Document:

EX-10(Z)

 

EXHIBIT 10(z)

THE SHERWIN-WILLIAMS COMPANY

2006 EQUITY AND PERFORMANCE INCENTIVE PLAN

Form of

Incentive Stock Option Award — Additional Terms and Conditions

          1. Grant and Nature of Option. The Board of Directors (the “Board”) of The Sherwin-Williams
Company (the “Company”) has granted an option to you pursuant to a Notice of Award that has been
delivered to you. The option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code. Each option entitles you to purchase from the Company one share of Common
Stock of the Company at the Option Price per share in accordance with the terms of The
Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (the “Plan”), the related
Prospectus, the Notice of Award, these Additional Terms and Conditions, and such other rules and
procedures as may be adopted by the Company. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Plan.

          2. Vesting of Option. (A) The option (unless terminated as hereinafter provided) shall be
exercisable only to the extent of one-third of the shares after you shall have been in the
continuous employ of the Company or any Subsidiary for one full year from the Date of Grant and to
the extent of an additional one-third of such shares after each of the next two successive full
years thereafter during which you shall have been in the continuous employ of the Company or any
Subsidiary.

     (B) Notwithstanding Section 2(A) above, the option shall become immediately exercisable
in full if you should die while in the employ of the Company or any Subsidiary.

     (C) Notwithstanding Section 2(A) above, the option shall become immediately exercisable
in full in the event of a Change of Control of the Company, as defined in Section 5, below.

          3. Termination of Option. The option shall terminate on the earliest of the following dates:

     (A) The date on which you cease to be an employee of the Company or a Subsidiary,
unless you cease to be such employee by reason of (i) death, (ii) disability or (iii)
retirement under a retirement plan of the Company or a Subsidiary at or after satisfying the
age and service criteria as provided for in the applicable retirement plan of the Company or
a Subsidiary or retirement at an earlier age with the consent of the Board (“Retirement”);

     (B) Three years after the date of your death if (i) you die while an employee of the
Company or a Subsidiary or (ii) you die following your Retirement;

     (C) Three years after the date you are terminated by the Company or a Subsidiary as a
result of expiration of available disability leave of absence pursuant to applicable Company
policy due to sickness or bodily injury;

     (D) Ten years from the Date of Grant; or

 

 

     (E) The date on which you knowingly or willfully engage in misconduct, which is
materially harmful to the interests of the Company or a Subsidiary as determined by the
Board.

          4. Exercise and Payment of Option. To the extent exercisable, the option may be exercised in
whole or in part from time to time. The Option Price shall be payable (i) in cash or by check
acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or
constructive transfer to the Company by you of nonforfeitable, unrestricted shares of Common Stock
of the Company owned by you and having an aggregate Market Value Per Share at the time of exercise
of the option equal to the total Option Price of the shares of Common Stock which are the subject
of such exercise, (iii) by a combination of such methods of payment, or (iv) by such other methods
as may be approved by the Board.

          5. Change of Control. A “Change of Control” shall be deemed to have occurred if:

     (A) Any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended, hereinafter the “Exchange Act”) who or that, together with
all “Affiliates” and “Associates” (as such terms are defined in Rule 12b-2, as in effect on
April 23, 1997, of the General Rules and Regulations under the Exchange Act) of such person, is
the Beneficial Owner (as defined below) of ten percent (10%) or more of the shares of Common
Stock then outstanding, except:

     (i) the Company;

     (ii) any of the Company’s subsidiaries in which a majority of the voting power of the
equity securities or equity interests of such subsidiary is owned, directly or indirectly,
by the Company;

     (iii) any employee benefit or stock ownership plan of the Company or any trustee or
fiduciary with respect to such a plan acting in such capacity; or

     (iv) any such person who has reported or may, pursuant to Rule 13d-l(b)(1) of the
General Rules and Regulations under the Exchange Act, report such ownership (but only as
long as such person is the Beneficial Owner of less than fifteen percent (15%) of the shares
of Common Stock then outstanding) on Schedule 13G (or any comparable or successor report)
under the Exchange Act.

Notwithstanding the foregoing: (a) no person shall become the Beneficial Owner of ten percent
(10%) or more (fifteen percent (15%) or more in the case of any person identified in clause (iv)
above) solely as the result of an acquisition of Common Stock by the Company that, by reducing
the number of shares outstanding, increases the proportionate number of shares beneficially
owned by such person to ten percent (10%) or more (fifteen percent (15%) or more in the case of
any person identified in clause (iv) above) of the shares of Common Stock then outstanding;
provided, however, that if a person becomes the Beneficial Owner of ten percent (10%) or more
(fifteen percent (15%) or more in the case of any person identified in clause (iv) above) of the
shares of Common Stock solely by reason of purchases of Common Stock by the Company and shall,
after such purchases by the Company, become the Beneficial Owner of any additional shares of
Common Stock which has the effect of increasing such person’s percentage ownership of the
then-outstanding shares of Common

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Stock by any means whatsoever, then such person shall be deemed to have triggered a Change of
Control; and (b) if the Board determines that a person who would otherwise be the Beneficial
Owner of ten percent (10%) or more (fifteen percent (15%) or more in the case of any person
identified in clause (iv) above) of the shares of Common Stock has become such inadvertently
(including, without limitation, because (1) such person was unaware that it Beneficially Owned
ten percent (10%) or more (fifteen percent (15%) or more in the case of any person identified in
clause (iv) above) of the shares of Common Stock or (2) such person was aware of the extent of
such beneficial ownership but such person acquired beneficial ownership of such shares of Common
Stock without the intention to change or influence the control of the Company) and such person
divests itself as promptly as practicable of a sufficient number of shares of Common Stock so
that such person would no longer be the Beneficial Owner of ten percent (10%) or more (fifteen
percent (15%) or more in the case of any person identified in clause (iv) above), then such
person shall not be deemed to be, or have been, the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of any person identified in clause (iv) above)
of the shares of Common Stock, and no Change of Control shall be deemed to have occurred.

     (B) During any period of two consecutive years, individuals who at the beginning of such
period constituted the Board and any new director (other than a director initially elected or
nominated as a director as a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies by or on behalf of such
director) whose election by the Board or nomination for election by the Company’s shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof.

     (C) There shall be consummated any consolidation, merger or other combination of the Company
with any other person or entity other than:

     (i) a consolidation, merger or other combination which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the surviving entity)
more than fifty-one percent (51%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such consolidation, merger or
other combination; or

     (ii) a consolidation, merger or other combination effected to implement a recapitalization
and/or reorganization of the Company (or similar transaction), or any other consolidation,
merger or other combination of the Company, which results in no person, together with all
Affiliates and Associates of such person, becoming the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of any person identified in clause (A)(iv)
above) of the combined voting power of the Company’s then outstanding securities.

     (D) There shall be consummated any sale, lease, assignment, exchange, transfer or other
disposition (in one transaction or a series of related transactions) of fifty percent (50%) or more
of the assets or earning power of the Company (including, without limitation, any such sale, lease,
assignment, exchange, transfer or other disposition effected to implement a recapitalization and/or
reorganization of the Company (or similar transaction)) which results in any person, together with
all Affiliates and Associates of such person, owning a proportionate share of such

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assets or earning power greater than the proportionate share of the voting power of the
Company that such person, together with all Affiliates and Associates of such person, owned
immediately prior to any such sale, lease, assignment, exchange, transfer or other disposition.

     (E) The shareholders of the Company approve a plan of complete liquidation of the Company.

     For purposes of this Section 5, a person shall be deemed the “Beneficial Owner” of and shall
be deemed to “beneficially own” any securities:

     (x) which such person or any of such person’s Affiliates or Associates is considered to be
a “beneficial owner” under Rule 13d-3 of the General Rules and Regulations under the Exchange
Act, as in effect on April 23, 1997;

     (y) which such person or any of such person’s Affiliates or Associates, directly or
indirectly, has or shares the right to acquire, hold, vote (except pursuant to a revocable
proxy as described in the proviso to this definition) or dispose of such securities (whether
any such right is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing), or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed to be the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such
person or any of such person’s Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or

     (z) which are beneficially owned, directly or indirectly, by any other person (or any
Affiliate or Associate of such other person) with which such person (or any of such person’s
Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in
writing), with respect to acquiring, holding, voting (except as described in the proviso to
this definition) or disposing of any securities of the Company;

provided, however, that a person shall not be deemed the Beneficial Owner of, nor to beneficially
own, any security if such person has the right to vote such security pursuant to an agreement,
arrangement or understanding which (1) arises solely from a revocable proxy given to such person in
response to a public proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on
Schedule 13D (or any comparable or successor report) under the Exchange Act; and provided, further,
that nothing in this Section 5 shall cause a person engaged in business as an underwriter or
securities to be the Beneficial Owner of, or to beneficially own, any securities acquired through
such person’s participation in good faith in a firm commitment underwriting until the expiration of
forty (40) days after the date of such acquisition or such later date as the Board may determine in
any specific case.

          6. Transferability, Binding Effect. The option is not transferable by you otherwise than by
will or the laws of descent and distribution, and is exercisable, during your lifetime, only by you
or, in the case of your legal incapacity, only by your guardian or legal representative. These
Additional Terms and Conditions bind you and your guardians, legal representatives and heirs.

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     7. Compliance with Law. The option shall not be exercisable if such exercise would involve a
violation of any law.

     8. Withholding Taxes. If the Company shall be required to withhold any federal, state, local
or foreign tax in connection with exercise of the option, it shall be a condition to such exercise
that you pay or make provision satisfactory to the Company for payment of all such taxes.

     9. No Right to Future Awards or Employment. The option award is a voluntary, discretionary
bonus being made on a one-time basis and it does not constitute a commitment to make any future
awards. The option award and any related payments made to you will not be considered salary or
other compensation for purposes of any severance pay or similar allowance, except as otherwise
required by law. Nothing contained herein will not confer upon you any right with respect to
continuance of employment or other service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate
your employment or other service at any time.

     10. Severability. If any provision of these Additional Terms and Conditions or the
application of any provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of these Additional Terms and Conditions and the application of
such provision to any other person or circumstances shall not be affected, and the provisions so
held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to
the extent) necessary to make it enforceable, valid and legal.

     11. Governing Law. These Additional Terms and Conditions shall be governed by and construed
with the internal substantive laws of the State of Ohio, without giving effect to any principle of
law that would result in the application of the law of any other jurisdiction.

     12. Application of The Sherwin-Williams Company Executive Compensation Adjustment and
Recapture Policy. You acknowledge and agree that the terms and conditions set forth in The
Sherwin-Williams Company Executive Compensation Adjustment and Recapture Policy (“Policy”) are
incorporated in these Additional Terms and Conditions by reference. To the extent the Policy is
applicable to you, it creates additional rights for the Company with respect to your option award.

5EX-10(AA)

 

EXHIBIT 10(aa)

THE SHERWIN-WILLIAMS COMPANY

2006 EQUITY AND PERFORMANCE INCENTIVE PLAN

Form of

Restricted Stock Grant

	 	 	 
	Grantee:                                         

	 	Date of Grant:                      , 20___
	Number of Shares:                                                             

	 	Date of Vesting:                  , 20___

          1. Grant of Restricted Shares. The Board of Directors (the “Board”) of The Sherwin-Williams
Company (the “Company”) grants to you (the “Grantee”) the aggregate number of shares of Common
Stock, $1.00 par value, of the Company set forth above (the “Restricted Shares”) in accordance with
the terms hereof and of The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan
(the “Plan”). Capitalized terms used herein without definition shall have the meanings assigned to
them in the Plan.

          2. Vesting of Restricted Shares. (A) Provided Grantee is continuously employed from the Date
of Grant through the Date of Vesting, inclusive (the “Restriction Period”) with the Company or a
Subsidiary, in Grantee’s present position or in such other position as the Board may determine
entitles Grantee to retain the rights under this grant (such positions being hereinafter referred
to as a “Participating Position”), a percentage ranging from 0% to 100% of the Restricted Shares
shall vest in accordance with the Management Objectives set forth below. The determination of the
percentage of the Restricted Shares that will vest shall be made after such time as the Board has
obtained the information, made the decisions, and completed the calculations necessary. The
percentage of the Restricted Shares that will vest is based upon (i) the Company achieving a
specified Average Return on Average Equity during the four year period ending on December 31 of the
most recently completed fiscal year prior to the Date of Vesting (“Measurement Period”), and (ii)
the Company’s Cumulative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
during the Measurement Period, as determined in accordance with the following table:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Percentage of Shares Vesting
	 	 	Average Return on Average Equity
	Cumulative	 	__%	 	__% to less	 	__% to less	 	 
	EBITDA	 	and above	 	than __%	 	than __%	 	below __%
	$                     (__% CAGR)
	 	 	100	%	 	 	90	%	 	 	70	%	 	 	0	%
	$                     (__% CAGR)
	 	 	90	%	 	 	80	%	 	 	60	%	 	 	0	%
	$                     (__% CAGR)
	 	 	80	%	 	 	70	%	 	 	50	%	 	 	0	%
	$                     (__% CAGR)
	 	 	70	%	 	 	60	%	 	 	40	%	 	 	0	%
	$                     (__% CAGR)
	 	 	60	%	 	 	50	%	 	 	30	%	 	 	0	%
	$                     (__% CAGR)
	 	 	50	%	 	 	40	%	 	 	20	%	 	 	0	%
	Less Than $                     (Less than __% CAGR)
	 	 	0	%	 	 	0	%	 	 	0	%	 	 	0	%

When the Cumulative EBITDA results during the Measurement Period are between the table values, an
interpolation will be made to determine the vesting percentage calculated to the nearest hundredth
of a percentage. The manner in which the Board will determine Average Return on Average Equity and
EBITDA during the Measurement Period is set forth on Exhibit A.

 

 

     (B) Notwithstanding Section 2(A) above, in the event of a “Change of Control” of the
Company, as defined below, during the Restriction Period the full number of the shares of
Restricted Shares shall immediately vest.

          3. Termination of Right to Restricted Shares. (A) On the date Grantee ceases to be
continuously employed in any Participating Position(s) at any time during the Restriction Period,
Grantee shall forfeit and lose all rights to the Restricted Shares, except as otherwise provided
below:

     (i) In the event of the death of Grantee during the Restriction Period, the full
number of Restricted Shares shall immediately vest.

     (ii) In the event Grantee is terminated by the Company or a Subsidiary as a result
of expiration of available disability leave of absence pursuant to applicable Company
policy due to sickness or bodily injury during the Restriction Period, the full number
of Restricted Shares shall immediately vest.

     (iii) In the event Grantee’s employment terminates as a result of normal retirement
age as defined under the applicable retirement plan of the Company or a Subsidiary, all
rights of Grantee under this grant shall continue as if Grantee had continued employment
in a Participating Position. The determination of the percentage of the number of
Restricted Shares that will vest will be made as if Grantee had remained employed in a
Participating Position throughout the Restriction Period.

     (iv) In the event Grantee’s employment terminates as a result of early retirement
(retirement on or after the earliest voluntary retirement age but before normal
retirement age as provided for in the applicable retirement plan of the Company or a
Subsidiary or retirement at an earlier age with the consent of the Board), the Board
shall have the right to cancel Grantee’s rights hereunder, continue Grantee’s rights
hereunder in full, or prorate the number of Restricted Shares granted hereunder for the
portion of the Restriction Period completed as of the date of such retirement or as the
Board may otherwise deem appropriate. In the event Grantee’s rights hereunder continue
in full or the number of Restricted Shares is prorated, determination of the percentage
of the number of Restricted Shares that will vest will be made as if Grantee had
remained employed in a Participating Position throughout the Restriction Period.

     (B) In the event Grantee is transferred from a Participating Position, the Board shall
have the right to cancel Grantee’s rights hereunder, continue Grantee’s rights hereunder in
full, or prorate the number of Restricted Shares granted hereunder for the portion of the
Restriction Period completed as of the date of such transfer or as the Board may otherwise
deem appropriate. In the event Grantee’s rights hereunder continue in full
or the number of Restricted Shares is prorated, determination of the percentage of the
number of Restricted Shares that will vest will be made as if Grantee had remained employed
in a Participating Position throughout the Restriction Period.

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     (C) In the event that Grantee knowingly or willfully engages in misconduct during the
Restriction Period, which is materially harmful to the interests of the Company or a
Subsidiary as determined by the Board, all rights of Grantee in the Restricted Shares shall
terminate.

          4. Book Entry Account; Stockholder Rights. Within a reasonable time following the Date of
Grant, the Company shall instruct its transfer agent to establish a book entry account representing
the Restricted Shares in Grantee’s name effective as of the Date of Grant, provided that the
Company shall retain control over the account until the Restricted Shares have vested. On the Date
of Grant, ownership of the Restricted Shares shall immediately transfer to Grantee and, except for
the substantial risk of forfeiture and the restrictions on transfer expressly set forth herein,
Grantee shall be entitled to all voting, dividend, distribution and other ownership rights as may
apply to the Common Stock generally. Notwithstanding the foregoing, any stock dividends or other
in-kind dividends or distributions shall be held by the Company until the related Restricted Shares
have become vested in accordance with this grant and shall remain subject to the forfeiture
provisions applicable to the Restricted Shares to which such dividends or distributions relate.

          5. Change of Control. A “Change of Control” shall be deemed to have occurred if:

     (A) Any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended, hereinafter the “Exchange Act”) who or that, together with
all “Affiliates” and “Associates” (as such terms are defined in Rule 12b-2, as in effect on
April 23, 1997, of the General Rules and Regulations under the Exchange Act) of such person, is
the Beneficial Owner (as defined below) of ten percent (10%) or more of the shares of Common
Stock then outstanding, except:

     (i) the Company;

     (ii) any of the Company’s subsidiaries in which a majority of the voting power of the
equity securities or equity interests of such subsidiary is owned, directly or indirectly,
by the Company;

     (iii) any employee benefit or stock ownership plan of the Company or any trustee or
fiduciary with respect to such a plan acting in such capacity; or

     (iv) any such person who has reported or may, pursuant to Rule 13d-l(b)(1) of the
General Rules and Regulations under the Exchange Act, report such ownership (but only as
long as such person is the Beneficial Owner of less than fifteen percent (15%) of the shares
of Common Stock then outstanding) on Schedule 13G (or any comparable or successor report)
under the Exchange Act.

Notwithstanding the foregoing: (a) no person shall become the Beneficial Owner of ten percent
(10%) or more (fifteen percent (15%) or more in the case of any person identified in clause (iv)
above) solely as the result of an acquisition of Common Stock by the Company that, by reducing
the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such person to ten percent (10%) or more (fifteen percent (15%) or
more in the case of any person identified in clause (iv) above) of the shares of Common

3

 

Stock
then outstanding; provided, however, that if a person becomes the Beneficial Owner of ten
percent (10%) or more (fifteen percent (15%) or more in the case of any person identified in
clause (iv) above) of the shares of Common Stock solely by reason of purchases of Common Stock
by the Company and shall, after such purchases by the Company, become the Beneficial Owner of
any additional shares of Common Stock which has the effect of increasing such person’s
percentage ownership of the then-outstanding shares of Common Stock by any means whatsoever,
then such person shall be deemed to have triggered a Change of Control; and (b) if the Board
determines that a person who would otherwise be the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of any person identified in clause (iv) above)
of the shares of Common Stock has become such inadvertently (including, without limitation,
because (1) such person was unaware that it Beneficially Owned ten percent (10%) or more
(fifteen percent (15%) or more in the case of any person identified in clause (iv) above) of the
shares of Common Stock or (2) such person was aware of the extent of such beneficial ownership
but such person acquired beneficial ownership of such shares of Common Stock without the
intention to change or influence the control of the Company) and such person divests itself as
promptly as practicable of a sufficient number of shares of Common Stock so that such person
would no longer be the Beneficial Owner of ten percent (10%) or more (fifteen percent (15%) or
more in the case of any person identified in clause (iv) above), then such person shall not be
deemed to be, or have been, the Beneficial Owner of ten percent (10%) or more (fifteen percent
(15%) or more in the case of any person identified in clause (iv) above) of the shares of Common
Stock, and no Change of Control shall be deemed to have occurred.

     (B) During any period of two consecutive years, individuals who at the beginning of such
period constituted the Board and any new director (other than a director initially elected or
nominated as a director as a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies by or on behalf of such
director) whose election by the Board or nomination for election by the Company’s shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof.

     (C) There shall be consummated any consolidation, merger or other combination of the Company
with any other person or entity other than:

     (i) a consolidation, merger or other combination which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the surviving entity)
more than fifty-one percent (51%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such consolidation, merger or
other combination; or

     (ii) a consolidation, merger or other combination effected to implement a recapitalization
and/or reorganization of the Company (or similar transaction), or any other consolidation,
merger or other combination of the Company, which results in no person, together with all
Affiliates and Associates of such person, becoming the Beneficial Owner of ten percent (10%) or
more (fifteen percent (15%) or more in the case of any person identified
in clause (A)(iv) above) of the combined voting power of the Company’s then outstanding

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securities.

     (D) There shall be consummated any sale, lease, assignment, exchange, transfer or other
disposition (in one transaction or a series of related transactions) of fifty percent (50%) or more
of the assets or earning power of the Company (including, without limitation, any such sale, lease,
assignment, exchange, transfer or other disposition effected to implement a recapitalization and/or
reorganization of the Company (or similar transaction)) which results in any person, together with
all Affiliates and Associates of such person, owning a proportionate share of such assets or
earning power greater than the proportionate share of the voting power of the Company that such
person, together with all Affiliates and Associates of such person, owned immediately prior to any
such sale, lease, assignment, exchange, transfer or other disposition.

     (E) The shareholders of the Company approve a plan of complete liquidation of the Company.

     For purposes of this Section 5, a person shall be deemed the “Beneficial Owner” of and shall
be deemed to “beneficially own” any securities:

     (x) which such person or any of such person’s Affiliates or Associates is considered to be
a “beneficial owner” under Rule 13d-3 of the General Rules and Regulations under the Exchange
Act, as in effect on April 23, 1997;

     (y) which such person or any of such person’s Affiliates or Associates, directly or
indirectly, has or shares the right to acquire, hold, vote (except pursuant to a revocable
proxy as described in the proviso to this definition) or dispose of such securities (whether
any such right is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing), or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed to be the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such
person or any of such person’s Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or

     (z) which are beneficially owned, directly or indirectly, by any other person (or any
Affiliate or Associate of such other person) with which such person (or any of such person’s
Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in
writing), with respect to acquiring, holding, voting (except as described in the proviso to
this definition) or disposing of any securities of the Company;

provided, however, that a person shall not be deemed the Beneficial Owner of, nor to beneficially
own, any security if such person has the right to vote such security pursuant to an agreement,
arrangement or understanding which (1) arises solely from a revocable proxy given to such person in
response to a public proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act, and (2) is not also then reportable on
Schedule 13D (or any comparable or successor report) under the Exchange Act; and provided, further,
that nothing in this Section 5 shall cause a person engaged in business as an underwriter or
securities to be the Beneficial Owner of, or to beneficially own, any securities acquired through
such person’s participation in good faith in a firm commitment

5

 

underwriting until the expiration of forty (40) days after the date of such acquisition or such
later date as the Board may determine in any specific case.

          6. Transferability. During the Restriction Period, Grantee shall not be permitted to sell,
transfer, pledge, encumber, assign or dispose of the Restricted Shares. The Restricted Shares
granted hereunder shall be deemed to be subject to a substantial risk of forfeiture within the
meaning of Section 83 of the Internal Revenue Code.

          7. Withholding Taxes. If the Company shall be required to withhold any federal, state, local
or foreign tax in connection with the Restricted Shares, Grantee shall pay or make provision
satisfactory to the Company for payment of all such taxes.

          8. No Right to Future Awards or Employment. The grant is a voluntary, discretionary bonus
being made on a one-time basis and it does not constitute a commitment to make any future awards.
The grant and any related payments made to Grantee will not be considered salary or other
compensation for purposes of any severance pay or similar allowance, except as otherwise required
by law. Nothing contained herein will not confer upon Grantee any right with respect to
continuance of employment or other service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate
Grantee’s employment or other service at any time.

          9. Severability. If any provision of this grant or the application of any provision hereof to
any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of
this grant and the application of such provision to any other person or circumstances shall not be
affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.

          10. Governing Law. This grant shall be governed by and construed with the internal
substantive laws of the State of Ohio, without giving effect to any principle of law that would
result in the application of the law of any other jurisdiction.

          11. Application of The Sherwin-Williams Company Executive Compensation Adjustment and
Recapture Policy. Grantee acknowledges and agrees that the terms and conditions set forth in The
Sherwin-Williams Company Executive Compensation Adjustment and Recapture Policy (“Policy”) are
incorporated in this Restricted Stock Grant by reference. To the extent the Policy is applicable
to Grantee, it creates additional rights for the Company with respect to Grantee’s Restricted
Shares.

6

 

Exhibit A

Average Return on Average Equity

	1.	 	Add the beginning and ending shareholder’s equity (less those items relating to extraordinary
events or which result in a distortion of comparative results) with respect to each fiscal
year of the Company beginning with or immediately prior to each year of the Measurement Period
and divide by two to arrive at the Average Equity for each such year.
	 
	2.	 	Divide the Net Income as determined for each such year by the Average Equity of the Company
for each such year to arrive at the Return on Average Equity. Net Income equals Reported Net
Income (less those items relating to extraordinary events or which result in a distortion of
comparative results).
	 
	3.	 	Add the Return on Average Equity for each year of the Measurement Period as determined above
and divide by the number of years in the Measurement Period to arrive at the Average Return on
Average Equity during the Measurement Period.

Example

Assuming a four year Measurement Period.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Year 4	 	Year 3	 	Year 2	 	Year 1
	Beginning Equity
	 	 	492	 	 	 	465  	 	 	 	404	 	 	 	370	 
	Ending Equity
	 	 	550	 	 	 	492	 	 	 	465	 	 	 	404	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	1042	 	 	 	957	 	 	 	869	 	 	 	774	 
	 
	 	 	÷2	 	 	 	÷2	 	 	 	÷2	 	 	 	÷2	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Average Equity
	 	 	521	 	 	 	478.5	 	 	 	434.5	 	 	 	387	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net Income
	 	 	97	 	 	 	86	 	 	 	75	 	 	 	65	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Return on
Average Equity
	 	 	97=18.6%
	 	 	 	86=18.0%
	 	 	 	75=17.3%
	 	 	 	65=16.8%
	 
	 
	 	 	521	 	 	 	478.5	 	 	 	434.5	 	 	 	387	 

	 	 	 	 	 
	Year	 	Return on Average Equity
	 
	Year 1
	 	16.8%		
	Year 2
	 	17.3%		
	Year 3
	 	18.0%		
	Year 4
	 	18.6%		
	 
	 	 	 	 
	 
	 	70.7 ÷ 4 = 17.7% Average Return on Average Equity

7

 

Cumulative Earnings Before Interest, Taxes, Depreciation and Amortization

Add the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (adjusted for those
items relating to extraordinary events or which results in a distortion of comparative results)
with respect to each fiscal year of the Company beginning with or immediately prior to each year of
the Measurement Period.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year 1 EBITDA	 	Year 2 EBITDA	 	Year 3 EBITDA	 	Year 4 EBITDA	 	Cumulative EBITDA

	 
	$100,000,000

	 	$	110,000,000	 	 	$	121,000,000	 	 	$	133,100,000	 	 	$	464,100,000	 

8

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