying amount of goodwill, by reporting segment, for the year ended May 31, 2003 are as follows:
Industrial Consumer (In thousands) Segment Segment Total - -------------- ------- ------- ----- Balance as of May 31, 2002 $255,966 $336,363 $592,329 Goodwill related to acquisitions 25,334 25,334 Translation adjustments 9,497 4,093 13,590 -------- -------- -------- Balance as of May 31, 2003 $290,797 $340,456 $631,253 ======== ======== ========
32 RPM International Inc. and Subsidiaries Other intangible assets consist of the following major classes:
Gross Net Other Amortization Carrying Accumulated Intangible (In thousands) Period (in Years) Amount Amortization Assets - -------------- ----------------- ------ ------------ ------ As of May 31, 2003 Amortized intangible assets Formulae 10 to 33 $173,102 $ 49,849 $123,253 Customer-related intangibles 7 to 33 65,317 13,097 52,220 Trademarks/names 5 to 40 5,544 1,779 3,765 Other 3 to 20 23,583 10,419 13,164 -------- -------- -------- -------- Total Amortized Intangibles 267,546 75,144 192,402 Unamortized intangible assets Trade names 90,547 90,547 -------- -------- -------- TOTAL OTHER INTANGIBLE ASSETS $358,093 $ 75,144 $282,949 ======== ======== ======== As of May 31, 2002 Amortized intangible assets Formulae 10 to 33 $167,721 $ 42,067 $125,654 Customer-related intangibles 10 to 33 48,094 10,960 37,134 Trademarks/names 5 to 40 4,336 1,146 3,190 Other 3 to 20 23,088 8,903 14,185 -------- -------- -------- -------- Total Amortized Intangibles 243,239 63,076 180,163 Unamortized intangible assets Trade names 84,367 84,367 -------- -------- -------- TOTAL OTHER INTANGIBLE ASSETS $327,606 $ 63,076 $264,530 ======== ======== ========
The aggregate other intangible asset amortization expense for the fiscal years ended May 31, 2003, 2002 and 2001 was $11,904,000, $11,329,000 and $16,602,000, respectively. For each of the next five fiscal years through May 31, 2008, the estimated annual intangible asset amortization expense will approximate $12,000,000. The following pro forma information reconciles net income reported for the year ended May 31, 2001 to adjusted net income, reflecting the impact of SFAS No. 142. All amortization amounts are reflected net of tax.
Year Ended May 31 2003 2002 2001 ----------- ----------- ----------- (In thousands, except per share data) Net Income Reported net income $ 35,327 $ 101,554 $ 62,961 Add back: Goodwill amortization 18,468 Add back: Trade name and workforce amortization 3,336 ----------- ----------- ----------- ADJUSTED NET INCOME $ 35,327 $ 101,554 $ 84,765 =========== =========== =========== Basic Earnings per Share Reported net income $ 0.31 $ 0.97 $ 0.62 Goodwill amortization 0.18 Trade name and workforce amortization 0.03 ----------- ----------- ----------- ADJUSTED BASIC EARNINGS PER SHARE $ 0.31 $ 0.97 $ 0.83 =========== =========== =========== Diluted Earnings per Share Reported net income $ 0.30 $ 0.97 $ 0.62 Goodwill amortization 0.18 Trade name and workforce amortization 0.03 ----------- ----------- ----------- ADJUSTED DILUTED EARNINGS PER SHARE $ 0.30 $ 0.97 $ 0.83 =========== =========== ===========
33 RPM International Inc. and Subsidiaries (11) DEPRECIATION Depreciation is computed primarily using the straight-line method over the following ranges of useful lives: Land improvements 5 to 42 years Buildings and improvements 5 to 50 years Machinery and equipment 3 to 20 years
(12) REVENUE RECOGNITION The Company's subsidiaries recognize revenue when title and risk of loss pass to customers. (13) SHIPPING COSTS Shipping costs paid to third-party shippers for transporting products to customers are included in selling, general and administrative expenses. For the years ended May 31, 2003, 2002 and 2001, shipping costs were $74,200,000, $73,700,000 and $75,400,000, respectively. (14) ADVERTISING COSTS Advertising costs are charged to operations when incurred and are included in selling, general and administrative expenses. For the years ended May 31, 2003, 2002 and 2001, advertising costs were $58,700,000, $53,400,000 and $52,400,000, respectively. (15) RESEARCH AND DEVELOPMENT Research and development costs are charged to operations when incurred and are included in selling, general and administrative expenses. The amounts charged for the years ended May 31, 2003, 2002 and 2001 were $23,800,000, $20,900,000 and $21,800,000, respectively. The customer-sponsored portion of such expenditures was not significant. (16) STOCK-BASED COMPENSATION At May 31, 2003, the Company had two stock-based compensation plans accounted for under the recognition and measurement principles of Accounting Principles Board Opinion (APBO) No. 25, "Accounting for Stock Issued to Employees," and related interpretations, as more fully described in Note D. Pro forma information regarding the impact of stock-based compensation on net income and earnings per share is required by SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." Such pro forma information, determined as if the Company had accounted for its employee stock options under the fair value recognition provisions of SFAS No. 123, is illustrated in the following table:
Year Ended May 31 2003 2002 2001 --------- --------- --------- (In thousands, except per share amounts) Net income, as reported $ 35,327 $ 101,554 $ 62,961 Add: Stock-based employee compensa- tion expense from restricted stock plans included in reported net income, net of related tax effects 1,339 806 905 Deduct: Total stock-based compensation expense determined under fair value-based method for all awards, net of related tax effects (4,517) (2,949) (3,910) --------- --------- --------- PRO FORMA NET INCOME $ 32,149 $ 99,411 $ 59,956 ========= ========= ========= EARNINGS PER SHARE: BASIC, AS REPORTED $ 0.31 $ 0.97 $ 0.62 ========= ========= ========= DILUTED, AS REPORTED $ 0.30 $ 0.97 $ 0.62 ========= ========= ========= PRO FORMA BASIC AND DILUTED $ 0.28 $ 0.95 $ 0.59 ========= ========= =========
The fair value for these options was estimated as of the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions for all options granted:
2003 2002 2001 ---- ---- ---- Risk-free interest rate 3.3% 4.4% 5.1% Expected life of option 7yrs 7yrs 7yrs Expected dividend yield 3.5% 3.0% 3.5% Expected volatility rate 37.3% 34.2% 32.5%
(17) INTEREST EXPENSE, NET Interest expense is shown net of investment income, which consists of interest, dividends and capital gains (losses). Investment income for the years ended May 31, 2003, 2002 and 2001 was $1,437,000, $2,094,000 and $3,682,000, respectively. 34 RPM International Inc. and Subsidiaries (18) INCOME TAXES The Company and its wholly owned domestic subsidiaries file a consolidated federal income tax return. The tax effects of transactions are recognized in the year in which they enter into the determination of net income, regardless of when they are recognized for tax purposes. As a result, income tax expense differs from actual taxes payable. The Company does not intend to distribute the accumulated earnings of consolidated foreign subsidiaries totaling approximately $115,000,000 at May 31, 2003, and therefore no provision has been made for the taxes that would result if such earnings were remitted to the Company. (19) REPORTABLE SEGMENTS Reportable segment information appears on pages 16 and 17 of this report. (20) OTHER RECENT ACCOUNTING PRONOUNCEMENTS In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, and is effective for exit or disposal activities that are initiated after December 31, 2002. The Company will apply the provisions of SFAS No. 146 to any future exit or disposal activities. NOTE B - BORROWINGS A description of long-term debt follows:
May 31 2003 2002 -------- -------- (In thousands) Revolving credit agreement for $500,000,000 with a syndicate of banks through July 14, 2005. Interest, which is tied to LIBOR, averaged 2.32% at May 31, 2003. $113,000 $395,000 Unsecured $297,000,000 face value at maturity 2.75% senior convertible notes due May 13, 2033. 150,042 Unsecured 7.00% senior notes due June 15, 2005. 150,000 150,000 Unsecured notes due March 1, 2008. Interest, which is tied to LIBOR, averaged 1.28% at May 31, 2003. 100,000 100,000 Accounts Receivable Securitization Program for $125,000,000 with two banks through June 4, 2005, subject to annual renewal by the banks at a weighted average interest rate at May 31, 2003 of 1.89%. These obligations, along with other short-term borrowings, have been reclassified as long-term debt, reflecting the Company's intent and ability, through unused credit facilities, to refinance these obligations. 91,000 Unsecured senior notes due insurance companies: 6.12% due November 15, 2004 in the amount of $15,000,000; 6.61% due November 15, 2006 in the amount of $10,000,000 and 7.30% due November 15, 2008 in the amount of $30,000,000. 55,000 55,000 Commercial paper with a weighted average interest rate at May 31, 2003 of 1.92%. 51,735 Revolving 364-day credit agreement for $28,000,000 with a bank through October 13, 2003. Interest, which is tied to one of various rates, averaged 1.88% at May 31, 2003. 11,200 Revolving multi-currency credit agreement for $15,000,000 with a bank through December 31, 2005. Interest, which is tied to one of various rates, averaged 3.24% at May 31, 2003. 1,930 3,835 Other unsecured notes payable at various rates of interest due in installments through 2011. 2,221 9,962 -------- -------- 726,128 713,797 Less current portion 1,282 5,876 -------- -------- TOTAL LONG-TERM DEBT, LESS CURRENT MATURITIES $724,846 $707,921 ======== ========
35 RPM International Inc. and Subsidiaries At May 31, 2003, the Company had additional unused short-term lines of credit with several banks totaling $77,700,000. The aggregate maturities of long-term debt for the five years subsequent to May 31, 2003 are as follows: 2004 - $1,282,000; 2005 - $15,712,000; 2006 - $418,912,000; 2007 - $10,044,000; 2008 - $250,087,000, including $150,042,000 of 2.75% Senior Convertible Notes based on the date of the noteholders' first put option. In June 2002, the Company established an accounts receivable securitization program for certain of its subsidiaries. The securitized accounts receivable are owned in their entirety by RPM Funding Corporation, a wholly owned consolidated subsidiary of the Company, and are not available to satisfy claims of the Company's creditors until the participating banks' obligations have been paid in full. This securitization transaction will remain on the balance sheet and allows for a maximum of $125,000,000 of borrowings. The amounts available under the program are subject to changes in the credit ratings of the Company's customers, customer concentration levels or certain characteristics of the underlying accounts receivable. In May 2003, the Company issued $297,000,000 face value at maturity unsecured 2.75% Senior Convertible Notes due May 13, 2033. The 2.75% Notes are convertible into 8,034,355 shares of the Company's common stock at a price of $18.68 per share, subject to adjustment, during any fiscal quarter for which the closing price of the Company's common stock is greater than $22.41 per share for a defined duration of time. The Notes are also convertible during any period in which the credit rating of the Notes is below a specified level or if specified corporate transactions have occurred. The 2.75% Notes are redeemable by the holder for the issuance price plus accrued original issue discount in May 2008, 2013, 2018, 2023, 2028 and 2033. Interest on the 2.75% Notes is payable at a rate of 2.75% beginning November 13, 2003 until May 13, 2008. After that date, cash interest will not be paid prior to maturity subject to certain contingencies. Note C - Income Taxes Consolidated income before taxes consists of the following:
YEAR ENDED MAY 31 2003 2002 2001 - ----------------------------------------------------- -------- --------- --------- (In thousands) United States $ 19,025 $ 128,883 $ 81,853 Foreign 28,828 25,241 19,634 -------- --------- --------- CONSOLIDATED INCOME BEFORE TAXES $ 47,853 $ 154,124 $ 101,487 ======== ========= ========= Provision for income taxes consists of the following: Current U.S. federal $ 42,500 $ 42,901 $ 31,821 State and local 3,088 4,770 3,829 Foreign 13,671 8,829 9,308 -------- --------- --------- $ 59,259 $ 56,500 $ 44,958 -------- --------- --------- Deferred U.S. federal $(45,275) $ (5,370) $ (9,603) Foreign (1,458) 1,440 3,171 -------- --------- --------- $(46,733) $ (3,930) $ (6,432) -------- --------- --------- PROVISION FOR INCOME TAXES $ 12,526 $ 52,570 $ 38,526 ======== ========= =========
36 RPM International Inc. and Subsidiaries A reconciliation between the actual income tax expense provided and the income tax expense computed by applying the statutory federal income rate of 35% to income before tax is as follows:
YEAR ENDED MAY 31 2003 2002 2001 - ----------------------------------------------------------------- -------- -------- -------- (In thousands) Income taxes at U.S. statutory rate $ 16,749 $ 53,943 $ 35,520 Difference in foreign taxes versus the U.S. statutory rate (2,986) (3,155) (1,563) State and local income taxes net of federal income tax benefit 2,007 3,101 2,489 Amortization of goodwill 4,530 Tax benefits from foreign sales corporation and extraterritorial income exclusion (1,250) (1,362) (1,675) Other (1,994) 43 (775) -------- -------- -------- ACTUAL TAX EXPENSE $ 12,526 $ 52,570 $ 38,526 ======== ======== ======== ACTUAL TAX RATE 26.2% 34.1% 38.0% ======== ======== ========
Deferred income taxes result from temporary differences in recognition of revenue and expenses for book and tax purposes. Temporary differences and carryforwards that give rise to deferred tax assets and liabilities as of May 31, 2003 and 2002 are as follows:
(In thousands) 2003 2002 - -------------------------------------------- --------- --------- Deferred income tax assets related to: Inventories $ 1,679 $ 2,095 Allowance for losses 18,146 13,668 Accrued compensation and benefits 9,864 11,661 Asbestos-related liabilities 54,219 1,267 Accrued other expenses 4,596 10,185 Other long-term liabilities 16,153 14,112 Tax loss/credit carryforwards 11,749 7,870 Other 1,047 2,811 --------- --------- TOTAL $ 117,453 $ 63,669 --------- --------- Deferred income tax (liabilities) related to: Depreciation $ (36,806) $ (28,513) Amortization of intangibles (84,118) (85,360) --------- --------- TOTAL $(120,924) $(113,873) --------- --------- DEFERRED INCOME TAX ASSETS (LIABILITIES), NET $ (3,471) $ (50,204) ========= =========
Deferred tax detail above is included in the consolidated balance sheet as follows:
2003 2002 -------- -------- Deferred income taxes - current asset $ 51,285 $ 42,441 Deferred income taxes - noncurrent (liability) (54,756) (92,645) -------- -------- TOTAL $ (3,471) $(50,204) ======== ========
Note D - Common Stock There are 300,000,000 shares of common stock authorized at May 31, 2003 (200,000,000 at May 31, 2002) with a par value of $0.01 per share (stated value of $.015 per share at May 31, 2002). At May 31, 2003 and 2002, there were 115,496,000 and 114,696,000 shares outstanding, respectively, each of which is entitled to one vote. Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during each year. To compute diluted earnings per share, the weighted average number of shares of common stock outstanding during each year was increased by common stock options with exercisable prices lower than the average market prices of common stock during each year and reduced by the number of shares assumed to have been purchased with proceeds from the exercised options. The Company's convertible notes, while potentially dilutive, are not common stock equivalents. The Company has shares outstanding under two restricted stock plans. Under the terms of the plans, up to 2,563,000 shares may be awarded to certain employees, generally subject to forfeiture until the completion of five or 10 years of service. For the year ended May 31, 2003, 600,000 shares were awarded under these plans, net of forfeitures (138,000 in 2002) and restrictions lapsed on 508,000 shares (3,000 in 2002). At May 31, 2003, 26,000 vested shares remained in these plans (86,000 at May 31, 2002). Unamortized deferred compensation expense with 37 RPM International Inc. and Subsidiaries respect to restricted stock grants was $5,231,000 at May 31, 2003 and is being amortized over the 10-year vesting period. For the years ended May 31, 2003, 2002 and 2001, deferred compensation expense aggregated $2,143,000, $1,224,000 and $1,459,000, respectively. In February 2003, the Company authorized the repurchase of up to 10,000,000 shares of its common stock, 100,000 of which had been repurchased at May 31, 2003. Shares repurchased under this program will be held at cost and included in Stockholders' Equity as treasury stock. The Company's Stockholder Rights Plan provides existing stockholders the right to purchase stock of the Company at a discount in certain circumstances as defined by the Plan. The rights were not exercisable at May 31, 2003 and expire in May 2009. The Company has options outstanding under two stock option plans, the 1989 Stock Option Plan and the 1996 Key Employees Stock Option Plan, the latter of which provides for the granting of options for up to 9,000,000 shares. These options are generally exercisable cumulatively in equal annual installments commencing one year from the grant date, and have expiration dates ranging from July 2003 to October 2012. At May 31, 2003, 1,902,000 shares (3,093,000 at May 31, 2002) were available for future grant. Transactions during the last two years are summarized as follows:
SHARES UNDER OPTION 2003 2002 - --------------------------------------------------------------------------- ------ ------ (In thousands, except per share amounts) Outstanding, beginning of year (weighted average price of $12.57 ranging from $8.69 to $16.70 per share) 6,223 7,017 Granted (price of $14.08) 1,191 496 Canceled/expired (weighted average price of $13.98 ranging from $8.81 to $16.35 per share) (153) (390) Exercised (weighted average price of $11.33 ranging from $8.69 to $15.15 per share) (324) (900) ------ ------ OUTSTANDING, END OF YEAR (WEIGHTED AVERAGE PRICE OF $12.86 RANGING FROM $8.69 TO $16.70 PER SHARE) 6,937 6,223 ====== ====== EXERCISABLE, END OF YEAR (WEIGHTED AVERAGE PRICE OF $13.19 RANGING FROM $8.69 TO $16.70 PER SHARE) 4,477 3,987 ====== ======
OPTIONS OUTSTANDING OPTIONS EXERCISABLE AT MAY 31, 2003 AT MAY 31, 2003 --------------------------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED RANGE OF PER SHARE SHARES AVERAGE AVERAGE SHARES AVERAGE EXERCISE PRICES (000'S) REMAINING LIFE PRICE (000'S) PRICE - ------------------ ------- -------------- -------- ------- -------- $ 8.00 to $ 9.99 1,752 7.3 $ 9.36 989 $ 9.40 $10.00 to $14.99 3,216 6.4 $13.18 1,613 $12.85 $15.00 to $16.75 1,969 4.6 $15.46 1,875 $15.47 ----- ----- 6,937 6.1 $12.86 4,477 $13.19 ===== =====
The Company has elected to follow APBO No. 25 and related interpretations in accounting for its employee stock options. Under APBO No. 25, because the exercise price of the Company's employee stock options is not less than the market price of the shares at the date of grant, no compensation expense is recognized in the financial statements. See Note A for pro forma information and the alternative fair value accounting provided for under SFAS No. 123. 38 RPM International Inc. and Subsidiaries Note E - Leases At May 31, 2003, certain property, plant and equipment were leased by the Company under long-term leases. Certain of these leases provide for increased rental based upon an increase in the cost-of-living index. Future minimum lease commitments as of May 31, 2003 for all non-cancelable leases are as follows:
MAY 31 - ----------------------------------------------------- (In thousands) 2004 $16,823 2005 13,841 2006 10,047 2007 7,682 2008 5,281 Thereafter 19,141 ------- TOTAL MINIMUM LEASE COMMITMENTS $72,815 =======
Rental expenses for all operating leases totaled $24,300,000 in 2003, $23,100,000 in 2002 and $20,500,000 in 2001. Capitalized leases were insignificant for the three years ended May 31, 2003. Note F - Retirement Plans The Company sponsors a non-contributory defined benefit pension plan (The Retirement Plan) covering substantially all domestic non-union employees. Pension coverage for employees of the Company's foreign subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, benefits for domestic union employees are provided by separate plans. The Retirement Plan provides benefits that are based upon years of service and average compensation with accrued benefits vesting after five years. Benefits for union employees are generally based upon years of service. The Company's funding policy is to contribute annually an amount that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. Net periodic pension cost (income) consisted of the following for the three years ended May 31, 2003:
U.S. PLANS NON-U.S. PLANS - --------------------------------------------- ---------------------------------- ---------------------------------- (In thousands) 2003 2002 2001 2003 2002 2001 - --------------------------------------------- -------- -------- -------- -------- -------- -------- Service cost $ 8,904 $ 8,310 $ 7,742 $ 1,168 $ 1,073 $ 1,112 Interest cost 6,634 6,706 6,470 2,344 2,305 2,314 Expected return on plan assets (7,769) (8,589) (9,157) (2,748) (3,118) (3,396) Amortization of: Prior service cost 197 188 164 Net gain on adoption of SFAS No. 87 (85) (85) (87) Net actuarial (gains) losses recognized 952 (11) (62) 324 87 (85) Curtailment/settlement (gains) losses 11 (722) ------- ------- ------- ------- ------- ------- NET PENSION COST $ 8,844 $ 6,519 $ 4,348 $ 1,088 $ 347 $ (55) ======= ======= ======= ======= ======= =======
39 RPM International Inc. and Subsidiaries The changes in benefit obligations and plan assets, as well as the funded status of the Company's pension plans at May 31, 2003 and 2002, were as follows:
U.S. PLANS NON-U.S. PLANS - ---------------------------------------------- ----------------------- ---------------------- (In thousands) 2003 2002 2003 2002 - ---------------------------------------------- --------- -------- -------- -------- Benefit obligation at beginning of year $ 96,217 $ 87,199 $ 35,244 $ 34,175 Service cost 8,904 8,310 1,168 1,073 Interest cost 6,634 6,706 2,344 2,305 Benefits paid (6,738) (14,022) (1,403) (1,465) Participant contributions 415 385 Actuarial (gains) losses 6,001 7,508 5,471 47 Currency exchange rate changes 4,287 (1,276) Curtailment/settlement (gains) losses (194) Plan amendments 1,447 516 --------- -------- -------- -------- BENEFIT OBLIGATION AT END OF YEAR $ 112,271 $ 96,217 $ 47,526 $ 35,244 ========= ======== ======== ======== Fair value of plan assets at beginning of year $ 85,345 $ 93,899 $ 33,477 $ 37,557 Actual return on plan assets (11,687) (4,748) (3,579) (2,101) Employer contributions 21,749 10,216 419 360 Participant contributions 415 385 Benefits paid (6,738) (14,022) (1,485) (1,476) Currency exchange rate changes 2,823 (1,248) --------- -------- -------- -------- FAIR VALUE OF PLAN ASSETS AT END OF YEAR $ 88,669 $ 85,345 $ 32,070 $ 33,477 ========= ======== ======== ======== Excess (deficit) of plan assets versus benefit obligations at end of year $ (23,602) $(10,872) $(15,456) $ (1,767) Contributions after measurement date 44 2,661 116 104 Unrecognized actuarial (gains) losses 47,881 23,571 22,065 8,439 Unrecognized prior service cost 3,135 1,896 Unrecognized net transitional asset (28) (113) --------- -------- -------- -------- NET AMOUNT RECOGNIZED $ 27,430 $ 17,143 $ 6,725 $ 6,776 ========= ======== ======== ======== Amounts recognized in the consolidated balance sheets consist of: Prepaid benefit cost $ 27,957 $ 17,688 $ 6,691 $ 7,739 Accrued benefit liability (1,036) (792) (8,441) (1,106) Accumulated other comprehensive loss 473 247 8,475 143 Intangible asset 36 --------- -------- -------- -------- NET AMOUNT RECOGNIZED $ 27,430 $ 17,143 $ 6,725 $ 6,776 ========= ======== ======== ========
For domestic plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of assets were $1,717,000, $1,670,000 and $612,000, respectively, as of May 31, 2003 and $1,293,000, $1,293,000 and $414,000, respectively, as of May 31, 2002. For foreign plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of assets were $27,002,000, $22,837,000 and $14,279,000, respectively, as of May 31, 2003 and $1,159,000, $1,106,000 and $-0-, respectively, as of May 31, 2002. The following weighted average assumptions were used to determine the Company's obligations under the plans:
U.S. PLANS NON-U.S. PLANS ------------------- ------------------- 2003 2002 2003 2002 ------ ------ ------ ------ Discount rate 6.70% 7.25% 6.43% 6.63% Expected return on plan assets 9.00% 9.00% 8.25% 8.13% Rate of compensation increase 4.00% 4.00% 3.95% 4.00%
The plans' assets consist primarily of stocks, bonds and fixed income securities. 40 RPM International Inc. and Subsidiaries The Company also sponsors employee savings plans under Section 401(k) of the Internal Revenue Code, which cover substantially all employees in the United States. The plans provide for matching contributions based upon qualified employee contributions. Matching contributions are invested in the same manner that the participants invest their own contributions. Matching contributions charged to income were $6,120,000, $5,206,000 and $5,222,000 for the years ending May 31, 2003, 2002 and 2001, respectively. Note G - Postretirement Health Care Benefits In addition to the defined benefit pension plan, the Company provides health care benefits to certain of its retired employees through unfunded plans. Employees become eligible for these benefits if they meet minimum age and service requirements. The components of this expense for the three years ended May 31, 2003 were as follows:
(In thousands) 2003 2002 2001 - ------------------------------------------------- -------- -------- ------ Service cost - Benefits earned during this period $ 177 $ 131 $ 81 Interest cost on the accumulated obligation 974 945 918 Amortization of unrecognized (gains) (47) (51) (124) ------- ------- ----- NET PERIODIC POSTRETIREMENT EXPENSE $ 1,104 $ 1,025 $ 875 ======= ======= =====
The changes in the benefit obligations of the plans at May 31, 2003 and 2002 were as follows:
(In thousands) 2003 2002 - ------------------------------------------------------------------ -------- -------- Accumulated postretirement benefit obligation at beginning of year $ 13,482 $ 12,615 Service cost 177 131 Interest cost 974 945 Benefit payments (933) (904) Actuarial (gains) losses 839 804 Currency exchange rate changes 315 (109) -------- -------- Accumulated postretirement benefit obligation at end of year 14,854 13,482 Unrecognized actuarial gains (losses) 86 973 -------- -------- ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS $ 14,940 $ 14,455 ======== ========
A 6.70% general discount rate was used in determining the accumulated postretirement benefit obligation as of May 31, 2003 (7.25% for May 31, 2002). A 9.00% increase in the cost of covered health care benefits was generally assumed for fiscal 2003 (8.00% for fiscal 2002). This trend rate in all cases is assumed to decrease to 5.00% after several years and remain at that level thereafter, except for various union plans, which will cap at alternate benefit levels. A 1.00% increase in the health care costs trend rate would have increased the accumulated postretirement benefit obligation as of May 31, 2003 by $1,768,000 and the net postretirement expense by $193,000. A 1.00% decrease in the health care costs trend rate would have decreased the accumulated postretirement benefit obligation as of May 31, 2003 by $1,538,000 and the net postretirement expense by $155,000. Note H - Contingencies and Loss Reserves Accrued loss reserves and asbestos-related liabilities consist of the following:
MAY 31 2003 2002 - ----------------------------------------- -------- ------- (In thousands) Accrued product liability reserves $ 51,840 $35,960 Accrued warranty reserves 6,328 5,412 Accrued environmental reserves 4,695 6,455 Accrued other 1,367 710 -------- ------- Accrued loss reserves - current 64,230 48,537 Asbestos-related liabilities - current 41,583 3,377 -------- ------- TOTAL RESERVES - CURRENT $105,813 $51,914 ======== ======= Accrued warranty reserves - noncurrent $ 7,781 $ 9,655 Asbestos-related liabilities - noncurrent 103,000 -------- ------- TOTAL RESERVES - NONCURRENT $110,781 $ 9,655 ======== =======
The Company, through its wholly owned insurance subsidiaries, provides certain insurance coverage, primarily product liability, to the Company's other subsidiaries. Excess coverage is provided by outside carriers. The reserves reflected above provide for these potential losses as well as other uninsured claims. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience. 41 RPM International Inc. and Subsidiaries Certain of our wholly owned subsidiaries, principally Bondex International, Inc. (Bondex), along with many other U.S. companies, are and have been involved in a large number of asbestos-related suits filed primarily in state courts during the past two decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products. The alleged claims relate primarily to products that Bondex sold through 1977. In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred resulted from exposure to Bondex products. The rate at which plaintiffs filed asbestos-related suits against Bondex increased in the fourth quarter of 2002 and the first two quarters of 2003, influenced by the bankruptcy filings of numerous other defendants in asbestos-related litigation. Based on the significant increase in asbestos claims activity and inequitable joint and several liability determinations against Bondex, as previously reported, our third-party insurance will be depleted within the first quarter of 2004. Our third-party insurers historically have been responsible, under various cost-sharing arrangements, for the payment of approximately 90% of the indemnity and defense costs associated with our asbestos litigation. Prior to this sudden precipitous increase in loss rates, the combination of book loss reserves and insurance coverage was expected to adequately fund asbestos loss payments for the foreseeable future. We have reserved our rights with respect to various of our third-party insurers' claims of exhaustion, and in late calendar 2002 commenced reviewing our known insurance policies to determine whether or not other insurance limits may be available to cover our asbestos liabilities. As a result of this examination, in which we were assisted by an archeological insurance investigation firm, on July 3, 2003, the Company filed a complaint in Federal Court against several insurance carriers for declaratory judgment, breach of contract and bad faith. We are unable at the present time to predict whether, or to what extent, any additional insurance may cover our asbestos liabilities. Our wholly owned captive insurance companies have not provided any insurance or re-insurance coverage of any asbestos-related claims. During the last seven months of 2003, new state liability laws were enacted in three states where more than 80% of the claims against Bondex are pending. Effective dates for the last two of the law changes were April 8, 2003 and July 1, 2003. The changes generally provide for liability to be determined on a "proportional cause" basis, thereby limiting Bondex's responsibility to only its share of the alleged asbestos exposure. The ultimate impacts of these new laws are difficult to predict given the limited time following enactment, because the full influence of these law changes on legal settlement values is not expected to be significantly visible until the latter part of fiscal 2004. At the end of 2002 and through the third quarter of 2003, Bondex had concluded it was not possible to estimate its cost of disposing of asbestos-related claims that might be filed against Bondex in the future due to a number of reasons, including its lack of sufficient comparable loss history from which to assess either the number or value of future asbestos-related claims. During the fourth quarter of 2003, Bondex retained a nationally recognized consulting firm with broad experience in estimating resolution costs associated with mass tort litigation, including asbestos, to assist it in analyzing its loss history data, to evaluate whether it would be possible to estimate the cost of disposing pending claims in light of both past and recent loss history, and to assist in determining whether future asbestos-related claims reasonably expected to be filed against Bondex were measurable, given recent changes of law. Bondex provided the consultants with all relevant data regarding asbestos-related claims filed against Bondex through May 31, 2003. The consultants concluded that it was not possible to currently estimate the full range of the cost of resolving future asbestos-related claims against Bondex because of various uncertainties associated with those potential future claims. These uncertainties, which hindered the consultant's and Bondex's ability to project 42 RPM International Inc. and Subsidiaries future claim volumes and resolution costs, included the following: - - The bankruptcies in the years 2000 through 2002 of other companies facing large asbestos liability were a likely contributing cause of a sharp increase in filings against many defendants, including Bondex. - - The recent state law changes in states wherein the vast majority of our claims are pending and have been historically filed are expected to materially affect future losses and future claim filing activity and resolution costs. - - The currently proposed federal legislative initiative aimed at establishment of a federal asbestos trust fund has influenced and changed the demand behavior of plaintiffs from that of historic levels, creating further uncertainty in the estimation process. At this time, the Company cannot estimate the liability that will result from all future claims. The Company has established a reserve for those pending cases that have progressed to a stage where the cost to dispose of these cases can reasonably be estimated. The estimation of even pending cases is difficult due to the dynamic nature of asbestos litigation. The reserve was established by taking an asbestos charge to 2003 operations of $140,000,000 for measurable known claims and a provision for the future claims that can presently be estimated. The Company believes this asbestos reserve will be sufficient to cover asbestos-related cash flow requirements for approximately three years. Additionally, Bondex's share of costs (net of then-available third-party insurance) for asbestos-related product liability were $6,700,000, $2,800,000 and $2,300,000 for the years ended May 31, 2003, 2002 and 2001, respectively. The Company developed the estimates for the $140,000,000 asbestos charge in consultation with its outside consulting firm and defense counsel, taking into account both historical and current settlement values. The Company recognizes that future facts, events and legislation, both state and/or federal, may alter its estimates of both its pending and future claims. The Company cannot estimate possible liabilities in excess of those accrued because it cannot predict the number of additional claims that may be filed in the future, the grounds for such claims, the damages that may be demanded, the probable outcome, or the impact of recent state and pending federal legislation on prospective asbestos claims. The Company, in conjunction with outside advisors, will continue to study its asbestos-related exposure and regularly evaluate the adequacy of this reserve and the related cash flow implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation. In addition, the Company, like others in similar businesses, is involved in several proceedings relating to environmental matters. It is the Company's policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted and do not take into consideration any possible recoveries of future insurance proceeds or claims against third parties. Due to the uncertainty inherent in the loss reserve estimation process, the Company is unable to estimate an additional range of loss in excess of its accruals. It is at least reasonably possible that actual costs will differ from estimates, but, based upon information presently available, such future costs are not expected to have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. However, such costs could be material to results of operations in a future period. 43 RPM International Inc. and Subsidiaries Note I - Quarterly Information (Unaudited) The following is a summary of the quarterly results of operations for the years ended May 31, 2003 and 2002:
FOR QUARTER ENDED ------------------------------------------------ (In thousands, except per share amounts) AUGUST 31 NOVEMBER 30 FEBRUARY 28 MAY 31 - ---------------------------------------- --------- ----------- ----------- --------- 2003 Net Sales $542,413 $517,968 $433,562 $ 589,546 -------- -------- -------- --------- Gross Profit $259,204 $234,148 $186,952 $ 274,248 -------- -------- -------- --------- Net Income (Loss) $ 44,173 $ 29,640 $ 4,883 $ (43,369) -------- -------- -------- --------- BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ 0.38 $ 0.26 $ 0.04 $ (0.38) ======== ======== ======== ========= DIVIDENDS PER SHARE $ 0.125 $ 0.130 $ 0.130 $ 0.130 ======== ======== ======== =========
FOR QUARTER ENDED ------------------------------------------------ (In thousands, except per share amounts) AUGUST 31 NOVEMBER 30 FEBRUARY 28 MAY 31 - ---------------------------------------- --------- ----------- ----------- --------- 2002 Net Sales $533,275 $487,880 $407,538 $ 557,433 -------- -------- -------- --------- Gross Profit $250,674 $221,968 $178,636 $ 260,938 -------- -------- -------- --------- Net Income $ 36,569 $ 24,490 $ 3,274 $ 37,221 -------- -------- -------- --------- BASIC EARNINGS PER SHARE $ 0.36 $ 0.24 $ 0.03 $ 0.34 -------- -------- -------- --------- DILUTED EARNINGS PER SHARE $ 0.36 $ 0.24 $ 0.03 $ 0.33 ======== ======== ======== ========= DIVIDENDS PER SHARE $ 0.125 $ 0.125 $ 0.125 $ 0.125 ======== ======== ======== =========
Quarterly earnings per share may not total to the yearly earnings per share due to the weighted average number of shares outstanding in each quarter. 44 RPM International Inc. and Subsidiaries INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders RPM INTERNATIONAL INC. AND SUBSIDIARIES MEDINA, OHIO We have audited the accompanying consolidated balance sheets of RPM International Inc. and Subsidiaries as of May 31, 2003 and 2002, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended May 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RPM International Inc. and Subsidiaries at May 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended May 31, 2003, in conformity with accounting principles generally accepted in the United States. /s/ Ciulla, Smith, & Dale, LLP Cleveland, Ohio July 7, 2003 QUARTERLY STOCK PRICE AND DIVIDEND INFORMATION RPM International Inc. common shares are traded on the New York Stock Exchange under the symbol RPM. The high and low sale prices for the common shares, and the cash dividends paid on the common shares, for each quarter of the two most recent fiscal years are set forth in the table below.
RANGE OF MARKET PRICES Fiscal 2003 High Low Dividends paid per share - ---------------------- ------ ------ ------------------------ First Quarter $16.59 $11.58 $0.125 Second Quarter $16.01 $12.90 0.130 Third Quarter $15.90 $ 9.29 0.130 Fourth Quarter $12.50 $ 9.10 0.130
Fiscal 2002 High Low Dividends paid per share - ---------------------- ------ ------ ------------------------ First Quarter $11.15 $ 8.02 $0.125 Second Quarter $15.05 $ 7.91 0.125 Third Quarter $17.08 $12.90 0.125 Fourth Quarter $17.87 $14.15 0.125
Source: The Wall Street Journal The number of holders of record of RPM International Inc. Common Stock as of July 14, 2003 was 38,877. 45 EX-21.1 11 l02719aexv21w1.txt EX-21.1 LIST OF SUBSIDIARIES Exhibit 21.1 ------------ The following is a list of subsidiaries of RPM International Inc.(1) as of August 25, 2003.
Jurisdiction of Name Incorporation - ---- ------------- First Colonial Insurance Company, Inc. Vermont RPM Asia Pte. Ltd. Singapore Alumanation (M) Sdn. Bhd. Malaysia Espan Corporation Pte. Ltd. Singapore RPM China Pte. Ltd. Singapore Magnagro Industries Pte. Ltd. Singapore Dryvit Wall Systems (Suzhou) Co. Ltd. China RPM Consumer Holding Company Delaware Bondo Corporation Ohio DAP Products Inc.(2) Delaware DAP Holdings, LLC(3) Delaware Rust-Oleum Corporation(4) Illinois Rust-Oleum International, LLC(5) Delaware ROC Sales, Inc.(6) Illinois Rust-Oleum Sales Company, Inc.(7) Ohio The Flecto Company, Inc.(8) California Rust-Oleum Japan Corporation Japan The Testor Corporation(9) Ohio Zinsser Co., Inc.(10) New Jersey Zinsser Holdings, LLC(11) Delaware Mantrose-Haeuser Co., Inc. Massachusetts Modern Masters Inc. California Thibaut Inc. New York RPM Enterprises, Inc. Delaware RPM, Inc.(12) Ohio American Emulsions Co., Inc. Georgia Select Dye & Chemical, Inc. Georgia Bondex International, Inc. Ohio Chemical Specialties Manufacturing Corporation Maryland Day-Glo Color Corp.(13) Ohio Dryvit Holdings, Inc. Delaware Dryvit Systems, Inc.(14) Rhode Island Dryvit Systems USA (Europe) sp z.oo. Poland Guardian Products, Inc. Delaware Kop-Coat, Inc. Ohio K-C Divestiture Corp. New York Kop-Coat New Zealand Limited New Zealand Agpro (N.Z.) Limited New Zealand RPM Wood Finishes Group, Inc.(15) Nevada
Chemical Coatings, Inc. North Carolina RPM of Mass., Inc. Massachusetts Westfield Coatings Corporation Massachusetts TCI, Inc. Georgia RPM Industrial Holding Company Delaware Carboline Company(16) Delaware Carboline International Corporation(17) Delaware Carboline Dubai Corporation Missouri StonCor Africa (Pty.) Ltd. South Africa Chemrite Equipment Systems (Pty.) Ltd. South Africa StonCor Namibia (Pty.) Ltd. South Africa Republic Powdered Metals, Inc.(18) Ohio StonCor Group, Inc.(19) Delaware Fibergrate Composite Structures Incorporated Delaware Fibergrate B.V. Netherlands Parklin Management Group, Inc.(20) New Jersey Stonhard Agencia en Chile Chile StonCor Corrosion Specialists Group Ltda.(21) Brazil Tremco Incorporated(22) Ohio The Euclid Chemical Company(23) Ohio Euclid Chemical International Sales Corp.(24) Ohio Grandcourt N.V.(25) Netherlands Antilles Redwood Transport, Inc.(26) Ohio Paramount Technical Products, Inc. South Dakota Tremco A.B. Sweden Tremco Asia Pacific Pty. Limited Australia PABCO Products Pty. Limited Australia Tremco Pty. Limited Australia Tremco Asia Pte. Ltd. Singapore Tremco Barrier Solutions, Inc. Delaware Tremco GmbH Germany Weatherproofing Technologies, Inc.(27) Delaware RSIF International Limited Ireland Sierra Performance Coatings, Inc. California
- -------- (1) RPM International Inc. owns 100% of the outstanding voting Common Stock of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non- 2 voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. (2) DAP Products Inc. owns 100% of the outstanding Series B Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. DAP Products Inc. owns 90% of the outstanding shares of DAP Chile S.A., a Chilean corporation. The remaining 10% of the outstanding shares of DAP Chile S.A. are held by RPM Canada Company. DAP Products Inc. owns 94% of the outstanding shares of Portazul, S.A., a Dominican Republic corporation. The remaining 6% of the outstanding shares of Portazul, S.A. are held by the directors of Portazul, S.A. (3) DAP Holdings, LLC owns 100% of the outstanding Common Stock of DAP Brands Company, a Delaware corporation. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of DAP Brands Company. DAP Holdings, LLC owns 1.60% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. 3 RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. (4) Rust-Oleum Corporation owns 100% of the outstanding Series E Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. Rust-Oleum Corporation owns 99% of Rust-Oleum (Chile) Ltda., a Chilean limited liability company. The remaining 1% of the outstanding shares of Rust-Oleum (Chile) Ltda. are held by ROC Sales, Inc. Rust-Oleum Corporation owns 99.992% of the outstanding shares of Rust-Oleum Argentina S.A., an Argentine corporation. The remaining .008% of the outstanding shares of Rust-Oleum Argentina S.A. are held by Rust-Oleum Sales Company, Inc. (5) Rust-Oleum International, LLC owns 100% of the outstanding Common Stock of Rust-Oleum Brands Company, a Delaware corporation. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Rust-Oleum Brands Company. Rust-Oleum International, LLC owns 15% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. 4 (6) ROC Sales, Inc. owns 1% of the outstanding shares of Rust-Oleum (Chile) Ltda., a Chilean limited liability company. The remaining 99% of the outstanding shares of Rust-Oleum (Chile) Ltda. are held by Rust-Oleum Corporation. (7) Rust-Oleum Sales Company, Inc. owns .008% of the outstanding shares of Rust-Oleum Argentina S.A., an Argentine corporation. The remaining 99.992% of the outstanding shares of Rust-Oleum Argentina S.A. are held by Rust-Oleum Corporation. (8) The Flecto Company, Inc. owns 79% of the outstanding shares of Harry A. Crossland Investments, Ltd., a Nevada corporation. The remaining 21% of the outstanding shares of Harry A. Crossland Investments, Ltd. are held by RPM Canada Company. Harry A. Crossland Investments, Ltd. owns 100% of the outstanding shares of Crossland Distributors Ltd., a Canadian corporation. (9) The Testor Corporation owns 100% of the outstanding Series F Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. (10) Zinsser Co., Inc. owns 100% of the outstanding Series I Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; and 100% of the Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc. 5 RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. (11) Zinsser Holdings, LLC owns 100% of the outstanding Common Stock of Zinsser Brands Company, a Delaware corporation. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Zinsser Brands Company. Zinsser Holdings, LLC owns .27% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87% and Tremco Incorporated 44.67%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. (12) RPM, Inc. owns 88% of the outstanding shares of RPM/Lux Consult S.A., a Luxembourg corporation. The remaining 12% of the outstanding shares of RPM/Lux Consult S.A. are held by Tremco Incorporated. RPM/Lux Consult S.A. owns .2% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining 99.8% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Belgium N.V. (13) Day-Glo Color Corp. owns 7.33% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. Day-Glo Color Corp. owns .32% of the outstanding shares of Radiant Color N.V., a Belgian corporation. The remaining 99.68% of the outstanding shares of Radiant Color N.V. are held by RPM/Europe B.V. Radiant Color N.V. owns 99.99% of the outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining .01% of the outstanding shares of Martin Mathys N.V. are held by RPM/Belgium N.V. 6 Radiant Color N.V. owns 85.71% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 13.57% are held by RPOW France S.A. and .72% are held by RPM/Europe B.V. (14) Dryvit Systems, Inc. owns 8.40% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. Dryvit Systems, Inc. owns 88% of the outstanding shares of Beijing Dryvit Chemical Building Materials Co., Ltd., a Peoples Republic of China company. The remaining outstanding shares of Beijing Dryvit Chemical Building Materials Co., Ltd. are held by a joint venture partner. (15) RPM Wood Finishes Group, Inc. owns 5.66% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. (16) Carboline Company owns 2.93% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. (17) Carboline International Corporation owns 49% of Carboline Korea Ltd.; 40% of Carboline Norge A/S; 49% of StonCor Middle East LLC; 33.33% of Japan Carboline Company Ltd.; and 40% of CDC Carboline (India) Ltd. All outstanding shares of these entities are held by joint 7 venture partners. However, 5% of the outstanding shares of Carboline Norge A/S are held by RPM Funding Corporation. (18) Republic Powdered Metals, Inc. owns 100% of the outstanding Series A & D Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. (19) StonCor Group, Inc. owns 12.87% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. StonCor Group, Inc. owns 99% of the outstanding shares of Stonhard S.A., a Luxembourg corporation. The remaining 1% of the outstanding shares of Stonhard S.A. are held by Parklin Management Group, Inc. StonCor Group, Inc. owns 99.25% of the outstanding shares of Grupo StonCor, S.A. de C.V., a Mexican corporation. The remaining .75% of the outstanding shares of Grupo StonCor, S.A. de C.V. are held by Parklin Management Group, Inc. Grupo StonCor, S.A. de C.V. owns 100% of the outstanding shares of Plasite, S.A. de C.V. Mexico, a Mexican corporation and 100% of the outstanding shares of Grupo StonCor, S.A. de C.V., a Colombian corporation. StonCor Group, Inc. owns 99.99% of the outstanding shares of Stonhard de Mexico S.A. de C.V., a Mexican corporation. The remaining .01% of the outstanding shares are held by Parklin Management Group, Inc. 8 Stonhard de Mexico S.A. de C.V. owns 100% of the outstanding shares of Juarez Immobiliaria, S.A., a Mexican corporation. StonCor Group, Inc. owns 80% of the outstanding shares of Multicor S.A. Argentina I.yC., an Argentine corporation. The remaining 20% of the outstanding shares of Multicor S.A. Argentina IyC. are equally divided between two individuals. StonCor Group, Inc. owns .01% of the outstanding shares of StonCor Services, Ltda., a Brazilian corporation. The remaining 99.99% of the outstanding shares of StonCor Services, Ltda. are held by StonCor Corrosion Specialists Group Ltda. (20) Parklin Management Group, Inc. owns 6% of the outstanding shares of StonCor (Deutschland) GmbH, a German corporation. The remaining 94% of the outstanding shares of StonCor (Deutshland) GmbH are held by RPM Canada Company. StonCor (Deutschland) GmbH owns 100% of the outstanding shares of Alteco Technik GmbH, a German corporation. Alteco Technik GmbH owns 1% of the outstanding shares of Alteco Chemical S.A., a Portuguese company. Of the remaining outstanding shares of Alteco Chemical S.A., 96% are held by RPM/Belgium N.V. and 3% are held by three directors of Alteco Chemical S.A. Parklin Management Group, Inc. owns .75% of the outstanding shares of Grupo StonCor, S.A. de C.V., a Mexican corporation. The remaining 99.25% of the outstanding shares of Grupo StonCor, S.A. de C.V. are held by StonCor Group, Inc. Parklin Management Group, Inc. owns .01% of the outstanding shares of Stonhard de Mexico S.A. de C.V., a Mexican corporation. The remaining 99.99% of the outstanding shares of Stonhard de Mexico S.A. de C.V. are held by StonCor Group, Inc. Parklin Management Group, Inc. owns 1% of the outstanding shares of Stonhard S.A., a Luxembourg corporation. The remaining 99% of the outstanding shares of Stonhard S.A. are held by StonCor Group, Inc. (21) StonCor Corrosion Specialists Group Ltda. owns 99.99% of the outstanding shares of StonCor Services, Ltda., a Brazilian corporation. The remaining .01% of the outstanding shares of StonCor Services, Ltda. are held by StonCor Group, Inc. (22) Tremco Incorporated owns 100% of the outstanding Series G Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The 9 Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. Tremco Incorporated owns 44.67% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of DAP Brands Company, a Delaware corporation. DAP Holdings, LLC owns 100% of the outstanding Common Stock of DAP Brands Company. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Rust-Oleum Brands Company, a Delaware corporation. Rust-Oleum International, LLC owns 100% of the outstanding Common Stock of Rust-Oleum Brands Company. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Zinsser Brands Company, a Delaware corporation. Zinsser Holdings, LLC owns 100% of the outstanding Common Stock of Zinsser Brands Company. RPM Canada Company owns 100% of the outstanding shares of RPM Canada Investment Company, a Canadian unlimited liability company. RPM Canada Company is a 99% partner in RPM Canada, a General Partnership, an Ontario partnership. RPM Canada Investment Company is a 1% partner in RPM Canada, a General Partnership. RPM Canada Company owns 21% of the outstanding shares of Harry A. Crossland Investments, Ltd., a Nevada corporation. The remaining 79% of the outstanding shares of Harry A. Crossland Investments, Ltd. are held by The Flecto Company, Inc. 10 Harry A. Crossland Investments, Ltd. owns 100% of the outstanding shares of Crossland Distributors Ltd., a Canadian corporation. RPM Canada, a General Partnership owns 100% of the outstanding shares of Tremco Limited, a United Kingdom corporation. RPM Canada, a General Partnership owns 100% of the outstanding shares of Euclid Admixture Canada Inc., a Canadian corporation. Tremco Limited owns 100% of the outstanding shares of OY Tremco Ltd., a Finnish corporation and 100% of the outstanding shares of each of Tretolbond Limited., Tretol Group Limited and Tretol Limited, all United Kingdom corporations. RPM Canada Company owns 10% of the outstanding shares of DAP Chile S.A., a Chilean corporation. The remaining 90% of the outstanding shares of DAP Chile S.A. are held by DAP Products Inc. RPM Canada Company owns 100% of the outstanding shares of RPM/Europe B.V., a Netherlands corporation. RPM/Europe B.V. owns 100% of the outstanding shares of Rust-Oleum Netherlands B.V., StonCor Benelux B.V., and Tremco B.V., all Netherlands corporations, and RPOW U.K. Limited, a United Kingdom corporation. RPM/Europe B.V. owns 96.04% of the outstanding shares of RPM/Belgium N.V., a Belgian corporation. The remaining 3.96% of the outstanding shares of RPM/Belgium N.V. are held by Tremco Incorporated. RPM/Belgium N.V. owns 99.8% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining .2% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Lux Consult S.A. RPM/Belgium N.V. owns 96% of the outstanding shares of Alteco Chemical S.A., a Portuguese corporation. Of the remaining outstanding shares of Alteco Chemical S.A., 1% are held by Alteco Technik GmbH and 3% are held by three directors of Alteco Chemical S.A. RPM/Europe B.V. owns 99.99% of the outstanding shares of RPOW France S.A., a French corporation. The remaining .01% of the outstanding shares of RPOW France S.A. are held by the directors of RPOW France S.A. RPM/Europe B.V. owns .72% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 85.71% are held by Radiant Color N.V. and 13.57% are held by RPOW France S.A. 11 RPM/Europe B.V. owns 99.04% of the outstanding shares of RPM Europe S.A., a Belgian corporation. The remaining .96% of the outstanding shares of RPM Europe S.A. are held by RPM/Lux Consult S.A. RPOW France S.A. owns 13.57% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 85.71% are held by Radiant Color N.V. and .72% are held by RPM/Europe B.V. RPOW France S.A. owns 99.40% of the outstanding shares of Corroline France S.A., a French corporation. The remaining .60% of the outstanding shares of Corroline France S.A. are held by the directors of Corroline France S.A. RPOW France S.A. owns 99.90% of the outstanding shares of Rust-Oleum France S.A., a French corporation. The remaining .10% of the outstanding shares of Rust-Oleum France S.A. are held by the directors of Rust-Oleum France S.A. RPOW France S.A. owns 70% of the outstanding shares of Rust-Oleum Mathys Italia S.r.l., an Italian corporation. The remaining 30% of the outstanding shares of Rust-Oleum Mathys Italia S.r.l. are held by a joint venture partner. RPOW France S.A. owns 99.90% of the outstanding shares of Stonhard S.A.S., a French corporation. The remaining .10% of the outstanding shares are held by the directors of Stonhard S.A.S. RPOW U.K. Limited owns 100% of the outstanding shares of each of Bondo U.K. Limited, Carboline U.K. Limited, Chemspec Europe Limited, Dryvit U.K. Limited, Fibergrate Composite Structures Limited, Mantrose U.K. Limited, RPM Holdings UK Limited, Rust-Oleum U.K. Limited and Stonhard U.K. Limited, all United Kingdom corporations, and Stonhard (Ireland) Limited, an Irish corporation. Mantrose U.K. Limited owns 100% of the outstanding shares of each of Agricoat Industries Limited and Wm. Zinsser Limited, both United Kingdom corporations. RPM Holdings UK Limited owns 100% of the outstanding shares of Dore Holdings Limited, a United Kingdom corporation. Dore Holdings Limited owns 100% of the outstanding shares of each of Amtred Limited and Nullifire Limited, both United Kingdom corporations. RPM Canada Company owns 94% of the outstanding shares of StonCor (Deutschland) GmbH, a German corporation. The remaining 6% of the outstanding shares of StonCor (Deutschland) GmbH are held by Parklin Management Group, Inc. StonCor (Deutschland) GmbH owns 100% of the outstanding shares of Alteco Technik GmbH, a German corporation. 12 Alteco Technik GmbH owns 1% of the outstanding shares of Alteco Chemical S.A., a Portuguese company. Of the remaining outstanding shares of Alteco Chemical S.A., 96% are held by RPM/Belgium N.V. and 3% are held by three directors of Alteco Chemical S.A. Tremco Incorporated owns 3.96% of the outstanding shares of RPM/Belgium N.V., a Belgian corporation. The remaining 96.04% of the outstanding shares of RPM/Belgium N.V. are held by RPM/Europe B.V. RPM/Belgium N.V. owns 99.8% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining .2% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Lux Consult S.A. RPM/Belgium N.V. owns 96% of the outstanding shares of Alteco Chemical S.A., a Portuguese corporation. Of the remaining outstanding shares of Alteco Chemical S.A., 1% are held by Alteco Technik GmbH and 3% are held by three directors of Alteco Chemical S.A. RPM/Belgium N.V. owns .01% of the outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining 99.99% of the outstanding shares of Martin Mathys N.V. are held by Radiant Color N.V. Tremco Incorporated owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp, Redwood Transport, Inc. and Weatherproofing Technologies, Inc. each own .0025%. Tremco Incorporated owns 50% of the outstanding shares of Sime Tremco Sdn. Bhd., a Malaysian corporation. The remaining outstanding shares of Sime Tremco Sdn. Bhd. are held by a joint venture partner. Sime Tremco Sdn. Bhd. Owns 100% of the outstanding shares of each of Sime Tremco (Malaysia) Sdn. Bhd. and Sime Tremco Specialty Chemicals Sdn, Bhd., both Malaysian corporations. Tremco Incorporated owns 99.999% of the outstanding shares of Tremco Far East Limited, a Hong Kong corporation. The remaining .001% of the outstanding shares of Tremco Far East Limited are held by a director of Tremco Far East Limited. Tremco Far East Limited owns 100% of the outstanding shares of Tremco (Malaysia) Sdn. Bhd., a Malaysian corporation and 100% of the outstanding shares of Shanghai Tremco International Trading Co., Ltd., a Chinese corporation. Tremco Incorporated owns 12% of the outstanding shares of RPM/Lux Consult S.A., a Luxembourg corporation. The remaining 88% of the outstanding shares of RPM/Lux Consult S.A. are held by RPM, Inc. 13 RPM/Lux Consult S.A. owns .2% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining 99.8% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Belgium N.V. RPM/Lux Consult S.A. owns .96% of the outstanding shares of RPM Europe S.A., a Belgian corporation. The remaining 99.04% of the outstanding shares of RPM Europe S.A. are held by RPM/Europe B.V. (23) The Euclid Chemical Company owns 100% of the outstanding Series C Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. The Euclid Chemical Company owns 1.27% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%. RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote. The Euclid Chemical Company owns 99.997% of the outstanding shares of Eucomex S.A. de C.V., a Mexican corporation. The remaining .003% of the outstanding shares of Eucomex S.A. de C.V. are held by Redwood Transport, Inc. The Euclid Chemical Company owns 49% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99% and Euclid Chemical International Sales Corp., Redwood Transport, Inc., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%. 14 (24) Euclid Chemical International Sales Corp. owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Redwood Transport, Inc., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%. (25) Grandcourt N.V. owns 50.99% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp., Redwood Transport, Inc., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%. (26) Redwood Transport, Inc. owns .003% of the outstanding shares of Eucomex S.A. de C.V., a Mexican corporation. The remaining 99.997% of the outstanding shares of Eucomex S.A. de C.V. are held by The Euclid Chemical Company. Redwood Transport, Inc. owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%. (27) Weatherproofing Technologies, Inc. owns 100% of the outstanding Series H Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; and 100% of the Series I Preferred Stock (non-voting) by Zinsser Co., Inc. RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner. Weatherproofing Technologies, Inc. owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp., Redwood Transport, Inc. and Tremco Incorporated each own .0025%. 15 EX-23.1 12 l02719aexv23w1.txt EX-23.1 CONSENT OF INDEPENDENT CPA'S EXHIBIT 23.1 Consent of Independent Accountants As independent public accountants, we hereby consent to the incorporation by reference of our report dated July 7, 2003 in the Annual Report on Form 10-K for the year ending May 31, 2003, in RPM International Inc.'s Registration Statements on Forms S-8 (Reg. Nos. 33-32794, 1989 Stock Option Plan; 333-35967 and 333-60104, 1996 Stock Option Plan; 333-101512,Deferred Compensation Plan; and; 333-101501, 401(k) Trust and Plan and Union 401(k) Retirement Savings Trust and Plan). /s/ Ciulla, Smith & Dale, LLP --------------------------------------- Ciulla, Smith & Dale, LLP August 29, 2003 EX-31.1 13 l02719aexv31w1.txt EX-31.1 RULE 13-14(A) CERTIFICATION - CFO EXHIBIT 31.1 RULE 13A-l4(a) CERTIFICATION I, Robert L. Matejka, certify that: 1. I have reviewed this Annual Report on Form 10-K of RPM International Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 29, 2003 /s/ Robert L. Matejka --------------------- Robert L. Matejka, Vice President, Chief Financial Officer and Controller EX-31.2 14 l02719aexv31w2.txt EX-31.2 RULE 13-14(A) CERTIFICATION - CEO Exhibit 31.2 RULE 13A-14(a) CERTIFICATION I, Frank C. Sullivan, certify that: 1. I have reviewed this Annual Report on Form 10-K of RPM International Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-l5(e) and 15d-l5(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 29, 2003 /s/ Frank C. Sullivan --------------------- Frank C. Sullivan, President and Chief Executive Officer EX-32.1 15 l02719aexv32w1.txt EX-32.1 CERTIFICATION - CFO EXHIBIT 32.1 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, the undersigned officer of RPM International Inc., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that the Company's Annual Report on Form 10-K for the year ended May 31, 2003 (the "Form 10-K") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K. Dated: August 29, 2003 /s/ Robert L. Matejka ---------------------------------------- Robert L. Matejka Vice President, Chief Financial Officer and Controller The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-K or as a separate disclosure document. EX-32.2 16 l02719aexv32w2.txt EX-32.2 CERTIFICATION - CEO EXHIBIT 32.2 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, the undersigned officer of RPM International Inc., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that the Company's Annual Report on Form 10-K for the year ended May 31, 2003 (the "Form 10-K") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K. Dated: August 29, 2003 /s/ Frank C. Sullivan ---------------------------------------- Frank C. Sullivan President and Chief Executive Officer The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-K or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----