-----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, O1lysvjFbzYtqVWYHz+0jol/+5WObJXTY3hAFCXmRQoSHY/gBXkZPISsmvrxSZTV JF2nSkn+4RLhM74gHLd6/A== 0000950132-00-000329.txt : 20000508 0000950132-00-000329.hdr.sgml : 20000508 ACCESSION NUMBER: 0000950132-00-000329 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPG INDUSTRIES INC CENTRAL INDEX KEY: 0000079879 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 250730780 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01687 FILM NUMBER: 620303 BUSINESS ADDRESS: STREET 1: ONE PPG PL 40 EAST CITY: PITTSBURGH STATE: PA ZIP: 15272 BUSINESS PHONE: 4124343131 MAIL ADDRESS: STREET 1: ONE PPG PL 40 EAST CITY: PITTSBURGH STATE: PA ZIP: 15272 FORMER COMPANY: FORMER CONFORMED NAME: PITTSBURGH PLATE GLASS CO DATE OF NAME CHANGE: 19681219 10-Q 1 FORM 1O-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2000 Commission File Number 1-1687 ------------------ ---------- PPG INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 25-0730780 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) One PPG Place, Pittsburgh, Pennsylvania 15272 (Address of principal executive offices) (Zip Code) (412) 434-3131 (Registrant's telephone number, including area code) As of March 31, 2000, 174,146,678 shares of the Registrant's common stock, par value $1.66-2/3 per share, were outstanding. 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- PPG INDUSTRIES, INC. AND SUBSIDIARIES INDEX PAGE(S) Part I. Financial Information Item 1. Financial Statements: Condensed Statement of Income........................................... 2 Condensed Balance Sheet..................................................3 Condensed Statement of Cash Flows........................................4 Notes to Condensed Financial Statements...............................5-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................12-16 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......16 Part II. Other Information Item 1. Legal Proceedings................................................17 Item 2. Change in Securities and Use of Proceeds.........................17 Item 4. Submission of Matters to a Vote of Security Holders..............18 Item 6. Exhibits and Reports on Form 8-K.................................18 Signature....................................................................19 - 1 - PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ------------------------------ PPG INDUSTRIES, INC. AND SUBSIDIARIES Condensed Statement of Income (Unaudited) ----------------------------------------- (Millions, except per share amounts)
Three Months Ended March 31 --------------------------- 2000 1999 ------ ------ Net sales......................................................... $2,087 $1,803 Cost of sales..................................................... 1,254 1,103 ------ ------ Gross profit................................................... 833 700 ------ ------ Other expenses (earnings): Selling, general and administrative............................ 327 286 Depreciation................................................... 93 91 Research and development....................................... 70 67 Interest....................................................... 43 26 Amortization................................................... 19 9 Business divestitures and realignments (Note 3)........................................ 1 24 Other charges.................................................. 53 12 Other earnings................................................. (29) (23) ------ ------ Total other expenses - net................................. 577 492 ------ ------ Income before income taxes and minority interest....................................................... 256 208 Income taxes...................................................... 109 79 Minority interest................................................. 8 6 ------ ------ Net income........................................................ $ 139 $ 123 ====== ====== Earnings per common share (Note 2)................................ $ 0.80 $ 0.71 ====== ====== Earnings per common share - assuming dilution (Note 2).............................................. $ 0.79 $ 0.70 ====== ====== Dividends per common share........................................ $ 0.40 $ 0.38 ====== ======
The accompanying notes to the condensed financial statements are an integral part of this statement. - 2 - PPG INDUSTRIES, INC. AND SUBSIDIARIES Condensed Balance Sheet (Unaudited) -----------------------------------
March 31 Dec. 31 2000 1999 -------- -------- Assets (Millions) - ------ Current assets: Cash and cash equivalents...................................... $ 145 $ 158 Receivables-net................................................ 1,713 1,594 Inventories (Note 4)........................................... 1,067 1,016 Other.......................................................... 252 294 -------- -------- Total current assets....................................... 3,177 3,062 Property (less accumulated depreciation of $3,983 million and $3,926 million)............................. 2,918 2,933 Investments....................................................... 227 261 Goodwill (less accumulated amortization of $106 million and $100 million)................................. 1,066 1,002 Identifiable intangible assets (less accumulated amortization of $71 million and $63 million)................... 656 660 Other assets...................................................... 1,028 996 -------- -------- Total...................................................... $ 9,072 $ 8,914 ======== ======== Liabilities and Shareholders' Equity - ------------------------------------ Current liabilities: Short-term borrowings and current portion of long-term debt.................................. $ 1,105 $ 954 Accounts payable and accrued liabilities....................... 1,403 1,430 -------- -------- Total current liabilities.................................. 2,508 2,384 Long-term debt.................................................... 1,825 1,836 Deferred income taxes............................................. 490 520 Accumulated provisions............................................ 463 422 Other postretirement benefits..................................... 547 548 -------- -------- Total liabilities.......................................... 5,833 5,710 -------- -------- Commitments and contingent liabilities (Note 8).................. Minority interest................................................. 102 98 -------- -------- Shareholders' equity: Common stock................................................... 484 484 Additional paid-in capital..................................... 107 104 Retained earnings.............................................. 6,168 6,098 Treasury stock................................................. (3,264) (3,268) Unearned compensation.......................................... (121) (134) Accumulated other comprehensive loss (Note 5).................. (237) (178) -------- -------- Total shareholders' equity................................. 3,137 3,106 -------- -------- Total...................................................... $ 9,072 $ 8,914 ======== ========
The accompanying notes to the condensed financial statements are an integral part of this statement. - 3 - PPG INDUSTRIES, INC. AND SUBSIDIARIES Condensed Statement of Cash Flows (Unaudited) ---------------------------------------------
Three Months Ended ------------------ March 31 -------- 2000 1999 ------ ------ (Millions) Cash from operating activities.................................... $ 90 $ 125 ------ ------ Investing activities: Capital spending Additions to property and investments...................... (118) (120) Business acquisitions, net of cash balances acquired............................................... (106) (89) Reduction of property and investments.......................... 11 12 Other.......................................................... - 11 ------ ------ Cash used for investing activities......................... (213) (186) ------ ------ Financing activities: Net change in borrowings with maturities of three months or less......................... 186 175 Proceeds from other short-term debt............................ 67 69 Repayment of other short-term debt............................. (73) (68) Proceeds from long-term debt................................... 1 1 Repayment of long-term debt.................................... (13) (28) Repayment of loans by employee stock ownership plan............................................. 13 13 Issuance (purchase) of treasury stock, net..................... 2 (79) Dividends paid................................................. (70) (66) ------ ------ Cash provided by financing activities...................... 113 17 ------ ------ Effect of currency exchange rate changes on cash and cash equivalents................................... (3) (2) ------ ------ Net decrease in cash and cash equivalents......................... (13) (46) Cash and cash equivalents, beginning of period.................... 158 128 ------ ------ Cash and cash equivalents, end of period.......................... $ 145 $ 82 ====== ======
The accompanying notes to the condensed financial statements are an integral part of this statement. - 4 - PPG INDUSTRIES, INC. AND SUBSIDIARIES Notes to Condensed Financial Statements (Unaudited) --------------------------------------------------- 1. Financial Statements -------------------- The condensed financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position of PPG Industries, Inc. and subsidiaries (the Company or PPG) at March 31, 2000 and the results of their operations and their cash flows for the three months ended March 31, 2000 and 1999. These condensed financial statements should be read in conjunction with the financial statements and notes thereto incorporated by reference in PPG's Annual Report on Form 10-K for the year ended December 31, 1999. The results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results to be expected for the full year. 2. Earnings Per Common Share ------------------------- The following table reflects the earnings per common share calculations for the three months ended March 31, 2000 and 1999.
Three Months Ended March 31 --------------------------- (Millions, except per share amounts) 2000 1999 ------ ------ Earnings per common share Net income.............................................. $ 139 $ 123 ------ ------ Weighted average common shares outstanding........................................... 174.1 174.2 ------ ------ Earnings per common share............................... $ 0.80 $ 0.71 ====== ====== Earnings per common share - assuming dilution Net income.............................................. $ 139 $ 123 ------ ------ Weighted average common shares outstanding........................................... 174.1 174.2 Effect of dilutive securities: Stock options......................................... 0.3 0.4 Other stock compensation plans........................ 1.3 1.2 ------ ------ Potentially dilutive common shares...................... 1.6 1.6 ------ ------ Adjusted common shares outstanding........................................... 175.7 175.8 ------ ------ Earnings per common share - assuming dilution..................................... $ 0.79 $ 0.70 ====== ======
- 5 - 3. Acquisitions and Business Realignments -------------------------------------- Acquisition In February 2000, the Company acquired Monarch Paint Co. (Monarch), an architectural coatings producer. The Company has completed a preliminary purchase price allocation for this acquisition and the operating activity associated with Monarch has been included in the Company's results of operations from the acquisition date. The preliminary purchase price allocation is subject to adjustment later in 2000 when finalized. Business Realignments In March 2000, the Company refined the restructuring plans for certain locations related to the integration of the global automotive refinish, automotive and industrial coatings businesses of Imperial Chemical Industries PLC (the ICI business). These restructuring plans were originally developed at the acquisition date (July 1999). The restructuring plans include severance benefits for 241 employees and resulted in an increase in goodwill of $12 million and a pretax charge of $1 million. As of March 31, 2000, $2 million had been paid to 53 employees and the remaining reserve of $11 million, which covered 188 employees, is expected to be paid by the end of 2000. The Company also completed the sale of its equity interest in an Asian float glass plant and one Asian downstream fabrication facility. In addition, the Company substantially completed the sale of its equity interest in another Asian downstream fabrication facility, pending approval of the transaction by regulatory authorities. The regulatory approval is expected to be received in the second quarter of 2000. During 1999, the Company approved restructuring plans associated with the integration of the packaging coatings acquisitions and cost reduction activities across all of its businesses that resulted in pre-tax charges of $47 million. The components of the plans included severance benefits for 519 employees and estimated losses of $17 million on the disposal of a redundant European facility and the disposition of the assets of a U.S. coatings facility. As of March 31, 2000, $12 million had been paid under the plans to 293 employees. In addition, fixed asset write-offs totaling $1 million were recorded in the first quarter of 2000. At March 31, 2000, the remaining reserves associated with the 1999 restructuring plans covered 226 employees. PPG anticipates that the remaining severance benefits will be paid and the asset dispositions will be completed during 2000. In 1999, the Company also recorded a reversal of $1 million related to reserves established in 1999 for cost reduction initiatives in its glass and coatings businesses. During 1998, the Company recorded a pretax charge of $19 million in connection with a restructuring plan to reduce costs in its glass and coatings businesses. The components of the plan included severance benefits for 283 employees. As of March 31, 2000, approximately $15 million has been paid out under the restructuring plan and $1 million was reversed in 1999 for amounts that will not be paid under the plan. The remaining reserves associated with the 1998 restructuring plan are designated to cover 66 employees. - 6 - At March 31, 2000, the remaining reserves associated with the 1999 and 1998 restructuring plans totaled $19 million and are expected to be paid in 2000. In 1997, the Company recorded a pre-tax restructuring charge of $102 million related to certain glass businesses that were not meeting strategic performance objectives. The principal components of this program included the closure of the Perry, Ga., flat glass plant and the disposition of our equity interests in two Asian float glass plants. The pre-tax restructuring charge in 1997 included $61 million of asset write-offs and $41 million associated with cash outlays primarily for severance costs for 317 employees, a proportionate share of equity investee indebtedness and demolition and environmental costs, net of proceeds from sale. An additional $15 million pretax restructuring charge was recorded in 1998 related to a reassessment of the proceeds expected to be realized on the dispositions and additional asset write-offs. As of March 31, 2000, cash outlays and asset write-offs associated with both the 1997 restructuring program and the additional restructuring charge recorded in 1998 related to this program totaled $108 million. We also reversed $3 million of these restructuring charges in each of the years 1999 and 1998, respectively. At March 31, 2000, approximately $3 million of reserves related to the 1997 restructuring program are outstanding and will be paid out during 2000 or early in 2001. 4. Inventories ----------- Inventories at March 31, 2000 and December 31, 1999 are detailed below. March 31 Dec. 31 2000 1999 -------- ------- (Millions) Finished products and work in process........................ $ 743 $ 716 Raw materials................................................ 211 189 Supplies..................................................... 113 111 ------ ------ Total.................................................... $1,067 $1,016 ====== ======
Most domestic and certain foreign inventories are valued using the last-in, first-out method. If the first-in, first-out method had been used, inventories would have been $158 million and $164 million higher at March 31, 2000 and December 31, 1999, respectively. - 7 - 5. Comprehensive Income -------------------- Total comprehensive income for the three months ended March 31, 2000 and 1999 was as follows:
Three Months Ended March 31 --------------------------- 2000 1999 ----- ----- (Millions) Net income................................................. $ 139 $ 123 ----- ----- Other comprehensive loss, net of tax: Currency translation adjustment......................... (56) (71) Minimum pension liability adjustment.................... 2 (1) Unrealized losses on marketable securities.............. (5) (5) ----- ----- (59) (77) ----- ----- Total comprehensive income........................... $ 80 $ 46 ===== =====
As of March 31, 2000 and December 31, 1999, accumulated other comprehensive loss, as reflected on the condensed balance sheet, was comprised of the following: March 31 Dec. 31 2000 1999 -------- ------- (Millions) Currency translation adjustment................................. $ (218) $ (162) Minimum pension liability adjustment............................ (11) (13) Unrealized losses on marketable securities...................... (8) (3) ------ ------ Accumulated other comprehensive loss.......................... $ (237) $ (178) ====== ======
6. Cash Flow Information --------------------- Cash payments for interest were $54 million and $20 million for the three months ended March 31, 2000 and 1999, respectively. Net cash payments for income taxes for the three months ended March 31, 2000 and 1999 were $19 million and $17 million, respectively. - 8 - 7. Business Segment Information ---------------------------- Business segment net sales and operating income for the three months ended March 31, 2000 and 1999 were as follows:
Three Months Ended March 31 --------------------------- 2000 1999 ------ ------ (Millions) Net sales: Coatings (a).................................................. $1,128 $ 912 Glass......................................................... 571 557 Chemicals (b)................................................. 391 337 Intersegment net sales........................................ (3) (3) ------ ------ Total...................................................... $2,087 $1,803 ====== ====== Operating income: Coatings (c).................................................. $ 160 $ 101 Glass......................................................... 105 97 Chemicals..................................................... 74 36 ------ ------ Total...................................................... 339 234 Interest expense - net.......................................... (40) (25) Other unallocated corporate expense - net (d)................... (43) (1) ------ ------ Income before income taxes and minority interest............................................. $ 256 $ 208 ====== ======
(a) Includes intersegment net sales of $1 million for each of the three- month periods. (b) Includes intersegment net sales of $2 million for each of the three- month periods. (c) Includes for the three months ended March 31, 2000, pretax charges of $2 million representing the fair-market-value adjustment of acquired inventories that have been sold and $1 million related to cost reduction initiatives associated with the integration of the ICI business acquired in 1999. Includes for the three months ended March 31, 1999, a pretax restructuring charge of $24 million associated with the integration of the packaging coatings acquisitions, including the disposal of a redundant European facility and work-force reductions. (d) Includes for the three months ended March 31, 2000, a pretax charge of $39 million representing the write-off of an equity investment in Pittsburgh Corning Corporation, which has filed for reorganization under the federal bankruptcy code. - 9 - 8. Commitments and Contingent Liabilities -------------------------------------- PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial money damages are sought. These lawsuits and claims relate to product liability, contract, patent, environmental, antitrust and other matters arising out of the conduct of PPG's business. The Company has been named in a number of antitrust lawsuits alleging that PPG acted with competitors to fix prices and allocate markets for certain glass products. These antitrust proceedings are in an early stage. For over 30 years, the Company has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. Aggregate settlements by PPG to date have been immaterial. Over the past few years, the number of asbestos- related claims against the Company, as well as numerous other defendants, has increased. At March 31, 2000, the Company was one of many defendants in numerous asbestos-related lawsuits involving approximately 110,000 claims. In many of the cases, the plaintiffs allege that the Company should be liable for injuries from products manufactured and distributed by Pittsburgh Corning Corporation ("PC"). The Company and Corning Incorporated are each 50% shareholders of PC. The Company believes it is not responsible for any injuries caused by PC products and intends to defend against such claims. PPG has successfully defended such claims in the past. In January 2000, for the first time, a trial court found PPG liable for injuries to five plaintiffs alleged to be caused by PC products. The Company intends to appeal that verdict. On April 16, 2000, PC filed a petition for reorganization under the federal bankruptcy code. Accordingly, during the three months ended March 31, 2000, the Company recorded an after-tax charge of $35 million for the write-off of its investment in PC. The Company and others are also defendants in three cases involving claims alleging injury from exposure to lead. PPG believes it has adequate insurance for the personal injury and property damage claims against the Company described above. PPG's lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters. Management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG will not have a material effect on PPG's consolidated financial position, results of operations or liquidity. It is PPG's policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are not discounted. As of March 31, 2000 and December 31, 1999, PPG had reserves for environmental contingencies totaling $79 million and $82 million, respectively. Pre-tax charges against income for environmental remediation costs for the three months ended March 31, 2000 and 1999 totaled $1 million and $2 million, respectively, and are included in "Other charges" in the condensed statement of income. Cash outlays related to such environmental remediation for the three months ended March 31, 2000 and 1999 aggregated $4 million and $6 million, respectively. Management anticipates that the resolution of the Company's environmental contingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management's opinion, the Company operates in an environmentally - 10 - sound manner and the outcome of the Company's environmental contingencies will not have a material effect on PPG's financial position or liquidity. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from December 31, 1999. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's environmental contingencies are expected to be resolved over an extended period of time. Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated. The loss contingencies related to the remaining portion of such unreserved exposure include significant unresolved issues such as the nature and extent of contamination, if any, at sites and the methods that may have to be employed should remediation be required. With respect to certain waste sites, the financial condition of any other potentially responsible parties also contributes to the uncertainty of estimating PPG's final costs. Although contributors of waste to sites involving other potentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a major contributor to such sites. The impact of evolving programs, such as natural resource damage claims, industrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. - 11 - Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------- Results of Operations --------------------- Performance Overview Sales increased 16% in the first quarter of 2000 to $2.09 billion from $1.80 billion in the same quarter of 1999. First quarter 2000 sales increased 10% due to acquisitions within our coatings segment, 6% from sales volume improvements across all of our business segments and 2% from higher selling prices within our chemicals segment. These sales increases were partially offset by a 2% decline due to foreign currency translation primarily from the weaker euro currency that principally affected our coatings segment. The gross profit percentage increased to 39.9% during the first quarter of 2000 from 38.8% in the same quarter of 1999. The increase in the gross profit percentage is due to higher selling prices for commodity chemicals in our chemicals segment, improved manufacturing efficiencies in our chemicals and glass segments, and favorable sales mix changes in our coatings segment. These favorable factors were partially offset by higher raw material and energy costs in our chemicals and coatings segments. Net income and earnings per share, diluted, for the first quarter of 2000 increased to $139 million and $0.79, respectively, compared to $123 million and $0.70, respectively, in the same quarter of 1999. The increase in net income and earnings per share for the first quarter of 2000 resulted from the sales volume improvements previously discussed, the same factors that contributed to an improvement in the gross profit percentage, the absence of a first quarter 1999 after-tax restructuring charge of $20 million related to the integration of packaging coatings acquisitions and earnings from acquisitions. These favorable factors more than offset a first quarter 2000 after-tax charge of $35 million for the write-off of an equity investment, increased income tax expense from improved pretax earnings and higher interest expense as a result of acquisition activity. Excluding the write-off of the equity investment in the first quarter of 2000 and the restructuring charges in the first quarter of 1999, net income and earnings per share, diluted, were $174 million and $0.99, respectively, compared to $143 million and $0.81, respectively. Performance of Business Segments Coatings sales increased 24% to $1.13 billion from $911 million in the first quarter of 1999. Sales increased 20% primarily from the acquisitions of the ICI businesses and PRC-DeSoto International, Inc. (PRC-DeSoto) in the third quarter of 1999 and 9% from volume improvements in our worldwide automotive original and industrial businesses and, to a lesser extent, our automotive refinish and packaging coatings businesses. These sales increases were offset in part by a 4% decline from foreign currency translation principally from the weaker euro currency which affected all of our coatings businesses and a 1% decrease in overall selling prices for our automotive original products in North America and Europe. Operating income increased to $160 million in the first quarter of 2000 from $101 million in the same quarter of 1999. Operating income in the first quarter of 2000 improved due to increased sales volumes, as previously discussed, favorable sales mix changes in certain businesses, a reduction in pretax restructuring charges as discussed below and earnings from acquisitions. First quarter 2000 operating income included pretax restructuring charges of $1 million related to the integration of the ICI businesses and operating income for the first quarter of 1999 included $24 million of restructuring charges for the integration of packaging coatings acquisitions. The factors which contributed to the increase in operating income more than offset the effects of lower selling prices, as previously discussed, and higher raw material and energy costs in our North American automotive refinish, automotive original and industrial - 12 - businesses. Excluding the pretax restructuring charges, operating income increased to $161 million in the first quarter of 2000 as compared to $125 million in the same quarter of 1999. Glass sales increased 3% to $571 million from $557 million in the first quarter of 1999. The increase is attributable primarily to sales volume improvements in our North American automotive original, fiber glass and flat glass businesses. Operating income increased to $105 million in the first quarter of 2000 from $97 million in the same quarter of 1999. Improved manufacturing efficiencies in our North American automotive original, fiber glass reinforcement and flat glass businesses and lower selling and administrative expenses in our North American automotive replacement and electronic and specialty fiber glass businesses more than offset the slightly higher raw material and energy costs in our flat and fiber glass reinforcement businesses. Chemicals sales increased 16% to $389 million compared to $335 million in the same quarter of 1999. Substantial increases in selling prices for our chlorine and other chlor-alkali products contributed 12% to sales growth and volume improvements of 5% for certain chlor-alkali and specialty chemical products were offset slightly by a 1% decline from the negative effect of foreign currency translation principally on our European optical products business. Operating income increased to $74 million in the first quarter of 2000 from $36 million in the same quarter of 1999 due to the same factors that contributed to the overall sales increase and manufacturing efficiencies in our chlor-alkali and optical products businesses. These favorable factors were partially offset by higher raw material and energy costs. Other Factors The Company recorded a pretax charge of $39 million in the first quarter of 2000, which is included in other unallocated corporate expense, representing the write-off of an equity investment. The Company's pretax earnings for the first quarter of 2000 and 1999 included net periodic pension income of $21 million and $15 million, respectively, related to its U.S. defined benefit pension plans. Interest expense increased during the first quarter of 2000 as compared to the same quarter in 1999 due to the issuance of $800 million aggregate principal amount of debt securities in August 1999 to repay a substantial portion of the short-term debt issued to finance the acquisitions of the ICI businesses and PRC-DeSoto. The increase in the overall effective tax rate is due to the impact of the write-off of the equity investment in the first quarter of 2000. The increase in receivables-net is due primarily to increased sales in our coatings and glass segments. The increase in short-term borrowings is due in part to the issuance of commercial paper to finance certain acquisitions. - 13 - Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". The effective date of this standard has been delayed to fiscal years beginning after June 15, 2000. The Company is currently evaluating the prospective impact of this standard on its financial position and results of operations. Conversion to the Euro On January 1, 1999, eleven of the member countries of the European Monetary Union converted from their sovereign currencies to a common currency, the euro. At that time, fixed conversion rates between the legacy currencies and the euro were set. The legacy currencies will remain legal tender through July 1, 2002. Beginning January 1, 2002, euro-denominated currency will be issued. No later than July 1, 2002, the participating countries will withdraw all bills and coins so that their legacy currencies will no longer be considered legal tender. PPG has identified and substantially addressed the significant issues that may have resulted from the euro conversion. These issues include increased competitive pressures from greater price transparency, changes to information systems to accommodate various aspects of the new currency and exposure to market risk with respect to financial instruments. The impact on PPG's operating results and financial condition from the conversion to the euro has not been, and is not expected to be, material. Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Management's Discussion and Analysis and other sections of this Form 10-Q contain forward- looking statements that reflect the Company's current views with respect to future events and financial performance. Forward-looking statements are identified by the use of the words "aim," "believe," "expect," "anticipate," "intend," "estimate" and other expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission. Also, note the following cautionary statements. Many factors could cause actual results to differ materially from the Company's forward-looking statements. Among these factors are increasing price and product competition by foreign and domestic competitors, fluctuations in the cost and availability of raw materials, the ability to maintain favorable supplier relationships and arrangements, economic and political conditions in international markets, the ability to penetrate existing, developing and emerging foreign and domestic markets, which also depends on economic and political conditions, foreign exchange rates and fluctuations in those rates. Further, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. The consequences of material differences in the results as compared to those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which - 14 - could have a material adverse effect on the Company's consolidated financial condition, operations or liquidity. Commitments and Contingent Liabilities, including Environmental Matters PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial money damages are sought. These lawsuits and claims relate to product liability, contract, patent, environmental, antitrust and other matters arising out of the conduct of PPG's business. See Note 8, "Commitments and Contingent Liabilities," to the condensed financial statements in this Form 10-Q for an expanded description of certain of these lawsuits. PPG's lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental and other matters. Management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG will not have a material effect on PPG's consolidated financial position, results of operations or liquidity. It is PPG's policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are not discounted. As of March 31, 2000 and December 31, 1999, PPG had reserves for environmental contingencies totaling $79 million and $82 million, respectively. Pre-tax charges against income for environmental remediation costs for the three months ended March 31, 2000 and 1999 totaled $1 million and $2 million, respectively, and are included in "Other charges" in the condensed statement of income. Cash outlays related to such environmental remediation for the three months ended March 31, 2000 and 1999 aggregated $4 million and $6 million, respectively. Management anticipates that the resolution of the Company's environmental contingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management's opinion, the Company operates in an environmentally sound manner and the outcome of the Company's environmental contingencies will not have a material effect on PPG's financial position or liquidity. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from December 31, 1999. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's environmental contingencies are expected to be resolved over an extended period of time. Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated. The loss contingencies related to the remaining portion of such unreserved exposure include significant unresolved issues such as the nature and extent of contamination, if any, at sites and the methods that may have to be employed should remediation be required. - 15 - With respect to certain waste sites, the financial condition of any other potentially responsible parties also contributes to the uncertainty of estimating PPG's final costs. Although contributors of waste to sites involving other potentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a major contributor to such sites. The impact of evolving programs, such as natural resource damage claims, industrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. Item 3. Quantitative and Qualitative Disclosures About Market Risk - -------------------------------------------------------------------- There were no material changes in the Company's exposure to market risk from December 31, 1999. - 16 - PART II. OTHER INFORMATION Item 1. Legal Proceedings - --------------------------- In the Company's Form 10-K for the year ended December 31, 1999, it was reported that the Company has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. In many of the cases, the plaintiffs allege that the Company should be liable under various theories for injuries involving asbestos-containing thermal insulation products manufactured and distributed by Pittsburgh Corning Corporation (PC). The Company and Corning Incorporated are each 50% shareholders of PC. On April 16, 2000, PC filed a petition for reorganization under the federal bankruptcy code. During the three months ended March 31, 2000, the Company recorded an after-tax charge of $35 million for the write-off of its equity investment in PC. Item 2. Change in Securities and Use of Proceeds - -------------------------------------------------- Directors who are not also Officers of the Company receive Common Stock Equivalents pursuant to the Deferred Compensation Plan for Directors and the Directors' Common Stock Plan. Common Stock Equivalents are hypothetical shares of Common Stock having a value on any given date equal to the value of a share of Common Stock. Common Stock Equivalents earn dividend equivalents that are converted into additional Common Stock Equivalents but carry no voting rights or other rights of a holder of Common Stock. The Common Stock Equivalents credited to Directors under both plans are exempt from registration under Section 4(2) of the Securities Act of 1933 as private offerings made only to Directors of the Company in accordance with the provisions of the plans. Under the Company's Deferred Compensation Plan for Directors, each Director must defer receipt of such compensation as the Board mandates. Currently, the Board mandates deferral of one-third of each payment of the basic annual retainer of each Director. Each Director may also elect to defer the receipt of (1) an additional one-third of each payment of the basic annual retainer, (2) all of the basic annual retainer, or (3) all compensation. All deferred payments are held in the form of Common Stock Equivalents. Payments out of the deferred accounts are made in the form of Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). In the first quarter of 2000, the Directors, as a group, were credited with 776 Common Stock Equivalents under this Plan. The values of the Common Stock Equivalents, when credited, ranged from $46.69 to $55.06. Under the Directors' Common Stock Plan, each Director who neither is nor was an employee of the Company is credited annually with Common Stock Equivalents worth one-half of the Director's basic annual retainer. Upon termination of service, the Common Stock Equivalents held in a Director's account are converted to and paid in Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). In the first quarter of 2000, the Directors, as a group, received 314 Common Stock Equivalents under this Plan. The value of each Common Stock Equivalent, when credited, was $46.69. - 17 - Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------- At the Company's Annual Meeting of Shareholders held on April 20, 2000 (the Annual Meeting), the shareholders voted on the election of three directors to serve for the terms indicated in the proxy statement relating to the Annual Meeting. The vote was as follows: Nominees Votes For Votes Withheld -------- --------- -------------- Steven C. Mason 138,786,304 3,100,359 Thomas J. Usher 138,791,974 3,094,689 David R. Whitwam 138,859,974 3,026,689 There were no broker non-votes with respect to this matter. Each of the nominees was elected to serve as a director for the terms indicated in the proxy statement relating to the Annual Meeting. Item 6. Exhibits and Reports on Form 8-K - ------------------------------------------ (a) Exhibits (3) Bylaws of PPG Industries, Inc. (10) Directors' Common Stock Plan (10.1) PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees (12) Computation of Ratio of Earnings to Fixed Charges (27) Financial Data Schedule (b) Reports on Form 8-K (1) The Company filed a Form 8-K on April 17, 2000 reporting the write-off of its equity investment in Pittsburgh Corning Corporation. - 18 - SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PPG INDUSTRIES, INC. ------------------------------------- (Registrant) Date: May 5, 2000 By /s/ W. H. Hernandez ------------------------------------- W. H. Hernandez Senior Vice President, Finance (Principal Financial and Accounting Officer and Duly Authorized Officer) - 19 - PPG INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- INDEX TO EXHIBITS Exhibit Number Description - ------ ----------- (3) Bylaws of PPG Industries, Inc. (10) Directors' Common Stock Plan. (10.1) PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees. (12) Computation of Ratio of Earnings to Fixed Charges. (27) Financial Data Schedule. EX-3 2 BYLAWS OF PPG INDUSTRIES Exhibit 3 BYLAWS OF PPG INDUSTRIES, INC. (Incorporated under the Laws of the Commonwealth of Pennsylvania) ______________________________________ April 20, 2000 TABLE OF CONTENTS -----------------
PAGE ARTICLE I -- MEETINGS OF SHAREHOLDERS Section 1.1. Annual Meetings 1 Section 1.2. Business at Annual Meetings 1 Section 1.3. Nominations of Director Candidates 1 Section 1.4. Other Matters Brought by Shareholders 2 Section 1.5. Special Meetings 3 Section 1.6. Business at Special Meetings 3 Section 1.7. Notice 3 Section 1.8. Quorum 3 Section 1.9. Voting 4 Section 1.10. Proxies; Appointment and Revocation 5 Section 1.11. Meeting Procedure 5 ARTICLE II -- BOARD OF DIRECTORS Section 2.1. Number, Classification and Removal; Vacancies 5 Section 2.2. Qualifications and Powers 7 Section 2.3. Organizational Meeting 7 Section 2.4. Regular Meetings; Notice 7 Section 2.5. Special Meetings; Notice 7 Section 2.6. Quorum; Action 8 Section 2.7. Fees and Expenses 8 Section 2.8. Charitable Contributions 8 Section 2.9. Catastrophe 8 Section 2.10. Limitation of Liability 9 ARTICLE III -- COMMITTEES Section 3.1. Standing Committees 9 (a) Audit Committee 10 (b) Nominating and Governance Committee 10
i (c) Officers-Directors Compensation Committee 10 (d) Investment Committee 10 Section 3.2. Other Committees 11 Section 3.3. Organization of and Action by Committees 11 ARTICLE IV -- OFFICERS Section 4.1. Election 11 Section 4.2. Chairman 12 Section 4.3. Chief Executive Officer 12 Section 4.4. Vice Chairman 12 Section 4.5. President 12 Section 4.6. Vice Presidents and Other Officers 12 Section 4.7. Secretary 13 Section 4.8. Treasurer 13 Section 4.9. Controller 13 Section 4.10. Vacancies 14 Section 4.11. Delegation of Duties 14 ARTICLE V -- MISCELLANEOUS CORPORATE TRANSACTIONS AND DOCUMENTS Section 5.1. Borrowing 14 Section 5.2. Execution of Instruments 14 Section 5.3. Voting and Acting with Respect to Stock and Other Securities Owned by the Corporation 15 ARTICLE VI -- INDEMNIFICATION Section 6.1. Entitlement to Indemnification 15 Section 6.2. Advancement of Expenses 16 Section 6.3. Indemnification Procedure 16 Section 6.4. Partial Indemnification 17 Section 6.5. Insurance 17 Section 6.6. Agreements 18 Section 6.7. Miscellaneous 18 Section 6.8. Construction 18
ii Section 6.9. Effectiveness 18 Section 6.10. Amendment 18 ARTICLE VII -- CAPITAL STOCK Section 7.1. Share Certificates 19 Section 7.2. Transfer of Shares 19 Section 7.3. Holders of Record 20 Section 7.4. Replacement 20 ARTICLE VIII -- MISCELLANEOUS Section 8.1. Description of Seal 21 Section 8.2. Fiscal Year 21 Section 8.3. Gender 21 Section 8.4. Adoption, Amendment or Repeal of Bylaws 21
iii BYLAWS ------ OF -- PPG INDUSTRIES, INC. -------------------- (Incorporated under the Laws of the Commonwealth of Pennsylvania) ARTICLE I MEETINGS OF SHAREHOLDERS ------------------------ Section 1.1. Annual Meetings. An annual meeting of the shareholders shall ------------ ---------------- be held each year on such day as the Board of Directors of the Corporation (the "Board of Directors") may designate, or, if not so designated, on the third Thursday in April if not a legal holiday, and if a legal holiday, then on the next business day following. Annual meetings shall be held at the registered office of the Corporation, or at such other places, within or without the Commonwealth of Pennsylvania, as may be designated by the Board of Directors. Section 1.2. Business at Annual Meetings. The business at each annual ------------ ---------------------------- meeting of the shareholders shall include: (a) a review of the business of the preceding year; (b) the election of directors; and (c) such other business as may properly be brought before the meeting. No business may be transacted at any annual meeting other than (i) matters referred to in the notice of the meeting or any supplement thereto, (ii) matters otherwise properly brought before the meeting by or at the direction of the Board of Directors, (iii) matters properly brought before the meeting by one or more shareholders, but only in accordance and upon compliance with the provisions of the proxy rules of the Securities and Exchange commission and the notice provisions of Sections 1.3 and 1.4 of these bylaws and (iv) matters which are incidental or germane to any of the foregoing. Section 1.3. Nominations of Director Candidates. Nominations for the ------------ ----------------------------------- election of directors at a meeting of shareholders may be made only (a) by the Board of Directors or a committee appointed by the Board of Directors or (b) by a holder of record of stock entitled to vote in the election of the directors to be elected; but a nomination (other than a nomination to fill a vacancy resulting from removal from office by a vote of the shareholders under Article Sixth of the Restated Articles of Incorporation) may be made 1 by a shareholder only if written notice of such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary and has been received by the Secretary at the principal executive offices of the Corporation not later than (i) with respect to an election to be held at an annual meeting of shareholders held on the third Thursday in April, 90 days prior to such annual meeting and (ii) with respect to an election to be held at an annual meeting of shareholders held on a date other than the third Thursday in April or an election to be held at a special meeting of the shareholders, the close of business on the tenth day following the date of the first public disclosure of the date of such meeting. For purposes of this Section 1.3, the first public disclosure of the date of any special meeting of shareholders or any annual meeting of shareholders held on a date other than the third Thursday in April shall be when disclosure of such meeting date is first made in a filing made by the Corporation with the Securities and Exchange Commission, in any notice given to the New York Stock Exchange, or in a news release reported by the Dow Jones News Service, Reuters, Bloomberg, Associated Press or comparable national news service. Each notice of nomination from a shareholder shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to be present at the meeting in person or by proxy to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated by the Board of Directors; and (e) the written consent of each nominee, signed by such nominee, to serve as a director of the Corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person by a shareholder not made in compliance with the foregoing procedure. Section 1.4. Other Matters Brought by Shareholders. For business other ------------ -------------------------------------- than nominations of director candidates properly brought before an annual meeting by a shareholder pursuant to clause (c) of Section 1.2 of these bylaws, the shareholder must give timely notice thereof in writing to the Secretary and such business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be given, either by personal delivery or by United States mail, postage prepaid, to the Secretary and received by the Secretary at the principal executive officers of the Corporation not later than 90 days prior to such annual meeting, provided that, if such 2 annual meeting is held on a date other than the third Thursday in April, such written notice must be given within ten days after the first public disclosure of the date of such meeting. For purposes of this Section 1.4, the first public disclosure of the date of any annual meeting of shareholders held on a date other than the third Thursday in April shall be when disclosure of such meeting date is first made in a filing by the Corporation with Securities and Exchange Commission, in any notice given to the New York Stock Exchange, or in a news release reported by the Dow Jones News Service, Reuters, Bloomberg, Associated Press or comparable national news service. Such shareholder's notice shall set forth (a) as to each matter a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder; (b) the beneficial owner, if any, on whose behalf the notice is given and a specific representation that the shareholder intends to be present at the meeting in person or by proxy to present and speak as to such business; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the notice is given (i) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. The presiding officer of the meeting may refuse to permit any business to be brought before an annual meeting by a shareholder without compliance with the procedure set forth in this Section 1.4. Section 1.5. Special Meetings. Special meetings of the shareholders may be ------------ ----------------- called at any time, for the purpose or purposes set forth in the call, by the Board of Directors or by the Chairman of the Board of Directors. Special meetings shall be held at the registered office of the Corporation, or at such other places, within or without the Commonwealth of Pennsylvania, as may be designated by the Board of Directors or the Chairman of the Board of Directors. Section 1.6. Business at Special Meetings. No business may be transacted ------------ ----------------------------- at any special meeting of the shareholders other than matters referred to in the notice of the meeting or any supplement thereto and matters which are incidental or germane thereto. Section 1.7. Notice. Written notice specifying the place, date and time ------------ ------- and the general nature of business to be transacted at each meeting of the shareholders shall be given by the Secretary to each shareholder of record entitled to vote at such meeting. Section 1.8. Quorum. A shareholders' meeting shall not be organized for ------------ ------- the transaction of business unless a quorum is present. At any meeting, the presence in 3 person or by proxy of shareholders entitled to cast the minimum number of votes required by law to constitute a quorum on a particular matter in the absence of a bylaw to the contrary, or if no such number is required by law, at least a majority of the votes which all shareholders are entitled to cast on such matter, shall be necessary and sufficient to organize a meeting for the purpose of considering such matter. Notwithstanding the withdrawal of enough shareholders to leave less than the number of votes required by the preceding sentence, the shareholders who continue to be present at a duly organized meeting shall constitute a quorum in order to continue to do business until adjournment. If a meeting cannot be organized because a quorum has not attended, those present in person or by proxy may by majority vote adjourn the meeting to such time and place as they may determine, and it shall not be necessary to give notice of such adjourned meeting or the business to be transacted at such meeting to any shareholder other than by announcement at the meeting at which such adjournment is taken, unless the Board of Directors fixes a new record date for the adjourned meeting. Section 1.9. Voting. The voting at all meetings of the shareholders may be ------------ ------- by voice; but any qualified voter may demand a stock vote, whereupon (i) with respect to any matter specifically set forth in the notice of meeting, such stock vote shall be taken by ballot, and (ii) in the case of any other vote, such stock vote may be taken by ballot, by show of hands, or any other manner selected by the presiding officer. If the vote is taken by ballot, each ballot shall state the name of the shareholder voting and the number of shares voted by him, and if such ballot be cast by proxy, it shall state the name of the proxy voting and the number of shares voted by him as proxy. Each shareholder shall be entitled to one vote for each share having voting power registered in his name on the books of the Corporation as of the record date for the determination of the shareholders entitled to vote at the meeting, and it may be voted by the shareholder or his duly authorized proxy. When a stock vote is demanded, all questions shall be decided by a vote of shareholders present, in person or by proxy, entitled to cast at least a majority of the votes which all shareholders present and voting (excluding abstentions) are entitled to cast on the particular matter, unless otherwise especially provided in these bylaws, in the Restated Articles of Incorporation, as amended from time to time (the "Restated Articles of Incorporation"), or by law, and except that in the case of privileged, subsidiary or incidental motions or questions involving the convenience of the shareholders present, the presiding officer may call for a per capita vote, either by voice or by show of hands. Where a proxy or proxies represent the holders of shares entitled to cast in aggregate a sufficient number of votes to adopt a particular resolution, the vote of such proxy or proxies may, in the discretion of the presiding officer, constitute action by the shareholders. 4 A complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order with the address of and the number of shares held by each, shall be prepared by the Secretary and shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. In lieu of the making of a list, the Corporation may make the information therein available at the meeting by any other means. Section 1.10. Proxies; Appointment and Revocation. Every shareholder ------------- ------------------------------------ entitled to vote at a meeting of the shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons, but not more than three, to act for him by proxy. Every proxy shall be executed in writing (including telegram, cable or radiogram, telex, TWX, facsimile transmission or similar transmission), by the shareholder or by his duly authorized attorney-in-fact, and filed with the Secretary. Section 1.11. Meeting Procedure. At all meetings of shareholders, the ------------- ------------------ Chairman of the Board of Directors shall preside, but in his absence, the presiding officer shall be designated by the Board of Directors, or if not so designated, selected by the shareholders present. The Secretary shall take the minutes of the meeting, but in the absence of the Secretary or an Assistant Secretary, the presiding officer shall designate any person to take the minutes of the meeting. The presiding officer of any meeting shall determine the order of business and the procedure at the meeting, including such regulation of the conduct of discussion as seems to him in order. The conduct of meetings shall be governed by accepted corporate practice (not Roberts' Rules), the fundamental --- rule being that all who are entitled to take part shall be treated with fairness and good faith. ARTICLE II BOARD OF DIRECTORS ------------------ Section 2.1. Number, Classification and Removal; Vacancies. ------------ ---------------------------------------------- Article Sixth of the Restated Articles of Incorporation reads as follows: "SIXTH. 6.1 The business and affairs of the corporation shall be managed ----- by a Board of Directors comprised as follows: 5 (a) The Board of Directors shall consist of not less than 9 nor more than 17 persons, the exact number to be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority vote of the directors then in office; (b) Directors shall, from and after the annual meeting of shareholders held in 1987, continue to be classified with respect to the time for which they shall severally hold office by dividing them into 3 classes, as nearly equal in number as possible. At such meeting and at each succeeding annual meeting of shareholders, the class of directors then being elected shall be elected to hold office for a term of 3 years. Each director shall hold office for the term for which elected and until his or her successor shall have been elected and qualified; (c) Subject to the rights of the holders of any series of preferred stock then outstanding, any director, any class of directors, or the entire Board of Directors, may be removed from office by shareholder vote at any time, with or without assigning any cause, but only if shareholders entitled to cast at least 80% of the votes which all shareholders would be entitled to cast at an annual election of directors or of such class of directors shall vote in favor of such removal; provided, however, that no individual director shall be removed (unless the entire Board of Directors or any class of directors be removed) in case the votes cast against such removal would be sufficient, if voted cumulatively for such director, to elect him or her to the class of directors of which he or she is a member; and (d) Subject to the rights of the holders of any series of preferred stock then outstanding, vacancies in the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled only by a majority vote of the remaining directors then in office, though less than a quorum, except that vacancies resulting from removal from office by a vote of the shareholders may be filled by the shareholders at the same meeting at which such removal occurs. All directors elected to fill vacancies shall hold office for a term expiring at the annual meeting of shareholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 6 6.2 Notwithstanding any other provisions of law, the Restated Articles or the bylaws of the corporation, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote in an annual election of directors, voting together as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article Sixth." Section 2.2. Qualifications and Powers. No person shall be elected a ------------ -------------------------- director unless such person owns at least 100 shares of Common Stock of the Corporation. In addition to the powers and authority expressly conferred upon it by these bylaws and the Restated Articles of Incorporation, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things in the management of the Corporation as are not, by these bylaws, by the Restated Articles of Incorporation, or by law directed or required to be exercised or done by the shareholders. Section 2.3. Organizational Meeting. The first regular meeting of each ------------ ----------------------- newly-elected Board of Directors shall be held immediately following the annual meeting of the shareholders, and no notice of such meeting shall be necessary in order legally to constitute the meeting, provided that a quorum of the Board of Directors shall be present. At such meeting the Board of Directors shall organize itself, and may elect officers, appoint members of standing committees and transact any other business. Section 2.4. Regular Meetings; Notice. Regular meetings of the Board of ------------ ------------------------- Directors shall be held at such time and place as shall be designated by the Board of Directors from time to time. Notice of such regular meetings of the Board of Directors shall not be required to be given, except as otherwise expressly required in these bylaws or by law. However, whenever the time or place of regular meetings shall be initially fixed or changed, notice of such action shall be given to each director not participating in such action. Any business may be transacted at any regular meeting. Section 2.5. Special Meetings; Notice. Special meetings of the Board of ------------ ------------------------- Directors may be called at any time by the Chairman of the Board of Directors or, in his absence or during his inability to act, by the Chief Executive Officer or, in the absence or during the inability of either to act, by the Vice Chairman of the Board of Directors or, in the absence or during the inability of any of them to act, by the President, or by any four directors of the Corporation, by giving notice to the Secretary. Notice of every special meeting of the Board of Directors stating the place, day and hour thereof shall be given by the Secretary to each director by being mailed by first class at least five days, or 7 express mail or sent by courier service at least three days, or sent by telex, TWX, telegram, facsimile transmission or similar transmission or given personally or by telephone at least 24 hours, before the time at which the meeting is to be held. Any business may be transacted at any special meeting. Section 2.6. Quorum; Action. A meeting of the Board of Directors shall not ------------ --------------- be organized for the transaction of business unless a quorum is present. At any meeting, a majority of the directors then in office shall be necessary and sufficient to organize the meeting. A meeting at which a quorum is not present may be adjourned from time to time by a majority vote of those present to such time and place as they may determine, and it shall not be necessary to give notice of such adjourned meeting or the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. Notwithstanding the withdrawal of enough directors to leave less than a majority, the directors who continue to be present at a duly organized meeting shall constitute a quorum in order to continue to do business. Unless otherwise provided in these bylaws, in the Restated Articles of Incorporation or by law, the acts of a majority of the directors present and voting (excluding abstentions) at a duly organized meeting shall be the acts of the Board of Directors. The yeas and nays shall be taken and recorded in the minutes at the request of any director present at a meeting. Section 2.7. Fees and Expenses. The Board of Directors shall fix the ------------ ------------------ compensation of each director (except for those directors who are officers of the Corporation, whose compensation is to be fixed by the Officers-Directors Compensation Committee) including, without limitation: (a) a fixed annual fee; and (b) a fixed sum for attendance at any meeting of the Board of Directors or any committee. Directors shall be reimbursed for the expenses of attendance at any meeting of the Board of Directors or any committee. Section 2.8. Charitable Contributions. The Board of Directors may ------------ ------------------------- authorize contributions out of the income of the Corporation for the public welfare or for religious, charitable, scientific, or educational purposes. Section 2.9. Catastrophe. Notwithstanding any other provisions of law, the ------------ ------------ Restated Articles of Incorporation or these bylaws, during any emergency period caused by a national catastrophe or local disaster, a majority of the surviving members (or the sole survivor) of the Board of Directors who have not been rendered incapable of acting because of incapacity or the difficulty of communication or transportation to the place of meeting, shall constitute a quorum for the sole purpose of electing directors to fill such emergency vacancies or to reduce the size of the full Board of Directors or both; and a 8 majority of the directors (or the sole survivor) present at such a meeting may take such action. Directors so elected shall serve until such absent directors are able to attend meetings or until the shareholders act to elect directors for such purpose. During such an emergency period, if the Board of Directors and the Policy and Planning Committee are unable to or fail to meet, any action appropriate to the circumstances may be taken by such officers of the Corporation as may be present and able. Questions as to the existence of a national catastrophe or local disaster and the number of surviving members capable of acting shall be conclusively determined at the time by the directors or the officers so acting. Section 2.10. Limitation of Liability. To the fullest extent that the laws ------------- ------------------------ of the Commonwealth of Pennsylvania, as in effect on January 27, 1987, or as thereafter amended, permit the elimination or limitation of the liability of directors, no director of the Corporation shall be personally liable for monetary damages as such for any action taken, or any failure to take any action, as a director. This Section 2.10 shall not apply to any actions filed prior to January 27, 1987, nor to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. The provisions of this Section 2.10 shall be deemed to be a contract with each director of the Corporation who serves as such at any time while such provisions are in effect, and each such director shall be deemed to be serving as such in reliance on such provisions. Any amendment to or repeal of this Section 2.10, or adoption of any other Article or bylaw of the Corporation, which has the effect of increasing director liability shall require the affirmative vote of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote in an annual election of directors, voting together as a single class. Any such amendment or repeal, other Article or bylaw, shall operate prospectively only and shall not have effect with respect to any action taken, or any failure to act, by a director prior thereto. ARTICLE III COMMITTEES ---------- Section 3.1. Standing Committees. The Board of Directors, upon the ------------ -------------------- recommendation of the Nominating and Governance Committee, shall appoint the members of the following standing committees: 9 (a) Audit Committee, comprised of independent, non-employee members of the Board of Directors, which shall recommend to the Board of Directors the independent public accountants to be appointed or elected annually; review with the independent public accountants and the internal auditors the scope and plan of their respective future audit programs and their respective reports and recommendations concerning audit findings; meet with the officers of the Corporation and separately with the independent public accountants and with the internal auditors to review audits, annual financial statements prior to their release, accounting and financial controls and compliance with appropriate codes of conduct; report on its meetings to the Board of Directors together with its comments and recommendations; and have such other powers and perform such other duties as the Board of Directors may specify. (b) Nominating and Governance Committee, comprised of non-employee members of the Board of Directors, which shall recommend to the Board of Directors (i) the persons to be nominated by the Board of Directors to stand for election as directors at the annual meeting of the shareholders, (ii) the person or persons to be elected by the Board of Directors to fill any vacancy or vacancies in the Board of Directors, (iii) the persons to be elected by the Board of Directors to the offices of the Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman of the Board of Directors, President and any office which would cause such person to be an executive officer (as defined under the Securities Exchange Act of 1934) of the Corporation, (iv) the persons to be appointed by the Board of Directors as members of the Executive Committee, (v) actions to be taken regarding the structure, organization and functioning of the Board of Directors and (vi) the directors to be appointed to serve as members, and as chairmen, of the standing and other committees established by the Board of Directors; and have such other powers and perform such other duties as the Board of Directors may specify." (c) Officers-Directors Compensation Committee, comprised of non-employee members of the Board of Directors, which shall approve, adopt, administer, interpret, amend, suspend or terminate the compensation plans of the Corporation applicable to, and fix the compensation and benefits of, (i) all officers of the Corporation serving as directors of the Corporation and (ii) all executive officers (as defined under the Securities Exchange Act of 1934) of the Corporation; and have such other powers and perform such other duties as the Board of Directors may specify. (d) Investment Committee, comprised of non-employee members of the Board of Directors, which shall (i) review the investment policies (a) of the Corporation concerning its pension plans and appropriate benefit plans and (b) of the PPG Industries 10 Foundation concerning its assets and (ii) review (a) the selection of providers of services to such pension plans and benefit plans and such Foundation, (b) the allocation among asset classes, and the performance, of the investments of such pension plans and benefit plans and such Foundation, and (c) the actuarial assumptions concerning, and the funding levels of, such pension plans; and have such other powers and perform such other duties as the Board of Directors may specify. Section 3.2. Other Committees. The Board of Directors shall establish the ------------ ----------------- Executive Committee and may establish such other committees as it may deem appropriate, all of which committees shall have such powers and perform such duties as the Board of Directors may specify and have such membership, which may or may not include directors, as the Board of Directors may appoint. Section 3.3. Organization of and Action by Committees. All committee ------------ ----------------------------- ----------- members appointed by the Board of Directors shall serve at the pleasure of the Board of Directors. All committees shall determine their own organization, procedures and times and places of meeting, unless otherwise directed by the Board of Directors. Any action taken by any committee shall be subject to alteration or revocation by the Board of Directors; provided, however, that third parties shall not be prejudiced by such alteration or revocation. ARTICLE IV OFFICERS -------- Section 4.1. Election. The Board of Directors shall elect a Chairman of ------------ --------- the Board of Directors, a Secretary and a Treasurer. In addition, the Board of Directors may elect a Chief Executive Officer, Vice Chairman of the Board of Directors, President and Controller, or any one or more of them, and may elect one or more Vice Presidents or other officers. Each officer elected by the Board of Directors shall serve until the next organizational meeting of the Board of Directors and until his successor, if any, shall have been elected, unless his resignation or removal shall expressly be effective earlier. Each officer appointed by the Executive Committee shall serve until his successor, if any, shall have been appointed, unless his resignation or removal shall expressly be effective earlier. Any officer of the Corporation may be removed by the Board of Directors with or without cause. 11 Section 4.2. Chairman. The Chairman of the Board of Directors shall have ------------ --------- general control and direction of the business of the Corporation. He shall preside at all meetings of shareholders and directors and shall have such other powers and perform such other duties as the Board of Directors may specify. The Chairman of the Board of Directors shall be an ex officio member, without the right to vote, of the Audit, Nominating and Governance, Officers-Directors Compensation and Investment Committees. No person shall hold the position of Chairman of the Board of Directors for a period in excess of ten years. Section 4.3. Chief Executive Officer. Subject to the control of the ------------ ----------------------- Chairman of the Board of Directors, the Chief Executive Officer shall have general control and direction of the business of the Corporation. If no person is elected to the office of the Chief Executive Officer, the Chairman of the Board of Directors shall be the Chief Executive Officer. Section 4.4. Vice Chairman. The Vice Chairman of the Board of Directors ------------ -------------- shall have such powers and perform such duties as the Board of Directors or the Chairman of the Board of Directors may specify. Section 4.5. President. The President shall have such powers and perform ------------ ---------- such duties as the Board of Directors or the Chairman of the Board of Directors may specify. If the office of President is vacant, the Chairman of the Board of Directors shall have all of the powers and perform all acts incident to the office of the President. Section 4.6. Vice Presidents and Other Officers. The Vice Presidents and ------------ ----------------------------------- other officers elected by the Board of Directors shall have such powers and perform such duties as the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors or the President may specify. In the absence of the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors and the President, or during their inability to act, such Vice Presidents and other officers may exercise, subject to the control of the Board of Directors, the powers and duties of the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors and the President. The Vice Presidents and other officers appointed by the Executive Committee shall have such powers and perform such duties as the entity that appointed them or any officers to whom they report, directly or indirectly, may specify. 12 Section 4.7. Secretary. The Secretary shall attend all meetings of the ------------ ---------- shareholders and of the Board of Directors and shall keep careful records of all such meetings, the proceedings of which shall be transcribed into the minute book of the Corporation over his signature. He shall have custody of the corporate seal and of all books, documents, and papers of the Corporation committed to his charge. He shall cause all notices to be given to shareholders and to directors of the Corporation as may be required by law or these bylaws. He shall make such reports, have such other powers and perform such other duties as are authorized or required by law or the Board of Directors may specify. The Secretary may delegate to one or more Assistant Secretaries any of his powers and duties. In the absence of the Secretary or during his inability to act, his powers and duties shall be performed by one or more Assistant Secretaries. Section 4.8. Treasurer. The Treasurer shall have the custody and care of, ------------ ---------- and shall manage and invest, all the money, securities, and funds of the Corporation. To the extent not invested in stocks, bonds or other securities, the Treasurer shall deposit the money and funds of the Corporation in such bank or banks or depositories as the Board of Directors may designate, provided that the Board of Directors may delegate to the Treasurer, subject to such limitations as it may from time to time prescribe, the power to designate such bank or banks or depositories. Under the direction of the Board of Directors, the Treasurer shall pay out and dispose of all drafts, notes, checks, warrants, and orders for the payment of money; render such statements to the Board of Directors as it shall require; and have such other powers and perform such other duties as the Board of Directors may specify or which are authorized or required of the Treasurer by law. The Treasurer may delegate any of his powers and duties to one or more Assistant Treasurers and, if authorized by the Board of Directors, any officer or agent of the Corporation. If required by the Board of Directors, the Treasurer and any Assistant Treasurer shall give bond for the faithful discharge of his duties in such amount as may be fixed by the Board of Directors and with such surety as may be approved by the Board of Directors. In the absence of the Treasurer or during his inability to act, his powers and duties shall be performed by one or more Assistant Treasurers. Section 4.9. Controller. The Controller shall keep or cause to be kept all ------------ ----------- books of account and accounting records of the Corporation. He shall periodically render to the Board of Directors financial statements and reports covering the results of the operations of the Corporation. Subject to the control of the Board of Directors, he shall determine all accounting policies and procedures, including, without limiting the generality of the foregoing, matters relating to depreciation, depletion, valuation of inventories, the method of creating reserves and accruals, and the establishment of the value of land, buildings, 13 equipment, securities and other assets and shall perform all other acts authorized or required of the Controller by law and shall have such other powers and perform such other duties as the Board of Directors may specify. The Controller may delegate to one or more Assistant Controllers any of his powers and duties. In the absence of the Controller or during his inability to act, his powers and duties shall be performed by one or more Assistant Controllers. If the office of Controller is vacant, his duties shall be performed by the officer designated by the Board of Directors. Section 4.10. Vacancies. Vacancy in any office or position by reason of ------------- ---------- death, resignation, removal, disqualification or any other cause, shall be filled in the manner provided in this ARTICLE IV for regular election or appointment to such office. Section 4.11. Delegation of Duties. In case of the absence of any officer ------------- --------------------- of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate for the time being the powers and duties, or any of them, of such officer to any other officer or director or other person whom it may select. ARTICLE V MISCELLANEOUS CORPORATE TRANSACTIONS AND DOCUMENTS -------------------------------------------------- Section 5.1. Borrowing. No officer, agent or employee of the Corporation ------------ ---------- shall have any power or authority to borrow money on its behalf, to guarantee or pledge its credit, or to mortgage or pledge any of its real or personal property, except within the scope and to the extent of such authority as may be delegated by the Board of Directors. Authority may be granted by the Board of Directors for any of the above purposes and may be general or limited to specific instances. Section 5.2. Execution of Instruments. All properly authorized notes, ------------ ------------------------- bonds, drafts, acceptances, checks, endorsements (other than for deposit), guarantees, and all evidences of indebtedness of the Corporation whatsoever, and all deeds, mortgages, contracts and other instruments requiring execution by the Corporation may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer; and authority to sign any such instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons, subject to such 14 requirements as to countersignature or other conditions, as the Board of Directors may from time to time determine. Facsimile signatures may be used on checks, notes, bonds or other instruments. Any person having authority to sign on behalf of the Corporation may delegate, from time to time, by instrument in writing, all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. Unless otherwise delegated, the Board of Directors retains the authority to approve any and all transactions entered into on behalf of the Corporation. Section 5.3. Voting and Acting with Respect to Stock and Other Securities ------------ ------------------------------------------------------------ Owned by the Corporation. The Chairman of the Board of Directors, the Chief - ------------------------- Executive Officer, the Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer of the Corporation shall have the power and authority to vote and act with respect to all stock and other securities in any other corporation owned by this Corporation, unless the Board of Directors confers such authority, which may be general or confined to specific instances, upon some other officer or person. Any person so authorized shall have the power to appoint an attorney or attorneys, with general power of substitution, as proxies for the Corporation, with full power to vote and act on behalf of the Corporation with respect to such stock and other securities. ARTICLE VI INDEMNIFICATION --------------- Section 6.1. Entitlement to Indemnification. The Corporation shall, to the ------------ ------------------------------- extent that a determination of entitlement is made pursuant to, or to the extent that entitlement to indemnification is otherwise accorded by, this Article, indemnify every person who was or is a director, officer or employee of the Corporation (hereinafter referred to as the "Indemnitee") who was or is involved in any manner (including, without limitation, as a party or a witness), or is threatened to be made so involved, in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including without limitation, any investigation, claim, action, suit or proceeding by or in the right of the Corporation) by reason of the fact that the Indemnitee is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or other representative of another corporation, partnership, joint venture, trust, employee benefit plan or other entity (such investigation, claim, action, suit or proceeding 15 hereinafter being referred to as a "Proceeding"), against any expenses and any liability actually and in good faith paid or incurred by such person in connection with such Proceeding; provided, that indemnification may be made with respect to a Proceeding brought by an Indemnitee against the Corporation only as provided in the last sentence of this Section 6.1. As used in this Article, the term "expenses" shall include fees and expenses of counsel and all other expenses (except any liability) and the term "liability" shall include amounts of judgments, fines or penalties and amounts paid in settlement. Indemnification may be made under this Article for expenses incurred in connection with any Proceeding brought by an Indemnitee against the Corporation only if (1) the Proceeding is a claim for indemnification under this Article or otherwise, (2) the Indemnitee is successful in whole or in part in the Proceeding for which expenses are claimed, or (3) the indemnification for expenses is included in a settlement of, or is awarded by a court in, a Proceeding to which the Corporation is a party. Section 6.2. Advancement of Expenses. All expenses incurred in good faith ------------ ------------------------ by or on behalf of the Indemnitee with respect to any Proceeding shall, upon written request submitted to the Secretary of the Corporation, be advanced to the Indemnitee by the Corporation prior to final disposition of such Proceeding, subject to any obligation which may be imposed by law or by provision in the Articles, bylaws, an agreement or otherwise to repay the Corporation in certain events. Section 6.3. Indemnification Procedure. ------------ -------------------------- (a) To obtain indemnification under this Article, an Indemnitee shall submit to the Secretary of the Corporation a written request, including such supporting documentation as is reasonably available to the Indemnitee and reasonably necessary to the making of a determination of whether and to what extent the Indemnitee is entitled to indemnification. The Secretary of the Corporation shall promptly thereupon advise the General Counsel in writing of such request. (b) The Indemnitee's entitlement to indemnification shall be determined by a Referee (selected as hereinafter provided) in a written opinion. The Referee shall find the Indemnitee entitled to indemnification unless the Referee finds that the Indemnitee's conduct was such that, if so found by a court, indemnification would be prohibited by Pennsylvania law. (c) "Referee" means an attorney with substantial expertise in corporate law who neither presently is, nor in the past five years has been, retained to represent: (i) the 16 Corporation or the Indemnitee, or an affiliate of either of them, in any matter material to either such party, except to act as a Referee in similar proceedings, or (ii) any other party to the Proceeding giving rise to a claim for indemnification under this Article. The Corporation's General Counsel, if Disinterested (as hereinafter defined), or if not, the Corporation's senior officer who is Disinterested, shall propose a Referee. The Secretary of the Corporation shall notify the Indemnitee of the name of the Referee proposed, whose appointment shall become final unless the Indemnitee, within 10 days of such notice, reasonably objects to such Referee as not being qualified, independent or unbiased. If the Corporation and the Indemnitee cannot agree on the selection of a Referee, or if the Corporation fails to propose a Referee, within 45 days of the submission of a written request for indemnification, the Referee shall be selected by the American Arbitration Association. The General Counsel or a senior officer shall be deemed Disinterested if not a party to the Proceeding and not alleged in the pleadings as to the Proceeding to have participated in the action, or participated in the failure to act, which is the basis for the relief sought in the Proceeding. (d) Notwithstanding any other provision of this Article, to the extent that there has been a determination by a court as to the conduct of an Indemnitee such that indemnification would not be prohibited by Pennsylvania law, or if an Indemnitee would be entitled by Pennsylvania law to indemnification, the Indemnitee shall be entitled to indemnification hereunder. (e) A determination under this Section 6.3 shall be conclusive and binding on the Company but not on the Indemnitee. Section 6.4. Partial Indemnification. If an Indemnitee is entitled under ------------ ------------------------ any provision of this Article to indemnification by the Corporation of a portion, but not all, of the expenses or liability resulting from a Proceeding, the Corporation shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled. Section 6.5. Insurance. The Corporation may purchase and maintain ------------ ---------- insurance to protect itself and any Indemnitee against expenses and liability asserted or incurred by any Indemnitee in connection with any Proceeding, whether or not the Corporation would have the power to indemnify such person against such expense or liability by law, under an agreement or under this Article. The Corporation may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification. 17 Section 6.6. Agreements. The Corporation may enter into agreements with ------------ ----------- any director, officer or employee of the Corporation, which agreements may grant rights to the Indemnitee or create obligations of the Corporation in furtherance of, different from, or in addition to, but not in limitation of, those provided in this Article, without shareholder approval of any such agreement. Without limitation of the foregoing, the Corporation may obligate itself (1) to maintain insurance on behalf of the Indemnitee against certain expenses and liabilities and (2) to contribute to expenses and liabilities incurred by the Indemnitee in accordance with the application of relevant equitable considerations to the relative benefits to, and the relative fault of, the Corporation. Section 6.7. Miscellaneous. The entitlement to indemnification and ------------ -------------- advancement of expenses provided for in this Article (1) shall be a contract right, (2) shall not be exclusive of any other rights to which an Indemnitee may otherwise be entitled under any Article, bylaw, agreement, vote of shareholders or directors or otherwise, (3) shall continue as to a person who has ceased to be a director, officer or employee and (4) shall inure to the benefit of the heirs and legal representatives of any person entitled to indemnification or advancement of expenses under this Article. Section 6.8. Construction. If any provision of this Article shall be held ------------ ------------- to be invalid, illegal or unenforceable for any reason (1) such provision shall be invalid, illegal or unenforceable only to the extent of such prohibition and the validity, legality and enforceability of the remaining provisions of this Article shall not in any way be affected or impaired thereby, and (2) to the fullest extent possible, the remaining provisions of this Article shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Section 6.9. Effectiveness. This Article shall apply to every Proceeding ------------ -------------- other than a Proceeding filed prior to January 27, 1987, except that it shall not apply to the extent that Pennsylvania law does not permit its application to any breach of performance of duty or any failure of performance of duty by an Indemnitee occurring prior to January 27, 1987. Section 6.10. Amendment. This Article may be amended or repealed at any ------------- ---------- time in the future by vote of the directors without shareholder approval; provided, that any amendment or repeal, or adoption of any Article of the Restated Articles or any other bylaw of the Corporation, which has the effect of limiting the rights granted to directors under this Article, shall require the affirmative vote of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote in an 18 annual election of directors, voting together as a single class. Any amendment or repeal, or such Article or other bylaw, limiting the rights granted under this Article shall operate prospectively only, and shall not limit in any way the indemnification provided for herein with respect to any action taken, or failure to act, by an Indemnitee prior thereto. ARTICLE VII CAPITAL STOCK ------------- Section 7.1. Share Certificates. Every holder of fully-paid stock of the ------------ ------------------- Corporation shall be entitled to a certificate or certificates, to be in such form as the Board of Directors may from time to time prescribe, and signed (in facsimile or otherwise, as permitted by law) by the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors, the President or any Vice President and also by the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, which certificate or certificates shall represent and certify the number of shares of stock owned by such holder. In case any officer, transfer agent or registrar who has signed (in facsimile or otherwise, as permitted by law) any share certificate shall cease to be such officer, transfer agent or registrar before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer, transfer agent or registrar had not ceased to be such at the date of its issue. The Board of Directors may authorize the issuance of certificates for fractional shares or, in lieu thereof, scrip or other evidence of ownership, which may (or may not) as determined by the Board of Directors entitle the holder thereof to voting, dividends or other rights of shareholders. Section 7.2. Transfer of Shares. Transfers of shares of stock of the ------------ ------------------- Corporation shall be made on the books of the Corporation only upon surrender to the Corporation of the certificate or certificates for such shares properly endorsed by the shareholder or by his assignee, agent or legal representative, who shall furnish proper evidence of assignment, authority or legal succession, or by the agent of one of the foregoing thereunto duly authorized by an instrument duly executed and filed with the Corporation in accordance with regular commercial practice. Section 7.3. Holders of Record. The Corporation shall be entitled to treat ------------ ------------------ the holder of record of any share or shares of stock of the Corporation as the holder and owner in fact thereof for all purposes and shall not be bound to recognize any equitable or 19 other claim to or interest in any share on the part of any person other than the registered holder thereof, whether or not it shall have express or other notice thereof, except as expressly provided by law. The Board of Directors may fix a record date, within any applicable limits imposed by law or the Restated Articles of Incorporation, for the determination of shareholders for any purpose, including meetings, payment of dividends, allotment of rights and reclassification, conversion or exchange of shares. The Board of Directors may adopt a procedure whereby a shareholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. The resolution of the Board of Directors adopting such a procedure may set forth: (1) the classification of shareholder who may certify; (2) the purpose or purposes for which the certification may be made; (3) the form of certification and information to be contained therein; (4) if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and (5) such other provisions with respect to the procedure as are deemed necessary or desirable. Upon receipt by the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 7.4. Replacement. Each duly appointed transfer agent and registrar ------------ ------------ of the Corporation may issue and register, respectively, from time to time, without further action or approval by or on behalf of the Corporation, new certificates of stock of the Corporation to replace certificates claimed to have been lost, stolen, or destroyed, upon receipt by the transfer agent of an Affidavit of Loss and Bond of Indemnity in such amount and upon such terms as may be required by the transfer agent to protect the Corporation, the transfer agent and registrar against all loss, cost or damage arising from the issuance of such new certificates, provided that a Bond of Indemnity shall not be required where not more than five shares of stock are involved. 20 ARTICLE VIII MISCELLANEOUS Section 8.1. Description of Seal. The corporate seal of the Corporation ------------ -------------------- shall be inscribed with the name of the Corporation, and the words "Corporate Seal," and may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. Section 8.2. Fiscal Year. The fiscal year of the Corporation shall be the ------------ ------------ calendar year. Section 8.3. Gender. In these bylaws, words used in the masculine gender ------------ ------- shall include the feminine. Section 8.4. Adoption, Amendment or Repeal of Bylaws. Except as otherwise ----------- -------------------------------- ------- provided by law, in the Restated Articles of Incorporation or in these bylaws, new or additional bylaws may be adopted and these bylaws may be amended or repealed by action of the Board of Directors at any regular or special meeting, subject to the power of the shareholders to change such action. __________________________________ CERTIFICATE ----------- I, __________________________, Assistant Secretary of PPG Industries, Inc., a Pennsylvania corporation, hereby certify that the foregoing is a true and correct copy of the bylaws of the Corporation. Witness my hand and the corporate seal of the Corporation this ____ day of ________________. _________________________________ Assistant Secretary 21 EX-10 3 DIRECTORS' COMMON STOCK PLAN Exhibit 10 PPG INDUSTRIES, INC. DIRECTORS' COMMON STOCK PLAN ---------------------------- 1. PURPOSE. The purpose of this Plan is to align the financial interests of ------- the Company's shareholders with those of its Non-Employee Directors by providing such Directors with compensation in the form of Company Common Stock. 2. DEFINITIONS. ----------- "Account" means the account maintained for each Non-Employee Director to which Common Stock Equivalents and Dividend Equivalents are credited. "Annual Contribution" means the Common Stock Equivalents credited to an Account each year under Section 4.1. "Beneficiary" means the person or entity designated by the Participant or the Participant's legal representative as provided under Section 9. "Board" means the Board of Directors of the Company. "Change in Control" has the same meaning as given to that term in the PPG Industries, Inc. Deferred Compensation Plan for Directors, as such plan may be amended from time to time. "Committee" means the Officers-Directors Compensation Committee of the Board. "Common Stock" means the common stock, par value $1.66 2/3 per share, of the Company. "Common Stock Equivalent" means a hypothetical share of Common Stock. "Company" means PPG Industries, Inc. "Dividend Equivalent" means an additional number of Common Stock Equivalents the Company shall credit to each Account as of 1 each dividend payment date declared with respect to the Company's Common Stock. The additional number of Common Stock Equivalents to be credited to each Account shall be equal to: (a) the product of (i) the dividend per share of the Common Stock which is payable as of the dividend payment date, multiplied by (ii) the number of whole Common Stock Equivalents credited to the Account as of the applicable dividend record date; DIVIDED BY ---------- (b) the closing price of a share of the Common Stock on the dividend payment date (or if such stock was not traded on that date, on the next preceding date on which it was traded), as reported in the New York Stock Exchange Composite Transactions. "Non-Employee Director" means a director of the Company who is not a present or former employee of the Company or any of its subsidiaries. "Participant" means a Non-Employee Director who has become eligible to receive benefits under this Plan. A Non-Employee Director becomes a Participant when he or she (1) resigns from the Board and (2) attains 70 years of age; provided however, that the Committee may waive the requirement that the Participant attain 70 years of age. "Plan" means the PPG Industries, Inc. Directors' Common Stock Plan. "Retainer" means the base annual retainer fee paid to each Non-Employee Director by the Company. It does not include committee retainer fees, meeting attendance fees, committee chairperson's retainer fees or any other compensation other than the base annual retainer fee. "Service" means the period of time a Non-Employee Director serves on the Board. 2 3. EFFECTIVE DATE. This Plan shall be effective on and after January 1, 1988. -------------- 4. CREDITING ACCOUNTS. ------------------ 4.1 Each year on the day following the Annual Meeting of Shareholders of the Company, the Company shall credit the Account of each Non-Employee Director who serves on the Board on that day with the number of Common Stock Equivalents determined by dividing one-half of such Director's Retainer by the average closing price of the Common Stock in the New York Stock Exchange Composite Transactions during the 5 days for which such price is available immediately preceding such day of crediting. The Account of any person who ceases to be a Director prior to April 16, 1999, shall be credited with no more than 10 such Annual Contributions and the total number of such Annual Contributions made to his or her Account under this Section 4.1 plus the number which is multiplied by $10,000 to determine the amount credited to the Account under Section 4.2 will not exceed 10. Any Non-Employee Director who is a Director of the Company on or after April 16, 1999 and whose total number of Annual Contributions was limited to 10 under the Plan in effect prior to April 16, 1999, shall have credited to his or her Account such additional Annual Contributions and Dividend Equivalents as are necessary so that such Account is credited with the number of Common Stock Equivalents it would have had credited if such limitation had never existed. 4.2 On the day following the 1988 Annual Meeting of Shareholders of the Company, the Company shall credit the Account of each Non-Employee Director who is age 61 or older on that date with the number of Common Stock Equivalents determined by (1) multiplying $10,000 times his or her number of full fiscal years of Service, but such number of full fiscal years of Service shall not exceed the number determined by subtracting 60 from the Non-Employee Director's age on the day immediately following the 1988 Annual Meeting of Shareholders and (2) then dividing that amount by the average closing price of the Common Stock in the New York Stock Exchange Composite Transactions during the 5 days for which such price is available immediately preceding such day. 3 5. PAYMENTS OF BENEFITS. -------------------- 5.1 Payments from the Account will be made in the form of Common Stock, provided that payment with respect to any partial shares of Common Stock shall be made in the form of cash. However, payments from the Account of any Participant who ceased to be a director of the Company before August 15, 1996 shall continue to be paid in the manner provided by the Plan as effective on August 15, 1996. 5.2 Subject to Section 5.4 and Section 5.5, a Participant may elect to have the amount deferred paid in from one to 15 annual installments after he or she shall cease to be a director of the Company. Such installment(s) shall commence upon or following (i) a specified date; (ii) an event certain; (iii) the earlier of a specified date or an event certain. Installments shall continue to be payable as soon as practicable after the first day of January of each year thereafter. Subject to Sections 5.4 and 5.5, payment of deferred amounts shall commence no later than January of the first calendar year which is the later of: (i) the year following attainment of age seventy (or such other age as may supersede the age referred to in Section 403(f)(3) of Title 42 United States Code); or (ii) the year following such Participant's retirement. The number of shares of Common Stock paid in each installment shall be equal to the whole number obtained by dividing the number of Common Stock Equivalents then credited to the Participant's Account by the number of unpaid installments. Common Stock Equivalents with respect to which payment has not yet occurred shall continue to be 4 credited with Dividend Equivalents until paid. However, no installment paid from the Account may be in an amount less than 20 shares of Common Stock, and, to the extent necessary, installments shall be accelerated to provide for such minimum installments. As of the date on which the last payment of benefits is made to a Participant from the Account, the Company shall pay the Participant, in cash, an amount equal to the value of any remaining fractional Common Stock Equivalent based on the closing price of the Common Stock on the New York Stock Exchange Composite Transactions on the last date such price is available prior to the payment date. 5.3 Death or Disability ------------------- (i) Subject to Section 7, in the event of the death or disability of a Participant either while serving as a director of the Company or prior to the commencement of any payments hereunder, any amount due under the Plan shall be paid in a lump sum to the Participant's beneficiary, or in the case of disability, to the Participant, as soon as practicable after the death or disability. (ii) Subject to Section 7, in the event of the death or disability of a Participant on or after the commencement of installment payments, in accordance with Section 5.2, payments shall continue to paid to the Participant's beneficiary, or in the case of disability, to the Participant, in accordance with the election made by the Participant in accordance with Section 5.2; provided, however, that the Secretary of the Committee shall have the power to accelerate the payment of any installment(s) because of hardship or other circumstances deemed by him, in his discretion, to warrant such acceleration. 5 5.4 Payment Elections ----------------- Subject to Section 5.6, a Participant may elect the number and the date or event for the commencement of installment payments in accordance with the following: (i) Such elections must be made at least six months and ten days prior to the first payment date; and (ii) In all cases, the elections must be made in the calendar year preceding the first payment date. 5.5 Notwithstanding any other provision of this Plan, the first installment to a Participant out of the Account shall not be paid until six months and ten days after the Participant shall cease to be a director of the Company. 5.6 Notwithstanding any other provision of this Plan, any Participant who, pursuant to any income tax laws to which he or she is subject, would be immediately taxed on any amounts credited under the Plan may not elect the number and the date or event for the commencement of payments under the Plan. Instead, the payment of all benefits to such Participant (including any Dividend Equivalents from the Plan) shall occur as a lump sum payment on the first business day which is 6 months and 10 days after the Participant's last day as a member of the Board. In the event of such Participant's death prior to receipt of the benefits, the Participant's Beneficiary shall be paid the benefits on the first business day which is 6 months and 10 days after the Participant's last day as a member of the Board. 6. CHANGES IN STOCK. In the event of any change in the outstanding shares of ---------------- the Common Stock, or in the number thereof, by reason of any stock dividend or split, recapitalization, merger, consolidation, exchange of shares or other similar change, a corresponding change will be made in the number of Common Stock Equivalents and Dividend Equivalents, if any, credited to each Account, unless the Committee determines otherwise. 6 7. ACCELERATION. The Committee, in its sole discretion, may accelerate the ------------ payment of benefits hereunder to any Participant or his or her Beneficiary for reasons of changes in tax laws or in the event of a Change in Control of the Company; provided that no payment of benefits may be accelerated hereunder to any Participant or his or her Beneficiary if such Participant was a director of the Company on or after November 1, 1990. An exception is provided for any Non-Employee Director if any income tax laws to which he or she is subject would cause him/her to be immediately taxed on amounts credited under the Plan. Under this exception, the requirement that age 70 be attained before a Non-Employee Director becomes a Participant is automatically waived by the Committee. Additionally, under this exception, the payment of all benefits under the Plan shall occur on the first business day which is 6 months and 10 days after the earlier of a Participant's resignation from the Board or death. In the event of such Non-Employee Director's death, either while still an active member of the Board or after resignation from the Board but before receipt of payment from the Plan, payment shall be made to the Participant's Beneficiary on the above referenced date. 8. CHANGE IN CONTROL. Upon, or in reasonable anticipation of, a Change in ----------------- Control (as defined above), the Company shall immediately make a payment in cash to a trustee on such terms as the Senior Vice President, Human Resources, and Administration and the Senior Vice President, Finance, or either of them, shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) of a sufficient amount to insure that Participants receive the payment of all amounts as contemplated under the Plan. 9. GENERAL PROVISIONS. The entire cost of benefits and administrative ------------------ expenses for this Plan shall be paid by the Company. This Plan is purely voluntary on the part of the Company. The Company, by action of the Board or, except as limited by the Company's bylaws, the Committee, may amend, suspend or terminate this Plan in whole or part at any time, but no such amendment, suspension or termination shall adversely affect the rights of any Non-Employee Director or Beneficiary of a deceased Non-Employee Director with respect to Common Stock 7 Equivalents and Dividend Equivalents credited prior to such amendment, suspension or termination or Dividend Equivalents which would otherwise have been credited in the future with respect to Common Stock Equivalents credited prior to such amendment, suspension or termination. No rights under the Plan may be transferred or assigned except that a Participant may designate, in writing filed with the Secretary of the Company, his spouse or children, a trustee or his or her executor or executrix as Beneficiary to receive any unpaid amounts under the Plan after the death of the Participant. In the absence of any such designation or in the event that the designated person or entity shall not be in existence at the time a payment under the Plan comes due, the Beneficiary of the Participant shall be the Participant's legal representative As Amended April 19, 2000 8 EX-10.1 4 INCENTIVE COMPENSATION & DEFERRED INCOME PLAN Exhibit 10.1 PPG INDUSTRIES, INC. INCENTIVE COMPENSATION AND DEFERRED INCOME PLAN FOR KEY EMPLOYEES Effective: February 15, 1995 As Amended 4/17/96; 2/18/98; 1/1/99 As Further Amended April 19, 2000 Table of Contents ----------------- Section I Definitions Section II Awards Section III Capital Enhancement Account Section IV Withdrawal Provisions Section V Specific Provisions Related to Benefits Section VI Administration & Claims Section VII Amendment & Termination Section VIII Miscellaneous Section IX Change in Control i SECTION I - DEFINITIONS ----------------------- 1.01 Administrator means an officer or officers of the Company appointed by the Committee, and any person(s) designated by such Administrator to assist in the administration of the Plan. 1.02 Award means a grant of incentive compensation. 1.03 Beneficiary means the person or persons designated by a Participant to receive benefits hereunder following the Participant's death, in accordance with section 5.02; provided, however, in the event a Participant fails to designate a Beneficiary in accordance with Section 5.02, his/her Beneficiary shall be the Beneficiary designated under the Deferred Compensation Plan. For purposes of this Section 1.05, "person or persons" is limited to an individual, a Trustee or a Participant's estate. 1.04 Board means the Board of Directors of PPG Industries, Inc. 1.05 Capital Enhancement Account or Account means a bookkeeping account or accounts maintained for a Participant who, for such period or periods as the Committee may establish or permit, elects to defer all or any part of an Award in the form of cash or Salary, as provided in Section 3.01. 1.06 CEA-1 means all funds contributed to the Capital Enhancement Account during the period August 1, 1985 thru July 31, 1986, and earnings thereon. 1.07 CEA-2 means all funds contributed to the Capital Enhancement Account during the period November 1, 1987 thru December 31, 1988, and earnings thereon. 1.08 CEBC means the Compensation and Employee Benefits Committee of the Company. 1.09 Code means the Internal Revenue Code of 1986, as amended. 1.10 Committee means the Officers-Directors Compensation Committee (or any successor) of the Board. 1.11 Company or PPG means PPG Industries, Inc. 1.12 Conversion Formula means dividing an amount by the average of the closing sale prices for PPG Stock reported on the New York Stock Exchange- Composite Tape for all days in the month of January during which the New York Stock Exchange is open during the year following the Plan Year to which the Award relates. - Page 1.1 - 1.13 Corporation means PPG and any Subsidiary Corporation designated by the Committee as eligible to participate in the Plan, and which, by proper authorization of the Board of Directors or other governing body of such Subsidiary Corporation, elects to participate in the Plan. 1.14 Deferred Compensation Plan means the PPG Industries, Inc. Deferred Compensation Plan. 1.15 Disability means any long-term disability. The Administrator, in his complete and sole discretion, shall determine a Participant's Disability; provided, however, that a Participant who is approved to receive Long-Term Disability benefits pursuant to the PPG Industries, Inc. Long-Term Disability Plan shall be considered to have a Disability. The Administrator may require that a Participant submit to an examination from time to time, but no more often than annually, at the expense of the Company, by a competent physician or medical clinic, selected by the Administrator, to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive. 1.16 Employee means any full-time, or permanent part-time employee (including any officer) of the Corporation. 1.17 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.18 Financial Hardship means an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence, as determined by the Administrator, in his complete and sole discretion. 1.19 Former Participant means a Participant who becomes ineligible to receive an Award but who continues to have an Account hereunder. 1.20 Insider means a Participant or a Former Participant who at any time within the prior six (6) months was a person subject to Section 16 of the Securities Act of 1934. 1.21 Minimum Rate - means the average of the daily closing yields during November of 10-year Treasury Notes. 1.22 Participant means an Employee who is approved by the CEBC, or the Committee, as appropriate, to participate. Participants shall be limited to key Employees of the Corporation who contribute the most to the growth and profitability of the Company. - Page 1.2 - 1.23 Plan Year means the calendar year. 1.24 Pre-tax Earnings means the consolidated earnings of the Company and its consolidated Subsidiaries and equity affiliates before the deduction of income taxes, minority interest and the amount to be set aside in the Reserve as provided in Section 2.01. The Reserve shall not be adjusted for any restatements of prior years' earnings. 1.25 PPG Stock means Common Stock of the Company. 1.26 Reserve means the aggregate of the amounts available for the making of Awards as provided in Section 2.01. 1.27 Retired Participant means a Participant who elects to maintain an Account in the Plan after his/her Retirement Date. 1.28 Salary means the regular base salary to be paid to a Participant by the Corporation. 1.29 Subsidiary means any corporation of which fifty percent (50%) or more of the outstanding voting stock or voting power is owned, directly or indirectly, by the Company and any partnership or other entity in which the Company has a fifty percent (50%) or more ownership interest. 1.30 Terminated Participant means a Participant who maintains an Account in the Plan following his/her termination of employment from the Corporation. - Page 1.3 - SECTION II - AWARDS ------------------- 2.01 The Reserve ----------- (a) For purposes of establishing a Reserve, an amount shall be set aside each year to be calculated as follows: (1) Multiply consolidated shareholders' equity as of the beginning of the year by 12%; (2) Subtract the result of (1) above from Pre-tax Earnings for the year; (3) Multiply the result of (2) above by 5%. (b) In no event, may the amount set aside exceed 20% of the cash dividends paid on PPG Stock during the year. (c) For purposes of subparagraph (a)(1) above, "shareholders' equity" shall be exclusive of the aggregate par or stated value of preferred stock outstanding, if any, and of any unpaid cumulative dividends thereon. (d) The Reserve shall be reduced by the amount of all Awards, including any deferred amounts, first from the amount, if any, set aside for the year to which the Awards relate, and then from the amounts which have been in the Reserve for the longest period of time. (e) Unawarded amounts set aside prior to the fourth preceding year shall be automatically released from the Reserve and returned to income. (f) The Reserve shall not be reduced by interest or dividend equivalents on deferred amounts, dividends paid on restricted shares, negative amounts resulting from the calculation of the amount to be set aside each year, or the expenses of administering the Plan. (g) Not later than the last day of the year to which the Awards relate, the Committee may make an allocation (on the basis of estimates of the amount to be set aside in the Reserve for such year and unawarded amounts in the Reserve) to a group of Employees without determining the amounts to be allocated to individuals in such group and such allocation shall create a legal obligation upon the Company to pay such amount to the individuals comprising such group. - Page 2.1 - 2.02 Awards ------ (a) The Committee shall determine or approve: (1) The Participants; (2) The maximum amount of all Awards to all Participants; and (3) The amount and the form of the Award to each Participant. (b) The Committee may delegate to another person(s) the authority to determine: (1) The Participants, other than Insiders; and (2) The amount of Awards to such Participants. (c) Awards may be made only from the Reserve; provided, however, that the Committee is under no obligation to make Awards; or, if Awards are made, to award the total amount set aside in the Reserve each year. (d) Awards may be made in the form of cash, shares of PPG Stock, or a combination of both. 2.03 Payment of Awards ----------------- (a) Awards to Participants will be made in the form of cash ("cash component"), shares of PPG Stock ("stock component"), or a combination of both, as the Committee may determine. (b) If all or any part of an Award is made in the form of shares of PPG Stock, the number of such shares shall be determined by applying the Conversion Formula. Fractional shares shall be paid in cash. If the number of such shares is specified, the Reserve shall be reduced on account of such shares by an amount determined by applying the Conversion Formula in reverse. As to shares of PPG Stock which constitute all or any part of an Award, the Committee may impose such restrictions concerning their transferability and/or their forfeitability as are provided for in Section 5.05. - Page 2.2 - (c) Payment of Awards shall be made to Participants not later than March 15 of the year following the end of the year to which the Awards relate. 2.04 Deferral of Awards ------------------ (a) Prior to the beginning of each Plan Year, a Participant may elect to defer a percentage, in whole percentages only, of his/her Award, as follows: Minimum Deferral Maximum Deferral ---------------- ---------------- Cash component 10% 100% Stock component 100% 100% (b) Except as otherwise provided in paragraph (c) below, all elections pursuant to this Section 2.04 must be filed with the Administrator no later than the last day of the Plan Year prior to the Plan Year to which an Award relates; and such election shall become irrevocable as of the first day of the Plan Year to which it relates. (c) Employees who are approved to participate during a Plan Year, may make an election in accordance with this Section 2.04 within the 30-day period following notice to the Participant that he/she has been approved. (d) Amounts deferred in accordance with this section 2.04 shall be credited to the Participant's account in the Deferred Compensation Plan and shall be subject to the provisions of the Deferred Compensation Plan. (e) Amounts deferred in accordance with this Plan prior to January 1, 1996, which have not been withdrawn by January 1, 1996, shall be transferred to the Deferred Compensation Plan, in accordance with the provisions of such Plan. 2.04.01 Investment Elections -------------------- (a) At the time an election is made to defer all or a portion of the cash component of a Award, the Participant must also designate whether such amount is to be credited to the Interest Account, the PPG Stock Account, or a combination of both in the Deferred Compensation Plan. (b) At the time an election is made to defer the stock component of an Award, such deferral shall be credited to the PPG Stock Account in the Deferred Compensation Plan. - Page 2.3 - (c) Amounts credited to the PPG Stock Account in the Deferred Compensation Plan shall be credited in the form of whole and fractional Stock Account Shares determined according to the Conversion Formula. 2.04.02 In-Service Withdrawal Elections ------------------------------- (a) Subject to the provisions of this Section 2.04.02, at the time an election is made to defer all or a portion of the cash component of an Award, a Participant may designate all or a portion of the cash component of such deferred amount, not including any earnings thereon, to be paid during a specified quarter/year. (b) Withdrawal elections made pursuant to this Section may not specify a year which is any sooner than the fourth Plan Year after the Plan Year in which the deferred amount is credited to the Participant's Account. (c) Any amount subject to withdrawal pursuant to this Section, must be invested in the Interest Account in the Deferred Compensation Plan. (d) Any election made in accordance with this subjection 2.04.02 shall be irrevocable. - Page 2.4 - SECTION III - CAPITAL ENHANCEMENT ACCOUNT ----------------------------------------- 3.01 Deferrals of Salary to Capital Enhancement Account -------------------------------------------------- (a) Subject to any minimum/maximum limits established by the Committee, each prospective Participant, or such prospective Participant as the Committee deems appropriate, may be given an opportunity to make an election to defer payment of all or any part of his/her Salary and/or Award, to be credited to the Capital Enhancement Account. (b) (1) Subject to subparagraph (2) below, interest equivalents shall be credited on amounts deferred to the Capital Enhancement Account as follows: CEA-1 ---- Minimum Rate plus 5% (2) Except as otherwise provided in subparagraph (3) below, when a Participant's employment terminates prior to age 62, interest equivalents shall be recalculated at the Minimum Rate for CEA-1 for the total period such amounts were invested in the Capital Enhancement Account, unless: (i) with respect to any Participant who is an Insider, the Committee, in its sole discretion, specifically determines such Participant is entitled to the interest rate described in subparagraph (1) above; or (ii) with respect to any Participant who is not an Insider, the Compensation and Employee Benefits Committee, in its sole discretion, specifically determines such Participant is entitled to the interest rate described in subparagraph (1) above. (3) In the case of a Participant whose termination of employment prior to age 62 is the result of retirement or a divestiture, such Participant shall be entitled to the interest rate described in subparagraph (1) above. (c) Designations to credit a deferred amount to the Capital Enhancement Account shall be made in such terms on such bases as the Administrator may prescribe. - Page 3.1 - 3.02 Payment of Deferrals from the Capital Enhancement Account --------------------------------------------------------- Payments from the Capital Enhancement Account shall be made in cash. 3.03 Pre-Retirement Death Benefit ---------------------------- If a Participant dies prior to retirement, the Company shall pay a pre- retirement death benefit to such Participant's Beneficiary equal to: (a) For a Participant who had a balance in his/her CEA-2 account at the time of death, the balance in the CEA-2 account; and (b) For Participants who had a balance in his/her CEA-1 account at the time of death, and who provided evidence of insurability at the time of enrollment in CEA-1, the pre-retirement death benefit shall be equal the greater of: (1) The CEA-1 account balance; or (2) The original amount deferred into the CEA-1 account (not including interest equivalents credited thereon) times the applicable factor in the following TABLE: TABLE ----- Attained Age on August 1, 1985 Factor -------------- ------ 44 and under 15 45 to 54 9 55 and older 8 3.04 Termination of Capital Enhancement Account - 2 ("CEA-2") -------------------------------------------------------- (a) Notwithstanding any other provision of Section III or Section IV herein, CEA-2 shall be terminated effective December 31, 1998. (b) Participants whose Account contains amounts credited under CEA-2 as of January 1, 1998, shall be required to make an election regarding the payout of all amounts credited under CEA-2 to be effective on January 1, 1999. (1) An active Participant may elect: - Page 3.2 - (A) To receive the full amount of his/her CEA-2 Account paid in a lump sum in January, 1999; or (B) To have such amount credited to his/her Account in the PPG Industries, Inc. Deferred Compensation Plan. (2) A terminated or retired Participant may elect: (A) To receive the full amount of his/her CEA-2 Account balance paid in a lump sum in January, 1999; or (B) To have his/her Account balance credited to his/her Account in the PPG Industries, Inc. Deferred Compensation Plan. A Participant who makes an election in accordance with this subparagraph must further elect to receive his/her CEA-2 Account balance paid in accordance with the election filed at the time of his/her termination or retirement for payments from: His/her Deferred Compensation Plan Account; or His/her CEA-2 Account. (3) Elections filed in accordance with this paragraph (b) must be received by the Administrator no later than June 20, 1998. In the event an active Participant fails to make an election in accordance with section (b)(1) above, his/her CEA-2 amount shall be credited to his/her Account in the PPG Industries, Inc. Deferred Compensation Plan. In the event a retired or terminated Participant fails to make an election in accordance with section (b)(2) above, his/her CEA-2 amount shall be credited to an account in the PPG Industries, Inc. Deferred Compensation Plan and the Participant shall be deemed to have elected to receive his/her CEA-2 Account balance paid in accordance with the election filed at the time of his/her termination or retirement for payments from his/her CEA-2 Account. (c) Elections made in accordance with subparagraph (b) above shall supersede any other elections on file with the Administrator which were made in accordance with Section IV. (d) Section 4.02 shall apply to any Participant whose employment is terminated notwithstanding any election filed in accordance with this Section 3.04. - Page 3.3 - SECTION IV - WITHDRAWAL PROVISIONS ---------------------------------- 4.01 Withdrawals at/after a Participant's Retirement Date ---------------------------------------------------- (a) A Participant may elect a payment schedule applicable to his/her Account provided such election is filed with the Administrator: (1) Prior to the Participant's Retirement Date; and (2) In the year prior to the year the first payment is to be made and, in all cases, at least six months/ten days prior to the time the first payment is to be made. (b) Participants may elect: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of up to a maximum of ten years. (c) A Participant may delay the first payment; provided, however, that, in all cases, payments must be completed no later than the month preceding the month in which the Participant's 75th birthday occurs. (d) The payment schedule elected by the Participant shall apply to his/her entire Account. Annual installments shall be each year on the first of the month selected by the Participant as the month for such payments to commence. Semiannual installments shall be paid twice each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second yearly payment paid the first of the month which is six month later. Quarterly installments shall be paid four times each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second, third and fourth payments following with three month between each such payment. - Page 4.1 - Each installment payment shall be calculated by dividing the Participant's account balance, increased by the projected rate of interest to be earned during the period of the payment schedule, by the remaining number of installments -(e.g.: Ten annual installments ---- shall be paid: 1st installment = 1/10 of Account as adjusted; 2nd installment = 1/9; 3rd installment = 1/8, etc.). (e) In the event a Participant fails to file a payment schedule election with the Administrator prior to his/her Retirement Date, his/her Account shall be paid in one lump sum in the year following the year of such Retirement Date and shall be paid during the first month in such year which is at least six months/ten days following such Retirement Date. 4.02 Withdrawals following Termination --------------------------------- Participants shall receive their entire Account balance, paid in a lump sum as soon as possible following their termination of employment. 4.03 Withdrawals in the event of Disability -------------------------------------- (a) In the event a Participant becomes disabled, he/she shall receive payments in accordance with the election filed with the Administrator at the time the deferral election was filed. (b) As provided in such election, the Participant shall receive: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of up to a maximum of ten years. (c) The payment schedule elected by the Participant shall apply to his/her entire Account. Annual installments shall be each year on the first of the month selected by the Participant as the month for such payments to commence. Semiannual installments shall be paid twice each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second yearly payment paid the first of the month which is six month later. - Page 4.2 - Quarterly installments shall be paid four times each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second, third and fourth payments following with three months between each such payment. Each installment payment shall be calculated by dividing the Participant's account balance, increased by the projected rate of interest to be earned during the period of the payment schedule, by the remaining number of installments -(e.g.: Ten annual installments ---- shall be paid: 1st installment = 1/10 of Account as adjusted; 2nd installment = 1/9; 3rd installment = 1/8, etc.). 4.04 Withdrawals following a Participant's death ------------------------------------------- (a) Death prior to the Participant's Payment Election ------------------------------------------------- In the event of a Participant's death prior to the time he/she files an irrevocable payment election in accordance with section 4.01 or 4.03, the Participant's entire Account shall be paid to the Participant's Beneficiary as soon as possible following the Participant's death. (b) Death on or after a Participant's Payment Election -------------------------------------------------- In the event of a Participant's death on or after the time he/she files an irrevocable payment election in accordance with section 4.01 or 4.03, the Participant's Beneficiary shall receive the remaining balance of the Participant's Account in accordance with the payment schedule filed by the Participant. 4.05 Withdrawals upon finding of Financial Hardship ----------------------------------------------- (a) Upon a finding that the Participant, or Beneficiary if the Participant is deceased, has suffered a Financial Hardship, the Administrator may, in his sole discretion, permit the acceleration of a withdrawal under the Plan in an amount reasonably necessary to alleviate such Financial Hardship. (b) The Participant shall be required to exhaust all our sources of funds, other than the PPG Savings Plan, before the Administrator will consider an accelerated withdrawal in accordance with this section 4.05. - Page 4.3 - 4.06 Small Account Provision ----------------------- (a) Each scheduled withdrawal must equal a minimum of $5,000, or 100 shares of PPG Stock. (b) If the remaining balance in a Participant's Account is less than $5,000, or 100 shares of PPG Stock, the Administrator may, at his discretion, distribute the remainder of the Account. - Page 4.4 - SECTION V SPECIFIC PROVISIONS ----------------------------- RELATED TO BENEFITS ------------------- 5.01 Nonassignability ---------------- (a) Except as provided in paragraph (b) below and in section 5.02, no person shall have any power to encumber, sell, alienate, or otherwise dispose of his/her interest under the Plan prior to actual payment to and receipt thereof by such person; nor shall the Administrator recognize any assignment in derogation of the foregoing. No interest hereunder of any person shall be subject to attachment, execution, garnishment or any other legal, equitable, or other process. (b) Paragraph (a) above shall not apply to the extent that a Participant's interest under the Plan is alienated pursuant to a "Qualified Domestic Relations Order" ("QDRO") as defined in (S)414(p) of the Code. (1) The administrator is authorized to adopt such procedural and substantive rules and to take such procedural and substantive actions as the Administrator may deem necessary or advisable to provide for the payment of amounts from the Plan to an Alternate Payee as provided in a QDRO. Such rules and actions shall be consistent with the principal purposes of the Plan. (2) Under no circumstances may the Administrator accept an order as a QDRO following a Participant's death. (3) An Alternate Payee may not establish an account in the Plan. All amounts taken from a Participant's Account, as provided in a QDRO, must be distributed as soon as possible following the acceptance of an order as a QDRO. (4) In the sole discretion of the Administrator, a Participant's scheduled withdrawal or otherwise requested withdrawal may be delayed for a period, not to exceed six months, if the Administrator has notice that part or all of the Participant's Account may be subject to alienation pursuant to a QDRO. - Page 5.1 - 5.02 Beneficiary Designation ----------------------- (a) The Participant shall have the right, at any time, to designate any person(s) as Beneficiary. The designation of a Beneficiary shall be effective on the date it is received by the Administrator, provided the Participant is alive on such date. (b) Each time a Participant submits a new Beneficiary designation form to the Administrator, such designation shall cancel all prior designations. (c) In the case of a Participant who does not have a valid Beneficiary designation on file at the time of his/her death, or in the case the designated Beneficiary predeceases the Participant, the entire balance in the Participant's Capital Enhancement Account shall be paid as soon as possible to the Participant's estate. 5.03 Limited Right to Assets of the Corporation ------------------------------------------ The Benefits paid under the Plan shall be paid from the general funds of the Company, and the Participants and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 5.04 Protective Provisions --------------------- The Participant or Beneficiary shall cooperate with the Administrator by furnishing any and all information requested by the Administrator in order to facilitate the payment of benefits hereunder. If a Participant refuses to cooperate, he/she may be deemed ineligible to receive a distribution and/or ineligible to continue to actively participate in the Plan. 5.05 Restricted Shares of PPG Stock ------------------------------ (a) The Committee may, on such terms as it deems appropriate, restrict the transferability of all or any number of such shares as constitute all or any part of an Award to installments over periods not exceeding five years and/or provide for the forfeitability of all or any number of such shares over a period not exceeding five years. During the period of restriction as to transferability and/or provision as to forfeitability, Participants shall receive dividends and have voting and other shareholders' rights as to such shares. - Page 5.2 - (b) No restriction on the transferability and/or provisions as to the forfeitability of any shares of PPG Stock may be imposed so as to obtain beyond the normal retirement date of the Participant awarded such shares. Further, all restrictions on the transferability and/or provisions as to the forfeitability of any shares of PPG Stock shall be such as to terminate in the event of death, total and permanent disability or early retirement, upon the occurrence of a Change in Control, or upon the occurrence of the commencement of a tender offer or an exchange offer. (c) Any restrictions on the transferability and/or provisions as to the forfeitability of any shares of PPG Stock shall be reflected in a legend imprinted on the certificate(s) representing such shares. 5.06 The shares of PPG Stock delivered under the Plan may be either authorized but unissued shares or issued shares acquired by the Company and held in its Treasury. 5.07 Withholding ----------- The Participant or Beneficiary shall make appropriate arrangements with the Administrator for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Administrator may provide for such withholding and tax payments by any means he deems appropriate, in his sole discretion. 5.08 Forfeiture Provision -------------------- In the event the Company becomes aware that a Participant is engaged or employed as a business owner, employee, or consultant in any activity which is in competition with any line of business of the Corporation, or has engaged in any activity otherwise determined to be detrimental to the Company, the Administrative Subcommittee may: (a) Terminate such Participant's participation in the Plan, and distribute the entire amount in the Participant's Account in a lump sum; (b) Recalculate all earnings in the Account as though all investments had been accruing interest at the Minimum Rate for the total period such amounts were credited in the Account; (c) Apply both (a) and (b) above; or - Page 5.3 - (d) Apply any other diminution or forfeiture of benefits. which is specifically approved by the Administrative Subcommittee. For purposes of this Section 5.08, the Administrative Subcommittee shall consist of the Senior Vice President, Human Resources and Administration, the Director, Compensation and Benefits, and a representative of the Law Department, as appointed by the General Counsel of PPG. The Administrative Subcommittee shall report all of its activities to the Committee. - Page 5.4 - SECTION VI ADMINISTRATION & CLAIMS ---------------------------------- 6.01 Administration -------------- (a) The Committee, for purposes of administering the Plan, shall meet and act as necessary to determine or approve the maximum amount of Awards to all Participants, the form of Awards to Participants and the amount of Awards to Insiders and such other Participants as the Committee deems appropriate. (b) The Administrator shall administer the Plan and interpret, construe and apply its provisions in accordance with its terms. The Administrator shall have the complete authority to: (1) Determine eligibility for benefits; (2) Construe the terms of the Plan; and (3) Control and manage the operation of the Plan. (c) The Administrator shall have the authority to establish rules for the administration and interpretation of the Plan and the transaction of its business. The determination of the Administrator as to any disputed question shall be conclusive. All actions, decisions and interpretations of the Administrator shall be performed in a uniform and nondiscriminatory manner. (d) The Administrator may employ counsel and other agents and may procure such clerical, accounting and other services as the Administrator may require in carrying out the provisions of the Plan. (e) The Administrator shall not receive any compensation from the Plan for his services. (f) The Corporation shall indemnify and save harmless the Administrator against all expenses and liabilities arising out of the Administrator's service as such, excepting only expenses and liabilities arising from the Administrator's own gross negligence or willful misconduct, as determined by the Committee. - Page 6.1 - 6.02 Claims ------ (a) Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally and physically competent and of age. If the Administrator determines that such person is mentally or physically incompetent or is a minor, payment shall be made to the legally appointed guardian, conservator, or other person who has been appointed by a court of competent jurisdiction to care for the estate of such person, provided that proper proof of such appointment is furnished in a form and manner suitable to the Administrator. Any payment made under the provisions of the paragraph (a) shall be a complete discharge of any liability therefor under the Plan. The Administrator shall not be required to see to the proper application of any such payment. (b) Claims Procedure ---------------- Claims for benefits by a Participant or Beneficiary shall be filed, in writing, with the Administrator. If the Administrator denies the claim, in whole or in part, the Administrator shall furnish a written notice to the claimant setting forth a statement of the specific reasons for the denial of the claim, references to the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the review procedure. Such notice shall be written in a way calculated to be understandable by the claimant. The written notice from the Administrator shall be furnished to the claimant within ninety (90) days following the date on which the claim was filed, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 90-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 90 days. - Page 6.2 - (c) Review Procedure ---------------- Within sixty (60) days of the date the Administrator denies a claim, in whole or in part, the claimant, or his/her authorized representative, may request that the decision be reviewed. Such request shall be in writing, shall be filed with the Administrator, and shall contain the following information: (1) The date on which the denial was received by the claimant; (2) The date on which the claimant's request for review was filed with the Administrator; (3) The specific portions of the denial which the claimant requests the Administrator to review; (4) A statement setting forth the basis on which the claimant believes that a review of the decision is required; (5) Any written material which the claimant desires the Administrator to take into consideration in reviewing the claim. The Administrator shall afford the claimant, or his/her authorized representative, an opportunity to review documents pertinent to the claim, and shall conduct a full and fair review of the claim and its denial. The Administrator's decision on such review shall be furnished to the claimant in writing, and shall be written in a manner calculated to be understandable to the claimant. Such decision shall include a statement of the specific reason(s) for the decision, including references to the specific provision(s) of the Plan relied upon. The written notice from the Administrator shall be furnished to the claimant within sixty (60) days following the date on which the request for review was received by the Administrator, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 60-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 60 days. - Page 6.3 - SECTION VII AMENDMENT AND TERMINATION ------------------------------------- 7.01 Amendment of the Plan --------------------- (a) Except as provided in paragraph (b) below, the Board or the Committee may amend the Plan, in whole or in part, at any time. (b) The Plan shall not be amended, without shareholder approval, so as to increase the percentage of Pre-tax Earnings to be set aside in the Reserve each year or extend the period of time after which unawarded amounts are automatically released from the Reserve and returned to income. 7.02 Termination of the Plan ----------------------- The Board or the Committee may terminate the Plan at any time. Upon a termination pursuant to this Section 7.02, the Committee has the sole discretion to determine distribution schedules for any or all Accounts, notwithstanding a Participant's previous distribution schedule. 7.03 Company Action. --------------- The Company's power to amend or terminate the Plan shall be exercisable by the Board or by the Committee, or by any individual authorized by the Board to exercise such powers. 7.04 Constructive Receipt -------------------- In the event the Administrator determines that amounts deferred under the Plan have been constructively received by Participants and must be recognized as income for federal income tax purposes, distributions shall be made to Participants, as determined by the Administrator. The determination of the Administrator under this section 7.04 shall be binding and conclusive. - Page 7.1 - SECTION VIII MISCELLANEOUS -------------------------- 8.01 Successors of the Company ------------------------- The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 8.02 ERISA Plan ---------- The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. 8.03 Trust ----- The Company shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust(s) may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. 8.04 Employment Not Guaranteed ------------------------- Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Corporation. 8.05 Gender, Singular and Plural --------------------------- All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person(s) requires. As the context may require, the singular may be read as the plural and the plural as the singular. 8.06 Headings -------- The headings of the Sections, subsections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. - Page 8.1 - 8.07 Validity -------- If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect, the validity of any other provision(s) of the Plan. 8.08 Waiver of Breach ---------------- The waiver by the Company of any breach of any provision of the Plan by a Participant or Beneficiary shall not operate or be construed as a waiver of any subsequent breach. 8.09 Applicable Law -------------- The Plan is intended to conform and be governed by ERISA. In any case where ERISA does not apply, the Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. 8.10 Notice ------ Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and either hand-delivered, or sent by first class mail to the principal office of the Company at One PPG Place, Pittsburgh, PA 15272, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery. - Page 8.2 - SECTION IX CHANGE IN CONTROL ---------------------------- 9.01 Change in Control ----------------- (a) Upon, or in reasonable anticipation of, a Change in Control (as defined in section 9.02): (1) Awards in the form of cash shall be made for the year during which the Change in Control occurs, and then paid immediately to a trustee on such terms as the Senior Vice President, Human Resources and Administration and the Senior Vice President, Finance, or either of them, or their successors, shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) in order to cause the Awards so paid to be paid either not later than the end of the first calendar quarter following the end of the year to which the Awards relate or on a deferred basis in accordance with the elections of Participants then in effect as to the timing of the receipt of Awards for such year. (2) Participants who are eligible to receive an Award for the Plan Year in which a Change in Control occurs shall be eligible to receive an Award for the Plan Year following the Change in Control. (3) The amount of the Award payable to each Participant shall be: one-half of the regular Award if the Change in Control occurs during the first six months of the year; or the full regular Award, if the Change in Control occurs during the second six months of the year either calculated at a rating of 12 for all performance categories. (4) All deferred amounts credited to the Capital Enhancement Account shall be paid immediately to a trustee on such terms as the Senior Vice President, Human Resources and Administration and the Senior Vice President, Finance, or either of them, or their successors shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) in order to give effect to the elections of Participants with respect to the timing of the receipt of such deferred amounts. - Page 9.1 - (b) By way of example of the operation of paragraph (a) above: If the Change in Control occurred on August 1 of a Plan Year, a Participant in a position with 1000 total points and an incentive award value of $1.75 per point would receive an Award of no less than $21,000 calculated as follows: 1000 x 1.75 x 12 = $21,000. If the Change in Control occurred on April 1 of a Plan Year, such Participant would receive $10,500. If the Plan were to be continued to the end of the year, and performance exceeded the 12 rating, a higher Award would be paid. (c) Notwithstanding any other provision of this section, if an Award ultimately made for such Plan Year is greater than the Award made pursuant to this section, the Participant shall be entitled to the difference between such Awards. If the Participant has elected his/her Award to be deferred, payment of such difference shall be made to a trustee in accordance with the provisions set forth in subparagraph (a)(4) above. (d) For purposes of this section, the fair market value of a share of PPG Stock on any date shall be the closing sale price as reported for such date (or, if no price is reported for such date, for the next preceding date for which a price is reported) on the New York Stock Exchange-Composite Tape. 9.02 Definition: Change in Control ------------------------------ A "Change in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"). - Page 9.2 - For purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control: Any acquisition directly from the Company; Any acquisition by the Company; Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or Any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) of this section 9.02. (b) Individuals who, as of September 20, 1995, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination: (i) All or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more - Page 9.3 - subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (ii) No Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; and (iii) At least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) A majority of the Board otherwise determines that a Change in Control shall have occurred. - Page 9.4 - EX-12 5 RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12
PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES Computation of Ratio Of Earnings to Fixed Charges (Dollars in Millions) Year Ended December 31, Three Months --------------------------------------------------------------- Ended 1995 1996 1997 1998 1999 March 31, 2000 ------ ------ ------ ------ ------ -------------- Earnings: Earnings before income taxes and net earnings in equity affiliates $1,231 $1,221 $1,165 $1,264 $ 945 $249 Plus: Fixed charges exclusive of capitalized interest 107 118 128 135 164 52 Amortization of capitalized interest 12 13 13 12 10 2 Adjustments for equity affiliates 14 15 14 16 16 4 -------------------------------------------------------------------------- Total $1,364 $1,367 $1,320 $1,427 $1,135 $307 ========================================================================== Fixed Charges: Interest expense including amortization of debt discount/premium and debt expense $ 85 $ 96 $ 105 $ 110 $ 133 $ 43 Rentals - portion representative of interest 22 22 23 25 31 9 -------------------------------------------------------------------------- Fixed charges exclusive of capitalized interest 107 118 128 135 164 52 Capitalized interest 9 12 10 9 11 4 -------------------------------------------------------------------------- Total $ 116 $ 130 $ 138 $ 144 $ 175 $ 56 ========================================================================== Ratio of earnings to fixed charges 11.8 10.5 9.6 9.9 6.5 5.5 ==========================================================================
EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG INDUSTRIES, INC. MARCH 31, 2000 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 145 0 1,713 0 1,067 3,177 6,901 3,983 9,072 2,508 1,825 0 0 484 2,653 9,072 2,087 2,087 1,254 1,254 236 0 43 256 109 0 0 0 0 139 0.80 0.79
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