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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 38-1794485
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 313-274-7400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
5 1/4% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2012 NEW YORK STOCK EXCHANGE, INC.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. /X/
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT ON MARCH 15, 1995 (BASED ON THE CLOSING SALE
PRICE OF $25 1/2 OF THE REGISTRANT'S COMMON STOCK, AS REPORTED ON THE NEW YORK
STOCK EXCHANGE COMPOSITE TAPE ON SUCH DATE) WAS APPROXIMATELY $3,890,000,000.
NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AT MARCH 15, 1995:
158,364,823 SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED FOR ITS 1995
ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF
THIS REPORT.
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
1. Business.......................................................................... 2
2. Properties........................................................................ 7
3. Legal Proceedings................................................................. 9
4. Submission of Matters to a Vote of Security Holders............................... 10
Supplementary Item. Executive Officers of Registrant.............................. 10
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters............. 11
6. Selected Financial Data........................................................... 11
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 12
8. Financial Statements and Supplementary Data....................................... 16
9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................................ 36
PART III
10. Directors and Executive Officers of the Registrant................................ 36
11. Executive Compensation............................................................ 36
12. Security Ownership of Certain Beneficial Owners and Management.................... 36
13. Certain Relationships and Related Transactions.................................... 36
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................. 37
Signatures........................................................................ 40
FINANCIAL STATEMENT SCHEDULES
Masco Corporation Financial Statement Schedule.................................... F-1
MascoTech, Inc. and Subsidiaries Consolidated Financial Statements and Financial
Statement Schedules............................................................. F-3
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PART I
ITEM 1. BUSINESS.
Masco manufactures home improvement, building and home furnishings products
for the home and family. Masco believes that it is the largest domestic
manufacturer of faucets, plumbing supplies, kitchen and bath cabinets and
furniture, and that it is a leading domestic producer of a number of other home
improvement, building and home furnishings products. Masco was incorporated
under the laws of Michigan in 1929 and in 1968 was reincorporated under the laws
of Delaware.
Except as the context otherwise indicates, the terms "Masco" and the
"Company" refer to Masco Corporation and its consolidated subsidiaries.
INDUSTRY SEGMENTS
The following table sets forth for the three years ended December 31, 1994,
the contribution of the Company's industry segments to net sales and operating
profit:
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(IN THOUSANDS)
NET SALES
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1994 1993 1992
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Home Improvement and Building Products..... $2,523,000 $2,188,000 $1,991,000
Home Furnishings Products.................. 1,945,000 1,698,000 1,534,000
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$4,468,000 $3,886,000 $3,525,000
========= ========= =========
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OPERATING PROFIT(1)
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1994 1993 1992
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Home Improvement and Building Products..... $ 504,000 $ 412,000 $ 368,000
Home Furnishings Products.................. 89,000 69,000 60,000
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$ 593,000 $ 481,000 $ 428,000
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(1) Amounts are before general corporate expense.
Additional financial information concerning the Company's operations by
industry segments as of and for each of the three years ended December 31, 1994,
is set forth in Item 8 of this Report in the Note to the Company's Consolidated
Financial Statements captioned "Segment Information."
HOME IMPROVEMENT AND BUILDING PRODUCTS
The Company is among the country's largest manufacturers of brand-name
consumer products designed for the improvement and building of the home,
including faucets, kitchen and bath cabinets, kitchen appliances, bath and
shower enclosure units, spas and hot tubs, other shower and plumbing specialties
and accessories, door locks and other builders' hardware, air treatment
products, venting and ventilating equipment and water pumps. These products are
sold for the home improvement and home construction markets through mass
merchandisers, hardware stores, home centers and other outlets to consumers and
contractors.
The Company manufactures a variety of single and double handle faucets.
DELTA(R) and PEERLESS(R) single and double handle faucets are used on kitchen,
lavatory and other sinks and in bath and shower installations. DELTA faucets are
sold primarily through manufacturers' representatives to distributors who sell
the faucets to plumbers, building contractors, remodelers, retailers and others.
PEERLESS faucets are sold primarily through manufacturers' representatives
directly to retail outlets such as mass merchandisers, home centers and hardware
stores and are also sold under private label. The Company's ARTISTIC BRASS(R)
and SHERLE WAGNER(TM) faucets and accessories are produced for the decorator
markets and are sold through wholesalers, distributor showrooms and other
outlets. In
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addition to its domestic manufacturing, the Company manufactures faucets in
Denmark, Italy and Canada.
Sales of faucets approximated $667 million in 1994, $608 million in 1993
and $528 million in 1992. The percentage of operating profit on faucets is
somewhat higher than that on products within the Home Improvement and Building
Products Segment as a whole. The Company believes that the simplicity, quality
and reliability of its faucet mechanisms, its marketing and merchandising
activities, and the development of a broad line of products have accounted for
the continued strength of its faucet sales.
The Company manufactures stock, semi-custom and custom kitchen and bath
cabinetry in a variety of styles and in various price ranges. The Company sells
cabinets under a number of trademarks, including MERILLAT(R), KRAFTMAID(R),
STARMARK(R) and FIELDSTONE(R), with sales in both the home improvement and new
construction markets. In addition to its domestic manufacturing, the Company
manufactures cabinetry in Germany and England. Sales of kitchen and bath
cabinets were approximately $665 million in 1994, $570 million in 1993 and $515
million in 1992.
The Company's brass and copper plumbing system components and other
plumbing specialties are sold to plumbing, heating and hardware wholesalers and
to home centers, hardware stores, building supply outlets and other mass
merchandisers. These products are marketed primarily for the wholesale trade
under the BRASS-CRAFT(R) trademark and for the "do-it-yourself" market under the
PLUMB SHOP(R) and HOME PLUMBER(R) trademarks and are also sold under private
label.
Other kitchen and bath consumer products sold by the Company include
THERMADOR(R) cooktops, ovens, ranges and related cooking equipment and
refrigerators, which are marketed through appliance distributors and dealers.
The Company's acrylic and gelcoat bath and shower units and whirlpools are sold
under the AQUA GLASS(R) trademark primarily to wholesale plumbing distributors
for use in the home improvement and new home construction markets. Luxury bath
and shower enclosures are manufactured and sold by the Company under the
HUPPE(R) trademark. The Company's spas and hot tubs are sold under the HOT
SPRING SPA(R) and other trademarks directly to retailers for sale to residential
customers.
Other specialty home improvement and building products include premium
quality brass rim and mortise locks and knobs, trim and other builders' hardware
which are manufactured and sold under the BALDWIN(R) trademark for the home
improvement and new home construction markets. WEISER(R) door locks and related
hardware are sold through contractor supply outlets, hardware distributors and
home centers. SAFLOK(TM) electronic locks and WINFIELD(TM) mechanical locks are
sold primarily to the hospitality market.
In 1994 the Company added several plumbing specialties and bath accessories
to its line of products through the acquisition of Melard Corporation, Zenith
Products Corporation, American Shower & Bath Corporation and NewTeam Group. The
Company expanded its kitchen cabinet businesses during 1994 by the acquisition
in Germany of Alma Kuchen Aloys Meyer GmbH and Co.
HOME FURNISHINGS PRODUCTS
The Company is the leading domestic manufacturer of brand-name consumer
products for the furnishing of the home, including furniture, upholstery and
other fabrics, mirrors, lamps and other decorative accessories.
The Company manufactures a broad array of home furnishings products at a
wide range of price points and utilizes a variety of distribution channels to
market its products. A complete line of traditional, transitional and
contemporary wood and upholstered furniture is sold under the HENREDON(R)
trademark through Henredon galleries located in furniture stores, and also
through designer showrooms, furniture outlets and department stores. DREXEL(R)
and HERITAGE(R) wood and upholstered furniture and home furnishings accessories
are marketed through Drexel Heritage galleries located in furniture stores,
through showcase stores which primarily feature Drexel Heritage
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furniture and also through independent furniture outlets. The Lexington
Furniture Industries group produces youth-correlated furniture, moderately
priced bedroom and dining room groups, occasional and upholstered furniture and
woven wicker and rattan products, which are sold through national and regional
chains and independent furniture dealers, department stores and interior
designers. Universal Furniture Limited manufactures dining room, bedroom,
occasional wood and upholstered furniture, which is sold primarily through
furniture retailers and department stores under UNIVERSAL(R), BENCHCRAFT(R) and
other trademarks. The Company believes that Universal is the largest supplier in
the United States of wood dining room furniture, much of which is shipped in
unassembled form from the Company's Far East factories to assembly and
distribution centers in the United States. The Berkline Corporation, acquired in
1994, manufactures family or home entertainment room motion furniture, which is
sold primarily through furniture retailers and department stores under the
BERKLINE(R) trademark. The Company also manufactures and sells designer
upholstered products and upholstered furniture under private label to furniture
stores and other retailers. Sales of the Company's furniture products
approximated $1.57 billion in 1994, $1.34 billion in 1993 and $1.19 billion in
1992.
The Company's textile group includes Robert Allen Fabrics, Inc., Ametex
Fabrics, Inc., Sunbury Textile Mills, Inc., Ametex U.K. Limited and Ramm, Son &
Crocker Limited. Robert Allen markets fabrics, which are used primarily for
residential furnishings, through independent sales representatives to designers
and retailers. Company-operated and independent showrooms have also been
established to sell fabrics and display and sell many of the Company's other
home furnishings products. Ametex and Ametex U.K. design and convert moderately
priced fabrics for use in commercial and residential furnishings, which are sold
through independent sales representatives to furniture and other furnishings
manufacturers, fabric jobbers and the hospitality market. Sunbury manufactures
high-quality jacquard woven fabrics which are sold through sales representatives
primarily to furniture manufacturers and decorative jobbers for furniture and
other decorative applications. Ramm, Son & Crocker is a United Kingdom supplier
of high-quality printed fabrics to the furniture and decorative fabric markets.
Additional markets for the Company's furnishings business include the
hospitality and institutional markets and the design trade. The Company supplies
furniture and accessories to contract accounts for the hotel and motel industry
as well as for commercial, governmental and institutional applications. The
Company's Beacon Hill showrooms, located in design centers, offer wide
selections of high-end furniture, fabrics and accessories, many of which are not
generally available through traditional retail channels.
GENERAL INFORMATION CONCERNING INDUSTRY SEGMENTS
No material portion of the Company's business is seasonal or has special
working capital requirements, although the Company maintains a higher investment
in inventories for certain of its businesses than the average manufacturing
company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Receivables and Inventories," included in Item 7 of
this Report. The Company does not consider backlog orders to be a material
factor in its industry segments, and no material portion of its business is
dependent upon any one customer or subject to renegotiation of profits or
termination of contracts at the election of the federal government. Compliance
with federal, state and local regulations relating to the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, is not expected to result in material capital expenditures by the
Company or to have a material effect on the Company's earnings or competitive
position. In general, raw materials required by the Company are obtainable from
various sources and in the quantities desired.
INTERNATIONAL OPERATIONS
The Company, through its subsidiaries, has manufacturing plants in Belgium,
Canada, the People's Republic of China, Denmark, France, Germany, Hong Kong,
Indonesia, Italy, Malaysia, Mexico, the Philippines, Singapore, Sweden, Taiwan,
Turkey and the United Kingdom. Products manufactured by
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the Company outside of the United States include faucets and accessory products,
bath and shower enclosures, kitchen and bath cabinets, furniture, decorative
accessories, door locks and related hardware, ventilating fans and equipment and
submersible water pumps.
The Company's foreign operations are subject to political, monetary,
economic and other risks attendant generally to international businesses. These
risks generally vary from country to country.
Financial information concerning the Company's foreign and domestic
operations, including the amounts of net sales, operating profit and assets
employed which are attributable to the Company's operations in the United States
and in foreign countries, as of and for the three years ended December 31, 1994,
is set forth in Item 8 of this Report in the Note to the Company's Consolidated
Financial Statements captioned "Segment Information." From 1992 through 1994,
the Company's annual net export sales from the United States to other countries,
as a percentage of consolidated annual net sales, approximated three percent.
EQUITY INVESTMENTS
MascoTech, Inc.
In 1984, Masco transferred its industrial businesses to a newly formed
subsidiary, MascoTech, Inc. (formerly Masco Industries, Inc.), which became a
separate public company in July, 1984 when Masco distributed to its stockholders
shares of MascoTech common stock as a special dividend. Masco currently owns
approximately 44 percent of the outstanding common stock of MascoTech.
MascoTech is a supplier of powertrain and chassis components, technical
engineering and related services and automotive aftermarket products and a
manufacturer of architectural products and other specialty products primarily
for the defense industry. In 1994, MascoTech had sales of $1.7 billion.
MascoTech has adopted a long term strategic plan to focus on certain core
operating capabilities and divest certain other businesses. In late 1993,
MascoTech adopted a plan to divest the businesses in its energy segment, which
has since been completed. MascoTech's financial statements have been
reclassified to present the operating results of the energy segment as
discontinued operations. These businesses manufactured specialized tools,
equipment and other products for energy-related industries. In late 1994,
MascoTech adopted a plan to dispose of its architectural products, defense and
certain of its transportation-related businesses. The disposition of these
businesses, which have annual sales of approximately $700 million, is expected
to occur primarily in 1995 with the cash portion of the proceeds applied to
reduce MascoTech's indebtedness and to provide capital to invest in its core
businesses. The disposition of these businesses does not meet the criteria for
discontinued operations treatment for accounting purposes; accordingly, the
sales and results of operations of these businesses will be included in the
results of continuing operations through the date of disposition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included in Item 7 of this Report regarding the effect of these
actions on the Company.
MascoTech's core transportation-related businesses manufacture powertrain,
chassis and aftermarket products and provide technical engineering and other
related services. Powertrain and chassis products include semi-finished
transmission shafts, drive gears, engine connecting rods, wheel spindles, front
wheel drive and exhaust system components, control arms and heavy stampings and
related assemblies for suspension and chassis applications. MascoTech's
technical engineering and related services businesses supply engineering and
engineering services to support the vehicle development processes of automotive
original equipment manufacturers as well as specialty vehicle, marketing,
training, visual and other related professional services. Aftermarket products
include fuel and emission systems components, windshield wiper blades,
constant-velocity joints, brake hardware repair kits and automotive accessories.
MascoTech's transportation-related businesses held for disposition manufacture
products for vehicle body related applications including automotive trim,
luggage racks and accessories and light, medium and specialty metal stampings.
These businesses also supply specialty coatings and truck cab body and passenger
car convertible assemblies. MascoTech's products
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are manufactured using various metalworking technologies, including cold, warm
and hot forming, powdered metal forming and stamping. During 1994, sales to
various divisions and subsidiaries of Ford Motor Company, Chrysler Corporation
and General Motors Corporation accounted for approximately 19 percent, 13
percent and 12 percent, respectively, of MascoTech's net sales (including both
core businesses and businesses held for disposition).
Specialty products manufactured by MascoTech include a variety of
architectural products for commercial, institutional and residential markets.
Products include steel doors and frames; stainable and low maintenance steel
doors; wood windows and aluminum-clad wood windows; leaded, etched and beveled
glass for decorative windows and entryways; residential entry systems; garage
doors; sectional and rolling doors; security grilles; and modular metal
partitions. MascoTech's sales of architectural products in 1994 were $277
million. MascoTech's other specialty products consist primarily of defense
products, including large diameter cold formed cartridge cases, projectiles and
casings for rocket motors and missiles for the United States government and its
suppliers. MascoTech also markets waste-water treatment services to other
industrial companies principally in southern California. MascoTech's sales in
1994 of these other specialty products were $93 million.
TriMas Corporation
The Company and MascoTech currently own approximately 5 percent and 41
percent, respectively, of the outstanding common stock of TriMas Corporation.
TriMas is a diversified proprietary products company with leadership positions
in commercial, industrial and consumer niche markets, including industrial
container closures, pressurized gas cylinders, specialty industrial gaskets,
towing systems products, specialty fasteners, tapes and products for fiberglass
insulation, and precision cutting tools.
Hans Grohe
The Company has a partnership interest in Hans Grohe GmbH & Co. KG, a
German manufacturer of faucets, handheld showers, shower heads and other shower
accessories.
PATENTS AND TRADEMARKS
The Company holds a number of United States and foreign patents covering
various design features and valve constructions used in certain of its faucets,
and also holds a number of other patents and patent applications, licenses,
trademarks and trade names. As a manufacturer of brand-name consumer products,
the Company views its trademarks as important, but does not believe that there
is any reasonable likelihood of a loss of such rights which would have a
material adverse effect on the Company's industry segments or its present
business as a whole.
COMPETITION
The major domestic and foreign markets for the Company's products in its
industry segments are highly competitive. Competition is based primarily on
performance, quality, style, service and price, with the relative importance of
such factors varying among products. A number of companies of varying size
compete with one or more of the Company's product lines.
EMPLOYEES
At December 31, 1994, the Company employed approximately 51,300 people.
Satisfactory relations have generally prevailed between the Company and its
employees.
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ITEM 2. PROPERTIES.
The following list includes the Company's principal manufacturing
facilities by location and the industry segments utilizing such facilities:
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Arizona............ Tucson (1)
California......... Carlsbad (1), City of Industry (2), Compton (2), Corona (1), Costa Mesa
(1), Los Angeles (1)(1), Pico Rivera (1), Pomona (1), Rosemead (2),
South Gate (1), Vista (1) and Whittier (2)
Georgia............ Atlanta (2)
Illinois........... Alsip (2) and Chicago (2)
Indiana............ Cumberland (1), Greensburg (1) and Kendallville (1)
Iowa............... Northwood (1)
Kentucky........... Henderson (1 and 2) and Morgantown (1)
Massachusetts...... Framingham (2) and Holyoke (2)
Michigan........... Adrian (1), Hillsdale (1), Holland (2), Lapeer (1), Madison Heights (1)
and Riverview (1)
Minnesota.......... Lakeville (1)
Mississippi........ Blue Mountain (2), New Albany (2), Olive Branch (1) and Ripley (2)(2)(2)
Nevada............. Las Vegas (1)
New Jersey......... Bellmawr (1) and Passaic (1)
North Carolina..... Black Mountain (2), Drexel (2), Goldsboro (2), Hickory (2)(2), High
Point (2)(2)(2), Hildebran (2)(2), Lexington (2)(2)(2)(2)(2), Linwood
(2), Longview (2), Marion (2)(2), Mocksville (2), Morganton
(2)(2)(2)(2)(2), Mt. Airy (2), Shelby (2), Spruce Pine (2), Thomasville
(1) and Whittier (2)
Ohio............... Jackson (1), Loudonville (1) and Middlefield (1)(1)
Oklahoma........... Chickasha (1)
Oregon............. Klamath Falls (1)
Pennsylvania....... Aston (1), Hazelton (1), Reading (1 and 2) and Sunbury (2)
South Carolina..... Kingstree (2)
South Dakota....... Rapid City (1) and Sioux Falls (1)
Tennessee.......... Adamsville (1)(1), LaFollette (1), Livingston (2), McEwen (1),
Morristown (2)(2)(2)(2)(2) and Rockwood (2)
Texas.............. Lancaster (1)
Virginia........... Atkins (1)(1), Culpeper (1), Lynchburg (1), Mt. Jackson (1) and
Portsmouth (2)
Belgium............ Brussels (1)
Canada............. Burnaby (1), British Columbia; Brantford (1), Cambridge (1), London (1),
Mississauga (2) and St. Thomas (1), Ontario; Montreal (1) and Ville
D'Anjou (2), Quebec
China (P.R.C.)..... Chang Chun (2)(2), Guangzhou (2) and Tianjin (2)(2)(2)
Denmark............ Odense (1)
France............. Sevres (1)
Germany............ Ahaus (1), Bad Zwischenahn (1), Grunhain (1), Iserlohn (1)(1),
Netzschkau (1), Steinhagen (1), Tangermunde (2) and Waldenburg (1)
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Hong Kong.......... (2)(2)
Indonesia.......... Semarang (2)
Italy.............. Lacchiarella (1) and Zingonia (1)
Malaysia........... Johor (2) and Kedah (2)(2)
Mexico............. Mexicali (1)
Philippines........ Cebu (2)(2)
Singapore.......... Kranji (2)(2)
Sweden............. Skene (2)
Taiwan............. Kaohshiung (2), Tai Chung (1), Tao Yuan (2) and Tung Kang (2)
Turkey............. Adana (1)
United Kingdom..... Brownhills (1), Corby (1), Silsden (2) and Warminster (2), England;
Aberdare (2) and Merthyr Tydfil (2), Wales
</TABLE>
Note: Multiple footnotes within the same parenthesis indicate the
facility is engaged in activities relating to both segments. Multiple
footnotes to the same municipality denote separate facilities in that
location. Industry segments in the preceding table are identified as
follows: (1) Home Improvement and Building Products Segment, and (2)
Home Furnishings Products Segment.
The home furnishings products manufacturing facilities are located
primarily in North Carolina, with principal facilities ranging in size from
710,000 to 1,108,000 square feet. The two principal faucet manufacturing plants
are located in Greensburg, Indiana and Chickasha, Oklahoma and a new 394,000
square foot faucet manufacturing plant is under construction in Jackson,
Tennessee. The faucet manufacturing plants and the majority of the Company's
other facilities range from approximately 20,000 to 700,000 square feet. The
Company owns most of its manufacturing facilities and none of the properties is
subject to significant encumbrances. The Company also maintains approximately
1.5 million square feet of designer and trade showroom space at various
locations throughout the United States where it coordinates the display and sale
of its home furnishings products and owns 725,000 square feet of showroom space
in High Point, North Carolina utilized for furniture industry trade shows. In
addition, the Company maintains 357,000 square feet of designer and trade
showroom space at various foreign locations. The Company's corporate
headquarters are located in Taylor, Michigan and are owned by the Company. An
additional building near its corporate headquarters is used by the Company's
corporate research and development department.
The Company's buildings, machinery and equipment have been generally well
maintained, are in good operating condition, and are adequate for current
production requirements.
The following list identifies the location of the principal manufacturing
facilities of MascoTech and the industry segments utilizing such facilities:
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Arizona............ Chandler (2)
California......... Vernon (3) and Yuba City (1)
Florida............ Auburndale (2), Deerfield Beach (1) and Orlando (2)
Georgia............ Adel (1)
Indiana............ Fort Wayne (1), Kendallville (1) and North Vernon (1)
Iowa............... Dubuque (2)
Kentucky........... Nicholasville (1)
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Michigan........... Auburn Hills (1)(1)(1), Brighton (1), Burton (1), Coopersville (1),
Dearborn (1), Detroit (1)(1)(1), Farmington Hills (1), Fraser (1), Green
Oak Township (1 and 3), Hamburg (1 and 3), Holland (1), Livonia (1),
Mesick (1), Mt. Clemens (1), Oxford (1)(1)(1), Port Huron (1), Redford
(1), Royal Oak (1), Shelby Township (1), St. Clair (1), St. Clair Shores
(1), Sterling Heights (1), Traverse City (1)(1)(1)(1)(1), Troy (1)(1),
Warren (1), West Branch (2) and Ypsilanti (1)
Mississippi........ Nesbit (2)
New York........... Brooklyn (2) and Maspeth (2)
Ohio............... Blue Ash (2), Bluffton (1), Canal Fulton (1), Columbus (2), Lima (1),
Minerva (1), Perrysburg (2), Port Clinton (1), Shelby (1) and Upper
Sandusky (1)
Oklahoma........... Tulsa (1)
Pennsylvania....... Ridgway (1)
Virginia........... Duffield (1) and Salem (1)
Germany............ Zell am Harmersbach (1 and 3)
Italy.............. Poggio Rusco (1)
United Kingdom..... Wednesfield, England (1)
</TABLE>
Note: Multiple footnotes within the same parenthesis indicate the
facility is engaged in significant activities relating to more than one
segment. Multiple footnotes to the same municipality denote separate
facilities in that location. Industry segments in the preceding table
are identified as follows: (1) transportation-related products; (2)
specialty products - architectural and (3) specialty products - other.
MascoTech's largest manufacturing facility is located in Vernon, California
and is a multi-plant facility of approximately 920,000 square feet. MascoTech
owns the largest plant, comprising approximately 540,000 square feet, and
operates the remaining portions of this facility under leases, the earliest of
which expires at the end of 1996. Except for the foregoing facility and an
additional manufacturing facility covering approximately 605,000 square feet,
MascoTech's manufacturing facilities range in size from approximately 10,000 to
325,000 square feet, are owned by MascoTech or leased and are not subject to
significant encumbrances. MascoTech's executive offices are located in Taylor,
Michigan, and are provided by the Company to MascoTech under a corporate
services agreement.
MascoTech's buildings, machinery and equipment have been generally well
maintained, are in good operating condition, and are adequate for current
production requirements.
ITEM 3. LEGAL PROCEEDINGS.
Civil suits were filed in December 1992 in a California state court by the
California Attorney General, the Natural Resources Defense Counsel and the
Environmental Law Foundation against a subsidiary of the Company and
approximately 15 other manufacturers or distributors of faucets sold in that
state. The suits principally allege that brass faucets unlawfully leach lead
into tap water and that the defendants have failed to provide clear and
reasonable warnings in violation of California law. The plaintiffs have
requested, among other things, that the defendants be enjoined from selling
products in California that leach lead into tap water, be ordered to offer
restitution to California purchasers of defendants' products, and pay
unspecified compensatory and punitive damages. Based upon the Company's present
knowledge and subject to future legal and factual developments, the Company does
not believe that these suits will result in any material adverse effect on the
Company's financial position.
9
<PAGE> 11
The Company is subject to other claims and litigation in the ordinary
course of business, but does not believe that any such claim or litigation will
have a material adverse effect on its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF REGISTRANT (PURSUANT TO INSTRUCTION 3
TO ITEM 401(B) OF REGULATION S-K).
<TABLE>
<CAPTION>
OFFICER
NAME POSITION AGE SINCE
- ------------------------------------ ------------------------------------ --- -------
<S> <C> <C> <C>
Alex Manoogian...................... Chairman Emeritus 93 1929
Richard A. Manoogian................ Chairman of the Board and 58 1962
Chief Executive Officer
Wayne B. Lyon....................... President and Chief Operating 62 1972
Officer
Gerald Bright....................... Vice President and Assistant 72 1970
Secretary
David A. Doran...................... Vice President - Taxes 53 1984
Eugene A. Gargaro, Jr. ............. Vice President and Secretary 52 1993
Ronald L. Jones..................... President - Home Furnishings 52 1989
Products
Raymond F. Kennedy.................. President - Building Products 52 1989
John R. Leekley..................... Vice President and General Counsel 51 1979
Richard G. Mosteller................ Senior Vice President - Finance 62 1962
John C. Nicholls, Jr. .............. Treasurer 61 1967
Robert B. Rosowski.................. Vice President - Controller 54 1973
Samuel Valenti, III................. Vice President - Investments 49 1971
David G. Wesenberg.................. Vice President - Human Resources 64 1980
</TABLE>
Executive officers who are elected by the Board of Directors serve for a
term of one year or less. Each elected executive officer has been employed in a
managerial capacity with the Company for over five years except for Mr. Gargaro.
Mr. Gargaro joined the Company as its Vice President and Secretary on October 1,
1993. Prior to joining the Company, Mr. Gargaro was a partner at the Detroit law
firm of Dykema Gossett PLLC. Mr. Gargaro has served as a director and Secretary
of MascoTech, Inc., since 1984 and a director and Secretary of TriMas
Corporation since 1989. Richard A. Manoogian, the Chairman of the Board and
Chief Executive Officer of the Company, is the son of its Chairman Emeritus,
Alex Manoogian.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The New York Stock Exchange is the principal market on which the Company's
Common Stock is traded. The following table indicates the high and low sales
prices of the Company's Common Stock as reported on the New York Stock Exchange
Composite Tape and the cash dividends declared per share for the periods
indicated:
<TABLE>
<CAPTION>
MARKET PRICE
---------------- DIVIDENDS
QUARTER HIGH LOW DECLARED
-------------------------------------------- ----- ----- ---------
<S> <C> <C> <C>
1993
First..................................... $35 1/4 $ 29 $ .16
Second.................................... 34 3/4 28 5/8 .16
Third..................................... 32 1/4 25 1/2 .17
Fourth.................................... 38 7/8 28 3/4 .17
---------
Total.................................. $ .66
========
1994
First..................................... $39 3/4 $ 31 $ .17
Second.................................... 32 1/8 26 1/4 .17
Third..................................... 28 1/4 23 5/8 .18
Fourth.................................... 25 1/4 21 1/4 .18
---------
Total.................................. $ .70
========
</TABLE>
On March 15, 1995, there were approximately 6,680 holders of record of the
Company's Common Stock.
The Company expects that its practice of paying quarterly dividends on its
Common Stock will continue, although future dividends will continue to depend
upon the Company's earnings, capital requirements, financial condition and other
factors.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth summary consolidated financial information
of the Company, for the years and dates indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales........................... $4,468,000 $3,886,000 $3,525,000 $3,141,000 $3,209,000
Net income(1)....................... $ 193,700 $ 221,100 $ 183,100 $ 44,900 $ 138,800
Per share of common stock:
Net income(1)..................... $1.22 $1.45 $1.21 $.30 $.91
Dividends declared................ $.70 $.66 $.62 $.58 $.55
Dividends paid.................... $.69 $.65 $.61 $.57 $.54
At December 31:
Total assets...................... $4,390,000 $4,053,100 $4,011,600 $3,785,800 $3,760,700
Long-term debt.................... $1,592,600 $1,418,300 $1,487,100 $1,369,300 $1,334,300
</TABLE>
(1) After the $79 million after-tax ($.50 per share) non-cash equity
investment charge in 1994.
11
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CORPORATE DEVELOPMENT
Acquisitions have historically contributed significantly to Masco's
long-term growth, even though generally the initial impact on earnings is
minimal after deducting acquisition-related costs such as interest and added
depreciation and amortization. The important earnings benefit to Masco arises
from subsequent growth of acquired companies, since incremental sales are not
handicapped by these expenses.
In early 1994, the Company acquired for common stock, Melard Corporation
and Zenith Products Corporation, manufacturers of plumbing specialties and bath
accessories, and Berkline Corporation, a manufacturer of popularly priced
recliners and motion upholstered furniture, all of which were accounted for as
poolings of interests.
In December 1994, the Company acquired Alma Kuchen Aloys Meyer GmbH and
Co., a German manufacturer of kitchen cabinets, and NewTeam Group, a United
Kingdom manufacturer of handheld showers and other bath accessories, both of
which were accounted for as purchase transactions.
The above pooled and purchased companies had annual net sales in 1993 of
approximately $320 million.
In January 1995, the Company received approximately $70 million upon the
sale of its investment in Formica Corporation. The Company anticipates that the
gain from this transaction, however, will be largely offset by charges and
reserves for profit improvement programs and asset disposals that should enhance
the Company's future performance.
PROFIT MARGINS
Net income and earnings per share for 1994, prior to an unusual non-cash
fourth quarter equity investment charge, were $273 million and $1.72,
representing increases of 23 percent and 19 percent from $221 million and $1.45
in 1993, respectively. Including the unusual charge of approximately $.50 per
share, net income was $194 million, with earnings per share of $1.22. The
unusual charge is the Company's equity share of its affiliate MascoTech, Inc.'s
$315 million non-cash after-tax charge which results from MascoTech's strategic
decision to focus on its core transportation-related business and divest
non-core businesses. MascoTech believes that this strategy should strengthen its
balance sheet and profitability, which in turn should enhance the value of the
Company's investment in MascoTech.
After-tax profit margin on sales and after-tax profit return on
shareholders' equity in 1994, before the effect of the above-mentioned unusual
equity charge, increased to 6.1 percent and 13.7 percent, respectively, as
compared with 5.7 percent and 11.7 percent, respectively, in 1993, and 5.2
percent and 10.2 percent, respectively, in 1992, primarily due to increased
product sales resulting from improved market shares and the expanded economy.
Including the effect of the equity charge, after-tax profit margin as a percent
of net sales and after-tax profit return on shareholders' equity were 4.3
percent and 9.7 percent, respectively, in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Over the years, the Company has largely funded its growth through cash
provided by a combination of operations and long-term bank and other borrowings.
At year-end 1994, current assets were approximately 3.1 times current
liabilities.
During 1994, cash of $311 million was provided by operating activities and
by $134 million from a net increase in debt; cash decreased by $191 million for
the purchase of property and equipment, by $127 million for the acquisition of
companies, by $62 million for the repurchase of Company Common Stock, by $109
million for cash dividends and by $15 million for other cash outflows. The
aggregate of the preceding items represents a net cash outflow of $59 million in
1994. Cash provided by operating
12
<PAGE> 14
activities totalled $311 million, $261 million and $204 million in 1994, 1993
and 1992, respectively; the Company has generally reinvested a majority of these
funds in its operations.
In late 1994, the Company's Board of Directors authorized the repurchase of
up to 10 million shares of its common stock in open-market transactions or
otherwise. Pursuant to this authorization, approximately 2.8 million common
shares were repurchased in the fourth quarter of 1994.
The Company's anticipated internal cash flow is expected to provide
sufficient liquidity to fund its near-term working capital and other investment
needs. The Company believes that its longer-term working capital and other
general corporate requirements will be satisfied through its internal cash flow
and to the extent necessary in the financial markets.
RECEIVABLES AND INVENTORIES
During 1994, the Company's receivables increased by $135 million. This
increase is primarily comprised of receivables from existing operations, which
increased by $53 million, principally as a result of increased sales in the
fourth quarter of 1994 compared with the same period in 1993, and receivables of
acquired companies.
During 1994, the Company's inventories increased by $125 million. This
increase is primarily comprised of a $75 million increase in inventories from
existing operations which had increased sales, and inventories of acquired
companies.
As compared with the average manufacturing company, the Company maintains a
higher investment in inventories, which relates to the Company's business
strategies of providing better customer service, establishing efficient
production scheduling and benefitting from larger, more cost-effective
purchasing.
CAPITAL EXPENDITURES AND DEPRECIATION
Capital expenditures totalled $191 million in 1994, compared with $167
million in 1993. These amounts primarily pertain to expenditures for additional
facilities related to increased demand for existing products as well as for new
Masco products.
The Company continues to invest in automating its manufacturing operations
and increasing its productivity, in order to be a more efficient producer and
improve customer service and response time.
Depreciation expense and amortization expense were $88.1 million and $32.5
million, respectively, in 1994, compared with $82.1 million and $33.9 million,
respectively, in 1993. The major portion of amortization expense, from the
excess of cost over net assets acquired, relates to companies acquired in
previous years. These companies have been successful for many years in
established markets not subject to rapid technological changes. At each balance
sheet date, management assesses whether there has been an impairment in the
carrying value of excess of cost over net assets of acquired companies,
primarily by comparing current and projected sales, operating income and annual
cash flows with the related annual amortization expense as well as considering
the equity of such companies.
EQUITY AND OTHER INVESTMENTS IN AFFILIATES
Equity losses from affiliates were $101.3 million in 1994, compared with
equity earnings of $18.7 million in 1993 and $17.3 million in 1992.
In December 1994, MascoTech, an equity affiliate of the Company, announced
and recorded a non-cash after-tax charge of $315 million in anticipation of
losses associated with the planned disposition of its non-core businesses. As a
result, the Company recorded $138 million pre-tax ($79 million after-tax) as its
equity share of this non-cash charge.
13
<PAGE> 15
CASH DIVIDENDS
During 1994, the Company increased its dividend rate six percent to $.18
per share quarterly. This marks the 36th consecutive year in which dividends
have been increased. Dividend payments over this period have increased at an 18
percent average annual rate. Although the Company is aware of the greater
interest in yield by many investors and has maintained an increased dividend
payout in recent years, the Company continues to believe that its shareholders'
long-term interests are best served by investing a significant portion of its
earnings in the future growth of the Company.
RECENTLY ISSUED PROFESSIONAL ACCOUNTING STANDARDS
The American Institute of Certified Public Accountants' Statement of
Position 93-7, Reporting on Advertising Costs, becomes effective in 1995. This
statement provides guidance on the accounting treatment and reporting of
advertising costs and should not have a material effect on the Company's
financial statements.
GENERAL FINANCIAL ANALYSIS
1994 VERSUS 1993
Net sales in 1994, aided by acquisitions, increased 15 percent to $4,468
million; excluding acquisitions, net sales increased 7 percent. Sales in 1994 of
the Company's Home Improvement and Building Products and Home Furnishings
Products each increased 15 percent to $2,523 million and $1,945 million,
respectively; excluding acquisitions, sales of Home Improvement and Building
Products and Home Furnishings Products increased 8 percent and 6 percent,
respectively.
Cost of sales as a percentage of sales decreased modestly to 67.2 percent
in 1994 from 67.5 percent in 1993. Selling, general and administrative expenses
as a percentage of sales decreased to 21.4 percent in 1994 from 22.1 percent in
1993. Operating profit, after general corporate expense, increased 26 percent to
$510 million in 1994, primarily due to increased sales and profit improvement
programs.
Operating profit of the Company's Home Improvement and Building Products
segment, before general corporate expense, increased 22 percent to $504 million.
Operating profit of the Company's Home Furnishings Products segment, before
general corporate expense, increased 29 percent to $89 million.
Included in other income and expense for 1994 are equity losses from
MascoTech of $106 million, which reflect the Company's $138 million pre-tax
equity share of MascoTech's unusual non-cash fourth quarter charge, as compared
with $13.2 million of equity earnings from MascoTech in 1993. MascoTech reported
a loss from continuing operations and a net loss, after preferred stock
dividends, of $234.4 million and $233.1 million, respectively, in 1994, as
compared with income from continuing operations and net income, after preferred
stock dividends, of $70.9 million and $32.7 million, respectively, in 1993.
Net income and earnings per common share, for 1994 prior to the
above-mentioned MascoTech charge, were $273 million and $1.72, representing
increases of 23 percent and 19 percent from $221 million and $1.45 in 1993,
respectively. Including the above-mentioned charge of approximately $.50 per
share, net income was $194 million, with earnings per share of $1.22.
1993 VERSUS 1992
Net sales in 1993 increased 10 percent to $3,886 million. The sales
increase was primarily due to increased shipments of kitchen, bath and home
furnishings products. Cost of sales as a percentage of sales was 67.5 percent in
both 1993 and 1992. Selling, general and administrative expenses as a percentage
of sales decreased modestly to 22.1 percent in 1993 from 22.3 percent in 1992.
Operating profit increased 13 percent in 1993 from 1992.
14
<PAGE> 16
The Company's Home Improvement and Building Products sales in 1993
increased 10 percent to $2,188 million while operating profit increased 12
percent to $412 million.
Sales in 1993 of the Company's Home Furnishings Products increased 11
percent to $1,698 million and operating profit increased 15 percent to $69
million.
Included in other income and expense for 1993 are equity earnings from
MascoTech, Inc. of $23.2 million, prior to an approximate $10 million after-tax
fourth quarter charge which reflects the Company's equity share of MascoTech's
loss provision for the disposition of its energy-related businesses and
extraordinary loss on the early extinguishment of debt, as compared with $12.6
million of equity earnings in 1992. MascoTech reported income from continuing
operations of $70.9 million and $39.0 million in 1993 and 1992, respectively,
and net income, after preferred stock dividends, of $32.7 million for 1993 and
$29.1 million for 1992. The 1993 results of MascoTech were favorably impacted by
internal cost reductions and from increased demand in its transportation
industries, which more than offset its fourth quarter special charges of
approximately $26 million after-tax.
Included in the fourth quarter of 1993 is a $28.3 million pre-tax gain
(approximately $18 million after-tax) on the redemption of MascoTech's 10%
exchangeable preferred stock. This gain was principally offset by the Company's
approximate $10 million after-tax equity share of MascoTech's above-mentioned
fourth quarter special charges, as well as by charges related to certain
restructurings of Company operations which should result in future cost savings.
The Company reported increases in net income and earnings per share of 21
percent and 20 percent, respectively, in 1993 as compared with 1992.
15
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Masco Corporation:
We have audited the accompanying consolidated balance sheet of Masco
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1994, and the financial statement schedule as
listed in Item 14(a)(2)(i) of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Masco
Corporation and subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
February 17, 1995
16
<PAGE> 18
MASCO CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994 AND 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash investments................................... $ 61,160,000 $ 119,980,000
Marketable securities....................................... 9,910,000 4,890,000
Receivables................................................. 745,170,000 610,120,000
Inventories................................................. 948,830,000 824,130,000
Prepaid expenses and other.................................. 126,370,000 116,750,000
-------------- --------------
Total current assets................................... 1,891,440,000 1,675,870,000
Equity investments in MascoTech, Inc.......................... 184,960,000 294,700,000
Equity investments in other affiliates........................ 57,790,000 54,630,000
Property and equipment........................................ 1,231,810,000 1,095,170,000
Excess of cost over acquired net assets....................... 706,160,000 605,170,000
Other assets.................................................. 317,880,000 327,570,000
-------------- --------------
Total assets........................................... $4,390,040,000 $4,053,110,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................... $ 48,380,000 $ 33,160,000
Accounts payable............................................ 201,320,000 161,220,000
Accrued liabilities......................................... 351,590,000 296,060,000
-------------- --------------
Total current liabilities.............................. 601,290,000 490,440,000
Long-term debt................................................ 1,592,610,000 1,418,290,000
Deferred income taxes and other............................... 83,460,000 145,950,000
-------------- --------------
Total liabilities...................................... 2,277,360,000 2,054,680,000
-------------- --------------
Shareholders' Equity:
Common shares authorized: 400,000,000;
issued: 1994 -- 156,990,000; 1993 -- 152,850,000......... 156,990,000 152,850,000
Preferred shares authorized: 1,000,000...................... -- --
Paid-in capital............................................. 44,840,000 69,880,000
Retained earnings........................................... 1,924,740,000 1,805,170,000
Cumulative translation adjustments.......................... (13,890,000) (29,470,000)
-------------- --------------
Total shareholders' equity............................. 2,112,680,000 1,998,430,000
-------------- --------------
Total liabilities and shareholders' equity............. $4,390,040,000 $4,053,110,000
============= =============
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 19
MASCO CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales...................................... $4,468,000,000 $3,886,000,000 $3,525,000,000
Cost of sales.................................. 3,001,770,000 2,621,630,000 2,381,040,000
-------------- -------------- --------------
Gross profit............................ 1,466,230,000 1,264,370,000 1,143,960,000
Selling, general and administrative expenses... 956,630,000 860,540,000 785,420,000
-------------- -------------- --------------
Operating profit........................ 509,600,000 403,830,000 358,540,000
-------------- -------------- --------------
Other income (expense), net:
Re: MascoTech, Inc.:
Equity earnings (loss).................... (106,110,000) 13,160,000 12,570,000
Interest and dividend income.............. -- 16,220,000 17,100,000
Gain from redemption of preferred stock... -- 28,300,000 --
Equity earnings, other affiliates............ 4,800,000 5,580,000 4,720,000
Other, net................................... 19,030,000 1,330,000 12,510,000
Interest expense............................. (104,720,000) (105,820,000) (100,640,000)
-------------- -------------- --------------
(187,000,000) (41,230,000) (53,740,000)
-------------- -------------- --------------
Income before income taxes.............. 322,600,000 362,600,000 304,800,000
Income taxes................................... 128,900,000 141,500,000 121,700,000
-------------- -------------- --------------
Net income.............................. $ 193,700,000 $ 221,100,000 $ 183,100,000
============= ============= =============
Earnings per share............................. $1.22 $1.45 $1.21
===== ===== =====
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 20
MASCO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM (FOR):
Operating Activities:
Net income................................. $ 193,700,000 $ 221,100,000 $ 183,100,000
Depreciation and amortization.............. 120,630,000 115,990,000 114,450,000
Equity (earnings) loss, net................ 108,030,000 (13,800,000) (13,190,000)
Deferred income taxes and other............ (36,050,000) (8,500,000) 11,620,000
Gain from redemption of MascoTech preferred
stock, net of tax........................ -- (17,550,000) --
------------- ------------- -------------
Total from earnings................... 386,310,000 297,240,000 295,980,000
(Increase) in receivables.................. (53,470,000) (42,520,000) (52,450,000)
(Increase) in inventories.................. (74,540,000) (38,840,000) (35,100,000)
Increase (decrease) in accounts payable and
accrued liabilities, net................. 52,860,000 45,050,000 (4,800,000)
------------- ------------- -------------
Net cash from operating activities.... 311,160,000 260,930,000 203,630,000
------------- ------------- -------------
Investing Activities:
Capital expenditures....................... (190,610,000) (166,540,000) (117,690,000)
Currency translation adjustments........... 15,580,000 (17,500,000) (27,090,000)
Sale of affiliate investments to
MascoTech................................ -- 87,500,000 --
Proceeds from redemption of MascoTech
preferred stock.......................... -- 100,000,000 --
Acquisition of companies................... (126,830,000) -- --
Other, net................................. (31,650,000) 40,700,000 (63,380,000)
------------- ------------- -------------
Net cash from (for) investing
activities.......................... (333,510,000) 44,160,000 (208,160,000)
------------- ------------- -------------
Financing Activities:
Issuance of notes.......................... -- 400,000,000 400,000,000
Retirement of notes........................ -- (200,000,000) (300,000,000)
Increase in other debt..................... 264,600,000 290,770,000 460,470,000
Payment of other debt...................... (130,380,000) (622,230,000) (480,000,000)
Repurchase of Company common stock......... (61,730,000) -- --
Cash dividends paid........................ (108,960,000) (99,000,000) (92,690,000)
------------- ------------- -------------
Net cash (for) financing activities... (36,470,000) (230,460,000) (12,220,000)
------------- ------------- -------------
Cash and Cash Investments:
Increase (decrease) for the year........... (58,820,000) 74,630,000 (16,750,000)
At January 1............................... 119,980,000 45,350,000 62,100,000
------------- ------------- -------------
At December 31............................. $ 61,160,000 $ 119,980,000 $ 45,350,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 21
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of Masco Corporation and all majority-owned subsidiaries. All
significant intercompany transactions have been eliminated. Certain prior period
amounts have been reclassified to conform with the current-year presentation.
Average Shares Outstanding. The average number of common shares outstanding
in 1994, 1993 and 1992 approximated 158.8 million, 152.7 million and 151.7
million, respectively.
Cash and Cash Investments. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash and
cash investments.
Receivables. Accounts and notes receivable are presented net of allowances
for doubtful accounts of $20.1 million at December 31, 1994 and $19.1 million at
December 31, 1993.
Property and Equipment. Property and equipment, including significant
betterments to existing facilities, are recorded at cost. Upon retirement or
disposal, the cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in income. Maintenance and repair costs are
charged to expense as incurred.
Depreciation and Amortization. Depreciation is computed principally using
the straight-line method over the estimated useful lives of the assets. Annual
depreciation rates are as follows: buildings and land improvements, 2 to 10
percent, and machinery and equipment, 5 to 33 percent. Depreciation was $88.1
million, $82.1 million and $79.4 million in 1994, 1993 and 1992, respectively.
The excess of cost over net assets of acquired companies is being amortized
using the straight-line method over periods not exceeding 40 years; at December
31, 1994 and 1993, such accumulated amortization totalled $147.3 million and
$127.2 million, respectively. At each balance sheet date, management assesses
whether there has been an impairment in the carrying value of excess of cost
over net assets of acquired companies, primarily by comparing current and
projected sales, operating income and annual cash flows with the related annual
amortization expense as well as considering the equity of such companies.
Purchase costs of patents are being amortized using the straight-line method
over the legal lives of the patents, not to exceed 17 years. Amortization of
intangible assets was $32.5 million, $33.9 million and $35.1 million in 1994,
1993 and 1992, respectively.
Fair Value of Financial Instruments. The carrying value of financial
instruments reported in the balance sheet for current assets and current
liabilities approximates fair value. The fair value of financial instruments
that are carried as long-term investments (other than those accounted for by the
equity method) was based principally on quoted market prices for those or
similar investments or by discounting future cash flows using a discount rate
that approximates the risk of the investments. The fair value of the Company's
long-term debt instruments was based principally on quoted market prices for the
same or similar issues or the current rates available to the Company for debt
with similar terms and remaining maturities. The aggregate market value of the
Company's long-term investments and long-term debt at December 31, 1994 was
approximately $187 million and $1,483 million, as compared with the Company's
carrying value of $152 million and $1,593 million, respectively. The aggregate
market value of the Company's long-term investments and long-term debt at
December 31, 1993 was approximately $230 million and $1,471 million, as compared
with the Company's carrying value of $200 million and $1,418 million,
respectively.
Statement of Financial Accounting Standards No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments, became
effective in 1994. This Standard defines
20
<PAGE> 22
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING POLICIES -- (CONTINUED)
the disclosure requirements for derivative financial instruments, of which the
Company has no material holdings.
Recently Issued Professional Accounting Standards. The American Institute
of Certified Public Accountants' Statement of Position 93-7, Reporting on
Advertising Costs, becomes effective in 1995. This statement provides guidance
on the accounting treatment and reporting of advertising costs and should not
have a material effect on the Company's financial statements.
ACQUISITIONS
POOLING ACQUISITIONS:
During 1994, the Company issued approximately 6.5 million of its common
shares for the acquisitions of Melard Manufacturing Corporation, Zenith Products
Corporation and Berkline Corporation. Each of these acquisitions was accounted
for as a pooling of interests. Melard and Zenith are manufacturers of plumbing
specialties and bath accessories, and Berkline is a manufacturer of recliners
and motion upholstered furniture. Prior year financial statements were not
restated due to immateriality.
PURCHASE ACQUISITIONS:
In December 1994, the Company acquired Alma Kuchen Aloys Meyer GmbH and
Co., a German manufacturer of kitchen cabinets, and NewTeam Group, a United
Kingdom manufacturer of handheld showers and other bath accessories, for
approximately $100 million.
The Company also acquired several other companies in 1994 for approximately
$25 million.
The above pooled and purchased companies had combined net sales in 1993 of
approximately $320 million.
INVENTORIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1994 1993
-------- --------
<S> <C> <C>
Finished goods........................................... $388,440 $312,470
Raw material............................................. 333,280 280,450
Work in process.......................................... 227,110 231,210
-------- --------
$948,830 $824,130
======== ========
</TABLE>
Inventories are stated at the lower of cost or net realizable value, with
cost determined principally by use of the first-in, first-out method.
21
<PAGE> 23
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES
Equity investments in affiliates consist primarily of the following common
equity and partnership interests:
<TABLE>
<CAPTION>
AT DECEMBER 31
--------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
MascoTech, Inc.............................................. 44% 42% 47%
Hans Grohe, a German partnership............................ 27% 27% 27%
TriMas Corporation.......................................... 5% 5% 7%
</TABLE>
MascoTech, Inc. presently has voting preferred shares outstanding, which
are to be converted into common shares no later then mid-1997. On an assumed
converted basis and utilizing the minimum number of common shares to be so
issued, the Company's equity investment in MascoTech would be 38 percent at
December 31, 1994 (which equals the Company's voting interest at that date).
Excluding the partnership interest in Hans Grohe, for which there is no
quoted market value, the aggregate market value of the Company's equity
investments at December 31, 1994 (which may differ from the amounts that could
then have been realized upon disposition), based upon quoted market prices at
that date, was $431 million, as compared with the Company's related aggregate
carrying value of $205 million.
The Company's carrying value of its equity investments in MascoTech exceeds
its equity in the underlying net book value by approximately $73 million at
December 31, 1994. This excess, which principally resulted from repurchases by
MascoTech of its common stock, is being amortized over a period not to exceed 40
years. The Company's carrying value of its other equity investments at December
31, 1994 approximates the Company's equity in the underlying net book value in
these affiliates.
In March 1993, the Company and MascoTech partially restructured their
affiliate relationships through transactions that reduced the Company's common
equity interest in MascoTech from 47 percent to approximately 35 percent and
resulted in MascoTech's acquisition of the Company's investments in Emco
Limited, a Canadian company. The Company received $87.5 million in cash, $100
million of 10% exchangeable preferred stock and seven-year warrants to purchase
10 million common shares of MascoTech at $13 per share. MascoTech received 10
million of its common shares, all $77.5 million of its 12% exchangeable
preferred stock, the Company's investments in Emco Limited and a modified option
expiring in early 1997 to require the Company to purchase up to $200 million
aggregate amount of debt securities in MascoTech.
In November 1993, MascoTech redeemed for cash its $100 million of 10%
exchangeable preferred stock issued in March 1993. As a result of this
redemption, the Company realized a $28.3 million pre-tax gain.
In December 1993, following MascoTech's call for redemption, the Company
converted $130 million of MascoTech's 6% debentures due 2011 into MascoTech
common stock, thereby increasing the Company's common equity interest in
MascoTech from approximately 35 percent to 42 percent.
22
<PAGE> 24
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES -- (CONTINUED)
Approximate combined condensed financial data of the above-listed
affiliates are summarized in U.S. dollars as follows, in thousands:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
At December 31:
Current assets........................ $ 944,940 $ 875,610 $ 881,200
Current liabilities................... (277,260) (300,650) (371,350)
----------- ----------- -----------
Working capital....................... 667,680 574,960 509,850
Property and equipment................ 626,670 720,290 755,290
Other assets.......................... 681,630 853,720 737,660
Long-term liabilities................. (1,266,060) (1,213,940) (1,400,950)
----------- ----------- -----------
Shareholders' equity.................. $ 709,920 $ 935,030 $ 601,850
========== ========== ==========
Net sales............................... $ 2,465,070 $ 2,230,330 $ 2,051,730
========== ========== ==========
Income (loss) from continuing
operations............................ $ (165,200) $ 199,190 $ 115,180
========== ========== ==========
Net income (loss) attributable to common
shareholders.......................... $ (164,750) $ 75,900 $ 34,030
========== ========== ==========
The Company's net equity in above income
(loss)................................ $ (101,310) $ 18,740 $ 17,290
========== ========== ==========
Cash dividends received by the Company
from affiliates....................... $ 6,720 $ 4,940 $ 4,100
========== ========== ==========
</TABLE>
In December 1994, MascoTech announced and recorded a non-cash after-tax
charge of $315 million in anticipation of losses associated with the planned
disposition of its non-core businesses. As a result, the Company recorded $138
million pre-tax as its equity share of this non-cash charge.
Equity in undistributed earnings of affiliates of $24 million at December
31, 1994, $132 million at December 31, 1993 and $118 million at December 31,
1992 are included in consolidated retained earnings.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1994 1993
---------- ----------
<S> <C> <C>
Land and improvements................................. $ 87,460 $ 78,670
Buildings............................................. 685,310 595,630
Machinery and equipment............................... 1,145,120 1,009,060
---------- ----------
1,917,890 1,683,360
Less accumulated depreciation......................... 686,080 588,190
---------- ----------
$1,231,810 $1,095,170
========= =========
</TABLE>
23
<PAGE> 25
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
---------------------
1994 1993
-------- --------
<S> <C> <C>
Salaries, wages and commissions....................... $ 79,170 $ 60,910
Advertising and sales promotion....................... 43,080 32,370
Insurance............................................. 38,060 35,180
Dividends payable..................................... 29,250 26,260
Employee retirement plans............................. 27,690 21,840
Interest.............................................. 25,960 26,070
Income taxes.......................................... 24,140 26,110
Other................................................. 84,240 67,320
-------- --------
$351,590 $296,060
======== ========
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1994 1993
---------- ----------
<S> <C> <C>
Notes, 6.25%, due 1995............................... $ 200,000 $ 200,000
Notes, 9%, due 1996............................... 250,000 250,000
Notes, 6.625%, due 1999............................... 200,000 200,000
Notes, 9%, due 2001............................... 175,000 175,000
Notes, 6.125%, due 2003............................... 200,000 200,000
Notes, 7.125%, due 2013............................... 200,000 200,000
Notes payable to banks................................ 70,000 --
Convertible subordinated debentures, 5.25%, due
2012................................................ 177,920 177,930
Other, primarily acquisition related in 1994.......... 134,330 23,980
---------- ----------
1,607,250 1,426,910
Less current portion.................................. 14,640 8,620
---------- ----------
$1,592,610 $1,418,290
========= =========
</TABLE>
At December 31, 1994, all of the outstanding notes other than notes payable
to banks are nonredeemable.
The Company intends to refinance the 6.25% notes due June 15, 1995 through
borrowings under its bank revolving-credit agreement.
In August 1993, the Company issued $200 million of 7.125% notes due August
15, 2013. In September 1993, the Company issued $200 million of 6.125% notes due
September 15, 2003. The proceeds from these financings were used to eliminate
floating-rate borrowings under the Company's bank revolving-credit agreement.
The 5.25% subordinated debentures due February 15, 2012 are convertible
into common stock at $42.28 per share.
The notes payable to banks at December 31, 1994 relate to a $750 million
revolving-credit agreement, with any outstanding balance due and payable in May
1998. Interest is payable on borrowings under this agreement based upon various
floating rates as selected by the Company.
24
<PAGE> 26
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT -- (CONTINUED)
Certain debt agreements contain limitations on additional borrowings and
restrictions on cash dividend payments and common share repurchases. At December
31, 1994, the amount of retained earnings available for cash dividends and
common share repurchases approximated $199 million under the most restrictive of
these provisions.
At December 31, 1994, the maturities of long-term debt during each of the
next five years were approximately as follows: 1995-$214.6 million; 1996-$257.2
million; 1997-$2.6 million; 1998-$105.8 million; and 1999-$200.9 million.
In October 1994, the Company amended its shelf registration statements, on
file with the Securities and Exchange Commission, for the purpose of converting
these statements to an unallocated shelf registration, which allows for the
issuance of up to a combined $800 million of debt and equity securities.
Interest paid was approximately $103 million, $104 million and $121 million
in 1994, 1993 and 1992, respectively.
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Common Shares, $1 Par Value
Balance, January 1....................... $ 152,850 $ 152,470 $ 153,210
Shares issued............................ 6,910 380 1,470
Shares repurchased....................... (2,770) -- --
Shares retired........................... -- -- (2,210)
---------- ---------- ----------
Balance, December 31..................... 156,990 152,850 152,470
---------- ---------- ----------
Paid-In Capital
Balance, January 1....................... 69,880 61,370 64,950
Common shares issued..................... 33,920 8,510 25,050
Common shares repurchased................ (58,960) -- --
Common shares retired.................... -- -- (28,630)
---------- ---------- ----------
Balance, December 31..................... 44,840 69,880 61,370
---------- ---------- ----------
Retained Earnings
Balance, January 1....................... 1,805,170 1,685,010 1,596,180
Retained earnings of pooled companies.... 37,820 -- --
Net income............................... 193,700 221,100 183,100
Cash dividends declared.................. (111,950) (100,940) (94,270)
---------- ---------- ----------
Balance, December 31..................... 1,924,740 1,805,170 1,685,010
---------- ---------- ----------
Cumulative Translation Adjustments
Balance, December 31..................... (13,890) (29,470) (11,970)
---------- ---------- ----------
Treasury Shares
Balance, January 1....................... -- -- (30,550)
Shares repurchased....................... -- -- (290)
Shares retired........................... -- -- 30,840
---------- ---------- ----------
Balance, December 31..................... -- -- --
---------- ---------- ----------
Shareholders' Equity
Balance, December 31..................... $2,112,680 $1,998,430 $1,886,880
========= ========= =========
</TABLE>
25
<PAGE> 27
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY -- (CONTINUED)
On the basis of amounts paid (declared), cash dividends per share were $.69
($.70) in 1994, $.65 ($.66) in 1993 and $.61 ($.62) in 1992.
In 1994, the Company's Board of Directors authorized the repurchase of up
to 10 million shares of its common stock in open-market transactions or
otherwise. Pursuant to this authorization, approximately 2.8 million common
shares were repurchased in the fourth quarter of 1994 at an aggregate cost of
approximately $62 million.
STOCK OPTIONS AND AWARDS
For the three years ended December 31, 1994, stock option data pertaining
to stock option plans for key employees of the Company and affiliated companies
are as follows:
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Option shares outstanding, January 1.............. 5,686 6,742 7,390
Option shares granted............................. 73 298 1,212
Option price.................................... $25-$40 $27-$37 $25-$30
Option shares exercised........................... 224 1,210 1,860
Option price.................................... $15-$32 $2-$30 $2-$21
Option shares cancelled........................... 25 144 --
Option price.................................... $21-$30 $2-$21 --
Option shares outstanding, December 31............ 5,510 5,686 6,742
Option price.................................... $11-$40 $10-$37 $2-$30
Option shares exercisable, December 31............ 2,445 1,457 1,326
</TABLE>
Pursuant to restricted stock incentive award plans, the Company granted
long-term incentive awards, net, for 598,000, 100,000 and 267,000 shares of
Company Common Stock during 1994, 1993 and 1992, respectively, to key employees
of the Company and affiliated companies. The unamortized costs of unvested
awards under these plans, aggregating approximately $55.3 million at December
31, 1994, are being amortized over the ten-year vesting periods.
At December 31, 1994, a combined total of 10,680,000 shares of Company
Common Stock was available for the granting of stock options and incentive
awards under the above plans.
Pursuant to the 1984 Restricted Stock (MascoTech) Incentive Plan, the
Company may award to key employees of the Company and affiliated companies,
shares of common stock of MascoTech, Inc. held by the Company. No such awards
were granted in 1994, 1993 or 1992. At December 31, 1994, there were 4,695,000
of such shares available for granting future awards under this plan.
26
<PAGE> 28
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS
The Company sponsors defined-benefit pension plans for most of its
employees. In addition, substantially all salaried employees participate in
noncontributory profit-sharing plans, to which payments are determined annually
by the Directors. Aggregate charges to income under the pension and
profit-sharing plans were $23.3 million in 1994, $19.2 million in 1993 and $16.9
million in 1992.
Net periodic pension cost for the Company's pension plans includes the
following components:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost -- benefits earned during the $ 13,690 $ 11,800 $ 10,850
year..........................................
Interest cost on projected benefit obligation... 20,060 17,240 15,280
Actual return on assets......................... 8,650 (28,940) (12,190)
Net amortization and deferral................... (35,740) 6,100 (9,810)
-------- -------- --------
Net periodic pension cost....................... $ 6,660 $ 6,200 $ 4,130
======== ======== ========
</TABLE>
Major assumptions used in accounting for the Company's pension plans are as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ------ -----
<S> <C> <C> <C>
Discount rate for obligations......................... 8.5% 7.25% 8.0%
Rate of increase in compensation levels............... 5.0% 5.0 % 6.0%
Expected long-term rate of return on plan assets...... 13.0% 13.0 % 13.0%
</TABLE>
The funded status of the Company's pension plans is summarized as follows,
in thousands, at December 31:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit
obligation............. $ 147,110 $ 46,840 $ 135,800 $ 54,130
========== ========== ========== ==========
Accumulated benefit
obligation............. $ 151,710 $ 56,010 $ 142,110 $ 62,660
========== ========== ========== ==========
Projected benefit
obligation............. $ 190,120 $ 64,210 $ 181,850 $ 68,420
Assets at fair value.......... 170,130 35,250 158,630 47,790
----------- ----------- ----------- -----------
Projected benefit obligation
in excess of plan
assets................... (19,990) (28,960) (23,220) (20,630)
Reconciling items:
Unrecognized net loss....... 21,510 5,240 22,780 13,720
Unrecognized prior service
cost..................... 7,740 10,030 8,680 1,240
Unrecognized net (asset)
obligation at
transition............... (12,340) 6,640 (12,800) 1,400
Requirement to recognize
minimum liability........ -- (14,360) -- (11,170)
----------- ----------- ----------- -----------
Accrued pension cost........ $ (3,080) $ (21,410) $ (4,560) $ (15,440)
========== ========== ========== ==========
</TABLE>
The Company sponsors certain postretirement benefit plans that provide
medical, dental and life insurance coverage for eligible retirees and dependents
in the United States based on age and length of service. At December 31, 1994,
the aggregate present value of the accumulated postretirement benefit obligation
approximated $6 million pre-tax and is being amortized over 20 years.
27
<PAGE> 29
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION
The Company's operations in the industry segments detailed below consisted
of the manufacture and sale principally of the following products:
Home improvement and building -- faucets; plumbing fittings; kitchen and
bath cabinets; shower tubs, whirlpools and spas; bath accessories;
kitchen appliances; builders' hardware; venting and ventilating
equipment; and water pumps.
Home furnishings products -- quality furniture, fabrics and other home
furnishings products.
Corporate assets consisted primarily of real property and other
investments.
Pursuant to a corporate services agreement to provide MascoTech, Inc. with
certain corporate staff and administrative services, the Company charges a fee
approximating .8 percent of MascoTech net sales. This fee approximated $11
million in each of 1994, 1993 and 1992 and is included as a reduction of general
corporate expense.
<TABLE>
<CAPTION>
(IN THOUSANDS)
NET SALES OPERATING PROFIT ASSETS AT DECEMBER 31
------------------------------------ ------------------------------- ------------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
---------- ---------- ---------- --------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Company's
operations by
segment were:
Home
improvement
and
building.... $2,523,000.. $2,188,000 $1,991,000 $ 504,000 $412,000 $368,000 $1,603,000 $1,297,000 $1,262,000
Home
furnishings
products.... 1,945,000 1,698,000 1,534,000 89,000 69,000 60,000 1,966,000 1,886,000 1,778,000
---------- ---------- ---------- --------- -------- -------- ---------- ---------- ----------
Total..... $4,468,000 $3,886,000 $3,525,000 $ 593,000 $481,000 $428,000 $3,569,000 $3,183,000 $3,040,000
========= ========= ========= ========= ======== ======== ========= ========= =========
The Company's
operations by
geographic area
were:
United
States...... $3,741,000 $3,194,000 $2,895,000 $ 480,000 $387,000 $334,000 $2,822,000 $2,638,000 $2,522,000
European
Union....... 404,000 375,000 378,000 73,000 60,000 64,000 399,000 240,000 245,000
Other foreign
countries... 323,000 317,000 252,000 40,000 34,000 30,000 348,000 305,000 273,000
---------- ---------- ---------- --------- -------- -------- ---------- ---------- ----------
Total, as
above... $4,468,000 $3,886,000 $3,525,000 593,000 481,000 428,000 3,569,000 3,183,000 3,040,000
========= ========= =========
Other expense,
net............. (187,000) (41,000) (54,000)
General corporate
expense, net.... (83,000) (77,000) (69,000)
--------- -------- --------
Income before
income
taxes(1)........ $ 323,000 $363,000 $305,000
========= ======== ========
Equity and other
investments
in affiliates... 243,000 349,000 463,000
Corporate
assets.......... 578,000 521,000 509,000
---------- ---------- ----------
Total
assets... $4,390,000 $4,053,000 $4,012,000
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND
PROPERTY ADDITIONS(2) AMORTIZATION
-------------------------------- ------------------------------
1994 1993 1992 1994 1993 1992
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
The Company's operations by segment
were:
Home improvement and building...... $128,000 $ 80,000 $ 80,000 $ 52,000 $48,000 $48,000
Home furnishings products.......... 70,000 71,000 35,000 48,000 46,000 45,000
-------- -------- -------- -------- ------- -------
Total.......................... $198,000 $151,000 $115,000 $100,000 $94,000 $93,000
======== ======== ======== ======== ======= =======
</TABLE>
(1) Income before income taxes and net income from foreign operations for
1994, 1993 and 1992 were $114 million and $76 million, $92 million and
$55 million, and $88 million and $54 million, respectively.
(2) Property additions include assets of acquired companies.
28
<PAGE> 30
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Re: MascoTech, Inc.:
Equity earnings (loss)..................... $(106,110) $ 13,160 $ 12,570
--------- --------- ---------
Interest and dividend income............... -- 16,220 17,100
--------- --------- ---------
Gain from redemption of preferred stock.... -- 28,300 --
--------- --------- ---------
Equity earnings, other affiliates............ 4,800 5,580 4,720
--------- --------- ---------
Other, net:
Income from cash and marketable
securities.............................. 2,280 3,250 4,330
Other interest income...................... 8,230 9,800 11,640
Other items................................ 8,520 (11,720) (3,460)
--------- --------- ---------
19,030 1,330 12,510
--------- --------- ---------
Interest expense............................. (104,720) (105,820) (100,640)
--------- --------- ---------
$(187,000) $ (41,230) $ (53,740)
========= ========= =========
</TABLE>
Equity earnings from MascoTech for 1994 were $32 million, prior to the
Company's $138 million pre-tax equity share of MascoTech's non-cash fourth
quarter charge.
29
<PAGE> 31
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes:
Domestic...................................... $208,170 $270,930 $216,460
Foreign....................................... 114,430 91,670 88,340
-------- -------- --------
$322,600 $362,600 $304,800
======== ======== ========
Provision for income taxes:
Currently payable:
Federal.................................... $110,150 $ 96,830 $ 62,360
State and local............................ 19,000 13,530 12,500
Foreign.................................... 32,230 39,640 35,220
Deferred:
Federal, net............................... (39,090) (5,570) 12,090
Foreign.................................... 6,610 (2,930) (470)
-------- -------- --------
$128,900 $141,500 $121,700
======== ======== ========
Deferred tax assets at December 31:
Intangibles................................... $ 31,810 --
Inventories................................... 17,480 $ 12,080
Earlier recognition of expenses for financial
reporting purposes......................... 37,990 26,670
Other, principally equity investments......... 57,770 19,450
-------- --------
145,050 58,200
-------- --------
Deferred tax liabilities at December 31:
Property and equipment........................ 152,830 145,880
Other......................................... 14,020 9,240
-------- --------
166,850 155,120
-------- --------
Net deferred tax liability at December 31..... $ 21,800 $ 96,920
======== ========
Provision for deferred income taxes for
temporary differences:
Accelerated tax deductions, including
depreciation............................. $ 15,970 $ 900 $ 3,990
Earlier recognition of gains and (losses),
net for financial reporting purposes..... (48,450) (9,400) 7,630
-------- -------- --------
$(32,480) $ (8,500) $ 11,620
======== ======== ========
</TABLE>
Net deferred tax liability at December 31, 1994 and 1993 consists of net
short-term deferred tax assets of $44.5 million and $32.1 million, respectively,
and net long-term deferred tax liabilities of $66.3 million and $129.0 million,
respectively.
The effective tax rate differs from the United States federal statutory
rate principally due to: foreign income tax (-1 percent in 1993 and -2 percent
in 1992), amortization in excess of tax, net (-2 percent in 1994, -1 percent in
1993 and -2 percent in 1992), dividends-received deduction (2 percent in 1994
and 1 percent in 1993 and 1992), state income tax (-4 percent in 1994, -2
percent in 1993 and -3 percent in 1992) and other (-1 percent in 1994 and 1993).
30
<PAGE> 32
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES -- (CONTINUED)
Income taxes paid were approximately $175 million, $135 million and $97
million in 1994, 1993 and 1992, respectively.
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which requires the use of an asset and liability method of accounting for
income taxes, became effective in January 1993. Deferred income taxes result
from temporary differences between the tax basis of assets and liabilities and
the related basis reported in the consolidated financial statements. Prior to
1993, the Company followed the requirements of Statement of Financial Accounting
Standards No. 96, Accounting for Income Taxes.
Provision has not been made for U.S. or additional foreign taxes on
approximately $75 million of remaining undistributed earnings of foreign
subsidiaries, as those earnings are intended to be permanently reinvested.
Generally, such earnings become taxable upon the remittance of dividends and
under certain other circumstances. It is not practicable to estimate the amount
of deferred tax liability on foreign undistributed earnings which are intended
to be permanently reinvested.
31
<PAGE> 33
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The following presents the combined financial statements of the Company,
MascoTech, Inc. and TriMas Corporation as one entity, with Masco Corporation as
the parent company. Intercompany transactions have been eliminated. Amounts,
except earnings per share, are in thousands.
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------
1994 1993
---------- ----------
<S> <C> <C>
COMBINED BALANCE SHEET
Assets
Current assets:
Cash and cash investments........................... $ 230,780 $ 272,950
Marketable securities............................... 72,020 32,680
Receivables......................................... 980,940 906,500
Prepaid expenses.................................... 133,490 118,700
Deferred income taxes............................... 68,270 73,830
Net current assets of businesses held for 146,690 28,830
disposition......................................
Inventories:
Finished goods................................... 449,290 393,820
Raw material..................................... 404,240 365,370
Work in process.................................. 266,810 281,680
---------- ----------
1,120,340 1,040,870
---------- ----------
Total current assets........................... 2,752,530 2,474,360
Equity investments in affiliates...................... 150,310 163,970
Property and equipment................................ 1,779,520 1,747,590
Excess of cost over acquired net assets............... 964,000 1,114,740
Net non-current assets of businesses held for 232,370 38,680
disposition.........................................
Other assets.......................................... 405,220 428,390
---------- ----------
Total assets................................... $6,283,950 $5,967,730
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable....................................... $ 52,330 $ 36,310
Accounts payable.................................... 334,770 277,070
Accrued liabilities................................. 457,160 428,720
---------- ----------
Total current liabilities...................... 844,260 742,100
Long-term debt........................................ 2,699,450 2,445,540
Deferred income taxes and other....................... 206,630 307,450
Other interests in combined affiliates................ 420,930 474,210
---------- ----------
Total liabilities.............................. 4,171,270 3,969,300
Equity of shareholders of Masco Corporation........... 2,112,680 1,998,430
---------- ----------
Total liabilities and shareholders' equity..... $6,283,950 $5,967,730
========= =========
</TABLE>
32
<PAGE> 34
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
COMBINED STATEMENT OF INCOME
Net sales............................... $ 6,692,190 $ 5,901,060 $ 5,360,330
Cost of sales........................... (4,735,170) (4,169,190) (3,797,980)
Selling, general and administrative
expenses.............................. (1,233,870) (1,112,300) (1,033,350)
Charge for disposition of businesses.... (400,000) -- --
----------- ----------- -----------
Operating profit................. 323,150 619,570 529,000
----------- ----------- -----------
Other income (expense), net:
Interest expense...................... (167,480) (189,610) (188,230)
Other, net............................ 74,930 45,360 45,040
----------- ----------- -----------
(92,550) (144,250) (143,190)
----------- ----------- -----------
Income before income taxes and
other interests............... 230,600 475,320 385,810
Income taxes............................ 126,760 208,930 172,610
Other interests in combined
affiliates............................ (89,860) 45,290 30,100
----------- ----------- -----------
Net income....................... $ 193,700 $ 221,100 $ 183,100
========== ========== ==========
Earnings per share...................... $1.22 $1.45 $1.21
===== ===== =====
</TABLE>
33
<PAGE> 35
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------
1994 1993 1992
--------- ----------- ---------
<S> <C> <C> <C>
COMBINED STATEMENT OF CASH FLOWS
Cash Flows From (For) Operating Activities:
Net income............................... $ 193,700 $ 221,100 $ 183,100
Depreciation and amortization............ 207,970 194,270 191,290
Equity (earnings), net of dividends...... (5,020) (4,840) (1,140)
Gain from change in investment........... -- (9,490) (16,700)
Deferred income taxes and other.......... (100,600) 7,590 15,860
Charge for disposition of businesses..... 400,000 -- --
Other interests in net income (loss) of
combined affiliates, net.............. (89,860) 45,290 30,100
--------- ----------- ---------
Total from earnings................. 606,190 453,920 402,510
(Increase) in receivables................ (98,690) (52,670) (75,340)
(Increase) in inventories................ (100,790) (49,950) (36,550)
Increase (decrease) in accounts payable
and accrued liabilities, net.......... 90,670 37,230 (9,690)
Discontinued operations, net............. (30,410) 16,700 830
--------- ----------- ---------
Net cash from operating
activities....................... 466,970 405,230 281,760
--------- ----------- ---------
Cash Flows From (For) Investing Activities:
Capital expenditures..................... (330,140) (252,360) (198,170)
Acquisitions, net of cash acquired....... (126,830) -- --
Currency translation adjustments......... 15,580 (17,500) (27,090)
Proceeds from sale of subsidiaries....... 41,220 33,170 --
Other, net............................... (69,590) 39,730 (45,810)
--------- ----------- ---------
Net cash (for) investing
activities....................... (469,760) (196,960) (271,070)
--------- ----------- ---------
Cash Flows From (For) Financing Activities:
Increase in debt......................... 684,570 862,800 872,140
Payment of debt.......................... (479,940) (1,087,400) (915,630)
Issuance of common shares................ -- -- 85,150
Issuance of preferred stock.............. -- 209,520 --
Repurchase of common stock............... (115,860) -- --
Cash dividends paid...................... (128,150) (106,360) (93,410)
--------- ----------- ---------
Net cash (for) financing
activities....................... (39,380) (121,440) (51,750)
--------- ----------- ---------
Cash and Cash Investments:
Increase (decrease) for the year......... (42,170) 86,830 (41,060)
At January 1............................. 272,950 186,120 227,180
--------- ----------- ---------
At December 31........................... $ 230,780 $ 272,950 $ 186,120
========= ========== =========
</TABLE>
34
<PAGE> 36
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NET EARNINGS
QUARTERS NET GROSS INCOME (LOSS)
ENDED SALES PROFIT (LOSS) PER SHARE
----------------------------------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
1994
December 31........................ $1,148,000 $ 365,030 $(13,800) $(.09)
September 30....................... 1,150,000 382,700 72,100 .45
June 30............................ 1,120,000 366,500 70,100 .44
March 31........................... 1,050,000 352,000 65,300 .42
---------- ---------- -------- ---------
$4,468,000 $1,466,230 $193,700 $1.22
========= ========= ======== =======
1993
December 31........................ $1,010,000 $ 322,070 $ 57,600 $ .38
September 30....................... 982,000 319,900 55,700 .36
June 30............................ 948,000 309,500 53,300 .35
March 31........................... 946,000 312,900 54,500 .36
---------- ---------- -------- ---------
$3,886,000 $1,264,370 $221,100 $1.45
========= ========= ======== =======
</TABLE>
Fourth quarter 1994 net loss and loss per share reflect the Company's $138
million pre-tax equity share of MascoTech's non-cash fourth quarter charge
associated with the planned disposition of its non-core businesses.
35
<PAGE> 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers required by this Item is set forth
as a Supplementary Item at the end of Part I hereof (pursuant to Instruction 3
to Item 401(b) of Regulation S-K). Other information required by this Item will
be contained in the Company's definitive Proxy Statement for its 1995 Annual
Meeting of Stockholders, to be filed on or before April 28, 1995, and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1995 Annual Meeting of Stockholders, to be
filed on or before April 28, 1995, and such information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1995 Annual Meeting of Stockholders, to be
filed on or before April 28, 1995, and such information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1995 Annual Meeting of Stockholders, to be
filed on or before April 28, 1995, and such information is incorporated herein
by reference.
36
<PAGE> 38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) LISTING OF DOCUMENTS.
(1) Financial Statements. The Company's Consolidated Financial
Statements included in Item 8 hereof, as required at December 31,
1994 and 1993, and for the years ended December 31, 1994, 1993 and
1992, consist of the following:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
(i) Financial Statement Schedule of the Company appended hereto,
as required for the years ended December 31, 1994, 1993 and
1992, consists of the following:
II. Valuation and Qualifying Accounts
(ii) (A) MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements appended hereto, as required at December 31,
1994 and 1993, and for the years ended December 31, 1994,
1993 and 1992, consist of the following:
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(ii) (B) MascoTech, Inc. and Subsidiaries Financial Statement
Schedule appended hereto, as required for the years ended
December 31, 1994, 1993 and 1992, consists of the
following:
II. Valuation and Qualifying Accounts
(3) Exhibits.
<TABLE>
<S> <C>
3.i Restated Certificate of Incorporation of Masco Corporation and
amendments thereto.
3.ii Bylaws of Masco Corporation, as amended.(2)
4.a.i Indenture dated as of December 1, 1982 between Masco Corporation and
Morgan Guaranty Trust Company of New York, as Trustee(6), and Directors'
resolutions establishing Masco Corporation's: (i) 9% Notes Due April 15,
1996,(5), (ii) 9% Notes Due October 1, 2001,(6), (iii) 6 1/4% Notes Due
June 15, 1995,(4), (iv) 6 5/8% Notes Due September 15, 1999,(4), 6 1/8%
Notes Due September 15, 2003,(3), and (vi) 7 1/8% Debentures Due August
15, 2013,(3).
4.a.ii Agreement of Appointment and Acceptance of Successor Trustee dated as of
July 25, 1994 among Masco Corporation, Morgan Guaranty Trust Company of
New York and The First National Bank of Chicago.(1)
4.a.iii Supplemental Indenture dated as of July 26, 1994 between Masco
Corporation and The First National Bank of Chicago.(1)
</TABLE>
37
<PAGE> 39
<TABLE>
<S> <C>
4.b Indenture dated as of December 1, 1982 between Masco Corporation and
Citibank, N.A., as Trustee, and Directors' resolutions establishing
Masco Corporation's 5 1/4% Convertible Subordinated Debentures Due 2012,
including form of Debenture.(6)
4.c $750,000,000 Amended and Restated Credit Agreement dated as of May 18,
1994 among Masco Corporation, the banks signatory thereto and Morgan
Guaranty Trust Company of New York, as agent.(1)
4.d Indenture dated as of November 1, 1986 between Masco Industries, Inc.
(now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New
York, as Trustee, and Directors' resolutions establishing Masco
Industries, Inc.'s 4 1/2% Convertible Subordinated Debentures Due
2003,(2), Agreement of Appointment and Acceptance of Successor Trustee
dated as of August 4, 1994 among MascoTech, Inc., Morgan Guaranty Trust
Company of New York and The First National Bank of Chicago and
Supplemental Indenture dated as of August 5, 1994 among MascoTech, Inc.
and The First National Bank of Chicago.
4.e Credit Agreement dated as of September 2, 1993 by and among MascoTech,
Inc., the banks party thereto, and NBD Bank, N.A. (now known as NBD
Bank), as Agent, and Comerica Bank, The Bank of New York, The First
National Bank of Chicago, Morgan Guaranty Trust Company of New York and
NationsBank of North Carolina, N.A., as Co-Agents(2), First Amendment
thereto dated June 29, 1994 and Second Amendment thereto dated December
21, 1994.
NOTE: Other instruments, notes or extracts from agreements defining the rights
of holders of long-term debt of Masco Corporation or its subsidiaries
have not been filed since (i) in each case the total amount of long-term
debt permitted thereunder does not exceed 10 percent of Masco
Corporation's consolidated assets, and (ii) such instruments, notes and
extracts will be furnished by Masco Corporation to the Securities and
Exchange Commission upon request.
10.a Assumption and Indemnification Agreement dated as of May 1, 1984 between
Masco Corporation and Masco Industries, Inc. (now known as MascoTech,
Inc.).(7)
10.b Corporate Services Agreement dated as of January 1, 1987 between Masco
Corporation and Masco Industries, Inc. (now known as MascoTech,
Inc.).(4)
10.c Corporate Opportunities Agreement dated as of May 1, 1984 between Masco
Corporation and Masco Industries, Inc. (now known as MascoTech,
Inc.).(7)
10.d Stock Repurchase Agreement dated as of May 1, 1984 between Masco
Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.)
and related forfeiture letter dated September 20, 1985, Amendment to
Stock Repurchase Agreement dated as of December 20, 1990(6) and
Agreement dated as of November 23, 1993 including an amendment to Stock
Repurchase Agreement.(2)
NOTE: Exhibits 10.e through 10.p constitute the management contracts and
executive compensatory plans or arrangements in which certain of the
Directors and executive officers of the company participate.
10.e Masco Corporation 1991 Long-Term Stock Incentive Plan.(6)
10.f Masco Corporation 1988 Restricted Stock Incentive Plan (Restated Septem-
ber 11, 1990).(7)
10.g Masco Corporation 1988 Stock Option Plan (Restated September 11,
1990).(7)
10.h Masco Corporation 1984 Restricted Stock (Industries) Incentive Plan
(Restated September 14, 1993).
</TABLE>
38
<PAGE> 40
<TABLE>
<S> <C>
10.i Masco Corporation 1984 Stock Option Plan (Restated September 14, 1993).
10.j Masco Corporation Restricted Stock Incentive Plan (Restated September
14, 1993).
10.k MascoTech, Inc. 1991 Long-Term Stock Incentive Plan (Restated September
14, 1993).(2)
10.l MascoTech, Inc. 1984 Restricted Stock Incentive Plan (Restated September
14, 1993).(2)
10.m MascoTech, Inc. 1984 Stock Option Plan (Restated September 14, 1993).(2)
10.n Masco Corporation Supplemental Executive Retirement and Disability Plan.
10.o Masco Corporation Benefits Restoration Plan.
10.p Form of Agreement dated June 29, 1989 between Masco Corporation and
certain of its officers.(2)
10.q Amended and Restated Securities Purchase Agreement dated as of November
23, 1993 between Masco Corporation and MascoTech, Inc., including form
of Note.(2)
10.r Registration Agreement dated as of March 31, 1993 between Masco
Corporation and Masco Industries, Inc. (now known as MascoTech,
Inc.).(2)
10.s Stock Purchase Agreement between Masco Corporation and Masco Industries,
Inc. (now known as MascoTech, Inc.) dated as of December 23, 1991
(regarding Masco Capital Corporation).(6)
11 Computation of Primary and Fully Diluted Per Share Earnings.
12 Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries.
23.a Consent of Coopers & Lybrand L.L.P. relating to Masco Corporation's
Financial Statements and Financial Statement Schedule.
23.b Consent of Coopers & Lybrand L.L.P. relating to MascoTech, Inc.'s
Financial Statements and Financial Statement Schedule.
27 Financial Data Schedule.
</TABLE>
- ---------------
(1) Incorporated by reference to the Exhibits filed with Masco
Corporation's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994.
(2) Incorporated by reference to the Exhibits filed with Masco
Corporation's Annual Report on Form 10-K for the year ended December
31, 1993.
(3) Incorporated by reference to the Exhibits filed with Masco
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
(4) Incorporated by reference to the Exhibits filed with Masco
Corporation's Annual Report on Form 10-K for the year ended December
31, 1992.
(5) Incorporated by reference to the Exhibits filed with Masco
Corporation's Quarterly Report on Form 10-Q for the quarter ended March
31, 1991.
(6) Incorporated by reference to the Exhibits filed with Masco
Corporation's Annual Report on Form 10-K for the year ended December
31, 1991.
(7) Incorporated by reference to the Exhibits filed with Masco
Corporation's Annual Report on Form 10-K for the year ended December
31, 1990.
(B) REPORTS ON FORM 8-K.
None.
39
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MASCO CORPORATION
By /s/ RICHARD G. MOSTELLER
------------------------------------
RICHARD G. MOSTELLER
Senior Vice President -- Finance
March 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ RICHARD A. MANOOGIAN Chairman of the Board
- ------------------------------------- and Chief Executive Officer
RICHARD A. MANOOGIAN
PRINCIPAL FINANCIAL OFFICER:
/s/ RICHARD G. MOSTELLER Senior Vice President -- Finance
- -------------------------------------
RICHARD G. MOSTELLER
PRINCIPAL ACCOUNTING OFFICER:
/s/ ROBERT B. ROSOWSKI Vice President -- Controller
- -------------------------------------
ROBERT B. ROSOWSKI
/s/ WAYNE B. LYON President and Director
- -------------------------------------
WAYNE B. LYON
March 28, 1995
/s/ LILLIAN BAUDER Director
- -------------------------------------
LILLIAN BAUDER
/s/ ERWIN L. KONING Director
- -------------------------------------
ERWIN L. KONING
/s/ JOHN A. MORGAN Director
- -------------------------------------
JOHN A. MORGAN
/s/ ARMAN SIMONE Director
- -------------------------------------
ARMAN SIMONE
/s/ PETER W. STROH Director
- -------------------------------------
PETER W. STROH
</TABLE>
40
<PAGE> 42
MASCO CORPORATION
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(A)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
Schedules, as required, for the years ended December 31, 1994, 1993 and
1992:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
II. Valuation and Qualifying Accounts................................................ F-2
MascoTech, Inc. and Subsidiaries Consolidated Financial Statements and
Financial Statement Schedules.................................................... F-3
</TABLE>
F-1
<PAGE> 43
MASCO CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COLUMN C
--------------------------
COLUMN B ADDITIONS
----------- -------------------------- COLUMN E
COLUMN A BALANCE AT CHARGED CHARGED COLUMN D -------------
- ---------------------------------------- BEGINNING TO COSTS TO OTHER ----------- BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ---------------------------------------- ----------- ------------ ---------- ----------- -------------
(A) (B)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
deducted from accounts receivable in
the balance sheet:
1994................................ $19,070,000 $ 9,770,000 $1,400,000 $10,190,000 $20,050,000
=========== ============= ========== =========== ==============
1993................................ $16,340,000 $12,900,000 $ (130,000) $10,040,000 $19,070,000
=========== ============= ========== =========== ==============
1992................................ $13,680,000 $15,460,000 -- $12,800,000 $16,340,000
=========== ============= ========== =========== ==============
</TABLE>
Notes:
(A) Allowance of companies acquired and companies disposed of, net.
(B) Deductions, representing uncollectible accounts written off, less
recoveries of accounts written off in prior years.
F-2
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of MascoTech, Inc.:
We have audited the accompanying consolidated balance sheet of MascoTech,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations and cash flows for each of the three years
in the period ended December 31, 1994, and the financial statement schedule as
listed in Item 14(a)(2)(ii) of this Form 10-K. These financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MascoTech, Inc.
and subsidiaries as of December 31, 1994 and 1993, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
February 17, 1995
F-3
<PAGE> 45
MASCOTECH, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994 AND 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash investments................................... $ 61,950,000 $ 83,200,000
Marketable securities....................................... 62,110,000 27,790,000
Receivables................................................. 171,870,000 238,820,000
Inventories................................................. 91,950,000 140,040,000
Deferred and refundable income taxes........................ 23,800,000 41,780,000
Prepaid expenses and other assets........................... 39,800,000 24,210,000
Net current assets of businesses held for disposition....... 146,690,000 28,830,000
-------------- --------------
Total current assets................................... 598,170,000 584,670,000
Equity and other investments in affiliates.................... 173,230,000 170,510,000
Property and equipment, net................................... 379,330,000 490,190,000
Excess of cost over net assets of acquired companies.......... 93,820,000 439,760,000
Notes receivable and other assets............................. 53,770,000 66,100,000
Net non-current assets of businesses held for disposition..... 232,370,000 38,680,000
-------------- --------------
Total assets........................................... $1,530,690,000 $1,789,910,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 111,860,000 $ 95,520,000
Accrued liabilities......................................... 72,090,000 103,260,000
Current portion of long-term debt........................... 3,670,000 2,830,000
-------------- --------------
Total current liabilities.............................. 187,620,000 201,610,000
Long-term debt................................................ 868,240,000 788,360,000
Deferred income taxes and other long-term liabilities......... 93,690,000 132,310,000
-------------- --------------
Total liabilities...................................... 1,149,550,000 1,122,280,000
-------------- --------------
Shareholders' equity:
Preferred stock, $1 par: Authorized: 25 million;
Outstanding: 10.8 million (liquidation value -- $216
million)................................................. 10,800,000 10,800,000
Common stock, $1 par: Authorized: 250 million; Outstanding:
56.6 million and 60.5 million............................ 56,610,000 60,510,000
Paid-in capital............................................. 318,960,000 367,290,000
Retained earnings (deficit)................................. (7,590,000) 232,120,000
Cumulative translation adjustments.......................... 2,360,000 (3,090,000)
-------------- --------------
Total shareholders' equity............................. 381,140,000 667,630,000
-------------- --------------
Total liabilities and shareholders' equity............. $1,530,690,000 $1,789,910,000
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 46
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales................................... $ 1,702,260,000 $ 1,582,880,000 $ 1,455,320,000
Cost of sales............................... (1,385,430,000) (1,257,480,000) (1,159,050,000)
--------------- --------------- ---------------
Gross profit........................... 316,830,000 325,400,000 296,270,000
Selling, general and administrative
expenses.................................. (194,680,000) (179,680,000) (184,430,000)
Charge for disposition of businesses........ (400,000,000) -- --
--------------- --------------- ---------------
Operating profit (loss)................ (277,850,000) 145,720,000 111,840,000
--------------- --------------- ---------------
Other income (expense), net:
Interest expense, Masco Corporation....... -- (6,990,000) (7,800,000)
Other interest expense.................... (49,830,000) (74,370,000) (78,190,000)
Equity and interest income from
affiliates............................. 29,810,000 21,000,000 15,750,000
Gain from change in investment of
equity affiliates...................... -- 9,490,000 16,700,000
Other, net................................ 33,380,000 26,330,000 9,950,000
--------------- --------------- ---------------
13,360,000 (24,540,000) (43,590,000)
--------------- --------------- ---------------
Income (loss) from continuing
operations before income taxes
(credit) and extraordinary income
(loss)............................... (264,490,000) 121,180,000 68,250,000
Income taxes (credit)....................... (30,070,000) 50,290,000 29,210,000
--------------- --------------- ---------------
Income (loss) from continuing
operations before extraordinary
income (loss)........................ (234,420,000) 70,890,000 39,040,000
Discontinued energy operations (net of
income taxes):
Income (loss) from operations of
discontinued energy segment.......... -- 2,630,000 (610,000)
Gain (loss) on disposition............. 11,700,000 (22,270,000) --
--------------- --------------- ---------------
Income (loss) before extraordinary
income (loss)........................ (222,720,000) 51,250,000 38,430,000
Extraordinary income (loss) (net of
income taxes)............................. 2,600,000 (3,650,000) --
--------------- --------------- ---------------
Net income (loss)...................... $ (220,120,000) $ 47,600,000 $ 38,430,000
=============== =============== ===============
Preferred stock dividends................... $ 12,960,000 $ 14,930,000 $ 9,300,000
=============== =============== ===============
Earnings (loss) attributable to
common stock......................... $ (233,080,000) $ 32,670,000 $ 29,130,000
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
1993
-------------------
ASSUMING
1994 FULL 1992
PRIMARY PRIMARY DILUTION PRIMARY
------- ------- -------- -------
<S> <C> <C> <C> <C>
Earnings (loss) per common and common equivalent share:
Continuing operations................................... $(4.20) $ .97 $.91 $ .49
Discontinued energy operations:
Income (loss) from operations of discontinued
energy segment..................................... -- .05 .04 (.01)
Gain (loss) on disposition........................... .20 (.39) * --
------ ----- ---- -----
Income (loss) before extraordinary income (loss)........ (4.00) .63 .63 .48
Extraordinary income (loss)............................. .04 (.06) * --
------ ----- ---- -----
Earnings (loss) attributable to common stock............ $(3.96) $ .57 $.57 $ .48
====== ===== ==== =====
</TABLE>
* Anti-dilutive
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 47
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
CASH FROM (USED FOR):
OPERATING ACTIVITIES:
Net income (loss)............................. $(220,120,000) $ 47,600,000 $ 38,430,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities,
excluding reclassification of businesses held
for disposition:
Charge for disposition of businesses....... 400,000,000 -- --
Gain from change in investment of equity
affiliates............................... -- (9,490,000) (16,700,000)
Gains from sales of TriMas common stock.... (17,900,000) -- --
Depreciation and amortization.............. 66,760,000 59,810,000 59,920,000
Equity earnings, net of dividends.......... (23,720,000) (12,000,000) (5,250,000)
(Decrease) increase in deferred taxes...... (67,760,000) 15,590,000 3,130,000
(Increase) decrease in marketable
securities, net.......................... (34,320,000) 2,980,000 3,150,000
(Increase) in receivables.................. (37,940,000) (5,900,000) (23,930,000)
(Increase) in inventories.................. (23,390,000) (2,990,000) (2,920,000)
(Increase) decrease in prepaid expenses.... (33,490,000) (11,650,000) 4,010,000
Increase (decrease) in accounts payable and
accrued liabilities...................... 65,330,000 (5,900,000) (12,930,000)
Other, net, including extraordinary income
(loss)................................... (5,370,000) 8,180,000 13,540,000
Net assets of businesses held for
disposition, net......................... (30,410,000) 16,700,000 830,000
------------- ------------- -------------
Net cash from operating activities....... 37,670,000 102,930,000 61,280,000
------------- ------------- -------------
FINANCING ACTIVITIES:
Issuance of convertible debt.................. 337,240,000 -- --
Increase in other debt........................ 82,730,000 -- 11,670,000
Payment or repurchase of other debt........... (349,230,000) (150,020,000) (135,490,000)
Issuance of preferred stock................... -- 209,520,000 --
Retirement of Company Common Stock............ (54,130,000) -- --
Retirement of preferred stock................. -- (100,000,000) --
Payment of dividends.......................... (18,980,000) (16,020,000) (9,300,000)
Other, net.................................... (5,010,000) 3,770,000 (2,240,000)
------------- ------------- -------------
Net cash used for financing activities... (7,380,000) (52,750,000) (135,360,000)
------------- ------------- -------------
INVESTING ACTIVITIES:
Cash received from sales or redemption of
TriMas securities............................ 18,180,000 -- 88,000,000
Cash paid Masco Corporation................... -- (87,500,000) --
Cash received from sale of energy
businesses................................. 41,220,000 93,450,000 --
Capital expenditures.......................... (115,220,000) (59,540,000) (60,000,000)
Receipt of cash from notes receivable......... 14,640,000 14,000,000 3,830,000
Other, net.................................... (10,360,000) (3,390,000) 300,000
------------- ------------- -------------
Net cash (used for) from investing
activities............................ (51,540,000) (42,980,000) 32,130,000
------------- ------------- -------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year.............. (21,250,000) 7,200,000 (41,950,000)
At January 1.................................. 83,200,000 76,000,000 117,950,000
------------- ------------- -------------
At December 31........................... $ 61,950,000 $ 83,200,000 $ 76,000,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 48
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. All significant
intercompany transactions have been eliminated. Corporations that are 20 to 50
percent owned are accounted for by the equity method of accounting. Capital
transactions by equity affiliates, which reduce the Company's ownership interest
at amounts differing from the Company's carrying amount, are reflected in other
income or expense and equity and other investments in affiliates.
Certain amounts for the years ended December 31, 1993 and 1992 have been
reclassified to conform to the presentation adopted in 1994. The balance sheet
at December 31, 1994 reflects the segregation of net current and net non-current
assets related to the plan, adopted in late 1994, to dispose of certain
businesses. The financial statements and related notes have been reclassified to
present the energy segment as discontinued operations (see "Dispositions of
Operations" note).
The Company has a corporate services agreement with Masco Corporation,
which at December 31, 1994 owned approximately 44 percent of the Company's
Common Stock. Under the terms of the agreement, the Company pays fees to Masco
Corporation for various corporate staff support and administrative services,
research and development and facilities. Such fees, which are determined
principally as a percentage of net sales, including net sales related to
businesses held for disposition, aggregated approximately $11 million in each of
1994, 1993 and 1992.
Cash and Cash Investments. The Company considers all highly liquid debt
instruments with an initial maturity of three months or less to be cash and cash
investments. The carrying amount reported in the balance sheet for cash and cash
investments approximates fair value.
Marketable Securities. The Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", in 1994. At December 31, 1994 marketable equity securities
have been categorized as trading securities, and, as a result, are stated at
fair value. At December 31, 1993 marketable equity securities were stated at the
lower of cost or market. Derivative financial instruments, consisting
principally of S&P 500 futures contracts, are held for purposes other than
trading and are carried at market value. Changes in market value of outstanding
futures contracts are recognized as incurred.
Receivables. Receivables are presented net of allowances for doubtful
accounts of approximately $1.6 million and $5.1 million at December 31, 1994 and
1993, respectively.
Inventories. Inventories are stated at the lower of cost or net realizable
value, with cost determined principally by use of the first-in, first-out
method.
Property and Equipment, Net. Property and equipment additions, including
significant betterments, are recorded at cost. Upon retirement or disposal of
property and equipment, the cost and accumulated depreciation are removed from
the accounts, and any gain or loss is included in income. Repair and maintenance
costs are charged to expense as incurred.
Depreciation and Amortization. Depreciation is computed principally using
the straight-line method over the estimated useful lives of the assets. Annual
depreciation rates are as follows: buildings and land improvements, 2 1/2 to 10
percent, and machinery and equipment, 6 2/3 to 33 1/3 percent. Deferred
financing costs are amortized over the lives of the related debt securities. The
excess of cost over net assets of acquired companies is amortized using the
straight-line method over the period estimated to be benefitted, not exceeding
40 years. At each balance sheet date, management assesses whether there has been
a permanent impairment of the excess of cost over net assets of acquired
companies by comparing anticipated undiscounted future cash flows from operating
activities with the carrying amount of the excess of cost over net assets of
acquired companies. The factors considered by
F-7
<PAGE> 49
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management in performing this assessment include current operating results,
business prospects, market trends, potential product obsolescence, competitive
activities and other economic factors. Based on this assessment there was no
permanent impairment related to the excess of cost over net assets of acquired
companies not held for disposition at December 31, 1994.
At December 31, 1994 and 1993, accumulated amortization of the excess of
cost over net assets of acquired companies and patents was $34.5 million and
$86.5 million, respectively. Amortization expense was $22.9 million, $22.2
million and $22.8 million in 1994, 1993 and 1992, respectively, including
amortization expense of approximately $1.6 million in both 1993 and 1992 related
to discontinued operations.
Income Taxes. In January 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
SFAS No. 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS No. 109 generally allows
consideration of all expected future events other than enactments of changes in
the tax law or tax rates. There was no income statement impact from the adoption
of SFAS No. 109. Provision has not been made for U.S. or additional foreign
taxes on approximately $28 million of undistributed earnings of foreign
subsidiaries as those earnings are intended to be permanently reinvested.
Generally, such earnings become taxable upon the remittance of dividends and
under certain other circumstances. It is not practicable to estimate the amount
of deferred tax liability on such undistributed earnings.
Earnings (Loss) Per Common Share. Primary loss per common share in 1994 is
based on 58.9 million weighted average shares of common stock outstanding. The
effect of stock options and warrants in 1994 would be anti-dilutive. Primary
earnings per common share are based on weighted average shares of common stock
and common stock equivalents outstanding (including the dilutive effect of stock
options and warrants, utilizing the treasury stock method) of 57.4 million and
60.9 million in 1993 and 1992, respectively. Primary earnings (loss) per common
share are calculated on earnings (loss) after deducting preferred stock
dividends of $13.0 million, $14.9 million and $9.3 million in 1994, 1993 and
1992, respectively.
Fully diluted earnings (loss) per common share are only presented when the
assumed conversion of convertible securities is dilutive. Fully diluted earnings
per common share in 1993 was calculated based on 68.8 million weighted average
common shares outstanding. Convertible securities did not have a dilutive effect
on earnings (loss) per common share in 1994 or 1992.
In late 1993, approximately 10.4 million common shares were issued as a
result of the conversion of the 6% Convertible Subordinated Debentures (see
"Shareholders' Equity" note). If such conversion had taken place at the
beginning of 1993, the primary earnings per common and common equivalent share
amounts would have approximated the amounts presented for earnings per common
and common equivalent share, assuming full dilution, in 1993.
Adoption of Statements of Financial Accounting Standards. The Company
expects that the adoption of Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan", will not have a
material impact on the financial position or the results of operations of the
Company when adopted in 1995.
SUPPLEMENTARY CASH FLOWS INFORMATION:
Significant transactions not affecting cash were: in 1993: in addition to
the payment by the Company of $87.5 million, the non-cash portion of the
issuance of Company Preferred Stock and warrants in exchange for Company Common
Stock, Company Preferred Stock and Masco
F-8
<PAGE> 50
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Corporation's holdings of Emco Limited common stock and convertible debentures
(see "Shareholders' Equity" note); conversion of $187 million of convertible
debentures into Company Common Stock (see "Shareholders' Equity" note); and
conversion of the Company's TriMas Corporation ("TriMas") convertible preferred
stock holdings into TriMas common stock (see "Equity and Other Investments in
Affiliates" note).
Income taxes paid were $28 million, $32 million and $23 million in 1994,
1993 and 1992, respectively. Interest paid was $61 million, $82 million and $91
million in 1994, 1993 and 1992, respectively.
DISPOSITIONS OF OPERATIONS:
In late 1994, the Company adopted a plan to dispose, by sale or
liquidation, a number of businesses, including its Architectural Products,
Defense and certain of its Transportation-Related Products businesses, as part
of its long-term strategic plan to increase the focus on its core operating
capabilities. The disposition of these businesses is expected to primarily occur
in 1995 with the cash portion of the proceeds applied to reduce the Company's
indebtedness and to provide capital to invest in its core businesses. The
disposition of these businesses does not meet the criteria for discontinued
operations treatment for accounting purposes; accordingly, the sales and results
of operations of these businesses will be included in continuing operations
until disposition. The businesses to be disposed had annual sales of $675
million, $715 million and $675 million in 1994, 1993 and 1992, respectively, and
operating profit (loss), before the charge recorded in 1994, of $(2) million,
$22 million and $30 million in 1994, 1993 and 1992, respectively.
The expected proceeds from the sale or liquidation of the businesses to be
disposed was estimated by the Company's management based on a variety of factors
including: historical and projected operating performance, competitive market
position, perceived strategic value to potential acquirors, tangible asset
values and other relevant factors. In addition, management's estimate of the
expected proceeds included input from independent parties familiar with business
valuations of this nature. The Company's carrying value of a number of the
businesses to be disposed exceeded the estimated proceeds expected from such
dispositions. To reflect the estimated loss on the disposition of these
businesses, the Company recorded a non-cash charge aggregating $400 million
pre-tax (approximately $315 million after-tax or $5.35 per common share) for
those businesses for which a loss is anticipated. The approximate components of
the charge are as follows (in thousands):
<TABLE>
<S> <C>
Write-down of assets due to anticipated net proceeds being less
than carrying value:
Excess of cost over net assets of acquired companies.......... $270,000
Other assets, principally property and equipment.............. 105,000
Expenses of sale or liquidation accruable at December 31, 1994..... 25,000
--------
Pre-tax charge.............................................. $400,000
========
</TABLE>
Future periods will include the operating results of the businesses to be
sold and any additional anticipated costs to be incurred in connection with the
sale or liquidation of the remaining businesses which cannot be accrued at
December 31, 1994, as well as the result of differences between estimated and
actual proceeds. In addition, management expects that certain of the businesses
to be disposed may be sold for gains; such gains will be recognized when
realized.
In late 1993, the Company adopted a plan to divest the business units in
its energy segment. This plan met the criteria for discontinued operations
accounting treatment; accordingly, the financial statements and related notes
present the Company's energy segment as discontinued operations.
F-9
<PAGE> 51
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1993, two such business units were sold for approximately $93 million,
including the sale of one business unit to the Company's equity affiliate,
TriMas, for $60 million cash. The expected loss from the disposition of the
Company's energy segment resulted in a fourth quarter 1993 pre-tax charge of
approximately $41 million (approximately $22 million after-tax), including a
provision for the businesses not sold in 1993 and the deferral of a portion of
the gain (approximately $6 million after-tax) related to the sale of the
business to TriMas. Certain of the remaining business units were sold at prices
greater than those used in estimating the loss on disposition in 1993, resulting
in a reversal in 1994 of approximately $18 million pre-tax ($11.7 million
after-tax) relating to the charge established in 1993.
Selected financial information for the Company's discontinued energy
segment is as follows for the period up to the decision to discontinue in 1993,
and for the year ended December 31, 1992:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1993 1992
-------- --------
<S> <C> <C>
Net sales................................................ $191,930 $201,520
======== ========
Operating income......................................... $ 5,540 $ 3,050
Other expense............................................ (480) (960)
-------- --------
Pre-tax income........................................... 5,060 2,090
Income taxes............................................. 2,430 2,700
-------- --------
Income (loss) from discontinued operations............... $ 2,630 $ (610)
======== ========
</TABLE>
The unusual relationship of income taxes to pre-tax income in 1992 results
principally from foreign losses for which no tax benefit was recorded.
Amounts included in the consolidated balance sheet for net assets of
businesses held for disposition consist of the following at December 31, 1994
and 1993, after reflecting the anticipated loss on disposition:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993
--------- --------
<S> <C> <C>
Receivables............................................. $ 107,760 $ 34,890
Other current assets, principally inventories........... 141,140 41,250
Current liabilities, including accrued exit costs....... (102,210) (47,310)
--------- --------
Net current assets.................................... 146,690 28,830
--------- --------
Property and equipment, net............................. 120,350 30,060
Other non-current assets and liabilities, net, including
deferred tax assets................................... 112,020 8,620
--------- --------
Net non-current assets................................ 232,370 38,680
--------- --------
Net assets of businesses held for disposition........... $ 379,060 $ 67,510
========= ========
</TABLE>
F-10
<PAGE> 52
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-------------------
1994 1993
------- --------
<S> <C> <C>
Finished goods............................................ $15,990 $ 39,400
Work in process........................................... 29,260 38,240
Raw material.............................................. 46,700 62,400
------- --------
$91,950 $140,040
======= ========
</TABLE>
EQUITY AND OTHER INVESTMENTS IN AFFILIATES:
Equity and other investments in affiliates consist primarily of the
following common stock interests in publicly traded affiliates:
<TABLE>
<CAPTION>
AT DECEMBER 31
--------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
TriMas Corporation........................................ 41% 43% 28%
Emco Limited.............................................. 43% 43% --
Titan Wheel International, Inc. .......................... 20% 21% 47%
</TABLE>
The carrying amount of investments in affiliates at December 31, 1994 and
1993 and quoted market values at December 31, 1994 for publicly traded
affiliates (which may differ from the amounts that could have been realized upon
disposition) are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994
QUOTED 1994 1993
MARKET CARRYING CARRYING
VALUE AMOUNT AMOUNT
-------- -------- --------
<S> <C> <C> <C>
Common stock:
TriMas Corporation......................... $303,820 $ 60,090 $ 40,550
Emco Limited............................... 55,680 50,130 50,470
Titan Wheel International, Inc. ........... 40,900 20,180 15,500
-------- -------- --------
Common stock holdings........................ 400,400 130,400 106,520
-------- -------- --------
Convertible debt:
Emco Limited............................... 29,950 31,560 30,700
-------- -------- --------
Convertible debt holdings.................... 29,950 31,560 30,700
-------- -------- --------
Investments in publicly traded affiliates.... $430,350 161,960 137,220
========
Other non-public affiliates.................. 11,270 33,290
-------- --------
Total........................................ $173,230 $170,510
======== ========
</TABLE>
In 1988, the Company transferred several businesses to TriMas, a publicly
traded, diversified manufacturer of commercial, industrial and consumer
products. In exchange, the Company received $128 million principal amount of 14%
Subordinated Debentures (which were subsequently redeemed resulting in
prepayment premium income to the Company of $9 million pre-tax in 1992), $70
million (liquidation value) of 10% Convertible Participating Preferred Stock and
9.3 million shares of TriMas common stock.
F-11
<PAGE> 53
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the second quarter of 1992, TriMas sold 9.2 million shares of newly
issued common stock at $9.75 per share in a public offering, which reduced the
Company's common equity ownership interest in TriMas to 28 percent from 41
percent. As a result, the Company recognized a pre-tax gain of $16.7 million
from the change in the Company's common equity ownership interest in TriMas. In
late 1993, the TriMas 10% Convertible Participating Preferred Stock held by the
Company was converted at a conversion price of $9 per share into 7.8 million
shares of TriMas common stock, increasing the Company's common equity ownership
interest in TriMas to 43 percent. During 1994, the Company sold a portion of its
common stock holdings in TriMas, decreasing the Company's common equity
ownership interest in TriMas to 41 percent, and resulting in a pre-tax gain of
$17.9 million.
The Company's holdings in Emco Limited ("Emco") were acquired from Masco
Corporation in 1993 (see "Shareholders' Equity" note). Emco is a major, publicly
traded, Canadian-based manufacturer and distributor of building and other
industrial products with annual sales of approximately $800 million.
At December 31, 1992, the Company had an approximate 47 percent common
equity ownership interest in Titan Wheel International, Inc. ("Titan"), a
manufacturer of wheels, tires and other products for agricultural, construction
and other off-highway equipment markets. In May 1993, Titan completed an initial
public offering of three million shares of common stock at $15 per share
(including 292,000 shares held by the Company), reducing the Company's common
equity ownership interest in Titan to 24 percent. The Company's ownership
interest was further reduced in late 1993 to 21 percent as a result of the
issuance of additional common shares by Titan in connection with an acquisition
by Titan. These transactions resulted in 1993 gains aggregating approximately
$12.8 million pre-tax (principally in the second quarter) as a result of the
sale of shares held by the Company and from the change in the Company's common
equity ownership interest in Titan.
In addition to its equity and other investments in publicly traded
affiliates, the Company has equity and other investment interests in privately
held manufacturers of automotive components, including the Company's common
equity ownership interest in Delco Remy America, Inc. ("Delco Remy"), a
manufacturer of automotive electric motors and other components in which the
Company acquired an interest in mid-1994.
F-12
<PAGE> 54
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Approximate combined condensed financial data of the Company's equity
affiliates, including Delco Remy and Emco subsequent to the Company's investment
in these affiliates, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1994 1993
--------- ---------
<S> <C> <C>
Current assets....................................... $ 881,150 $ 657,680
Current liabilities.................................. (320,400) (222,580)
--------- ---------
Working capital................................. 560,750 435,100
Property and equipment, net.......................... 524,140 349,740
Excess of cost over net assets of acquired
companies.......................................... 198,620 170,760
Other assets......................................... 80,710 69,540
Long-term debt....................................... (780,220) (628,520)
Deferred income taxes and other long-term
liabilities........................................ (75,730) (34,950)
--------- ---------
Shareholders' equity............................ $ 508,270 $ 361,670
========= =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
------------------------------------
1994 1993 1992
---------- ---------- --------
<S> <C> <C> <C>
Net sales.................................... $1,989,670 $1,412,620 $655,120
========== ========== ========
Operating profit............................. $ 174,850 $ 119,780 $ 77,860
========== ========== ========
Earnings attributable to common stock........ $ 74,870 $ 52,030 $ 23,200
========== ========== ========
</TABLE>
Equity and interest income from affiliates consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
The Company's equity in affiliates' earnings
available for common shareholders.............. $25,970 $12,890 $ 5,250
Dividends on TriMas preferred stock.............. -- 5,250 7,000
Interest income.................................. 3,840 2,860 3,500
------- ------- -------
Equity and interest income from affiliates....... $29,810 $21,000 $15,750
======= ======= =======
</TABLE>
PROPERTY AND EQUIPMENT, NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1994 1993
-------- --------
<S> <C> <C>
Cost:
Land and land improvements............................. $ 15,180 $ 33,720
Buildings.............................................. 103,630 158,750
Machinery and equipment................................ 507,190 605,600
-------- --------
626,000 798,070
Less accumulated depreciation............................ 246,670 307,880
-------- --------
$379,330 $490,190
======== ========
</TABLE>
F-13
<PAGE> 55
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense totalled $44 million, $48 million and $46 million in
1994, 1993 and 1992, respectively. These amounts include depreciation expense of
approximately $8 million in each of 1993 and 1992 related to the discontinued
energy segment.
ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1994 1993
------- --------
<S> <C> <C>
Salaries, wages and commissions.......................... $18,050 $ 22,970
Income taxes............................................. 2,740 5,930
Interest................................................. 9,020 20,420
Insurance................................................ 16,940 11,010
Property, payroll and other taxes........................ 6,730 9,360
Other.................................................... 18,610 33,570
------- --------
$72,090 $103,260
======= ========
</TABLE>
LONG-TERM DEBT:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1994 1993
-------- --------
<S> <C> <C>
Bank revolving credit agreement, due 1998................ $280,000 $295,000
10% Senior Subordinated Notes, due 1995 (noncallable).... 233,150 233,150
10 1/4% Senior Subordinated Notes, due 1997.............. -- 250,000
4 1/2% Convertible Subordinated Debentures, due 2003..... 310,000 --
Other.................................................... 48,760 13,040
-------- --------
871,910 791,190
Less current portion of long-term debt................... 3,670 2,830
-------- --------
Long-term debt........................................... $868,240 $788,360
======== ========
</TABLE>
In 1993, the Company entered into a new $675 million revolving credit
agreement with a group of banks, replacing its prior bank credit agreement.
During 1994, the Company amended this agreement, resulting in an extension of
the due date to July 1998 from January 1997. The interest rates applicable to
the revolving credit agreement are principally at alternative floating rates
provided for in the agreement (approximately six percent at December 31, 1994).
The revolving credit agreement contains restrictions including limitations
on intangible assets, ratio of senior debt to earnings and the ratio of debt to
equity. At December 31, 1994, the unused portion of the revolving credit
agreement was principally available to refinance the 10% Senior Subordinated
Notes and other indebtedness. Cash dividends and any acquisition of Company
Common Stock and Convertible Preferred Stock could be accomplished with future
internal cash flows and through future reductions of cash investments and
marketable securities.
In January 1994, the Company issued, in a public offering, $345 million of
4 1/2% Convertible Subordinated Debentures due December 15, 2003. These
debentures are convertible into Company Common Stock at $31 per share. The net
proceeds of approximately $337 million were used to redeem the $250 million of
10 1/4% Senior Subordinated Notes on February 1, 1994 and to reduce other
indebtedness. In the fourth quarter of 1993, the Company recognized a $5.8
million pre-tax
F-14
<PAGE> 56
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
extraordinary charge ($3.7 million after-tax) related to the call premium
(1.25%) and unamortized prepaid debenture expense associated with the early
extinguishment of the $250 million of 10 1/4% Senior Subordinated Notes. The 10%
Senior Subordinated Notes are due March 15, 1995 but are classified as
non-current at December 31, 1994 as the Company has the intent and the ability
to maintain these borrowings on a long-term basis (due to available borrowings
under the Company's revolving credit agreement). During 1994, the Company
recognized extraordinary income of $4.4 million pre-tax ($2.6 million after-tax)
related to the early extinguishment of a portion of the 4 1/2% Convertible
Subordinated Debentures.
The maturities of debt during the next five years are as follows (in
millions): 1995 -- $237; 1996 -- $1; 1997 -- $0; 1998 -- $316; and 1999 -- $0.
F-15
<PAGE> 57
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY:
<TABLE>
<CAPTION>
(IN THOUSANDS)
RETAINED CUMULATIVE
PREFERRED COMMON PAID-IN EARNINGS TRANSLATION SHAREHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) ADJUSTMENTS EQUITY
--------- -------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992........ $ 780 $ 59,450 $ 83,800 $ 173,530 $ 9,130 $ 326,690
Net income................. -- -- -- 38,430 -- 38,430
Preferred stock
dividends................ -- -- -- (9,300) -- (9,300)
Translation adjustments,
net...................... -- -- -- -- (3,080) (3,080)
Exercise of stock
options.................. -- 70 590 -- -- 660
------- -------- -------- --------- ------- ---------
Balance, December 31, 1992...... 780 59,520 84,390 202,660 6,050 353,400
Net income................. -- -- -- 47,600 -- 47,600
Preferred stock
dividends................ -- -- -- (14,930) -- (14,930)
Common stock dividends..... -- -- -- (3,210) -- (3,210)
Retirement of 12%
Preferred................ (780) -- (76,720) -- -- (77,500)
Issuance of 10%
Preferred................ 1,000 -- 99,000 -- -- 100,000
Issuance of warrants....... -- -- 70,800 -- -- 70,800
Issuance of DECS........... 10,800 -- 198,720 -- -- 209,520
Retirement of common
stock.................... -- (10,000) (90,000) -- -- (100,000)
Retirement of 10%
Preferred................ (1,000) -- (99,000) -- -- (100,000)
Conversion of convertible
debentures............... -- 10,370 174,120 -- -- 184,490
Translation adjustments,
net...................... -- -- -- -- (9,140) (9,140)
Exercise of stock
options.................. -- 620 5,980 -- -- 6,600
------- -------- -------- --------- ------- ---------
Balance, December 31, 1993...... 10,800 60,510 367,290 232,120 (3,090) 667,630
Net loss................... -- -- -- (220,120) -- (220,120)
Preferred stock
dividends................ -- -- -- (12,960) -- (12,960)
Common stock dividends..... -- -- -- (6,630) -- (6,630)
Retirement of common
stock.................... -- (4,070) (50,060) -- -- (54,130)
Translation adjustments,
net...................... -- -- -- -- 5,450 5,450
Exercise of stock
options.................. -- 170 1,730 -- -- 1,900
------- -------- -------- --------- ------- ---------
Balance, December 31, 1994...... $10,800 $ 56,610 $318,960 $ (7,590) $ 2,360 $ 381,140
======= ======== ======== ========= ======= =========
</TABLE>
On March 31, 1993, the Company acquired from Masco Corporation 10 million
shares of Company Common Stock, recorded at $100 million, $77.5 million of the
Company's previously outstanding 12% Exchangeable Preferred Stock, and Masco
Corporation's holdings of Emco Limited common stock and convertible debentures,
recorded at $80.8 million. In exchange, Masco Corporation received $100 million
(liquidation value) of the Company's 10% Exchangeable Preferred Stock,
seven-year warrants to purchase 10 million shares of Company Common Stock at $13
per share, recorded at $70.8 million, and $87.5 million in cash. The
transferable warrants are not exercisable by Masco Corporation if an exercise
would increase Masco Corporation's common equity ownership interest in the
Company above 35 percent. The cash portion of this transaction is included in
the accompanying statement of cash flows as cash used for investing activities
of $87.5 million. As part of this transaction, as modified in late 1993, Masco
Corporation agreed to purchase from the Company, at the Company's option through
March 1997, up to $200 million of subordinated debentures. In late 1993, the
Company redeemed the 10% Exchangeable Preferred Stock for its $100 million
liquidation value.
In July 1993, the Company issued 10.8 million shares of 6% Dividend
Enhanced Convertible Stock (DECS, classified as Convertible Preferred Stock) at
$20 per share ($216 million aggregate liquidation amount) in a public offering.
The net proceeds from this issuance were used to reduce the Company's
indebtedness. On July 1, 1997, each of the then outstanding shares of the DECS
will convert into one
F-16
<PAGE> 58
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share of Company Common Stock, if not previously redeemed by the Company or
converted at the option of the holder, in both cases for Company Common Stock.
Each share of the DECS is convertible at the option of the holder anytime
prior to July 1, 1997 into .806 of a share of Company Common Stock, equivalent
to a conversion price of $24.81 per share of Company Common Stock. Dividends are
cumulative and each share of the DECS has 4/5 of a vote, voting together as one
class with holders of Company Common Stock.
Beginning July 1, 1996, the Company, at its option, may redeem the DECS at
a call price payable in shares of Company Common Stock principally determined by
a formula based on the then current market price of Company Common Stock.
Redemption by the Company, as a practical matter, will generally not result in a
call price that exceeds one share of Company Common Stock or is less than .806
of a share of Company Common Stock (resulting from the holder's conversion
option).
The Company's 6% Convertible Subordinated Debentures were called for
redemption in late 1993. Substantially all holders, including Masco Corporation,
exercised their right to convert these debentures into Company Common Stock (at
a conversion price of $18 per share), resulting in the issuance of approximately
10.4 million shares of Company Common Stock.
During 1994, the Company repurchased and retired approximately four million
shares of its common stock in open-market purchases, pursuant to a Board of
Directors' authorized repurchase program. At December 31, 1994, the Company may
repurchase approximately six million additional shares of Company Common Stock
and Convertible Preferred Stock pursuant to this repurchase authorization.
The Company commenced paying cash dividends on its Common Stock in August
1993. On the basis of amounts paid (declared), cash dividends per Common Share
were $.10 ($.11) in 1994 and $.04 ($.06) in 1993.
STOCK OPTIONS AND AWARDS:
For the three years ended December 31, 1994, stock option data pertaining
to stock option plans for key employees of the Company and affiliated companies
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Options outstanding, January 1........... 3,810 4,540 3,770
Options granted.......................... 20 30 900
Option price per share................. $17-25 1/8 $13-26 $6 1/8-10 3/4
Options cancelled........................ 40 -- 60
Option price per share................. $4 1/2 -- $4 1/2
Options exercised........................ 170 760 70
Option price per share................. $4 1/2-9 1/8 $4 1/2-9 1/8 $9 1/8
------------ ------------ -------------
Options outstanding, December 31......... 3,620 3,810 4,540
============ ============ =============
Options exercisable, December 31......... 1,080 680 880
============ ============ =============
</TABLE>
At December 31, 1994, options have been granted and are outstanding with
exercise prices ranging from $4 1/2 to $26 per share, the fair market value at
the dates of grant.
Pursuant to restricted stock incentive plans, the Company granted long-term
incentive awards, net, for 213,000, 202,000 and 251,000 shares of Company Common
Stock during 1994, 1993 and 1992, respectively, to key employees of the Company
and affiliated companies. The unamortized costs of
F-17
<PAGE> 59
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
incentive awards, aggregating approximately $22 million at December 31, 1994,
are being amortized over the ten-year vesting periods.
At December 31, 1994 and 1993, a combined total of 5,773,000 and 5,631,000
shares, respectively, of Company Common Stock were available for the granting of
options and incentive awards under the above plans.
EMPLOYEE BENEFIT PLANS:
Pension and Profit-Sharing Benefits. The Company sponsors defined-benefit
pension plans for most of its employees. In addition, substantially all salaried
employees participate in noncontributory profit-sharing plans, to which payments
are approved annually by the Directors. Aggregate charges to income under these
plans were $9.8 million in 1994, $10.9 million in 1993 and $10.3 million in
1992, including approximately $.9 million in each of 1993 and 1992 related to
the discontinued energy segment.
Net periodic pension cost for the Company's defined-benefit pension plans
includes the following components for the three years ended December 31, 1994:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the
year.......................................... $ 4,800 $ 4,110 $ 4,150
Interest cost on projected benefit
obligations................................... 5,800 5,540 5,090
Actual (return) loss on assets.................. 1,850 (7,730) (3,820)
Net amortization and deferral................... (8,240) 1,600 (1,800)
------- ------- -------
Net periodic pension cost....................... $ 4,210 $ 3,520 $ 3,620
======= ======= =======
</TABLE>
Major assumptions used in accounting for the Company's defined-benefit
pension plans are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Discount rate for obligations........................ 8.5% 7.0% 8.25%
Rate of increase in compensation levels.............. 5.0% 5.0% 6.0%
Expected long-term rate of return on plan assets..... 13.0% 13.0% 13.0%
</TABLE>
In 1995, the Company changed its assumption for the expected long-term rate
of return on plan assets to 11 percent.
F-18
<PAGE> 60
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the Company's defined-benefit pension plans at
December 31, 1994 and 1993 is as follows (at December 31, 1994, no plans had
assets which exceeded accumulated benefits):
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993
----------- --------------------------
ACCUMULATED ASSETS ACCUMULATED
BENEFITS EXCEED BENEFITS
EXCEED ACCUMULATED EXCEED
RECONCILIATION OF FUNDED STATUS ASSETS BENEFITS ASSETS
- -------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................. $ 60,300 $23,040 $ 34,280
========= ======= =========
Accumulated benefit obligation........................ $ 64,570 $24,450 $ 38,650
========= ======= =========
Projected benefit obligation.......................... $ 75,000 $35,270 $ 39,920
Assets at fair value.................................... 53,280 29,550 26,560
--------- ------- ---------
Projected benefit obligation in excess of plan
assets............................................. (21,720) (5,720) (13,360)
Reconciling items:
Unrecognized net loss................................. 10,890 7,140 8,810
Unrecognized prior service cost....................... 7,950 460 3,250
Unrecognized net (asset) obligation at transition..... (1,330) (1,340) (160)
Adjustment required to recognize minimum liability.... (10,010) -- (10,840)
--------- ------- ---------
(Accrued) prepaid pension cost.......................... $ (14,220) $ 540 $ (12,300)
========= ======= =========
</TABLE>
Postretirement Benefits. The Company provides postretirement medical and
life insurance benefits for certain of its active and retired employees.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions", for its postretirement benefit
plans. This statement requires the accrual method of accounting for
postretirement health care and life insurance based on actuarially determined
costs to be recognized over the period from the date of hire to the full
eligibility date of employees who are expected to qualify for such benefits. In
conjunction with the adoption of SFAS 106, the Company elected to recognize the
transition obligation on a prospective basis and accordingly, the net transition
obligation is being amortized over 20 years. Net periodic postretirement benefit
cost includes the following components for the years ended December 31, 1994 and
1993:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993
------ ------
<S> <C> <C>
Service cost................................................. $ 400 $ 300
Interest cost................................................ 1,800 1,900
Net amortization............................................. 1,300 1,200
------ ------
Net periodic postretirement benefit cost..................... $3,500 $3,400
====== ======
</TABLE>
The incremental cost in 1994 and 1993 of accounting for postretirement
health care and life insurance benefits under SFAS 106, as compared to 1992,
amounted to approximately $2 million in each year.
F-19
<PAGE> 61
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement benefit obligations, none of which is funded, are summarized
as follows at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees............................................... $ 16,400 $ 19,400
Fully eligible active plan participants................ 1,000 1,400
Other active participants.............................. 5,500 6,400
-------- --------
Total accumulated postretirement benefit obligation...... 22,900 27,200
Unrecognized net gain (loss)........................... 1,800 (2,900)
Unamortized transition obligation...................... (17,100) (22,500)
-------- --------
Accrued postretirement benefits.......................... $ 7,600 $ 1,800
======== ========
</TABLE>
The discount rates used in determining the accumulated postretirement
benefit obligation were 8.5 percent and 7.0 percent in 1994 and 1993,
respectively. The assumed health care cost trend rate in 1994 was 12 percent,
decreasing to an ultimate rate in the year 2000 of seven percent. If the assumed
medical cost trend rates were increased by one percent, the accumulated
postretirement benefit obligation would increase by $2.1 million and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost would increase by $.3 million. Included in the
Company's 1994 charge for the disposition of certain businesses are curtailment
costs for postretirement benefit obligations relating to these businesses of
approximately $3.7 million.
SEGMENT INFORMATION:
The Company's business segments involve the production and sale of the
following:
Transportation-Related Products:
Precision products, generally produced using advanced metalworking
technologies with significant proprietary content, and
aftermarket products for the transportation industry.
Specialty Products:
Architectural -- Doors, windows, security grilles and office panels
and partitions for commercial and residential markets.
Other -- Products manufactured principally for the defense industry.
Corporate assets consist primarily of cash and cash investments, marketable
securities, equity and other investments in affiliates, notes receivable and net
assets of the discontinued energy segment.
F-20
<PAGE> 62
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
NET SALES OPERATING PROFIT(B)(C) ASSETS EMPLOYED AT DECEMBER 31(D)
------------------------------------ ------------------------------- ------------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
---------- ---------- ---------- --------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Company's
operations by
industry
segment are:
Transportation-
Related
Products
(A)........... $1,332,000 $1,195,000 $1,058,000 $ (55,000) $160,000 $124,000 $ 796,000 $ 883,000 $ 851,000
Specialty
Products:
Architectural... 277,000 289,000 291,000 (118,000) (4,000) 2,000 149,000 313,000 321,000
Other......... 93,000 99,000 106,000 (78,000) 5,000 3,000 32,000 104,000 109,000
---------- ---------- ---------- --------- -------- -------- ---------- ---------- ----------
Total..... $1,702,000 $1,583,000 $1,455,000 (251,000) 161,000 129,000 977,000 1,300,000 1,281,000
========== ========== ==========
Other income
(expense),
net........... 13,000 (25,000) (44,000)
General
corporate
expense....... (26,000) (15,000) (17,000)
--------- -------- --------
Income (loss)
from
continuing
operations
before income
taxes (credit)
and
extraordinary
income
(loss)........ $(264,000) $121,000 $ 68,000
========= ======== ========
Corporate
assets........ 554,000 490,000 526,000
---------- ---------- ----------
Total
assets... $1,531,000 $1,790,000 $1,807,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND
PROPERTY ADDITIONS AMORTIZATION
----------------------------- ------------------------------------
1994 1993 1992 1994 1993 1992
--------- ------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
The Company's operations by industry segment are:
Transportation-Related Products.......................... $101,000 $52,000 $47,000 $48,000 $42,000 $42,000
Specialty Products:
Architectural.......................................... 5,000 5,000 8,000 12,000 12,000 13,000
Other.................................................. 9,000 3,000 5,000 7,000 6,000 5,000
-------- ------- ------- ------- ------- -------
Total............................................ $115,000 $60,000 $60,000 $67,000 $60,000 $60,000
======== ======= ======= ======= ======= =======
</TABLE>
(A) Included within this segment are sales to one customer of $322 million, $324
million and $268 million in 1994, 1993 and 1992, respectively; sales to
another customer of $225 million, $186 million and $184 million in 1994,
1993 and 1992, respectively; and sales to a third customer of $212 million,
$222 million and $216 million in 1994, 1993 and 1992, respectively.
(B) Other income (expense), net in 1992, includes approximately $15 million to
reflect disposition costs related to idle facilities and other long-term
assets.
(C) Operating profit in 1994 includes the impact of a pre-tax charge in the
amount of $400 million for the disposition of businesses. The charge impacts
the Company's business segments as follows: Transportation-Related Products
-- $196 million; Architectural -- $116 million; and Other Specialty Products
-- $75 million. The remaining $13 million of the charge is included in
General Corporate Expense.
(D) Assets employed at December 31, 1994 include net assets related to the
disposition of certain operations (see "Dispositions of Operations" note).
F-21
<PAGE> 63
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Other, net:
Net realized and unrealized gains and losses from
marketable securities......................... $ 4,360 $11,550 $ 4,020
Gains from sales of TriMas common stock.......... 17,900 -- --
Interest income.................................. 5,490 9,570 9,260
Dividend income.................................. 2,880 3,150 1,750
Other, net....................................... 2,750 2,060 (5,080)
------- ------- -------
$33,380 $26,330 $ 9,950
======= ======= =======
</TABLE>
Gains and losses realized from sales of marketable securities and gains
from sales of common stock of equity affiliates are determined on a specific
identification basis at the time of sale.
INCOME TAXES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
--------- -------- -------
<S> <C> <C> <C>
Income (loss) from continuing operations before
income taxes (credit) and extraordinary income
(loss):
Domestic...................................... $(280,900) $105,470 $57,880
Foreign....................................... 16,410 15,710 10,370
--------- -------- -------
$(264,490) $121,180 $68,250
========= ======== =======
Provision for income taxes (credit):
Federal, current.............................. $ 36,660 $ 17,940 $12,750
State and local............................... 8,880 8,350 5,170
Foreign....................................... (7,850) 8,410 8,160
Deferred, principally federal................. (67,760) 15,590 3,130
--------- -------- -------
Income taxes (credit) on income (loss) from
continuing operations before
extraordinary income (loss).............. $ (30,070) $ 50,290 $29,210
========= ======== =======
</TABLE>
F-22
<PAGE> 64
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred taxes at December 31, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993
------- --------
<S> <C> <C>
Deferred tax assets:
Inventories............................................. $ 3,400 $ 8,430
Expected capital loss benefit related to businesses held
for disposition...................................... 53,000 --
Other, principally deductions reported in different
periods for financial reporting and tax purposes..... 19,260 25,780
------- --------
75,660 34,210
------- --------
Deferred tax liabilities:
Depreciation and amortization........................... 57,390 90,350
Other, principally equity in undistributed earnings of
affiliates........................................... 27,430 18,450
------- --------
84,820 108,800
------- --------
Net deferred tax liability................................ $ 9,160 $ 74,590
======= ========
</TABLE>
Net current and net non-current assets of businesses held for disposition
at December 31, 1994 include approximately $60 million of net deferred tax
assets, including an expected net capital loss carryforward benefit of
approximately $20 million. This capital loss is expected to be realized through
the sale of common stock of equity affiliates that result in capital gains, or
through the sale of businesses at a gain.
The following is a reconciliation of tax computed at the U.S. federal
statutory rate to the provision for income taxes (credit) allocated to income
(loss) from continuing operations before extraordinary income (loss):
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
U.S. federal statutory rate....................... 35% 35% 34%
Tax (credit) at U.S. federal statutory rate....... $(92,570) $42,410 $23,210
State and local taxes, net of federal tax
benefit......................................... 5,770 5,430 3,390
Higher effective foreign tax rate................. 3,380 2,910 4,670
Tax benefit on distributed foreign earnings,
net............................................. (4,200) -- --
Dividends-received deduction...................... (690) (2,290) (2,320)
Non-deductible portion of charge for disposition
of businesses................................... 54,600 -- --
Amortization in excess of tax, net................ 2,190 3,820 4,780
Other, net........................................ 1,450 (1,990) (4,520)
-------- ------- -------
Income taxes (credit) on income (loss) from
continuing operations before extraordinary
income (loss)................................ $(30,070) $50,290 $29,210
======== ======= =======
</TABLE>
F-23
<PAGE> 65
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," the following methods
were used to estimate the fair value of each class of financial instruments:
MARKETABLE SECURITIES, NOTES RECEIVABLE AND OTHER ASSETS
Fair values of financial instruments included in marketable securities,
notes receivable and other assets were estimated using various methods including
quoted market prices and discounted future cash flows based on the incremental
borrowing rates for similar types of investments. In addition, for variable-rate
notes receivable that fluctuate with the prime rate, the carrying amounts
approximate fair value.
LONG-TERM DEBT
The carrying amount of bank debt and certain other long-term debt
instruments approximate fair value as the floating rates inherent in this debt
reflect changes in overall market interest rates. The fair values of the
Company's subordinated debt instruments are based on quoted market prices. The
fair values of certain other debt instruments are estimated by discounting
future cash flows based on the Company's incremental borrowing rate for similar
types of debt instruments.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1994 1993
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash investments........................... $ 61,950 $ 61,950 $ 83,200 $ 83,200
Marketable securities, notes receivable and other
assets............................................ $101,900 $ 99,600 $ 72,650 $ 80,220
Long-term debt:
Bank debt......................................... $316,000 $316,000 $295,000 $295,000
10% Senior Subordinated Notes..................... $233,150 $233,910 $233,150 $243,640
10 1/4% Senior Subordinated Notes................. -- -- $250,000 $254,380
4 1/2% Convertible Subordinated Debentures........ $310,000 $234,050 -- --
Other long-term debt.............................. $ 9,090 $ 8,990 $ 9,120 $ 9,150
</TABLE>
DERIVATIVES
The Company has limited involvement with derivative financial instruments,
and does not use derivatives for trading purposes. The derivatives, principally
consisting of S&P 500 futures contracts, are intended to reduce the market risk
associated with the Company's marketable equity securities portfolio. The
Company's investment in futures contracts increases in value as a result of
decreases in the underlying index and decreases in value when the underlying
index increases. The contracts are financial instruments (with off balance sheet
market risk), as they are required to be settled in cash. At December 31, 1994
the notional amount of the derivatives was $33.2 million. The notional amounts
do not represent the amounts exchanged by the parties, and thus are not a
measure of the exposure of the Company through its use of derivatives. The
Company's market risk is subject to the price differential between the contract
market value and contract cost.
F-24
<PAGE> 66
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Futures contracts trade on organized exchanges, and as a result, settlement
of such contracts has little credit risk. Initial margin requirements are met in
cash or other instruments, and changes in the contract values are settled
periodically. Initial margin requirements are recorded as cash investments in
the balance sheet. Futures contracts are short-term in nature, usually less than
six months. Related gains and losses are reported as income or loss in other
income (expense) as part of marketable securities gain or loss. At December 31,
1994, based upon the current index, the Company's obligation amounted to $.3
million and is included in marketable securities.
INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE QUARTERS ENDED
----------------------------------------------
DECEMBER SEPTEMBER JUNE MARCH
31ST 30TH 30TH 31ST
--------- --------- -------- --------
<S> <C> <C> <C> <C>
1994:
Net sales.......................................... $ 440,570 $416,500 $432,780 $412,410
Gross profit....................................... $ 73,390 $ 73,440 $ 89,710 $ 80,290
Income (loss) from continuing operations before
extraordinary income (loss):
Income (loss).................................... $(305,940) $ 15,780 $ 29,440 $ 26,300
Per common and common equivalent share:
Primary....................................... $(5.46) $.21 $.39 $.34
Assuming full dilution........................ $(5.46) $.21 $.37 $.32
Net income (loss):
Income (loss).................................... $(294,240) $ 18,380 $ 29,440 $ 26,300
Income (loss) attributable to common stock....... $(297,480) $ 15,140 $ 26,200 $ 23,060
Per common and common equivalent share:
Primary....................................... $(5.25) $.25 $.39 $.34
Assuming full dilution........................ $(5.25) $.25 $.37 $.32
Market price per common share:
High............................................. $13 3/8 $15 1/4 $23 1/4 $27 7/8
Low.............................................. $11 $11 $13 $19 7/8
1993:
Net sales.......................................... $ 392,600 $373,680 $412,530 $404,070
Gross profit....................................... $ 76,440 $ 78,600 $ 85,610 $ 84,750
Income from continuing operations before
extraordinary income (loss):
Income........................................... $ 18,510 $ 15,000 $ 21,310 $ 16,070
Per common and common equivalent share:
Primary....................................... $.23 $.17 $.34 $.22
Assuming full dilution........................ $.22 $.17 $.31 $.22
Net income (loss):
Income (loss)................................. $ (6,980) $ 15,320 $ 21,740 $ 17,520
Income (loss) attributable to common stock....... $ (11,660) $ 9,900 $ 19,240 $ 15,190
Per common and common equivalent share:
Primary....................................... $(.20) $.18 $.35 $.25
Assuming full dilution........................ $(.15) $.18 $.32 $.24
Market price per common share:
High............................................. $28 1/8 $22 5/8 $21 $17 1/4
Low.............................................. $18 3/4 $19 1/2 $15 3/4 $11 3/8
</TABLE>
F-25
<PAGE> 67
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Results for the fourth quarter of 1994 include a non-cash pre-tax charge of
$400 million ($315 million after-tax or $5.56 per common share in the fourth
quarter of 1994) reflecting the anticipated loss on the disposition of certain
businesses (see "Dispositions of Operations" note).
Net income (loss) for the fourth quarter of 1994 also includes income
aggregating approximately $18 million pre-tax ($11.7 million after-tax or $.21
per common share) relating to the reversal of the charge established in the
fourth quarter of 1993 for the disposition of the Company's energy segment (see
"Dispositions of Operations" note).
Net income (loss) for the third quarter of 1994 includes $4.4 million
pre-tax of extraordinary income ($2.6 million after-tax or $.04 per common
share) related to the early extinguishment of convertible debt.
Results for the first, second and third quarters of 1994 include pre-tax
gains of approximately $9.8 million, $7.1 million and $1.0 million,
respectively, from the sale by the Company of a portion of its common stock
holdings of an equity affiliate.
The 1994 income (loss) per common share amounts for the quarters do not
total to the full year amounts due to the purchase and retirement of shares
throughout the year and a lower dilutive effect from outstanding options and
warrants on the year-to-date calculation.
Results for the second quarter of 1993 include pre-tax income of
approximately $9 million as a result of gains associated with the sale of common
stock through public offerings by equity affiliates. This income was largely
offset by costs and expenses related to cost reduction initiatives, the
restructuring of certain operations and product lines, adjustments to the
carrying value of certain long-term assets, and other costs and expenses.
Results for the third quarter of 1993 were reduced by a charge of
approximately $.04 per common share reflecting the increased 1993 federal
corporate income tax rate.
The fourth quarter of 1993 net loss includes the effect of a $5.8 million
pre-tax extraordinary loss ($3.7 million after-tax or $.06 per common share)
related to the early extinguishment of subordinated debt (see "Long-Term Debt"
note). The fourth quarter of 1993 net loss also includes an after-tax charge of
approximately $22 million ($.38 per common share) related to the disposition of
a segment of the Company's business (see "Dispositions of Operations" note).
The 1993 results include the benefit of approximately $11.5 million pre-tax
income ($6.7 million after-tax or $.12 per common share), primarily in the third
and fourth quarters, resulting from net gains from sales of marketable
securities.
The 1993 income (loss) per common share amounts for the quarters do not
total to the full year amounts due to the changes in the number of common shares
outstanding during the year and the dilutive effect of first, second and third
quarter 1993 results.
The calculation of earnings per common and common equivalent share for the
fourth quarter of 1993 results in dilution for income from continuing
operations, assuming full dilution. Therefore, the fully diluted earnings per
share computation is used for all computations, even though the result is
anti-dilutive for one of the per share amounts.
The following supplemental unaudited financial data combine the Company
with TriMas and have been presented for analytical purposes. The Company had a
common equity ownership interest in TriMas of approximately 41 percent at
December 31, 1994 and 43 percent at December 31, 1993. The
F-26
<PAGE> 68
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
interests of the other common shareholders are reflected below as "Equity of
other shareholders of TriMas." All significant intercompany transactions have
been eliminated.
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
Current assets...................................... $ 861,380 $ 799,640
Current liabilities................................. (243,260) (252,810)
----------- -----------
Working capital................................ 618,120 546,830
Property and equipment, net......................... 547,710 652,420
Excess of cost over net assets of acquired
companies......................................... 182,470 526,260
Other assets........................................ 432,850 269,460
Bank and other debt................................. (1,106,840) (1,027,250)
Deferred income taxes and other long-term
liabilities....................................... (123,170) (161,500)
Equity of other shareholders of TriMas.............. (170,000) (138,590)
----------- -----------
Equity of shareholders of MascoTech............ $ 381,140 $ 667,630
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $2,232,430 $2,022,240 $1,841,570
========== ========== ==========
Operating profit (loss).................... $ (186,450) $ 215,740 $ 170,460
========== ========== ==========
Income (loss) from continuing operations
before extraordinary income (loss)....... $ (234,420) $ 70,890 $ 39,040
========== ========== ==========
</TABLE>
F-27
<PAGE> 69
FINANCIAL STATEMENT SCHEDULE
PURSUANT TO ITEM 14(A)(2)(II)(B) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1994
Schedules, as required for the years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
II. Valuation and Qualifying Accounts................................................ F-29
</TABLE>
F-28
<PAGE> 70
MASCOTECH, INC.
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------- ----------- --------------------------- ---------- -------------
ADDITIONS
---------------------------
CHARGED
BALANCE AT CHARGED (CREDITED)
BEGINNING TO COSTS TO OTHER BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- -------------------------------- ----------- ------------ ----------- ---------- -------------
(A) (B)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
deducted from accounts
receivable in the balance
sheet:
1994.......................... $ 5,130,000 $3,480,000 $(4,310,000) $2,710,000 $ 1,590,000
=========== ========== =========== ========== ===========
1993.......................... $ 7,190,000 $2,470,000 $(1,820,000) $2,710,000 $ 5,130,000
=========== ========== =========== ========== ===========
1992.......................... $ 7,810,000 $3,040,000 -- $3,660,000 $ 7,190,000
=========== ========== =========== ========== ===========
</TABLE>
NOTES:
(A) Allowance of companies reclassified for businesses held for disposition in
1994, and for discontinuance of Energy-related segment in 1993.
(B) Deductions, representing uncollectible accounts written off, less
recoveries of accounts written off in prior years.
F-29
<PAGE> 71
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------ ------------
<S> <C> <C>
3.i Restated Certificate of Incorporation of Masco Corporation and
amendments thereto.
4.d Agreement of Appointment and Acceptance of Successor Trustee dated as of
August 4, 1994 among MascoTech, Inc., Morgan Guaranty Trust Company of
New York and The First National Bank of Chicago and Supplemental
Indenture dated as of August 5, 1994 among MascoTech, Inc. and The First
National Bank of Chicago.
4.e First Amendment dated June 29, 1994 and Second Amendment dated December
21, 1994 to Credit Agreement dated as of September 2, 1993 by and among
MascoTech, Inc., the banks party thereto, and NBD Bank, N.A. (now known
as NBD Bank), as Agent, and Comerica Bank, The Bank of New York, The
First National Bank of Chicago, Morgan Guaranty Trust Company of New
York and NationsBank of North Carolina, N.A., as Co-Agents.
10.h Masco Corporation 1984 Restricted Stock (Industries) Incentive Plan
(Restated September 14, 1993).
10.i Masco Corporation 1984 Stock Option Plan (Restated September 14, 1993).
10.j Masco Corporation Restricted Stock Incentive Plan (Restated September
14, 1993).
10.n Masco Corporation Supplemental Executive Retirement and Disability Plan.
10.o Masco Corporation Benefits Restoration Plan.
11 Computation of Primary and Fully Diluted Per Share Earnings.
12 Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries.
23.a Consent of Coopers & Lybrand L.L.P. relating to Masco Corporation's
Financial Statements and Financial Statement Schedule.
23.b Consent of Coopers & Lybrand L.L.P. relating to MascoTech, Inc.'s
Financial Statements and Financial Statement Schedule.
27 Financial Data Schedule.
</TABLE>
RESTATED CERTIFICATE OF INCORPORATION
OF
MASCO CORPORATION
* * * * *
MASCO CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the corporation is MASCO CORPORATION.
The date of filing its original Certificate of Incorporation
with the Secretary of State was June 15, 1962.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as
amended or supplemented heretofore is hereby restated without
further amendments or changes to read as herein set forth in
full:
FIRST: The name of the corporation is
MASCO CORPORATION.
SECOND: Its registered office in the State of Delaware is located at the
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name and address of its registered agent is The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The nature of the business, or objects or purposes to be
transacted, promoted or carried on are: To engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
<PAGE>
FOURTH: The total number of shares of stock the Corporation shall have
authority to issue is four hundred one million (401,000,000) shares.
Four hundred million (400,000,000) of such shares shall consist of common
shares, par value one dollar ($1.00) per share, and one million (1,000,000) of
such shares shall consist of preferred shares, par value one dollar ($1.00) per
share.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:
A. Each share of common stock shall be equal in all respects to all
other shares of such stock, and each share of outstanding common stock is
entitled to one vote.
B. Each share of preferred stock shall have or not have voting
rights as determined by the Board of Directors prior to issuance.
Dividends on all outstanding shares of preferred stock must be
declared and paid, or set aside for payment, before any dividends can be
declared and paid, or set aside for payment, on the shares of common stock
with respect to the same dividend period.
In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the holders
of the preferred stock shall be entitled, before any assets of the
Corporation shall be distributed among or paid over to the holders of the
common stock, to an amount per share to be determined before issuance by
the Board of Directors, together with a sum of money equivalent to the
amount of any dividends declared thereon and remaining unpaid at the date
of such liquidation, dissolution or winding up of the Corporation. After
the making of such payments to the holders of the preferred stock, the
remaining assets of the Corporation shall be distributed among the holders
of the common stock alone, according to the number of shares held by each.
If, upon such liquidation, dissolution or winding up, the assets of the
Corporation distributable as aforesaid among the holders of the preferred
stock shall be insufficient to permit the payment to them of said amount,
the entire assets shall be distributed ratably among the holders of the
preferred stock.
The Board of Directors shall have authority to divide the shares of
preferred stock into series and fix, from time to time, before issuance,
the number of shares to be included in any series and the designation,
relative rights, preferences and limitations of all shares of such series.
The authority
2
<PAGE>
of the Board of Directors with respect to each series shall include the
determination of any or all of the following, and the shares of each
series may vary from the shares of any other in the following respects:
(a) the number of shares constituting such series and the designation
thereof to distinguish the shares of such series from the shares of all
other series; (b) the rate of dividend, cumulative or noncumulative, and
the extent of further participation in dividend distribution, if any; (c)
the prices at which issued (at not less than par) and the terms and
conditions upon which the shares may be redeemable by the Corporation; (d)
sinking fund provisions for the redemption or purchase of shares; (e) the
voting rights; and (f) the terms and conditions upon which the shares are
convertible into other classes of stock of the Corporation, if such shares
are to be convertible.
C. No holder of any class of stock issued by this Corporation shall
be entitled to pre-emptive rights.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
SEVENTH: (a) The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less than
five nor more than twelve directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the 1988 Annual
Meeting of stockholders, Class I directors shall be elected for a one-year term,
Class II directors for a two-year term and Class III directors for a three-year
term. At each succeeding Annual Meeting of stockholders beginning in 1989,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement or removal from office. Except as otherwise
required by law, any vacancy on the Board of Directors that results from an
increase in the number of directors
3
<PAGE>
shall be filled only by a majority of the Board of Directors then in office,
provided that a quorum is present, and any other vacancy occurring in the Board
of Directors shall be filled only by a majority of the directors then in office,
even if less than a quorum, or by a sole remaining director. Any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall serve for the remaining term of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock or any other class of stock issued by the
Corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of the Certificate of Designation with respect to such
stock, such directors so elected shall not be divided into classes pursuant to
this Article SEVENTH, and the number of such directors shall not be counted in
determining the maximum number of directors permitted under the foregoing
provisions of this Article SEVENTH, in each case unless expressly provided by
such terms.
(b) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote in the election of directors.
Any stockholder entitled to vote in the election of directors, however, may
nominate one or more persons for election as director only if written notice of
such stock- holder's intent to make such nomination or nominations has been
given either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the Corporation not later than (i) with respect to an election
to be held at an Annual Meeting of stockholders, 45 days in advance of the date
on which the Corporation's proxy statement was released to stockholders in
connection with the previous year's Annual Meeting of stockholders and (ii) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the seventh day following the
day on which notice of such meeting is first given to stockholders. Each such
notice shall include: (A) the name and address of the stockholder who intends
to make the nomination or nominations and of the person or persons to be
nominated; (B) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (C) a description of all arrangements or understandings between
such stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations is or are to
be made by the stockholder; (D) such other information regarding each nominee
proposed by such stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission if the nominee had been nominated by the Board of
4
<PAGE>
Directors; and (E) the written consent of each nominee to serve as a director of
the Corporation if elected. The chairman of any meeting of stockholders may
refuse to acknowledge the nomination of any person if not made in compliance
with the foregoing procedure.
(c) Notwithstanding any other provision of this Certificate of
Incorporation or the by-laws (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
by-laws), and in addition to any affirmative vote required by law, the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding capital stock of the Corporation entitled to vote, voting together
as a single class, shall be required to amend, adopt in this Certificate of
Incorporation or in the by-laws any provision inconsistent with, or repeal this
Article SEVENTH.
EIGHTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by any such
holders. Except as otherwise required by law, special meetings of stockholders
of the Corporation may be called only by the Chairman of the Board, the
President or a majority of the Board of Directors, subject to the rights of
holders of any one or more classes or series of preferred stock or any other
class of stock issued by the Corporation which shall have the right, voting
separately by class or series, to elect directors. Notwithstanding any other
provision of this Certificate of Incorporation or the by-laws (and
notwithstanding that a lesser percentage may be specified by law, this
Certificate of Incorporation or the by-laws), and in addition to any affirmative
vote required by law, the affirmative vote of the holders of at least 80% of the
voting power of the outstanding capital stock of the Corporation entitled to
vote, voting together as a single class, shall be required to amend, adopt in
this Certificate of Incorporation or in the by-laws any provision inconsistent
with, or repeal this Article EIGHTH.
NINTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the real
and personal property of the Corporation.
To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
5
<PAGE>
By resolution passed by a majority of the whole board, to designate one or
more committees, each committee to consist of two or more of the Directors of
the Corporation, which, to the extent provided in the resolution or in the
by-laws of the Corporation, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be stated in the by-laws of the Corporation or as may be determined from
time to time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called for that purpose, to sell, lease or exchange
all of the property and assets of the Corporation, including its good will and
its corporate franchises, upon such terms and conditions and for such
consideration, which may be in whole or in part shares of stock in, and/or other
securities of, any other corporation or corporations, as its Board of Directors
shall deem expedient and for the best interests of the Corporation.
TENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
ELEVENTH: Meetings of stockholders may be held outside the State of
Delaware, if the by-laws so provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in
6
<PAGE>
the by-laws of the Corporation. Elections of Directors need not be by ballot
unless the by-laws of the Corporation shall so provide.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
THIRTEENTH: 1. The affirmative vote of the holders of 95% of all shares
of stock of the Corporation entitled to vote in elections of directors,
considered for the purposes of this Article THIRTEENTH as one class, shall be
required for the adoption or authorization of a business combination (as
hereinafter defined) with any other entity (as hereinafter defined) if, as of
the record date for the determination of stockholders entitled to notice thereof
and to vote thereon, such other entity is the beneficial owner, directly or
indirectly, of 30% or more of the outstanding shares of stock of the Corporation
entitled to vote in elections of directors considered for the purposes of this
Article THIRTEENTH as one class; provided that such 95% voting requirement shall
not be applicable if:
(a) The cash, or fair market value of other consideration, to be received
per share by common stockholders of the Corporation in such business combination
bears the same or a greater percentage relationship to the market price of the
Corporation's common stock immediately prior to the announcement of such
business combination as the highest per share price (including brokerage
commissions and soliciting dealers' fees) which such other entity has
theretofore paid for any of the shares of the Corporation's common stock already
owned by it bears to the market price of the common stock of the Corporation
immediately prior to the commencement of acquisition of the Corporation's common
stock by such other entity;
(b) The cash, or fair market value of other consideration, to be received
per share by common stockholders of the Corporation in such business combination
(i) is not less than the highest per share price (including brokerage
commissions and soliciting dealers' fees) paid by such other entity in acquiring
any of its holdings of the Corporation's common stock, and (ii) is not less than
the earnings per share of common stock of the Corporation for the four full
consecutive fiscal quarters immediately preceding the record date for
solicitation of votes on such business combination, multiplied by the then
price/earnings multiple (if any) of such other entity as customarily computed
and reported in the financial community;
(c) After such other entity has acquired a 30% interest and prior to the
consummation of such business combination: (i) such other entity shall have
taken steps to ensure that the Corporation's Board of Directors included at all
times representation by
7
<PAGE>
continuing director(s) (as hereinafter defined) proportionate to the
stockholdings of the Corporation's public common stockholders not affiliated
with such other entity (with a continuing director to occupy any resulting
fractional board position); (ii) there shall have been no reduction in the rate
of dividends payable on the Corporation's common stock except as necessary to
insure that a quarterly dividend payment does not exceed 5% of the net income of
the Corporation for the four full consecutive fiscal quarters immediately
preceding the declaration date of such dividend, or except as may have been
approved by a unanimous vote of the directors; (iii) such other entity shall not
have acquired any newly issued shares of stock, directly or indirectly, from the
Corporation (except upon conversion of convertible securities acquired by it
prior to obtaining a 30% interest or as a result of a pro rata stock dividend or
stock split); and (iv) such other entity shall not have acquired any additional
shares of the Corporation's outstanding common stock or securities convertible
into common stock except as a part of the transaction which results in such
other entity acquiring its 30% interest;
(d) Such other entity shall not have (i) received the benefit, directly or
indirectly (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial assis- tance or tax credits of or
provided by the Corporation, or (ii) made any major change in the Corporation's
business or equity capital structure without the unanimous approval of the
directors, in either case prior to the consummation of such business
combination; and
(e) A proxy statement responsive to the requirements of the United States
securities laws shall be mailed to all common stock- holders of the Corporation
for the purpose of soliciting stock- holder approval of such business
combination and shall contain on its first page thereof, in a prominent place,
any recommendations as to the advisability (or inadvisability) of the business
combination which the continuing directors, or any of them, may choose to state
and, if deemed advisable by a majority of the continuing directors, an opinion
of a reputable investment banking firm as to the fairness (or not) of the terms
of such business combination, from the point of view of the remaining public
stockholders of the Corporation (such investment banking firm to be selected by
a majority of the continuing directors and to be paid a reasonable fee for their
services by the Corporation upon receipt of such opinion).
The provisions of this Article THIRTEENTH shall also apply to a business
combination with any other entity which at any time has been the beneficial
owner, directly or indirectly, of 30% or more of the outstanding shares of stock
of the Corporation entitled to vote in elections of directors considered for the
purposes of this Article THIRTEENTH as one class, notwithstanding the fact that
such other entity has reduced its shareholdings below 30% if, as of the
8
<PAGE>
record date for the determination of stockholders entitled to notice of and to
vote on to the business combination, such other entity is an "affiliate" of the
Corporation (as hereinafter defined).
2. As used in this Article THIRTEENTH, (a) the term "other entity" shall
include any corporation, person or other entity and any other entity with which
it or its "affiliate" or "associate" (as defined below) has any agreement,
arrangement or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of stock of the Corporation, or which is
its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934 as in
effect on March 31, 1981, together with the successors and assigns of such
persons in any transaction or series of transactions not involving a public
offering of the Corpora- tion's stock within the meaning of the Securities Act
of 1933; (b) an other entity shall be deemed to be the beneficial owner of any
shares of stock of the Corporation which the other entity (as defined above) has
the right to acquire pursuant to any agreement, arrangement or understanding or
upon exercise of conversion rights, warrants or options, or otherwise; (c) the
outstanding shares of any class of stock of the Corporation shall include shares
deemed owned through application of clause (b) above but shall not include any
other shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights, warrants or options, or otherwise; (d) the term "business
combination" shall include any merger or consolidation of the Corporation with
or into any other entity, or the sale or lease of all or any substantial part of
the assets of the Corporation to, or any sale or lease to the Corporation or any
subsidiary thereof in exchange for securities of the Corporation of any assets
(except assets having an aggregate fair market value of less than $5,000,000) of
any other entity; (e) the term "continuing director" shall mean a person who was
a member of the Board of Directors of the Corporation elected by stockholders
prior to the time that such other entity acquired in excess of 10% of the stock
of the Corporation entitled to vote in the election of directors, or a person
recommended to succeed a continuing director by a majority of continuing
directors; and (f) for the purposes of subparagraphs l(a) and (b) of this
Article THIRTEENTH the term "other consideration to be received" shall mean, in
addition to other consideration received, if any, capital stock of the
Corporation retained by its existing public stockholders in the event of a
business combination with such other entity in which the Corporation is the
surviving corporation.
3. A majority of the continuing directors shall have the power and duty
to determine for the purposes of this Article THIRTEENTH on the basis of
information known to them whether (a) such other entity beneficially owns 30% or
more of the outstanding shares of stock of the Corporation entitled to vote in
elections of directors; (b) an other entity is an "affiliate" or "associate" (as
9
<PAGE>
defined above) of another; (c) an other entity has an agreement, arrangement or
understanding with another; or (d) the assets being acquired by the Corporation,
or any subsidiary thereof, have an aggregate fair market value of less than
$5,000,000.
4. No amendment to the Certificate of Incorporation of the Corporation
shall amend or repeal any of the provisions of this Article THIRTEENTH, unless
the amendment effecting such amendment or repeal shall receive the affirmative
vote of the holders of 95% of all shares of stock of the corporation entitled to
vote in elections of directors, considered for the purposes of this Article
THIRTEENTH as one class; provided that this paragraph 4 shall not apply to, and
such 95% vote shall not be required for, any amendment or repeal unanimously
recommended to the stockholders by the Board of Directors of the Corporation if
all of such directors are persons who would be eligible to serve as "continuing
directors" within the meaning of paragraph 2 of this Article THIRTEENTH.
5. Nothing contained in this Article THIRTEENTH shall be construed to
relieve any other entity from any fiduciary obligation imposed by law.
FOURTEENTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the Delaware General
Corporation Law, or (d) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to authorize the further limitation or elimination of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on liability provided herein, shall be limited to the fullest
extent permitted by the Delaware General Corporation Law, as amended. Any
repeal or modification of this Article FOURTEENTH shall not increase the
liability of any director of this Corporation for any act or occurrence taking
place prior to such repeal or modification, or otherwise adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
FIFTEENTH: 1. Each person who was or is made a party or is threatened to
be made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer or employee of the Corporation,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer or employee or in any other capacity while serving as a
director, officer, or employee, shall be indemnified
10
<PAGE>
and held harmless by the Corporation to the fullest extent permitted by the
Delaware General Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including, without limitation, attorneys' fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by such person in connection therewith, and such indemnification shall continue
as to a person who has ceased to be a director, officer or employee and shall
inure to the benefit of such person's heirs, executors and administrators. The
Corporation shall indemnify a director, officer or employee in connection with
an action, suit or proceeding (other than an action, suit or proceeding to
enforce indemnification rights provided for herein or elsewhere) initiated by
such director, officer or employee only if such action, suit or proceeding was
authorized by the Board of Directors. The right to indemnification conferred in
this Paragraph 1 shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any action, suit or
proceeding in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses incurred
by a director or officer in such person's capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person) in
advance of the final disposition of an action, suit or proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such director or officer is not entitled to be indemnified for such
expenses under this Article FIFTEENTH or otherwise.
2. The Corporation may, to the extent authorized from time to time by the
Board of Directors, provide indemnification and the advancement of expenses, to
any agent of the Corporation and to any person (other than directors, officers
and employees of the Corpo- ration, who shall be entitled to indemnification
under Paragraph 1 above) who is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, to such extent and to
such effect as the Board of Directors shall determine to be appropriate and
permitted by applicable law, as the same exists or may hereafter be amended.
3. The rights to indemnification and to the advancement of expenses
conferred in this Article FIFTEENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation or by-laws of the Corporation, agreement, vote
of stockholders or disinterested directors or otherwise.
11
<PAGE>
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with Section 245 of the General Corporation Law
of Delaware.
IN WITNESS WHEREOF, said MASCO CORPORATION has caused its
corporate seal to be affixed and this Certificate to be signed by Richard A.
Manoogian, its Chairman of the Board, and attested by Gerald Bright, its
Secretary, this 25th day of May, 1988.
MASCO CORPORATION
BY/s/ Richard A. Manoogian
Richard A. Manoogian
Chairman of the Board
ATTEST:
/s/ Gerald Bright
Gerald Bright
Secretary
12
<PAGE>
STATE OF MICHIGAN )
)
COUNTY OF WAYNE )
I, , a notary public, do hereby certify
that on this 25th day of May, 1988, personally appeared before me Richard A.
Manoogian, who, being by me first duly sworn, declared that he is the Chairman
of the Board of Masco Corporation, that he signed the foregoing document as the
act and deed of said corporation, and that the statements therein contained are
true.
/s/ Terry Lynn Przybylo
Notary Public
Wayne County, Michigan
My commission expires:
13
<PAGE>
CERTIFICATE OF MERGER
OF
WASTE KING, INC.
INTO
MASCO CORPORATION
Masco Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "GCL"),
certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations is as follows:
State of
Name Incorporation
Masco Corporation ("Masco") Delaware
Waste King, Inc. ("Waste King") Delaware
SECOND: An Agreement of Merger between Masco and Waste King with respect
to the merger of Waste King into Masco (the "Merger"), has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with Section 251 of the GCL.
THIRD: That the name of the surviving corporation of the Merger is Masco
Corporation, a Delaware corporation.
FOURTH: That the Restated Certificate of Incorporation of Masco, which is
the surviving corporation, shall continue in full force and effect as the
Restated Certificate of Incorporation of the surviving corporation.
FIFTH: The executed Agreement is on file at the principal place of
business of the surviving corporation, 21001 Van Born Road, Taylor, Michigan
48180.
SIXTH: A copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of the constituent
corporations.
SEVENTH: This Certificate of Merger shall be effective as of January 1,
1993.
MASCO CORPORATION
By/s/ Richard G. Mosteller
Richard G. Mosteller
Senior Vice President - Finance
ATTEST:
By/s/ Gerald Bright
Gerald Bright
Secretary
<PAGE>
AGREEMENT OF APPOINTMENT
AND
ACCEPTANCE OF SUCCESSOR TRUSTEE
THIS AGREEMENT dated as of August 4, 1994 (the "Agreement"), is among
MascoTech, Inc. (the "Company"), Morgan Guaranty Trust Company of New York
("Morgan") and The First National Bank of Chicago ("First Chicago").
WHEREAS, Section 8.10 of the Indenture dated as of November 1, 1986
between the Company and Morgan (the "Indenture") provides that the Trustee
thereunder may resign at any time by giving written notice of such resignation
to the Company;
WHEREAS, Morgan gave such written notice, dated July 11, 1994, to the
Company;
WHEREAS, Section 8.10 of the Indenture provides that in case the Trustee
shall resign, the Company shall promptly appoint a successor Trustee thereunder;
WHEREAS, the Company's Board of Directors authorized the appointment of
First Chicago as successor Trustee under the Indenture; and
WHEREAS, Section 8.11 of the Indenture provides that any successor Trustee
appointed thereunder shall execute, acknowledge and deliver to the Company and
the resigning Trustee thereunder an instrument accepting such appointment, and
thereupon the resignation of such resigning Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts, immunities, duties and
obligations of the resigning Trustee thereunder, with like effect as if origi-
nally named as Trustee therein.
NOW THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for and in consider-
ation of the premises and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company, Morgan and First
Chicago hereby covenant and agree as follows:
1. The Company hereby accepts the resignation of Morgan as Trustee
under the Indenture, such resignation to become effective at the close of
business on the date hereof. From the close of business on the date hereof and
except as otherwise provided for herein, Morgan shall have no further responsi-
bility for the exercise of the rights and powers or for the performance of the
trusts and duties vested in the Trustee under the Indenture.
<PAGE>
2. Pursuant to Section 8.10 of the Indenture, and in accordance with
the resolutions duly adopted by the Company's Board of Directors, the Company
hereby confirms its appointment of First Chicago as successor Trustee under the
Indenture, effective as of the close of business on the date hereof, and hereby
vests in First Chicago all the rights, powers, trusts, immunities, duties and
obligations which Morgan now holds under and by virtue of the Indenture with
like effect as if originally named as Trustee in the Indenture.
3. First Chicago hereby represents that it is qualified and eligible
under Article Eight of the Indenture and under the Trust Indenture Act of 1939,
as amended, to accept appointment as successor Trustee under the Indenture.
4. First Chicago hereby accepts, as of the close of business on the
date hereof, its appointment as successor Trustee under the Indenture and
assumes the rights, powers, trusts, immunities, duties and obligations which
Morgan now holds under and by virtue of the Indenture, upon the terms and
conditions set forth therein.
5. In accordance with Section 8.11 of the Indenture, Morgan hereby
confirms, assigns, transfers and sets over to First Chicago, as successor
Trustee under the Indenture, all rights, powers, trusts, immunities, duties and
obligations which Morgan now holds under and by virtue of the Indenture, and
does hereby assign, transfer and deliver to First Chicago, as such Trustee, all
property and money held by Morgan as Trustee under the Indenture.
6. In accordance with Section 8.11 of the Indenture, the Company and
Morgan, for the purpose of more fully and certainly vesting in and confirming to
First Chicago, as successor Trustee under the Indenture, the rights, powers,
trusts, immunities, duties and obligations of such Trustee with like effect as
if originally named as Trustee in the Indenture, agree upon reasonable request
of First Chicago to execute, acknowledge and deliver such further instruments of
conveyance and further assurance and to do such other things as may be reason-
ably required for more fully and certainly vesting and confirming in First
Chicago all rights, powers, trusts, immunities, duties and obligations which
Morgan now holds under and by virtue of the Indenture.
7. Promptly after the execution hereof, Morgan shall mail the notice of
the resignation of Morgan and the succession of First Chicago as successor
Trustee in accordance with Sections 8.10 and 8.11 of the Indenture. Such notice
shall be in the form attached hereto as Exhibit A.
2
<PAGE>
8. This Agreement may be executed in any number of counterparts all of
which taken together shall constitute one and the same Agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
9. This Agreement shall be governed by the laws of the State of New
York, both in interpretation and performance.
10. Unless otherwise defined, all terms used herein with initial capital
letters shall have the meaning given them in the Indenture.
11. Morgan hereby represents and warrants to First Chicago that: (a) no
covenant or condition contained in the Indenture has been waived by Morgan or,
to the best of the knowledge of the officers assigned to Morgan's Corporate
Trust Department, by the Holders of the percentage in aggregate principal amount
of the Securities required by the Indenture to effect any such waiver; (b) there
is no action, suit or proceeding pending or, to the best of the knowledge of the
officers assigned to Morgan's Corporate Trust Department, threatened against
Morgan before any court or any governmental authority arising out of any action
or omission by Morgan as Trustee under the Indenture; (c) to the best of the
knowledge of the officers assigned to Morgan's Corporate Trust Department, no
Event of Default, or event which, with the giving of notice or passage of time
or both, would become an Event of Default, has occurred and is continuing; and
(d) Morgan has furnished, or as promptly as practicable will furnish, to First
Chicago originals of all documents relating to the trust created by the Inden-
ture and all material information in its possession relating to the administra-
tion and status thereof and will furnish to First Chicago any of such documents
or information First Chicago may reasonably request, provided that First Chicago
will make available to Morgan as promptly as practicable following the request
of Morgan any such original documents which Morgan may need to defend against
any action, suit or proceeding against Morgan as Trustee or which Morgan may
need for any other proper purpose.
12. The Company hereby represents and warrants to First Chicago and
Morgan that no Event of Default, or event which, with the giving of notice or
passage of time or both, would become an Event of Default, has occurred and is
continuing.
13. Except as hereinabove expressly set forth, all other terms and
provisions set forth in the Indenture shall remain in full force and effect and
without any change whatsoever being made hereby.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and acknowledged as of the date first written above.
MASCOTECH, INC.
By:/s/ Timothy Wadhams
Name: Timothy Wadhams
Title: Vice President
[Seal]
Attest:
/s/ Eugene A. Gargaro, Jr.
Secretary
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as resigning
Trustee
By:/s/ Michael Culhane
Name: Michael Culhane
Title: Vice President
[Seal]
Attest:
/s/ M. E. McNulty
Assistant Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, as successor Trustee
By:/s/ R. D. Manella
Name: R. D. Manella
Title: Vice President
[Seal]
Attest:
/s/ T. Marshall
Trust Officer
4
<PAGE>
State of Michigan)
) ss
County of Wayne)
On the 2nd day of August, 1994, before me personally came Timothy Wadhams,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of MascoTech, Inc., the corporation described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
/s/ Nancy S. Steinrock
Notary Public
Wayne County, Michigan
My Comm. Exp.: Nov. 9, 1994
[NOTARIAL SEAL]
State of New York)
) ss
County of New York)
On the 2nd day of August, 1994, before me personally came Michael Culhane,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of Morgan Guaranty Trust Company of New York, the corporation de-
scribed in and which executed the above instrument; that he knows the corporate
seal of said corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
/s/ Thomas J. Courtney
Notary Public
State of New York
No. 24-4996233
Qualified in Kings County
My Comm. Exp.: May 11, 1996
[NOTARIAL SEAL]
5
<PAGE>
State of Illinois)
) ss
County of Cook )
On the 3rd day of August, 1994, before me personally came R. D. Manella,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of First Chicago, the corporation described in and which executed the
above instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
/s/ Nancy Lopez
Notary Public
State of Illinois
My Comm. Exp.: May 21, 1997
[NOTARIAL SEAL]
6
<PAGE>
Exhibit A
NOTICE OF RESIGNATION OF TRUSTEE
AND
APPOINTMENT OF SUCCESSOR TRUSTEE
To the Holders of the MascoTech, Inc. 4 1/2% Convertible Subordinated
Debentures Due 2003:
NOTICE IS HEREBY GIVEN THAT, pursuant to Sections 8.10 and 8.11 of the
Indenture (the "Indenture") dated as of November 1, 1986 between MascoTech, Inc.
(formerly Masco Industries, Inc.) (the "Company") and Morgan Guaranty Trust
Company of New York ("Morgan Guaranty"), under which the above-referenced
Securities were issued:
1. Morgan Guaranty has resigned as Trustee under the Indenture.
2. The Company has appointed The First National Bank of Chicago ("First
Chicago") as successor Trustee under the Indenture, and First Chicago has
accepted such appointment.
3. The following is the office or agency of the Company where securities
issued under the Indenture may be presented for payment, or presented for
registration of transfer and for exchange as provided in the Indenture and
where notices and demands to or upon the Company in respect of any of the
Securities issued under the Indenture or the Indenture may be served:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
14 Wall Street, 8th Floor
New York, New York 10005
Attention: Corporate Trust Administration
Dated: August 5, 1994
MASCOTECH, INC. MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
<PAGE>
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE, dated as of August 5, 1994, between MascoTec-
h, Inc., a Delaware corporation (the "Company"), and The First National Bank of
Chicago, as trustee (the "Trustee").
WHEREAS, the Company entered into an Indenture dated as of November 1,
1986 with Morgan Guaranty Trust Company (the "Indenture");
WHEREAS, the Trustee is the successor trustee under the Indenture; and
WHEREAS, Section 11.01(g) the Indenture provides for supplemental
indentures to make changes, provided such action does not adversely affect the
interests of the holders of the Securities.
NOW, THEREFORE, the parties agree as follows:
1. Section 8.10 of the Indenture shall be amended by inserting the
following as a new subparagraph (e):
"(e) Notwithstanding the provisions of Section 8.12, in
connection with any sale or proposed sale of all or any portion of
the corporate trust business of any Trustee hereunder or any other
transaction that would result in a change of control of such corpo-
rate trust business, and provided that no Event of Default exists,
the Company may remove the Trustee and appoint a successor trustee
by written instrument, in duplicate, executed by order of the Board
of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee. Any
removal of the Trustee and appointment of a successor trustee
pursuant to the foregoing shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 8.11."
2. Except as hereinabove expressly set forth, all other terms and
provisions set forth in the Indenture shall remain in full force and effect and
without any change whatsoever being made hereby.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to
be executed and acknowledged as of the date first written above.
MASCOTECH, INC.
By:/s/ Timothy Wadhams
Timothy Wadhams
Vice President
[Seal]
Attest:
/s/ Eugene A. Gargaro, Jr.
Secretary
THE FIRST NATIONAL BANK
OF CHICAGO
By:/s/ R. D. Manella
R. D. Manella
Vice President
[Seal]
Attest:
/s/ T. Marshall
State of Michigan)
) ss
County of Wayne)
On the 2nd day of August, 1994, before me personally came Timothy Wadhams,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of MascoTech, Inc., the corporation described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
/s/ Nancy S. Steinrock
Notary Public
Wayne County, Michigan
My Comm. Exp.: Nov. 9, 1994
[NOTARIAL SEAL]
2
<PAGE>
State of Illinois)
) ss
County of Cook )
On the 3rd day of August, 1994, before me personally came R. D. Manella,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of The First National Bank of Chicago, the corporation described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ Nancy Lopez
Notary Public
State of Illinois
My Comm. Exp.: May 21, 1997
[NOTARIAL SEAL]
3
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of June 29, 1994 (this
"Amendment") is by and among MASCOTECH, INC., a Delaware corporation, the Banks,
NBD BANK, N.A., a national banking association, as Agent for the Banks, and
COMERICA BANK, a Michigan banking association, THE BANK OF NEW YORK, a New York
banking corporation, THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking
association, and NATIONSBANK OF NORTH CAROLINA, N.A., a national banking
association, as Co-Agents.
RECITALS
A. The Company, the Banks, the Agent and the Co-Agents are parties to a
Credit Agreement dated as of September 2, 1993. Capitalized terms used but not
defined in this Amendment shall have the respective meanings ascribed thereto in
such Agreement.
B. The Company, the Banks, the Agent and the Co-Agents are willing to
amend the Agreement as set forth herein.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties hereby agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Agreement shall be amended as follows:
1.1 Recital B of the Agreement is amended by deleting the second
sentence thereof.
1.2 Section 1.1 is hereby amended as follows:
(a) The definition of "Applicable Margin" is amended by adding the
following new paragraph to the end of such definition:
Notwithstanding anything in this definition of "Applicable Margin"
to the contrary, if the Company has an Investment Grade Senior Debt
Rating at any time, including at any time prior to the end of an
Application Period, the Applicable Margin shall change on the date
such Investment Grade Senior Debt Rating is effective such that the
Applicable Margin is (i) 0.45% at any time Level II Status is in
effect, or (ii) 0.375% at any time Level I Status is in effect.
(b) The definition of "Available Masco Corporation Funding
Commitment" is restated in its entirety as follows:
<PAGE>
"Available Masco Corporation Funding Commitment" means, as of any date,
any unused and available amount of the "Commitment" of Masco Corporation
under, and as defined in, the Securities Purchase Agreement, provided
that such amount for purposes of this definition shall not exceed
$100,000,000.
(c) The following definitions are added in appropriate
alphabetical order:
"Investment Grade Senior Debt Rating" means, at any date, that the
senior unsecured unenhanced long term debt of the Company is rated
BBB- or better by S&P and Baa3 or better by Moody's, regardless of
whether the Company has any such debt outstanding.
"Level I Status" means, at any date, that the senior unsecured
unenhanced long term debt of the Company is rated BBB or better by
S&P and Baa2 or better by Moody's, regardless of whether the Company
has any such debt outstanding.
"Level II Status" means, at any date, that the senior unsecured
unenhanced long term debt of the Company is rated BBB- or better by
S&P and Baa3 or better by Moody's and Level I status does not exist,
regardless of whether the Company has any such debt outstanding.
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto. Any rating or change in rating given by Moody's shall be
deemed effective, and in effect, when publicly announced by Moody's.
"S&P" means Standard & Poor's Corporation or any successor thereto.
Any rating or change in rating given by S&P shall be deemed
effective, and in effect, when publicly announced by S&P.
(d) The definition of "Scheduled Expiration Date" is restated
in its entirety as follows:
"Scheduled Expiration Date" means July 31, 1998; provided that if
and only if, the requirements of Section 3.10 are satisfied, the
"Scheduled Expiration Date" shall be extended to June 29, 1999.
(e) The definition of "Securities Purchase Agreement" is restated
in its entirety as follows:
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of March 31, 1993 between the Company and Masco
Corporation, as in effect on the Closing Date in the form attached
hereto as Exhibit J,
2
<PAGE>
and as heretofore or hereafter amended, supplemented or otherwise
modified from time to time. Nothing in this Agreement shall
prohibit the Company and Masco Corporation from amending or
terminating such Securities Purchase Agreement, provided that at the
time of such amendment or termination, and immediately after giving
effect thereto, no Default exists or would exist.
(f) The definition of "Subordinated Debt" is amended by (i)
deleting clauses (b) and (c) thereof, (ii) redesignating clauses (d) and (e)
thereof as clauses (c) and (d), respectively, (iii) adding the following new
clause (b) immediately after the end of clause (a): "(b) Debt evidenced by the
Company's 4-1/2% Convertible Subordinated Debentures due 2003, in the original
principal amount of $345,000,000;", and (iv) in the provision beginning
"provided further, however," of such definition, deleting (A) the word
"respective" and (B) the references to "clauses (b), (c) and (d)" and "clauses
(c) and (d)" and substituting "clauses (b) and (c)" and "clause (c)",
respectively, in place thereof.
(g) The definition of "Tangible Capital Funds" is amended by deleting
the reference therein to "July 31, 1998" and substituting "the
Scheduled Expiration Date" in place thereof.
1.3 Section 1.3 is hereby amended by adding the following to the
end of such Section:
"Except as provided in the definition of Eurodollar Rate Interest
Period, if any payment, report, financial statement, notice or other
obligation is due hereunder on a day which is not a Business Day,
then the due date thereof shall be extended to the next Business
Day."
1.4 Section 3.4(a) is hereby restated in its entirety as follows:
(a) The Bid-Option. In addition to Syndicated
Borrowings that are made pursuant to Section 3.1,
the Company may, as set forth in this Section,
from time to time after the Closing Date to but
excluding the Termination Date request the Banks
to offer to make Bid-Option Loans to the Company.
Each Bank may, but shall have no obligation to,
make such offers; furthermore, each Bank may limit
the aggregate amount of Bid-Option Loans when
quoting rates for more than one Bid-Option
Interest Period in any Bid-Option Quote, provided
that
3
<PAGE>
such limitation shall not be less than the minimum
amounts required hereunder for Bid-Option Loans and
the Company may choose among the Bid-Option Loans
if such limitation is imposed. The Company may, but
shall have no obligation to, accept any such offers,
in the manner set forth in this Section; provided
that the Dollar Equivalent of the aggregate
outstanding principal amount of Bid-Option Loans
shall not at any time exceed the lesser of (i) the
excess of (A) the aggregate amount of the
Commitments over (B) the sum of (x) the aggregate
outstanding principal amount of Syndicated Loans
plus (y) the Letter of Credit Obligations Amount, or
(ii) fifty percent (50%) of the aggregate amount of
the Commitments (as the same may be reduced in
accordance with the terms of this Agreement during
any applicable Bid-Option Interest Period); and
provided, further, that the Dollar Equivalent of
the aggregate outstanding principal amount of
Foreign Currency Bid-Option Loans shall not exceed
$50,000,000.
1.5 Section 3.7(b) is hereby amended by adding the following to
the end of the first sentence thereof: "; provided, notwithstanding the
foregoing, such facility fee shall be at a rate equal to 0.15% per annum for
each day during which Level II Status is in effect and 0.10% per annum for
each day during which Level I Status is in effect."
1.6 Section 3.7 is further amended by adding the following
subsection (e):
(e) Extension Fee. If the facility is extended as
provided in Section 3.10, the Company will pay to
the Agent, for the pro rata benefit of the Banks
that are parties to the Agreement following such
extension, an extension fee equal to 5 basis
points of the aggregate amount of the Commitments
being extended, payable on or before such
extension is effective, provided that no such fee
shall be charged if at the time of extension of
the Commitments Level I Status is in effect.
1.7 Section 3.8 (b) is hereby restated in its entirety as follows:
(b) [intentionally omitted].
1.8 Section 3.10 is hereby amended by deleting the first two
sentences, and in their place substituting the following:
The Company may request that the Banks extend the Scheduled
Expiration Date from July 31, 1998 to June 29, 1999. No such
request shall be effective unless it is made in writing by the
Company between the period from and including August 15, 1995 to and
including October 15, 1995.
4
<PAGE>
1.9 Section 7.2(a) is hereby amended by adding the following to
the end thereof: " The certificate will be accompanied by a calculation of
the ratio of (i) Senior Debt as of the end of such fiscal quarter to (ii)
EBITDA Minus Capital Expenditures for the period of such fiscal quarter and
the immediately preceding three fiscal quarters (calculated on a pro forma
basis as appropriate)."
1.10 Section 7.5 is hereby restated in its entirety as follows:
Total Leverage Ratio. The Company will not permit or suffer the Total
Leverage Ratio to be greater than (a) 1.75 to 1.0 as of the last day of
any fiscal quarter of the Company occurring during the period from
January 1, 1994 through December 30, 1994, (b) 1.40 to 1.0 as of
December 31, 1994,(c) 1.65 to 1.0 as of the last day of any fiscal
quarter of the Company occurring during the period from January 1,
1995 through December 30,1995, (d) 1.40 to 1.0 as of December 31,
1995, (e) 1.65 to 1.0 as of the last day of any fiscal quarter of the
Company occurring during the period from January 1, 1996 through
December 30, 1996, (f) 1.25 to 1.0 as of December 31, 1996, (g) 1.50
to 1.0 as of the last day of any fiscal quarter of the Company
occurring during the period from January 1, 1997 through December 30,
1997, (h) 1.0 to 1.0 as of December 31, 1997, (i) 1.25 to 1.0 as of
the last day of any fiscal quarter of the Company occurring during
the period from January 1, 1998 through December 30, 1998, (j) 1.0 to
1.0 as of December 31, 1998, and (k) 1.25 to 1.0 as of the last day
of any fiscal quarter of the Company thereafter.
1.11 Section 7.6 is hereby restated in its entirety as follows:
7.6 [Intentionally omitted].
1.12 Section 7.7 is hereby restated in its entirety as follows:
Tangible Capital Funds. The Company will not permit or suffer
Tangible Capital Funds to at any time be less than the sum of (a)
$500,000,000 plus (b) 66-2/3% of Net Income Minus Preferred
Dividends for the period from January 1, 1995 through the then
latest fiscal year end of the Company; provided that for purposes of
this Section 7.7, Net Income shall exclude the pre-tax amount
attributable to recognition of the Deferred Trimas Gain or any
portion thereof as income.
1.13 Section 9.1(i) is hereby amended by deleting the word "or"
appearing at the end thereof.
5
<PAGE>
1.14 Section 9.1(j) is hereby deleted.
1.15 Schedule 1 and Exhibit G to the Agreement are hereby replaced
with Schedule 1 and Exhibit G, respectively, hereto.
ARTICLE II. REPRESENTATIONS. The Company represents and warrants that:
2.1 The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate action and do
not and will not violate the provisions of any applicable law or regulation or
of the certificate of incorporation or bylaws of the Company or any Subsidiary
or any order of any court, regulatory body or arbitral tribunal and do not and
will not result in the breach of, or constitute a default or require any consent
under, or create any lien, charge or encumbrance upon any property or assets of
the Company or any Subsidiary pursuant to, any indenture or other agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or its property may be bound or affected. The
execution, delivery and performance of this Amendment do not require, for the
validity thereof, nor does the enforceability of this Amendment require, any
filing with, or consent, authorization or approval of, any state or federal
agency or regulatory authority, other than filings, consents or approvals which
have been made or obtained.
2.2 This Amendment constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Article VI of the Agreement are true
on and as of the date hereof with the same force and effect as if made on and as
of the date hereof.
2.4 As of the date hereof, there is no Default.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until the following shall have been delivered to the Agent:
3.1 This Amendment duly executed on behalf of the Company and each of
the Banks.
3.2 A copy of the resolutions adopted by the Board of Directors of the
Company, certified by an officer of the Company as being true and correct and
6
<PAGE>
in full force and effect without amendment as of the date hereof, authorizing
the Company to enter into this Amendment.
3.3 An opinion of counsel for the Company in the form of Schedule 3.3
hereto.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Agreement or in any note, certificate, instrument
or other document to the Agreement shall be deemed to be references to the
Agreement as amended hereby and as further amended from time to time.
4.2 The Company agrees to pay and to save the Agent harmless for the
payment of all costs and expenses arising in connection with this Amendment,
including the reasonable fees of counsel to the Agent in connection with
preparing this Amendment and the related documents.
4.3 The Company agrees that the Agreement and other documents and
agreements executed by the Company in connection with the Agreement in favor of
the Agent, the Co-Agents and/or the Banks are ratified and confirmed and shall
remain in full force and effect, except as expressly amended hereby.
4.4 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument, and telecopied signatures shall be effective.
4.5 This Amendment is a contract made under, and shall be governed by
and construed in accordance with, the law of the State of Michigan applicable to
contracts made and to be performed entirely within such State and without giving
effect to choice of law principles of such State.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of June 29, 1994, which shall be the effective date of this
Amendment.
MASCOTECH, INC.
By: /s/ Timothy Wadhams
Timothy Wadhams
Its Vice President-
Controller and Treasurer
7
<PAGE>
NBD BANK, N.A.
By: /s/ Richard H. Huttenlocher
Richard H. Huttenlocher
Its: Vice President
COMERICA BANK
By: /s/ Charles T. Weddeel
Its: Assistant Vice President
THE BANK OF NEW YORK
By: /s/ Douglas A. Ober
Its: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ The First National Bank of Chicago
Its:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ John M. Mikolay
John M. Mikolay
Its: Vice President
8
<PAGE>
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Nationsbank of North Carolina, N.A.
Its:
CONTINENTAL BANK N.A.
By: /s/ Continental Bank N.A.
Its:
PNC BANK, NATIONAL ASSOCIATION
(f/k/a PITTSBURGH NATIONAL BANK)
By: /s/ PNC Bank, National Association
Its:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Bank of America National Trust and
Savings Association
Its:
MICHIGAN NATIONAL BANK
By: /s/ Joseph M. Redoutey
Joseph M. Redoutey
Its: Second Vice President
ROYAL BANK OF CANADA
By: /s/ Holly Spencer Kaczmarczyk
Holly Spencer Kaczmarczyk
Its: Manager
9
<PAGE>
NATIONAL CITY BANK
By: /s/ Margaret S. Howe
Margaret S. Howe
Its: Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ First Bank National Association
Its:
THE FUJI BANK, LTD.
By: /s/ Hidekagu Seo
Hidekagu Seo
Its: Joint General Manager
CITIBANK, N.A.
By: /s/ Barbara A. Cohen
Barbara A. Cohen
Its: Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/Wachovia Bank of Georgia, N.A.
Its:
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Canadian Imperial Bank of Commerce
Its:
10
<PAGE>
CORESTATES PHILADELPHIA NATIONAL BANK
By: /s/ Corestates Philadelphia National Bank
Its:
SHAWMUT BANK CONNECTICUT, N.A.
By: /s/ Manfred O. Eigenbrod
Manfred O. Eigenbrod
Its: Managing Director
FIRST NATIONAL BANK OF BOSTON
By: /s/ First National Bank of Boston
Its:
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By: /s/ Richard H. Ault
Its: Vice President
11
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Interest Interest Interest Interest
Coverage Ratio Coverage Ratio Coverage Coverage
APPLICATION Interest equal to or equal to or Ratio equal Ratio equal
MARGIN Coverage greater than greater than to or greater to or greater
CHART Ratio less 1.50:1.00 2.25:1:00 and than 3.00:1.00 than
than and less than less than and less than 4.25:1.00
1.50:1.00 2.25:1.00 3.00:1.00 4.25:1.00
<S> <C> <C> <C> <C> <C>
Senior Leverage Ratio
(a) as of any December 31,
greater than 1.10:1.00,
or
1.375% 1.250% 1.125% 1.000% .875%
(b) as of any other
Determination Date,
greater than 1.15:1.00
- --------------------------------------------------------------------------------------------------------------
Senior Leverage Ratio
(a) as of any December 31,
equal to or less than
1.10:1.00 and greater
than 0.85:1.00, or
1.250% 1.125% 1.000% 0.875% .750%
(b) as of any other
Determination Date,
equal to or less than
1.15:1.00 and greater
than 0.90:1.00
- ----------------------------------------------------------------------------------------------------------------
Senior Leverage Ratio
(a) as of any December 31,
equal to or less than
0.85:1.00 and greater
than 0.60:1.00, or
1.125% 1.000% 0.875% 0.750% 0.625%
(b) as of any other
Determination Date,
equal to or less than
0.90:1.00 and greater
than 0.65:1.00
- -----------------------------------------------------------------------------------------------------------------
Senior Leverage Ratio
(a) as of any December 31,
equal to or less than
0.60:1.00 and greater
than 0.50:1.00, or
1.000% 0.875% 0.750% 0.625% 0.500%
(b) as of any other
Determination Date,
equal to or less than
0.65:1.00 and greater
than 0.55:1.00
- ----------------------------------------------------------------------------------------------------------------
Senior Leverage Ratio
(a) as of any December 31,
equal to or less than
0.50:1.00, or
0.875% 0.750% 0.625% 0.500% 0.45%
(b) as of any other
Determination Date,
equal to or less than
0.55:1.00
</TABLE>
<PAGE>
EXHIBIT G
BID-OPTION QUOTE
[Date]
NBD Bank, N.A., as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Michigan Banking Division
Reference is made to the Credit Agreement, dated as of September 2, 1993,
as amended, supplemented or otherwise modified, by and among MASCOTECH, INC., a
Delaware corporation, the Banks and Co-Agents party thereto, and NBD Bank, N.A.,
as Agent. Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in such Agreement.
In response to your Invitation for Bid-Option Quotes dated _____, 19__,
_________________________ (the "Bank"), hereby makes the following offer[s] to
make [a] Bid-Option Loan[s]:
1. Quoting Bank: ____________________________
Contact Person: _________________________
2. Date of proposed Borrowing: __________, 19__ <F1>
3. Quotes:
Type of Bid-Option
Loans: Absolute Rate
Dollar, Eurodollar Bid-Option Absolute
Rate Dollar or Foreign Rate or Bid-Option
Currency (also specify Principal Eurodollar Rate Interest
the foreign currency <F2> Amount <F3> Margin <F4> Period <F5>
(a) ______________________ _________ ___________________ ___________
(b) ______________________ _________ ___________________ ___________
(c) ______________________ _________ ___________________ ___________
<PAGE>
4. The aggregate amount of Bid-Option Loans which may be accepted by
the Company pursuant to this Bid-Option Quote shall not exceed $_________. <F6>
The Bank acknowledges and agrees that this Bid-Option Quote (a) is
irrevocable and (b) subject to the terms and conditions of the Credit Agreement,
obligates it to make a Bid-Option Loan for which any quote is accepted, in whole
or in part.
[Name of Bank]
By: ___________________________________
Its: ________________________________
[FN]
<F1> As specified in the related Invitation for Bid-Option
Quotes.
<F2> As specified in the related Invitation for Bid-Option
Quotes.
<F3> The Dollar Equivalent of the principal amount (a)
must be (i) in the case of Dollar Bid-Option
Loans, $5,000,000 or a larger multiple thereof, or
(2) in the case of Foreign Currency Bid-Option
Loans, not less than $1,000,000, and (b) may not
exceed the Dollar Equivalent of the aggregate amount
of the related Bid-Option Borrowing specified in
the related Invitation for Bid-Option Quotes.
<F4> Specify rate of interest per annum (rounded up to the
nearest 1/10,000th of 1%) or applicable margin,
which may be positive or negative, expressed as a
percentage (rounded up to the nearest 1/10,000th
of 1%), as the case may be.
<F5> As specified in the related Invitation for Bid-Option
Quotes.
<F6> Must be at lease equal to the minimum amount
specified in note 3 above.
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of December 21, 1994
(this "Amendment") is by and among MASCOTECH, INC., a Delaware corporation, the
Banks, NBD BANK, N.A., a national banking association, as Agent for the Banks,
and COMERICA BANK, a Michigan banking association, THE BANK OF NEW YORK, a New
York banking corporation, THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking
association, and NATIONSBANK OF NORTH CAROLINA, N.A., a national banking
association, as Co-Agents.
RECITALS
A. The Company, the Banks, the Agent and the Co-Agents are
parties to a Credit Agreement dated as of September 2, 1993, as amended by a
First Amendment to Credit Agreement dated as of June 29, 1994. Capitalized
terms used but not defined in this Amendment shall have the respective
meanings ascribed thereto in such Agreement.
B. The Company, the Banks, the Agent and the Co-Agents are
willing to amend the Agreement as set forth herein.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties hereby agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Agreement shall be amended as follows:
The definition of "EBIT" contained in Section 1.1 is restated
in its entirety to read as follows:
"EBIT" means, for any period, Net Income, exclusive of any
Non-Cash Special Items, for such period plus, to the extent
deducted in determining such Net Income: (a) Interest Charges
for such period, (b) income and other taxes and (c) for all
purposes other than calculating the Interest Coverage Ratio in
determining the Applicable Margin, the portion of the special
charges not included in Non-Cash Special Items, recorded
through December 31, 1995, relating to the
<PAGE>
sale and/or restructuring of certain of the business units of
the Company and its Subsidiaries, the general components of such
sale and/or restructuring to be announced no later than
February 28, 1995, provided that for purposes of this
definition such portion not included in Non-Cash Special
Items shall not exceed $30,000,000.
1.2 Section 7.5 is restated in its entirety as follows:
Total Leverage Ratio. The Company will not permit or
suffer the Total Leverage Ratio to be greater than
(a) 1.75 to 1.0 as of the last day of any fiscal quarter
of the Company occurring during the period from January
1, 1994 through December 30, 1994, (b) 1.75 to 1.0 as of
the last day of any fiscal quarter of the Company during
the period from December 31, 1994 through March 31,
1995, (c) 1.65 to 1.0 as of the last day of any fiscal
quarter of the Company occurring during the period from
April 1, 1995 through December 30, 1995, (d) 1.40 to 1.0
as of December 31, 1995, (e) 1.65 to 1.0 as of the last
day of any fiscal quarter of the Company occurring
during the period from January 1, 1996 through December
30, 1996, (f) 1.25 to 1.0 as of December 31, 1996, (g)
1.50 to 1.0 as of the last day of any fiscal quarter of
the Company occurring during the period from January 1,
1997 through December 30, 1997, (h) 1.0 to 1.0 as of
December 31, 1997, (i) 1.25 to 1.0 as of the last day of
any fiscal quarter of the Company occurring during the
period from January 1, 1998 through December 30, 1998,
(j) 1.0 to 1.0 as of December 31, 1998, and (k) 1.25 to
1.0 as of the last day of any fiscal quarter of the
Company thereafter.
1.3 Clause (a) of Section 7.8 is restated in its entirety as
follows:
(a) The Company will not permit or suffer the Senior
Debt Coverage Ratio to be greater than (i) 5.50 to 1.00
at any time during the period from the Closing Date
through September 29, 1995, and (ii) 5.00 to 1.00 at any
time thereafter.
1.4 Clause (c) of Section 7.8 is restated in its entirety as
follows:
(c) As used in this Section 7.8, the term "Maximum
Allowed Senior Debt Coverage Ratio" means (i) 4.25 to
1.00 on the Relevant Day immediately following the last
day of any fiscal quarter of the Company ending during
the period from the Closing Date through December 30,
1993, (ii) 4.00 to 1.00 on the Relevant Day immediately
following December 31, 1993, (iii) 4.25 to 1.00 on the
Relevant Day immediately following the last day of any
fiscal quarter of the
2
<PAGE>
Company ending during the period from January 1, 1994 through
December 30, 1994, (iv) 3.50 to 1.00 on the Relevant Day
immediately following December 31, 1994, (v) 5.50 to 1.00 on
the Relevant Day immediately following the last day of any
fiscal quarter of the Company ending during the period from
January 1, 1995 through September 29, 1995, (vi) 3.75 to
1.00 on the Relevant Day immediately following September 30,
1995, (vii) 3.50 to 1.00 on the Relevant Day immediately
following December 31, 1995, (viii) 3.75 to 1.00 on the
Relevant Day immediately following the last day of any
fiscal quarter of the Company ending during the period from
January 1, 1996 through December 30, 1996, (ix) 3.25 to 1.00
on the Relevant Day immediately following each of December
31, 1996 and December 31, 1997, and (ix) 3.50 to 1.00 on the
Relevant Day immediately following the last day of any fiscal
quarter of the Company ending after January 1, 1997, other
than the fiscal quarter ending December 31, 1997. For
purposes of this Section 7.8, all Senior Debt which is repaid
with cash received by the Company from Masco Corporation for
the purchase of preferred stock or subordinated debt
securities pursuant to the Securities Purchase Agreement
within forty-five days after the last day of any fiscal
quarter of the Company shall be deemed repaid as of the last
day of such fiscal quarter, and during such forty-five day
period no Default shall be deemed to have occurred due to
noncompliance with this Section 7.8.
ARTICLE II. REPRESENTATIONS. The Company represents and warrants that:
2.1 The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate action and do
not and will not violate the provisions of any applicable law or regulation or
of the certificate of incorporation or bylaws of the Company or any Subsidiary
or any order of any court, regulatory body or arbitral tribunal and do not and
will not result in the breach of, or constitute a default or require any consent
under, or create any lien, charge or encumbrance upon any property or assets of
the Company or any Subsidiary pursuant to, any indenture or other agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or its property may be bound or affected. The
execution, delivery and performance of this Amendment do not require, for the
validity thereof, nor does the enforceability of this Amendment require, any
filing with, or consent, authorization or approval of, any state or federal
agency or regulatory authority, other than filings, consents or approvals which
have been made or obtained.
2.2 This Amendment constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3
<PAGE>
2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Article VI of the Agreement are true
on and as of the date hereof with the same force and effect as if made on and as
of the date hereof.
2.4 As of the date hereof, there is no Default.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until the following shall have been delivered to the Agent:
3.1 This Amendment duly executed on behalf of the Company and the
Required Banks.
3.2 A copy of the resolutions adopted by the Board of Directors
of the Company, certified by an officer of the Company as being true and
correct and in full force and effect without amendment as of the date hereof,
authorizing the Company to enter into this Amendment.
3.3 An opinion of counsel for the Company in the form of Schedule
3.3 hereto.
ARTICLE IV. MISCELLANEOUS.
4.1 The Company shall pay to the Agent, for the benefit of each
Consenting Bank, on or within two Business Days after the date of this
Amendment an amendment fee in the amount of five basis points of the Commitment
of such Consenting Bank. As used herein, a "Consenting Bank" shall be a Bank
which both (a) commits in writing to the Agent on or before December 19, 1994 to
execute this Amendment and (b) executes this Amendment.
4.2 For purposes of the representation contained in the last
sentence of Section 6.6, the Banks acknowledge that, after giving effect to
the special charges recorded by the Company and its Subsidiaries through
December 31, 1995 relating to the sale and/or restructuring of certain of the
business units of the Company and its Subsidiaries, the general components of
such sale and/or restructuring to be announced no later than February 28,
1995, there has been no material adverse change in the consolidated
operations or condition, financial or otherwise, of the Company and its
Consolidated Subsidiaries considered as a whole since December 31, 1992, to
the extent of $375,000,000 aggregate after-tax amount of such charges;
provided, however, that the foregoing does not constitute an acknowledgement
as to the effect of any special charge or event other than the special charge
referred to above for purposes of the representation contained in the last
sentence of Section 6.6.
4.3 References in the Agreement or in any note, certificate,
instrument or other document to the Agreement shall be deemed to be
references to the Agreement as amended from time to time.
4
<PAGE>
4.4 The Company agrees to pay and to save the Agent harmless for the
payment of all costs and expenses arising in connection with this Amendment,
including the reasonable fees of counsel to the Agent in connection with
preparing this Amendment and the related documents.
4.5 The Company agrees that the Agreement and other documents and
agreements executed by the Company in connection with the Agreement in favor of
the Agent, the Co-Agents and/or the Banks are ratified and confirmed and shall
remain in full force and effect, except as expressly amended hereby.
4.6 This Amendment may be signed upon any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument, and telecopied signatures shall be effective.
4.7 This Amendment is a contract made under, and shall be
governed by and construed in accordance with, the law of the State of
Michigan applicable to contracts made and to be performed entirely within
such State and without giving effect to choice of law principles of such State.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the day and year first above written.
NBD BANK, N.A. MASCOTECH, INC.
By: /s/ Richard H. Huttenlocher By: /s/ Timothy Wadhams
Richard H. Huttenlocher Timothy Wadhams
Its: Vice President Its Vice President-
Controller and Treasurer
THE BANK OF NEW YORK COMERICA BANK
By: /s/ Douglas A. Ober By: /s/ James R. Grossett
Its: Vice President Its: Vice President
THE FIRST NATIONAL BANK MORGAN GUARANTY TRUST
OF CHICAGO COMPANY OF NEW YORK
By: /s/ The First National Bank By: /s/ Timothy S. Broadbent
of Chicago
Its: __________________________ Its: Vice President
5
<PAGE>
NATIONSBANK OF NORTH BANK OF AMERICA ILLINOIS
CAROLINA, N.A.
By: /s/ William A. Bowen, Jr. By: /s/ Bank of America Illinois
Its: Vice President Its:
PNC BANK, NATIONAL ASSOCIATION BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ Jack Broeren By: /s/ Bank of America National
Trust and Savings Association
Its: Assistant Vice President Its: _________________________
MICHIGAN NATIONAL BANK ROYAL BANK OF CANADA
By: /s/ Joseph M. Redoutey By: /s/ Holly Spencer Kaczmarczyk
Its: Second Vice President Its: Manager
NATIONAL CITY BANK THE FUJI BANK, LTD.
By: /s/ National City Bank By: /s/ Peter L. Chinnici
Its: _________________________ Its: Joint General Manager
FIRST BANK NATIONAL CITIBANK, N.A.
ASSOCIATION
By: /s/ First Bank National By: /s/ Barbara A. Cohen
Association
Its: Vice President
Its: _________________________
6
<PAGE>
CIBC INC. WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Kent Davis By: /s/ Wachovia Bank of Georgia, N.A.
Its: Vice President Its: _________________________
CORESTATES PHILADELPHIA SHAWMUT BANK
NATIONAL BANK CONNECTICUT, N.A.
By: /s/ Corestates Philadelphia By: /s/ Manfred O. Eigenbrod
Its: ________________________ Its: Managing Director
FIRST NATIONAL BANK THE SANWA BANK, LIMITED,
OF BOSTON CHICAGO BRANCH
By: /s/ First National Bank By: /s/ Richard H. Ault
of Boston
Its: Vice President
Its: _______________________
7
<PAGE>
MASCO CORPORATION
1984 RESTRICTED STOCK (INDUSTRIES) INCENTIVE PLAN
(Restated September 14, 1993)
1. Purpose of the Plan
The purpose of the 1984 Restricted Stock (Industries) Incentive Plan (the
"Plan") is to aid Masco Corporation (the "Company") and its subsidiaries and
affiliated companies in securing and retaining key employees and consultants of
outstanding ability and to motivate such individuals to exert their best efforts
on behalf of the Company and its subsidiaries and affiliated companies. In
addition, the Company expects that it will benefit from the added interest which
such individuals will have in its welfare as a result of their ownership or
increased ownership in common stock of an affiliated Company, MascoTech, Inc., a
Delaware corporation (formerly Masco Industries, Inc. and referred to herein as
"Industries"). For purposes of this Plan a "subsidiary" is any corporation in
which the Company owns, directly or indirectly, stock possessing more than fifty
percent of the total combined voting power of all classes of stock. For
purposes of Paragraph 4 of the Plan, an "affiliated company" is any other cor-
poration (and its subsidiaries) in which the Company or its subsidiaries own
stock possessing at least twenty percent of the total combined voting power of
all classes of stock, and for all other purposes of the Plan, an "affiliated
company" is any other corporation, at least twenty percent of the total combined
voting power of all classes of stock of which is owned by the Company or by one
or more other corporations in a chain of corporations, at least twenty percent
of the stock of each of which is held by the Company or a subsidiary or another
corporation within such chain.
2. Stock Subject to the Plan
The total number of shares of stock that may be awarded under the Plan is
12,000,000 shares of Common Stock of Industries, $1.00 par value. Such stock
may be any shares of Industries Common Stock owned by the Company. Shares of
stock awarded under the Plan which are later reacquired by the Company as a
result of forfeiture pursuant to the Plan shall again become available for
awards under the Plan.
3. Administration
The Board of Directors of the Company shall appoint a committee (the
"Committee") consisting of three or more members of the Board of Directors who
shall administer the Plan. No director
<PAGE>
shall become or remain a member of the Committee unless at the time of his
exercise of any discretionary function as a Committee member such director is
not eligible and has not at any time within one year prior to the exercise of
such discretion been eligible for selection as a person to whom stock may be
allocated or to whom stock options or stock appreciation rights may be granted
pursuant to the Plan or any other plan of the Company or any of its affiliates
entitling the participants therein to acquire stock, stock options or stock
appreciation rights of the Company or any of its affiliates. The Committee
shall have the authority, consistent with the Plan, to determine the terms and
conditions of each award, to interpret the Plan and the agreements under the
Plan, to adopt, amend and rescind rules and regulations for the administration
of the Plan and the awards, and generally to conduct and administer the Plan and
to make all determinations in connection therewith which may be necessary or
advisable, and all such actions of the Committee shall be binding upon all par-
ticipants.
4. Eligibility
Key employees of and consultants to the Company and its subsidiaries and
affiliated companies, including officers of the Company (who may also be
directors, but excluding members of the Committee, any person who serves only as
a director of the Company and any consultant to the Company or any of its
subsidiaries or affiliated companies who is also a director of the Company), as
may be selected from time to time by the Committee in its discretion, are
eligible to receive awards under the Plan. The Committee shall determine in its
sole discretion the number of shares to be awarded to each such participant.
5. Terms and Conditions of Awards
All shares of Industries' Common Stock awarded to participants under this
Plan shall be subject to the following terms and conditions, and to such other
terms and conditions not inconsistent with the Plan as shall be contained in
each Award Agreement ("Agreement") referred to in Paragraph 5(f):
(a) At the time of each award there shall be established for the
shares of each participant a "Restricted Period" of transfer which shall
be not less than one year. Such Restricted Period may differ among
participants and may have different expiration dates with respect to
portions of shares covered by the same award. The Committee may also
determine that the expiration of any Restricted Period shall be subject to
such additional terms and conditions as it decides in its sole discretion
and as set forth in the participant's Agreement.
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<PAGE>
(b) Shares of stock awarded to participants may not be sold,
encumbered or otherwise transferred, except as hereinafter provided,
during the Restricted Period pertaining to such shares. Except for
such restrictions on transfer, the participant shall have all the
rights of a stockholder including but not limited to the right to
receive all dividends paid on such shares (subject to the provisions
of Paragraph 6) and the right to vote such shares.
(c) If a participant ceases to be employed or retained by the
Company or any of its subsidiaries or affiliated companies for any reason
(including termination by reason of the fact that any corporation is no
longer a subsidiary or affiliated company), other than death, permanent
and total disability, or, in the case of an employee, retirement on or
after normal retirement date, all shares of stock theretofore awarded to
the participant which are still subject to the restrictions imposed by
Paragraph 5(b) shall upon such termination be forfeited and transferred
back to the Company, provided, however, that in the event such employment
or consulting relationship is terminated by action of the Company or any
of its subsidiaries or affiliated companies without cause or by agreement
of the Company or any of its subsidiaries or affiliated companies and the
participant, the Committee may, but need not, determine that some or all
of such shares shall not be forfeited but instead shall be subject to such
restrictions as the Committee may establish or that some or all of such
shares shall be free of restrictions. For purposes of this Paragraph
5(c), a participant's employment or consulting arrangement shall not be
considered terminated (i) in the case of transfers of employment or the
consulting arrangement among the Company, its subsidiaries and affiliated
companies, (ii) by virtue of a change of status from employee to
consultant or from consultant to employee, or (iii) in the case of
interruption in service, not exceeding one year in duration unless
otherwise approved by the Committee, for approved sick leave or other bona
fide leave of absence.
(d) If a participant ceases to be employed or retained by the
Company or any of its subsidiaries or affiliated companies by reason of
death or permanent and total disability or if any employee ceases to be
employed by the Company or any of its subsidiaries or affiliated companies
by reason of retirement on or after normal retirement date, the
restrictions imposed by Paragraph 5(b) shall lapse with respect to the
shares then subject to restrictions, except to the extent provided to the
contrary in the Agreement.
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<PAGE>
(e) Each certificate issued in respect of shares awarded under the
Plan shall be registered in the name of the participant and deposited by
the participant with the Company, together with a stock power endorsed in
blank, and shall bear the following legend:
"The sale, encumbrance, or other transfer of this certificate and
the shares of stock represented hereby are subject to the terms and
conditions (including a contingent transfer obligation) contained in the
Masco Corporation's 1984 Restricted Stock (Industries) Incentive Plan and
an Award Agreement entered into between the registered owner and Masco
Corporation. Copies of such Plan and Award Agreement are on file in the
office of the Secretary of Masco Corporation, Taylor, Michigan."
(f) The participant shall enter into an Agreement with the Company
in a form specified by the Committee agreeing to the terms and conditions
of the award, the expiration of the Restricted Period as to the shares
covered by the award, and such other matters, including compliance with
applicable federal and state securities laws and methods of withholding or
providing for the payment of required taxes, as the Committee shall in its
sole discretion determine. The Committee may at any time amend the terms
of any Agreement consistent with the terms of the Plan, except that
without the participant's written consent no such amendment shall
adversely affect the rights of the participant who is a party to such
Agreement.
(g) At the expiration of the Restricted Period as to shares covered
by any award, the Company shall redeliver the stock certificates deposited
with it pursuant to Paragraph 5(e) and as to which the Restricted Period
has expired, as follows:
(1) if an assignment to a trust has been made in accordance
with Paragraph 5(i), to such trust; or
(2) if the Restricted Period has expired by reason of death
and a beneficiary has been designated in form approved by the
Company, to the beneficiary so designated; or
(3) in all other cases, to the participant or the legal
representative of the participant's estate.
Upon written request, the Company will instruct its stock transfer agent
that such certificates may be reissued without legend.
4
<PAGE>
(h) Notwithstanding any of the provisions of this Plan or
instruments evidencing awards heretofore or hereafter granted hereunder,
in the case of a Change in Control of the Company, each award granted at
least one year prior thereto shall immediately become fully vested and
non-forfeitable and shall thereupon be distributed to participants as soon
as practicable, free of all restrictions. A Change in Control shall occur
if:
(1) any "person" or "group of persons" as such terms are used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act") other than pursuant to a transaction or
agreement previously approved by the Board directly or indirectly
purchases or otherwise becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) or has the right to acquire such
beneficial ownership (whether or not such right is exercisable
immediately, with the passage of time, or subject to any condition),
of voting securities representing 25% or more of the combined voting
power of all outstanding voting securities of the Company; or
(2) during any period of twenty four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's Board of Directors, and any new directors
whose election by such Board or nomination for election by
stockholders was approved by a vote of at least two-thirds of the
members of such Board who were either directors on such Board at the
beginning of the period or whose election or nomination for election
as directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
(i) Notwithstanding any other provision of this Plan, a participant
may assign all rights under any award to a revocable grantor trust
established by the participant for the sole benefit of the participant
during the life of the participant, and under the terms of which the
participant is and remains the sole trustee until death or physical or
mental incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee and the
participant shall deliver to the Committee a true copy of the agreement or
other document evidencing such trust. If in the judgment of the Committee
the trust to which a participant may attempt to assign rights under an
award does not meet the criteria of a trust to which an assignment is
permitted by the terms of this paragraph, or if after assignment, because
of amendment, by force of law or any other reason such trust no longer
meets such criteria, such attempted assignment shall be void and may be
disregarded by the Committee and the Company and all rights to any awards
shall revert to and remain solely
5
<PAGE>
in the participant. Notwithstanding a qualified assignment, the
participant, and not the trust to which rights under an award may be
assigned, for the purpose of determining compensation arising by reason of
the award shall continue to be considered an employee or consultant, as
the case may be, of the Company, a subsidiary or affiliated company, but
such trust and the participant shall be bound by all of the terms and
conditions of the Award Agreement and this Plan.
The Committee, the Company and its officers, agents and employees
may rely upon any beneficiary designation, assignment or other instrument
of transfer, copies of trust agreements and any other documents delivered
to them by or on behalf of the participant which they believe genuine and
any action taken by them in reliance thereon shall be conclusive and
binding upon the participant, his personal representatives and all persons
asserting a claim based on an award granted pursuant to this Plan. The
delivery by a participant of a beneficiary designation, or an assignment
of rights under an award as permitted by this Paragraph 5(i), shall
constitute the participant's irrevocable undertaking to hold the Commit-
tee, the Company and its officers, agents and employees harmless against
claims, including any cost or expense incurred in defending against
claims, of any person (including the participant) which may be asserted or
alleged to be based upon an award subject to a beneficiary designation or
an assignment. In addition, the Company may decline to deliver shares to
a beneficiary until it receives indemnity against claims of third parties
satisfactory to the Company. Issuance of shares as to which restrictions
have lapsed in the name of, and delivery to, the trust to which rights may
be assigned shall be conclusively considered issuance and delivery to the
participant.
(j) The Committee, in its discretion and in accordance with the
procedures established by the Committee, may permit the participant to
satisfy, in whole or in part, the applicable income tax withholding
obligations when the restrictions imposed by Paragraph 5(b) lapse: (1) in
the case of participants who are employees of or consultants to Industries
or any of its subsidiaries, by having withheld from the shares as to which
the Restricted Period has expired or by delivering from shares of Common
Stock of Industries owned by the participant such number of shares having
a fair market value equal to the amount needed to satisfy such
obligations; or (2) in the case of all other participants, by having
withheld from the shares as to which the Restricted Period has expired or
by delivering from shares of Common Stock of Industries or common stock of
the Company owned by the participant such number of shares having a fair
market value equal to the amount needed to satisfy such obligations.
6
<PAGE>
6. Changes in Capitalization
In the event there is a change in, reclassification, subdivision or
combination of, stock dividend on, or exchange of stock by Industries for its
outstanding Common Stock, the maximum aggregate number and class of shares as to
which awards may be granted under the Plan may be appropriately adjusted by the
Committee whose determination thereof shall be conclusive. Unless the Committee
shall determine otherwise, any shares of stock or other securities received by a
participant with respect to shares still subject to the restrictions imposed by
Paragraph 5(b) will be subject to the same restrictions and shall be deposited
with the Company.
If Industries shall be consolidated or merged with another corporation,
the stock, securities or other property which a participant is entitled to
receive by reason of his ownership of the shares of stock subject to the
restrictions imposed pursuant to Paragraph 5(b) shall be subject to the same or
equivalent restrictions unless the Committee shall determine otherwise.
7. Amendment of the Plan
The Board of Directors may from time to time amend or discontinue the
Plan, except that without the approval of Stockholders of the Company no
amendment shall increase the total number of shares which may be awarded under
the Plan, extend the date for awards of shares under the Plan beyond December
31, 1999 or change the standard of eligibility to participate in the Plan. The
total number of shares which may be awarded under the Plan may, however, be
adjusted without stockholder approval pursuant to the adjustment provisions de-
scribed in Paragraph 6 hereof.
8. Effective Date and Termination of Plan
The Plan shall become effective when approved by the stockholders of the
Company and no shares may be awarded under the Plan after December 31, 1999.
7
<PAGE>
MASCO CORPORATION
1984 STOCK OPTION PLAN
(Restated September 14, 1993)
Article I. Purpose
The purpose of the 1984 Stock Option Plan (the "Plan") is to secure for
Masco Corporation (the "Company") and its stockholders the benefits inherent in
stock ownership by selected key employees of and consultants to the Company and
its subsidiaries and affiliated companies who in the judgment of the committee
responsible for the administration of the Plan are largely responsible for the
Company's growth and success. The Plan is designed to accomplish this purpose
by offering such employees and consultants an opportunity to purchase shares of
the Common Stock of the Company. For purposes of the Plan a "subsidiary" is any
corporation in which the Company owns, directly or indirectly, stock possessing
more than fifty percent of the total combined voting power of all classes of
stock. For purposes of Articles III and VII of the Plan, an "affiliated
company" is any other corporation (and its subsidiaries) in which the Company or
its subsidiaries own stock possessing at least twenty percent of the total
combined voting power of all classes of stock, and for all other purposes of the
Plan, an "affiliated company" is any other corporation, at least twenty percent
of the total combined voting power of all classes of stock of which is owned by
the Company or by one or more other corporations in a chain of corporations, at
least twenty percent of the stock of each of which is held by the Company or a
subsidiary or another corporation within such chain.
Article II. Administration
The Plan shall be administered by a committee (the "Committee") of three
or more of the Company's directors to be appointed by the Board of Directors.
No director shall become or remain a member of the Committee unless at the time
of exercise of any discretionary function as a Committee member such director is
not eligible, and has not at any time within one year prior to the exercise of
such discretion been eligible for selection as a person to whom stock may be
allocated or to whom stock options or stock appreciation rights may be granted
pursuant to the Plan or any other plan of the Company or any of its affiliates
entitling the participants therein to acquire stock, stock options or stock
appreciation rights of the Company or any of its affiliates. The Committee
shall have authority, consistent with the Plan:
<PAGE>
(a) to determine which key employees of and consultants to the
Company, its subsidiaries and affiliated companies shall be granted
options;
(b) to determine the time or times when options shall be granted and
the number of shares of Common Stock to be subject to each option;
(c) to determine the option price of the stock subject to each
option and the method of payment of such price;
(d) to determine the time or times when each option becomes
exercisable, limitations on exercise, and the duration of the exercise
period;
(e) to prescribe the form or forms of the instruments evidencing any
options granted under the Plan and of any other instruments required under
the Plan, and to change such forms from time to time;
(f) to designate options granted to key employees of the Company or
its "subsidiaries" under the Plan as "incentive stock options" ("ISOs"),
as such terms are defined under the Internal Revenue Code;
(g) to adopt, amend and rescind rules and regulations for the
administration of the Plan and the options and for its own acts and
proceedings; and
(h) to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan.
All decisions, determinations and interpretations of the Committee shall
be binding on all parties concerned.
Article III. Participants
Key employees of and consultants to the Company, its subsidiaries or
affiliated companies, including officers of the Company (who may also be
directors, but excluding members of the Committee, any person who serves only as
a director of the Company and any consultant to the Company or any of its sub-
sidiaries or affiliated companies who is also a director of the Company), as may
be selected from time to time by the Committee in its discretion, are eligible
to receive options under the Plan. The grant of an option to an employee or
consultant shall not entitle such individual to other grants or options, nor
shall such grant disqualify such individual from further participation.
2
<PAGE>
Article IV. Limitations
No options shall be granted under the Plan after December 31, 1999, but
options theretofore granted may extend beyond that date. The number of shares
of Common Stock of the Company which may be issued under the Plan shall not
exceed 4,000,000 in the aggregate, subject to adjustment as provided in Article
IX. To the extent that any option granted under the Plan shall expire or
terminate unexercised or for any reason become unexercisable as to any stock
subject thereto, such stock shall thereafter be available for further grants
under the Plan, within the limit specified above. If an option granted under
the Plan shall be accepted for surrender pursuant to Article VIII, any stock
covered by options so accepted shall not thereafter be available for the
granting of other options under the Plan.
Notwithstanding any provision to the contrary in the Plan, no option may
be designated an ISO unless all of the following conditions are satisfied with
respect to such option:
(a) Such option must be granted on or prior to April 24, 1994, and
such option by its terms is not exercisable after the expiration of ten
years from the date such option is granted;
(b) Either (i) the employee to whom such option is granted does not,
determined at the time such option is granted, own capital stock
representing more than ten percent of the voting power of all classes of
stock of the Company, its parent or any of its subsidiaries, or (ii) the
option price is at least 110 percent of the fair market value, determined
at the time such option is granted, of the stock subject to such option
and such option by its terms is not exercisable more than five years from
the date it is granted;
(c) Such option by its terms is not exercisable while there is
outstanding an ISO which was granted to the same employee at an earlier
time. For purposes of this clause (c), an ISO which has not been
exercised in full shall be deemed to be outstanding, notwithstanding any
cancellation or termination thereof, until the expiration of the period
during which it could have been exercised under its original terms; and
(d) The aggregate fair market value of the Common Stock subject to
such option plus the aggregate fair market value of Common Stock subject
to ISOs previously or concurrently granted to the same employee in the
same calendar year (all determined at the respective dates of grant of
such options) must not exceed $100,000 (the "Basic Amount") plus the sum
of the "Carry-Over Amounts" for each of the three calendar years
immediately preceding the year in which such option is
3
<PAGE>
granted. The "Carry-Over Amount", as used in this clause (d) for any
calendar year, shall mean (i) fifty percent of the amount by which
$100,000 exceeds the fair market value, determined at the time of grant,
of Common Stock subject to ISOs which were granted during such calendar
year to the employee for whom the Carry-Over Amount is being determined,
or (ii) $50,000 in the case such employee has not in such calendar year
been granted any ISO. No amount shall be included in a Carry-Over Amount
for any year to the extent such amount was theretofore necessarily in-
cluded as a Carry-Over Amount to permit the qualification of an ISO under
this clause (d), and Carry-Over Amounts shall only be utilized to permit
the qualification of an ISO under this clause (d) in the order in which
they first arose and then only if the Basic Amount has not theretofore
been utilized to permit such qualification.
Article V. Stock to be Issued
The stock as to which options may be granted is the Company's Common
Stock, $1 par value. Such stock may be authorized but unissued shares or shares
of Common Stock reacquired by the Company, including but not limited to shares
purchased on the open market. The Board of Directors and the officers of the
Company shall take any appropriate action required for such issuance.
Article VI. Terms and Conditions of Options
All options granted under the Plan shall be subject to the following terms
and conditions (except as otherwise provided in Article VII) and to such other
terms and conditions as the Committee shall deem appropriate.
(a) Option Price. Each option granted hereunder shall have such per share
option price as the Committee may determine, but not less than the fair market
value of Common Stock of the Company on the date the option is granted.
(b) Term of Options. The term of an option shall not exceed eleven years
from the date of grant. The date of grant shall be the date on which the option
is awarded by the Committee.
(c) Exercise of Options.
(i) Each option shall be made exercisable at such time or times,
whether or not in installments, as the Committee shall prescribe at the
time the option is granted.
(ii) A person electing to exercise an option shall give written
notice to the Company, as may be specified by the Committee, of exercise
of the option and of the number of
4
<PAGE>
shares of stock elected for exercise, such notice to be accompanied by
such instruments or documents as may be required by the Committee, and
such person shall at the time of such exercise tender the purchase price
of the stock elected for exercise unless otherwise directed by the
Committee.
(iii) Notwithstanding any of the provisions of this Plan or
instruments evidencing options heretofore or hereafter granted hereunder,
in the case of a Change in Control of the Company, each Option then
outstanding shall immediately become exercisable in full. A Change in
Control shall occur if:
(1) any "person" or "group of persons" as such terms are used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act") other than pursuant to a transaction or
agreement previously approved by the Board directly or indirectly
purchases or otherwise becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) or has the right to acquire such
beneficial ownership (whether or not such right is exercisable
immediately, with the passage of time, or subject to any condition),
of voting securities representing 25% or more of the combined voting
power of all outstanding voting securities of the Company; or
(2) during any period of twenty four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's Board of Directors, and any new directors
whose election by such Board or nomination for election by
stockholders was approved by a vote of at least two-thirds of the
members of such Board who were either directors on such Board at the
beginning of the period or whose election or nomination for election
as directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
(d) Payment for Issuance of Stock. Upon and at the time of exercise of
any option granted pursuant to the Plan, payment in full shall be made for all
such stock then being purchased either in cash or, at the discretion of the
Committee, in whole or in part in Common Stock of the Company valued at its then
fair market value. Notwithstanding the foregoing, the Committee may in its
discretion permit the issuance of stock upon such other plan of payment as it
deems reasonable, provided that the then unpaid portion of the purchase price
shall be evidenced by a promissory note at such rate of interest and upon such
other terms and conditions as the Committee shall deem appropriate. In all
cases where stock is issued for less than present full payment of the purchase
price, there shall be placed upon the certificate or certificates representing
such stock a legend setting forth the
5
<PAGE>
amount paid at issuance, and the amount remaining unpaid thereon, and stating
that the stock is subject to call for the remainder and may not be transferred
by the holder until the balance due thereon shall be fully paid.
The Committee, in its discretion and in accordance with the procedures
established by the Committee, may permit a participant to satisfy, in whole or
in part, the applicable income tax withholding obligations in connection with
the exercise of a non-qualified stock option under the Plan: (1) in the case of
participants who are employees of or consultants to MascoTech, Inc. or any of
its subsidiaries, by delivering from shares of common stock of MascoTech, Inc.
owned by the participant such number of shares having a fair market value equal
to the amount needed to satisfy such obligations; or (2) in the case of all
other participants, by having withheld from the shares to be issued upon the
exercise of the option or by delivering from shares of Common Stock of the
Company owned by the participant such number of shares having a fair market
value equal to the amount needed to satisfy such obligations.
(e) Conditions to Issuance. The Company shall not be obligated to issue
any stock unless and until:
(i) in the event the Company's outstanding Common Stock is at the
time listed upon any stock exchange, the shares of stock to be issued have
been listed, or authorized to be added to the list upon official notice of
issuance, upon such exchange, and
(ii) in the opinion of the Company's counsel there has been
compliance with applicable law in connection with the issuance and
delivery of stock and such issuance shall have been approved by the
Company's counsel.
Without limiting the generality of the foregoing, the Company may require from
the participant such investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to comply with the
Securities Act of 1933 as then in effect, and may require that the participant
agree that any sale of the stock will be made only in such manner as shall be in
accordance with law and that the participant will notify the Company of any
intent to make any disposition of the stock whether by sale, gift or otherwise.
The participant shall take any action reasonably requested by the Company in
such connection. A participant shall have the rights of a stockholder only as
and when shares of stock have been actually issued to the participant pursuant
to the Plan.
(f) Nontransferability of Options. No option may be transferred by the
participant other than by designation of beneficiary as provided in subsection
(j) of this Article, or by
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<PAGE>
will or by the laws of descent and distribution, and during the participant's
lifetime the option may be exercised only by the participant.
(g) Consideration for Option. Each person receiving an option must agree
to remain as an employee or consultant upon the terms of employment or the
consulting arrangement then existing (unless different terms are mutually agreed
upon) for at least one year from the date of the granting of the option, subject
to the right of the Company, its subsidiary or affiliated company to terminate
the participant's employment or consulting arrangement at any time.
(h) Termination of Employment. If the employment of or consulting
arrangement with a participant terminates for any reason (including termination
by reason of the fact that any corporation is no longer a subsidiary or
affiliated company) other than the participant's death or permanent and total
disability or, in the case of an employee, retirement on or after normal
retirement date, unless discharged for misconduct which in the opinion of the
Committee casts such discredit on the participant as to justify termination of
the option, the participant may thereafter exercise the option as provided
below. If such termination is voluntary on the part of the participant, the
option may be exercised only within ten days after the day of termination unless
a longer period is permitted by the Committee in its discretion. If such
termination is involuntary on the part of the participant, the option may be
exercised within three months after the day of termination. Except as expressly
provided in the Plan, in no event may a participant whose employment or
consulting arrangement has been terminated voluntarily or involuntarily exercise
an option at a time when the option would not have been exercisable had the
employment or consulting arrangement continued. Notwithstanding the foregoing,
the Committee may by the express terms of the grant of the option extend the
aforesaid periods of time within which the participant may exercise an option
after the termination of employment or the consulting arrangement. For purposes
of this Article VI(h), a participant's employment or consulting arrangement
shall not be considered terminated (i) in the case of approved sick leave or
other bona fide leave of absence (not to exceed one year unless otherwise
approved by the Committee), (ii) in the case of a transfer of employment or the
consulting arrangement among the Company, its subsidiaries and affiliated
companies, or (iii) by virtue of a change of status from employee to consultant
or from consultant to employee. Unless otherwise expressly provided in the Plan
or the grant of an option, an option may be exercised only to the extent
exercisable on the date of termination of employment or of the consulting ar-
rangement by reason of death, permanent and total disability, retirement or
otherwise.
(i) Retirement; Disability. If prior to the expiration date of an option
the employee shall retire on or after normal retirement date or if the
employment or consulting relationship is
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terminated by reason of permanent and total disability, such option may be
exercised to the extent exercisable on the date of retirement or such
termination, provided such option shall be exercised within three months of the
date of retirement or such termination. Notwithstanding the foregoing, in its
discretion the Committee may permit the exercise of an option held by a retired
or disabled option holder upon other terms and conditions as it deems advisable
under the circumstances, and if the period within which an option may be exer-
cised has been extended the Committee may terminate all unexercised options if
it shall determine that the participant has engaged in any activity detrimental
to the Company's interests.
(j) Death. If a participant dies at a time when entitled to exercise an
option, then at any time or times within one year after death (or such further
period as the Committee may allow) such option may be exercised as to all or any
of the shares which the participant was entitled to purchase immediately prior
to death (unless the Committee shall have provided in the instrument evidencing
such option that all shares covered by the option are subject to purchase upon
death), by the person or persons designated in writing by the participant in
such form of beneficiary designation as may be approved by the Company, or
failing designation by the participant's personal representative, executor or
administrator or the person or persons to whom the option is transferred by will
or the applicable laws of descent and distribution. The Company may decline to
deliver shares to a designated beneficiary until it receives indemnity against
claims of third parties satisfactory to the Company. Except as so exercised
such option shall expire at the end of such period.
Article VII. Replacement Options
The Committee may grant options under the Plan on terms differing from
those provided for in Article VI where such options are granted in substitution
for options held by employees of or consultants to other entities who
concurrently become employees of or consultants to the Company or a subsidiary
or an affiliated company as the result of a merger, consolidation or other
reorganization of such other entity with the Company or a subsidiary or an
affiliated company, or the acquisition by the Company or a subsidiary or an
affiliated company of the business, property or stock of such other entity. The
Committee may direct that the substitute options be granted on such terms and
conditions as the Committee considers appropriate in the circumstances.
8
<PAGE>
Article VIII. Surrender of Options
The Committee may, in its discretion and upon such terms and conditions as
it deems appropriate, accept the surrender by a participant of a presently
exercisable right to purchase stock granted under an option and authorize
payment by the Company in consideration therefor of an amount equal to the
difference obtained by subtracting the option price of the stock from its fair
market value on the date of such surrender, such payment to be in cash or shares
of the Common Stock of the Company valued at fair market value on the date of
such surrender, or partly in such stock and partly in cash, provided that the
Committee determines such settlement is consistent with the purpose of the Plan.
Article IX. Changes in Stock
The Board of Directors is authorized to make such adjustments, if any, as
it shall deem appropriate in the number and kind of shares which may be granted
under the Plan, the number and kind of shares which are subject to options then
outstanding and the purchase price of shares subject to such outstanding
options, in the event of any change in capital or shares of capital stock, any
special distribution to stockholders or any extraordinary transaction (including
a merger, consolidation or dissolution) to which the Company is a party. The
determination of the Board of Directors as to such matters shall be binding on
all persons.
Article X. Employment Rights
The adoption of the Plan does not confer upon any employee of or
consultant to the Company or a subsidiary or an affiliated company any right to
continue the employment or consulting relationship with the Company or a
subsidiary or an affiliated company, as the case may be, nor does it in any way
impair the right of the Company or a subsidiary or an affiliated company to
terminate the employment of any of its employees or the consulting arrangement
with any of its consultants at any time.
Article XI. Amendments
The Committee may at any time discontinue granting options under the Plan.
The Board of Directors may at any time or times amend the Plan or amend any
outstanding option or options for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that except to the extent permitted
under Article IX, without the approval of the stockholders of the Company no
such amendment shall increase the maximum number of shares of stock available
under the Plan, or alter the class of
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<PAGE>
persons eligible to receive options under the Plan, or without the consent of
the participant void or diminish options previously granted, nor increase or
accelerate the conditions and actions required for the exercise of the same,
except that nothing herein shall limit the Company's right to call stock, issued
for deferred payment which is evidenced by a promissory note, where the par-
ticipant is in default of the obligations of such note.
10
<PAGE>
MASCO CORPORATION
RESTRICTED STOCK INCENTIVE PLAN
(Restated September 14, 1993)
1. Purpose of the Plan
The purpose of the Plan is to aid Masco Corporation (the "Company") and
its subsidiaries and affiliated companies in securing and retaining key
employees and consultants of outstanding ability and to motivate such
individuals to exert their best efforts on behalf of the Company and its
subsidiaries and affiliated companies. In addition, the Company expects that it
will benefit from the added interest which such individuals will have in its
welfare as a result of their ownership or increased ownership of the Company's
Common Stock. For purposes of the Plan a "subsidiary" is any corporation in
which the Company owns, directly or indirectly, stock possessing more than fifty
percent of the total combined voting power of all classes of stock. For
purposes of Paragraph 4 of the Plan, an "affiliated company" is any other
corporation (and its subsidiaries) in which the Company or its subsidiaries own
stock possessing at least twenty percent of the total combined voting power of
all classes of stock, and for all other purposes of the Plan, an "affiliated
company" is any other corporation, at least twenty percent of the total combined
voting power of all classes of stock of which is owned by the Company or by one
or more other corporations in a chain of corporations, at least twenty percent
of the stock of each of which is held by the Company or a subsidiary or another
corporation within such chain.
2. Stock Subject to the Plan
The total number of shares of stock that may be awarded under the Plan is
4,000,000 shares of the Company's Common Stock, $1.00 par value. Such stock may
be authorized but unissued shares or shares of Common Stock reacquired by the
Company, including but not limited to shares purchased on the open market.
Shares of stock awarded under the Plan which are later reacquired by the Company
as a result of forfeiture pursuant to the Plan shall again become available for
awards under the Plan.
3. Administration
The Board of Directors of the Company shall appoint a committee (the
"Committee") consisting of three or more members of the Board of Directors who
shall administer the Plan. Members of the Committee shall not be eligible while
a member to participate in the Plan and shall not have at any time within one
year prior to appointment been eligible for selection as a person to whom stock
<PAGE>
may have been allocated or to whom stock options of the Company may have been
granted pursuant to the Plan or any other plan of the Company. The Committee
shall have the authority, consistent with the Plan, to determine the terms and
conditions of each award, to interpret the Plan and the agreements under the
Plan, to adopt, amend and rescind rules and regulations for the administration
of the Plan and the awards, and generally to conduct and administer the Plan and
to make all determinations in connection therewith which may be necessary or
advisable, and all such actions of the Committee shall be binding upon all
participants.
4. Eligibility
Key employees of and consultants to the Company and its subsidiaries and
affiliated companies, including officers of the Company (who may also be
directors, but excluding members of the Committee, any person who serves only as
a director of the Company and any consultant to the Company or any of its
subsidiaries or affiliated companies who is also a director of the Company), as
may be selected from time to time by the Committee in its discretion, are
eligible to receive awards under the Plan. The Committee shall determine in its
sole discretion the number of shares to be awarded to each such participant.
5. Terms and Conditions of Awards
All shares of Common Stock awarded to participants under this Plan shall
be subject to the following terms and conditions, and to such other terms and
conditions not inconsistent with the Plan as shall be contained in each Award
Agreement ("Agreement") referred to in Paragraph 5(f):
(a) At the time of each award there shall be established for the
shares of each participant a "Restricted Period" which shall be not less
than one year. Such Restricted Period may differ between and among
participants and may have different expiration dates with respect to
portions of shares covered by the same award. The Committee may also
determine that the expiration of any Restricted Period shall be subject to
such additional terms and conditions as it decides in its sole discretion
and as set forth in the participant's Agreement.
(b) Shares of stock awarded to participants may not be sold,
encumbered or otherwise transferred, except as hereinafter provided,
during the Restricted Period pertaining to such shares. Except for such
restrictions on transfer, the participant shall have all the rights of a
stockholder including but not limited to the right to receive all
dividends paid on such shares (subject to the provisions of Paragraph 6)
and the right to vote such shares.
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<PAGE>
(c) If a participant ceases to be employed or retained by the
Company or any of its subsidiaries or affiliated companies for any reason
(including termination by reason of the fact that any corporation is no
longer a subsidiary or affiliated company), other than death, permanent
and total disability, or, in the case of an employee, retirement on or
after normal retirement date, all shares of stock theretofore awarded to
the participant which are still subject to the restrictions imposed by
Paragraph 5(b) shall upon such termination of employment or the consulting
relationship be forfeited and transferred back to the Company, provided,
however, that in the event such employment or consulting relationship is
terminated by action of the Company or any of its subsidiaries or
affiliated companies without cause or by agreement of the Company or any
of its subsidiaries or affiliated companies and the participant, the
Committee may, but need not, determine that some or all of the shares
shall be free of restrictions. For purposes of this Paragraph 5(c), a
participant's employment or consulting arrangement shall not be considered
terminated (i) in the case of transfers of employment or the consulting
arrangement among the Company, its subsidiaries and affiliated companies,
(ii) by virtue of a change of status from employee to consultant or from
consultant to employee, or (iii) in the case of interruption in service,
not exceeding one year in duration unless otherwise approved by the
Committee, for approved sick leave or other bona fide leave of absence.
(d) If a participant ceases to be employed or retained by the
Company or any of its subsidiaries or affiliated companies by reason of
death or permanent and total disability or if an employee ceases to be
employed by the Company or any of its subsidiaries or affiliated companies
by reason of retirement on or after normal retirement date, the
restrictions imposed by Paragraph 5(b) shall lapse with respect to the
shares then subject to restrictions, except to the extent provided to the
contrary in the Agreement.
(e) Each certificate issued in respect of shares awarded under the
Plan shall be registered in the name of the participant and deposited by
the participant with the Company, together with a stock power endorsed in
blank, and shall bear the following legend:
"The sale, encumbrance, or other transfer of this certificate and
the shares of stock represented hereby are subject to the terms and
conditions (including a contingent transfer obligation) contained in the
Masco Corporation Restricted Stock Incentive Plan and an agreement entered
into between the registered owner and Masco Corporation. Copies of such
Plan and Agreement are on file in the office of the Secretary of Masco
Corporation, Taylor, Michigan."
3
<PAGE>
(f) The participant shall enter into an Agreement with the Company
in a form specified by the Committee agreeing to the terms and conditions
of the award, the expiration of the Restricted Period as to the shares
covered by the award, and such other matters, including compliance with
applicable federal and state securities laws and methods of withholding or
providing for the payment of required taxes, as the Committee shall in its
sole discretion determine. The Committee may at any time amend the terms
of any Agreement consistent with the terms of the Plan, except that
without the participant's written consent no such amendment shall
adversely affect the rights of the participant who is a party to such
Agreement.
(g) At the expiration of the Restricted Period as to shares covered
by any award, the Company shall redeliver the stock certificates deposited
with it pursuant to Paragraph 5(e) and as to which the Restricted Period
has expired, as follows:
(1) if an assignment to a trust has been made in accordance
with Paragraph 5(i), to such trust; or
(2) if the Restricted Period has expired by reason of death
and a beneficiary has been designated in form approved by the
Company, to the beneficiary so designated; or
(3) in all other cases, to the participant or the legal
representative of the participant's estate.
Upon written request, the Company will instruct its stock transfer agent
that such certificates may be reissued without legend.
(h) Notwithstanding any of the provisions of this Plan or
instruments evidencing awards heretofore or hereafter granted hereunder,
in the case of a Change in Control of the Company, each award granted at
least one year prior thereto shall immediately become fully vested and
non-forfeitable and shall thereupon be distributed to participants as soon
as practicable, free of all restrictions. A Change in Control shall occur
if:
(1) any "person" or "group of persons" as such terms are used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act") other than pursuant to a transaction or
agreement previously approved by the Board directly or indirectly
purchases or otherwise becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) or has the right to acquire such
beneficial ownership (whether or not such right is exercisable
immediately, with the passage of
4
<PAGE>
time, or subject to any condition), of voting securities rep-
resenting 25% or more of the combined voting power of all
outstanding voting securities of the Company; or
(2) during any period of twenty four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's Board of Directors, and any new directors
whose election by such Board or nomination for election by
stockholders was approved by a vote of at least two-thirds of the
members of such Board who were either directors on such Board at the
beginning of the period or whose election or nomination for election
as directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
(i) Notwithstanding any other provision of this Plan, a participant
may assign all rights under any award to a revocable grantor trust
established by the participant for the sole benefit of the participant
during the life of the participant, and under the terms of which the
participant is and remains the sole trustee until death or physical or
mental incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee and the
participant shall deliver to the Committee a true copy of the agreement or
other document evidencing such trust. If in the judgment of the Committee
the trust to which a participant may attempt to assign rights under an
award does not meet the criteria of a trust to which an assignment is
permitted by the terms of this paragraph, or if after assignment, because
of amendment, by force of law or any other reason such trust no longer
meets such criteria, such attempted assignment shall be void and may be
disregarded by the Committee and the Company and all rights to any awards
shall revert to and remain solely in the participant. Notwithstanding a
qualified assignment, the participant, and not the trust to which rights
under an award may be assigned, for the purpose of determining compen-
sation arising by reason of the award shall continue to be considered an
employee or consultant, as the case may be, of the Company, a subsidiary
or affiliated company, but such trust and the participant shall be bound
by all of the terms and conditions of the Award Agreement and this Plan.
The Committee, the Company and its officers, agents and employees
may rely upon any beneficiary designation, assignment or other instrument
of transfer, copies of trust agreements and any other documents delivered
to them by or on behalf of the participant which they believe genuine and
any action taken by them in reliance thereon shall be conclusive and
binding upon the participant, his personal representatives and all persons
asserting a claim based on an award granted pursuant to this Plan. The
delivery by a participant of a
5
<PAGE>
beneficiary designation, or an assignment of rights under an award as per-
mitted by this Paragraph 5(i), shall constitute the participant's
irrevocable undertaking to hold the Committee, the Company and its
officers, agents and employees harmless against claims, including any cost
or expense incurred in defending against claims, of any person (including
the participant) which may be asserted or alleged to be based upon an
award subject to a beneficiary designation or an assignment. In addition,
the Company may decline to deliver shares to a beneficiary until it re-
ceives indemnity against claims of third parties satisfactory to the
Company. Issuance of shares as to which restrictions have lapsed in the
name of, and delivery to, the trust to which rights may be assigned shall
be conclusively considered issuance and delivery to the participant.
(j) The Committee, in its discretion and in accordance with the
procedures established by the Committee, may permit the participant to
satisfy, in whole or in part, the applicable income tax withholding
obligations when the restrictions imposed by Paragraph 5(b) lapse: (1) in
the case of participants who are employees of or consultants to MascoTech,
Inc. or any of its subsidiaries, by delivering from shares of common stock
of MascoTech, Inc. owned by the participant such number of shares having a
fair market value equal to the amount needed to satisfy such obligations;
or (2) in the case of all other participants, by having withheld from the
shares as to which the Restricted Period has expired or by delivering from
shares of Common Stock of the Company owned by the participant such number
of shares having a fair market value equal to the amount needed to satisfy
such obligations.
6. Changes in Capitalization
In the event there is a change in, reclassification, subdivision or
combination of, stock dividend on, or exchange of stock by the Company for the
outstanding Common Stock of the Company, the maximum aggregate number and class
of shares as to which awards may be granted under the Plan shall be appro-
priately adjusted by the Committee whose determination thereof shall be
conclusive. Unless the Committee shall otherwise determine, any shares of stock
or other securities received by a participant with respect to shares still
subject to the restrictions imposed by Paragraph 5(b) will be subject to the
same restrictions and shall be deposited with the Company.
6
<PAGE>
If the Company shall be consolidated or merged with another corporation,
the stock, securities or other property which a participant is entitled to
receive by reason of his ownership of the shares of stock subject to the
restrictions imposed pursuant to Paragraph 5(b) shall be subject to the same or
equivalent restrictions unless the Committee shall determine otherwise at that
time.
7. Amendment of the Plan
The Board of Directors may from time to time amend or discontinue the
Plan, except that without the approval of Stockholders no amendment shall
increase the total number of shares which may be awarded under the Plan, extend
the date for awards of shares under the Plan beyond December 31, 1991 or change
the standards of eligibility of employees eligible to participate in the Plan.
The total number of shares awardable under the Plan may, however, without
stockholder approval, be adjusted pursuant to the adjustment provisions
described in Paragraph 6 hereof.
8. Effective Date and Termination of Plan
The Plan shall become effective when approved by the stockholders of the
Company and no shares may be awarded under the Plan after December 31, 1991.
7
<PAGE>
February 28, 1995
Dear :
As you know, our company's Board of Directors has adopted a Plan whereby
supplemental retirement and other benefits, in addition to those provided under
the Company's pension and other benefit plans, will be made available to those
Company and subsidiary executives as may be designated from time to time by the
company's Chief Executive Officer. You have been previously designated as a
participant in the Plan by a letter agreement signed by you and dated February
12, 1992. This agreement amends and replaces in its entirety your previously
signed letter agreement and describes in full your benefits pursuant to the Plan
and all of the Company's obligations to you and yours to the Company under the
Plan. These benefits as described below are contractual obligations of the
Company.
For the purposes of this Agreement, words and terms are defined as follows:
a. "Retirement" shall mean your termination of employment with the
Company, on or after you attain age 65. Your acting as a consultant shall
not be considered employment.
b. "Average Compensation" shall mean the aggregate of your highest
three years' total annual cash compensation paid to you by the Company,
consisting of (i) base salaries and (ii) regular year-end cash bonuses
paid with respect to the years in which such salaries are paid, divided by
three.
c. If you become Disabled, "Total Compensation" shall mean your
annual base salary rate in the year in which you become Disabled plus the
regular year-end cash bonus paid to you for the year immediately prior
thereto.
d. "Surviving Spouse" shall be the person to whom you shall be
legally married (under the law of the jurisdiction of your permanent
residence) at the date of (i) your Retirement or death after attaining age
65 (if death
<PAGE>
Page 2 February 28, 1995
terminated employment with the Company) for the purposes of paragraphs 1,
2 and 3, (ii) your death for the purposes of paragraph 5, and (iii) your
Disability for the purposes of paragraphs 6 and 7. For the purposes of
paragraphs 10a, 10e, 10f, 10g and 10h, "Surviving Spouse" shall be any
spouse entitled to survivor's benefits.
e. "Disability" and "Disabled" shall mean your being unable to
perform your duties as a Company executive by reason of your physical or
mental condition, prior to your attaining age 65, provided that you have
been employed by the Company for two consecutive Years or more.
f. "Company" shall mean Masco Corporation or any corporation in
which Masco Corporation or a subsidiary owns stock possessing at least 20%
of the total combined voting power of all classes of stock.
g. "Year" shall mean twelve full consecutive months, and "year"
shall mean a calendar year.
h. "Plan Limitation" for any year shall mean (x) for 1989,
$300,000 multiplied by the Cost of Living Factor for 1988, and (y) for any
year subsequent to 1989, the Plan Limitation for the immediately preceding
year multiplied by the Cost of Living Factor for such preceding year.
i. "Cost of Living Factor" for any year shall mean, except as
otherwise provided generally with respect to the Plan by the Company's
Board of Directors, the quotient (in no event to exceed 1.03 or to be less
than .97) obtained by dividing the monthly Consumer Price Index Number (as
compiled in the Consumer Price Index for Urban Consumers by the Bureau of
Labor Statistics) for the month of December in such year by the monthly
Consumer Price Index Number for the immediately preceding month of
December.
j. A "Change in Control" shall be deemed to have occurred if,
during any period of twenty-four consecutive calendar months, the
individuals who at the beginning of such period constitute the Company's
Board of Directors, and any new directors whose election by such Board or
nomination for election by stockholders was approved by a vote of at least
two-thirds of the members of such Board who were either directors on such
Board at the beginning of the period or whose election or nomination for
election as directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
<PAGE>
Page 3 February 28, 1995
1. In accordance with the Plan, upon your Retirement the Company will pay
you annually during your lifetime 60% of your Average Compensation, less: (i) a
sum equal to the annual benefit which would be payable to you upon your
Retirement if benefits payable to you under the Company funded qualified pension
plans and the defined benefit (pension) plan restoration provisions of the
Company's Retirement Benefits Restoration Plan and any similar plan were
converted to a life annuity, or if you are married when you retire, to a joint
and spouse survivor life annuity, (ii) a sum equal to the annual benefit which
would be payable to you upon Retirement if your vested accounts in the Company's
Future Service Profit Sharing Trust and the defined contribution (profit
sharing) restoration provisions of the Company's Retirement Benefits Restoration
Plan and any similar plan were converted to a life annuity and (iii) any
retirement benefits payable to you by reason of employment by your prior
employers (excluding, however, from such deduction any portion thereof, and
earnings thereon, determined by the committee referred to in paragraph 10 to
have been contributed by you rather than your prior employers). In all cases
the amount offset pursuant to these subsections (i) and (ii) shall be determined
prior to the effect of any payments from the plans and trust referred to therein
which are authorized pursuant to a Qualified Domestic Relations Order under
ERISA.
2. Upon your death after Retirement or while employed by the Company
after attaining age 65, your Surviving Spouse shall receive for life 75% of the
annual benefit pursuant to paragraph 1 of this Agreement which was payable to
you prior to your death (or, if death terminated employment after attaining age
65, which would have been payable to you had your Retirement occurred
immediately prior to your death).
3. Upon your Retirement the Company will provide or purchase for you and
your spouse's benefit, or at its option reimburse you or your Surviving Spouse
for premiums paid, during your joint and several lives, such supplemental
medical insurance as the Company may deem advisable from time to time.
4. Under no circumstances (i) will any retirement benefits be paid to
you or your Surviving Spouse pursuant to this Agreement unless you were employed
by the Company or Disabled on your Retirement, or were employed by the Company
at the time of your death after attaining age 65, and (ii) will you or your
Surviving Spouse be entitled to receive retirement benefits under this Agreement
if your Retirement commences prior to your attaining age 65.
<PAGE>
Page 4 February 28, 1995
5. If while employed by the Company you die prior to your attaining age
65 leaving a Surviving Spouse, and provided you shall have been employed by the
Company for two consecutive Years or more, your Surviving Spouse shall receive
annually for life 45% of your Average Compensation, less: (i) a sum equal to
the annual benefit which would be payable to your Surviving Spouse under Company
funded qualified pension plans and the defined benefit (pension) plan
restoration provisions of the Company's Retirement Benefits Restoration Plan and
any similar plan if such benefit were converted to a life annuity, and (ii) a
sum equal to the annual payments which would be received by your Surviving
Spouse as if your spouse were designated as the beneficiary of your vested
accounts in the Company's Future Service Profit Sharing Trust and the defined
contribution (profit sharing) restoration provisions of the Company's Retirement
Benefits Restoration Plan and any similar plan and such accounts were converted
to a life annuity. In all cases the amount offset pursuant to these subsections
(i) and (ii) shall be determined prior to the effect of any payments from the
plans and trust referred to therein which are authorized pursuant to a Qualified
Domestic Relations Order under ERISA. No death benefits are payable except to
your Surviving Spouse.
6. If you shall have been employed by the Company for two Years or more
and while employed by the Company you become Disabled prior to your attaining
age 65, until the earlier of your death, termination of Disability or attaining
age 65 the Company will pay you an annual benefit equal to 60% of your Total
Compensation less any benefits payable to you pursuant to long-term disability
insurance or other plans the cost of which is paid by the Company. If your
Disability continues until you attain age 65, you shall be considered retired
and you shall receive retirement benefits pursuant to paragraph 1 above, based
upon your Average Compensation as of the date it is determined you became
Disabled.
7. If you die leaving a Surviving Spouse while receiving Disability
benefits pursuant to paragraph 6 of this Agreement, notwithstanding paragraph 4
you will be deemed to have retired on your death and your Surviving Spouse shall
receive for life 75% of the annual benefit which would have been payable to you
if you had retired on the date of your death and your benefit determined
pursuant to paragraph 1, based upon your Average Compensation as of your
becoming Disabled.
8. Notwithstanding any of the provisions of this Agreement, the maximum
retirement, disability and death benefits payable to you and your spouse
pursuant to this Agreement for any year shall in no event exceed the higher of
(A) $500,000 less those sums to be deducted from benefits pursuant to clauses
(i),
<PAGE>
Page 5 February 28, 1995
(ii) and (iii) of paragraph 1, clauses (i) and (ii) of paragraph 5, or under
paragraph 6, whichever is applicable, or (B) the Plan Limitation for the year in
which such benefits were first paid, less the aggregate annual benefit with
respect to the Company's Retirement Benefits Restoration Plan (and any future
non-qualified retirement plan) to be deducted (x) under clauses (i) and (ii) of
paragraph 1, (y) under paragraph 5 should you die while employed prior to
attaining age 65 or (z) under paragraph 6 should you become disabled prior to
attaining age 65.
9. If you are eligible to receive benefits hereunder, unless otherwise
specifically agreed by the Company in writing, you will not be able to receive
benefits under any other Company sponsored non-qualified retirement plans other
than the Company's Retirement Benefits Restoration Plan.
10. We also agree upon the following:
a. The Compensation Committee of the company's Board of Directors,
or any other committee however titled which shall be vested with authority
with respect to the compensation of the company's officers and executives,
shall have the exclusive authority to make all determinations which may be
necessary in connection with this Agreement including the date of and
whether you are Disabled, the amount of annual benefits payable to you by
reason of employment by other employers, the interpretation of this
Agreement, and all other matters or disputes arising under this Agreement.
The determinations and findings of the Compensation Committee or such
other committee of the company's Board of Directors shall be conclusive
and binding, without appeal, upon both of us.
b. You will not during your employment or Disability, and after
Retirement or the termination of your employment, for any reason disclose
or make use of for your own or another person's benefit under any
circumstances any of the Company's Proprietary Information. Proprietary
Information shall include trade secrets, secret processes, information
concerning products, developments, manufacturing techniques, new product
or marketing plans, inventions, research and development information or
results, sales, pricing and financial data, information relating to the
management, operations or planning of the Company and any other
information treated as confidential or proprietary.
c. If your employment by the Company shall terminate for any
reason whatsoever prior to your Retirement other than by reason of your
death or Disability, for a period of two years after the termination of
your employment, and if
<PAGE>
Page 6 February 28, 1995
your employment shall be terminated by reason of Retirement or any
Disability during such time as you shall receive retirement or disability
benefits pursuant to this Agreement, you agree that you will not directly
or indirectly engage in any business activities, whether as a consultant,
advisor or otherwise, in which the Company is engaged in any geographic
area in which the products or services of the Company have been sold,
distributed or provided during the five year period prior to the date of
termination of employment or Retirement.
In addition to the foregoing and provided no "Change in Control" has
occurred, if while you are receiving retirement or other benefits pursuant
to this Agreement, in the judgment of the committee you directly or
indirectly engage in activity or act in a manner which can be considered
adverse to the interest of the Company or any of its direct or indirect
subsidiaries or affiliated companies, the committee may terminate your
rights to any further benefits hereunder.
d. Except as may be provided to the contrary in a duly authorized
written agreement between yourself and the Company you acknowledge that
the Company has made no commitments to you of any kind with respect to the
continuation of your employment, which we expressly agree is an employment
at will, and you or the Company shall have the unrestricted right to
terminate your employment with or without cause, at any time in your or
its discretion.
e. At the Company's request, expressed through a Company officer,
you agree to provide such information with respect to matters which may
arise in connection with this Agreement as may be deemed necessary by the
Company or the Compensation or other committee, including for example only
and not in limitation, information concerning benefits payable to you from
third parties, and you further agree to submit to such medical
examinations by duly licensed physicians as may be requested by the
Company or such committee from time to time. You also agree to direct
third parties to provide such information, and your Surviving Spouse's
cooperation in providing such information is a condition to the receipt of
survivor's benefits under this Agreement.
f. To the extent permitted by law, no interest in this Agreement
or benefits payable to you or to your Surviving Spouse shall be subject to
anticipation, or to pledge, assignment, sale or transfer in any manner nor
shall
<PAGE>
Page 7 February 28, 1995
you or your Surviving Spouse have the power in any manner to charge or
encumber such interest or benefits, nor shall such interest or benefits be
liable or subject in any manner for the liabilities of you or your
Surviving Spouse's debts, contracts, torts or other engagements of any
kind.
g. No person other than you and your Surviving Spouse shall have
any rights or property interest of any kind whatsoever pursuant to this
Agreement, and neither you nor your Surviving Spouse shall have any rights
hereunder other than those expressly provided in this Agreement. Upon the
death of you and your Surviving Spouse no further benefits of whatsoever
kind or nature shall accrue or be payable pursuant to this Agreement.
h. All benefits payable pursuant to this Agreement shall be paid
in installments of one-twelfth of the annual benefit, or at such shorter
intervals as may be deemed advisable by the Company in its discretion,
upon receipt of your or your Surviving Spouse's written application, or by
the applicant's personal representative in the event of disability.
i. All benefits under this Agreement shall be payable from the
Company's general assets, which assets are subject to the claims of
general creditors, and are not set aside for your or your Surviving
Spouse's benefit.
j. This Agreement shall be governed by the laws of the State of
Michigan.
11. We have agreed that the determinations of the committee described in
paragraph 10a shall be conclusive as provided in such paragraph, but if for any
reason a claim is asserted which subverts the provisions of paragraph 10a, we
agree that, except for causes of action which may arise under paragraph 10b and
the first paragraph of paragraph 10c, arbitration shall be the sole and
exclusive remedy to resolve all disputes, claims or controversies which could be
the subject of litigation (hereafter referred to as "dispute") involving or
arising out of this Agreement. It is our mutual intention that the arbitration
award will be final and binding and that a judgment on the award may be entered
in any court of competent jurisdiction and enforcement may be had according to
its terms.
The arbitrator shall be chosen in accordance with the commercial
arbitration rules of the American Arbitration Association and the expenses of
the arbitration shall be borne equally by the parties to the dispute. The place
of the
<PAGE>
Page 8 February 28, 1995
arbitration shall be the principal offices of the American Arbitration
Association in the metropolitan Detroit area.
The arbitrator's sole authority shall be to apply the clauses of this
Agreement.
We agree that the provisions of this paragraph 11, and the decision of the
arbitrator with respect to any dispute, with only the exception provided in this
paragraph 11, shall be the sole and exclusive remedy for any alleged cause of
action in any manner based upon or arising out of this Agreement. Subject to
the foregoing exception, we acknowledge that since arbitration is the exclusive
remedy, neither of us or any party claiming under this Agreement has the right
to resort to any federal, state or local court or administrative agency
concerning any matters dealt with by this Agreement and that the decision of the
arbitrator shall be a complete defense to any action or proceeding instituted in
any tribunal or agency with respect to any dispute. The arbitration provisions
contained in this paragraph shall survive the termination or expiration of this
Agreement, and shall be binding on our respective successors, personal
representatives and any other party asserting a claim based upon this Agreement.
We further agree that any demand for arbitration must be made within one
year of the time any claim accrues which you or any person claiming hereunder
may have against the Company; unless demand is made within such period it is
forever barred.
We are pleased to be able to make this supplemental plan available to you.
Please examine the terms of this Agreement carefully and at your earliest
convenience indicate your assent to all of its terms and conditions by signing
and dating where provided below and returning a signed copy to me.
Sincerely,
MASCO CORPORATION
By /s/Richard A. Manoogian
Richard A. Manoogian
Chief Executive Officer
_______________________
DATE:__________________
<PAGE>
MASCO CORPORATION RETIREMENT
BENEFIT RESTORATION PLAN
SECTION 1
ADOPTION OF PLAN
1.1 Adoption. Masco Corporation (Masco) hereby adopts the Masco
Corporation Retirement Benefit Restoration Plan (Plan), effective January 1,
1995 (Effective Date).
1.2 Purpose. The sole purpose of the Plan is to provide benefits
to a select group of management or highly compensated employees that would be
provided to such employees who terminate employment or retire after the
Effective Date under certain retirement plans of Masco Corporation and its
subsidiaries, which plans are set forth in Appendix "A" hereto and are qualified
plans under Section 401(a) of the Internal Revenue Code of 1986, as amended
(Code) (the "Qualified Plans"), but for the benefit limitations of the Code, in
order to encourage the continued employment and diligent service of such
employees with Masco following the Effective Date. Accordingly (by way of
example and not limitation), in no event shall the provisions of the Plan be
construed to benefit any employee whose termination of employment occurred prior
to the Effective Date.
1.3 Construction. The Plan shall be construed in accordance with
Michigan law, except where preempted by federal law. It is intended that the
Plan shall be unfunded and maintained by Masco primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees, so that the Plan is exempt from the requirements of Parts
2, 3 and 4 of the Employee Retirement Income Security Act of 1974, as amended
(ERISA). All provisions of the Plan shall be interpreted in accordance with
such intentions.
<PAGE>
SECTION 2
COVERAGE
2.1 Covered Employees. The coverage of the Plan shall be limited
to highly-compensated or management employees of Masco and of those subsidiaries
of Masco the Qualified Plans of which are listed in Appendix "A", who (a)
receive from Masco or the subsidiary of Masco which is the employer of such
person compensation otherwise eligible for coverage under the terms of such
Qualified Plan for any calendar year which compensation exceeds $150,000 or such
other adjusted limit as provided by Section 401(a)(17) of the Code, or (b) whose
benefits or contributions under the Qualified Plans are reduced due to the
application of Section 415 of the Code.
2.2 Commencement and Cessation of Coverage. An employee shall be
covered under the Plan commencing on the later of (a) the Effective Date or (b)
the earlier of the date that his plan-eligible compensation described in Section
2.1 first exceeds the annual limitation amount described in Section 2.1 or the
date his benefits or contributions under the Qualified Plans are first reduced
by the application of Code Section 415. An employee shall cease to be covered
by the Plan on his date of termination of employment from Masco and its
subsidiaries. If prior to such termination an employee ceases to qualify for
coverage under the Plan due to some other event (by way of examples and not as
limitation, a decrease in Plan-eligible compensation or the commencement of
employment with a Masco subsidiary which has no Qualified Plan or has
discontinued its Qualified Plan), his coverage under the Plan shall cease as of
the time such disqualifying event occurs and only the benefits accrued hereunder
up to such time shall be payable from this Plan.
2
<PAGE>
SECTION 3
BENEFITS
3.1 Amount. Subject to Section 3.3 hereof, a covered employee
shall be entitled to either or both, as applicable, the supplemental retirement
benefits described below:
(a) An annual amount equal to the benefit which would have been
payable to the employee under any defined benefit (pension) Qualified
Plan in which he is a participant ("Qualified Pension Plan") but for
any benefit limitations imposed by the Code on the computation of
such benefit, reduced (but not below zero) by
(b) any benefits which the employee is eligible to receive,
prior to the giving effect to any qualified domestic relations order,
under any such Qualified Pension Plan,
each benefit being expressed for this purpose in the normal form of payment
under said Qualified Pension Plan, plus
(c) A single lump sum payment equal to the sum of amounts which
would have been contributed to the account of the employee as a
company contribution with respect to periods after December 31, 1993
under any defined contribution (profit sharing) Qualified Plan in
which he is a participant (but in no case including any amounts,
however characterized, which the employee or the company may have
contributed to any such plan pursuant to the provisions of Section
401(k) or 401(m) of the Code) ("Qualified Profit Sharing Plan") but
for any benefit limitations imposed by the Code on the contribution
amount, plus
(d) investment adjustments applied to the contribution amounts
of Section 3.1(c) which adjustments shall be applied to such accounts
(i)
3
<PAGE>
utilizing the same provisions for calculating the effect of
investment earnings (or losses) as prevail under the terms of any
such Qualified Profit Sharing Plan and (ii) utilizing the amount of
investment earnings (or loss) as is experienced in a given year in
the Masco Master Profit Sharing Trust or other investment vehicle in
which the assets of any such Qualified Profit Sharing Plan are
invested (and in no case applying any adjustments for forfeitures of
any kind) reduced (but not below zero) by
(e) the covered employee's account balance attributable to
company profit sharing contributions made with respect to periods
after December 31, 1993 which the employee is eligible to receive,
prior to the giving effect to any qualified domestic relations order,
under any such Qualified Profit Sharing Plan,
provided, however, that any lump sum payment made pursuant to this Plan shall
have no adjustment the purpose of which is to make such payment equivalent after
the effect of any taxes which may have to be paid by the employee because such
lump sum payments from this Plan are taxable when received as ordinary income
and may not be eligible for rollover or other tax-advantaged treatment under the
Code.
3.2 Timing and Form of Payments. (a) Retirement benefit payments
hereunder which are supplemental to a Qualified Pension Plan shall be made at
the same time as benefit payments are made from the Qualified Pension Plan and
shall be payable (i) for an employee who is unmarried at the time payments
commence, in the form of a single life annuity, or (ii) for any employee who is
married when payments commence, in the form of a 50% joint and survivor annuity
with the employee's spouse, unless, in either case, the employee validly elects
another form of payment for benefits under the Qualified Pension Plan, in which
case the supplemental retirement benefit hereunder shall be paid in the same
form as benefits are paid under the Qualified Pension Plan, computed using the
same formulas and actuarial factors as set forth for the determination of
optional forms
4
<PAGE>
of benefits under such plan; for purposes of this Section 3.2(a), an employee's
marital status and spouse shall be determined in accordance with the Qualified
Pension Plan.
(b) Retirement benefit payments hereunder which are supplemental to
a Qualified Profit Sharing Plan shall be payable in a lump sum and shall be made
at the time and to the same person as the lump sum payment is made from the
Qualified Profit Sharing Plan.
3.3 Forfeitability. Payment of benefits under the Plan shall be
conditioned upon receipt of benefit payments from the respective Qualified Plans
and shall be vested in the same manner and to the same extent as benefits under
such Qualified Plans.
3.4 No Payment During Employment. Notwithstanding the foregoing, no
periodic payments computed under paragraphs (a) and (b) of Section 3.1 of this
Plan shall be made during such time as any person both receives payments from
any Qualified Plan and is employed by Masco or any affiliated company, and no
lump sum payment computed under paragraphs (c), (d) and (e) of Section 3.1 of
this Plan shall be made until after the covered employee's termination of
employment.
5
<PAGE>
SECTION 4
COST OF BENEFITS
4.1 Current Expense. The entire cost of providing benefits under
the Plan, including the costs of the Plan Administrator, shall be paid by Masco
out of its current operating budget, and Masco's obligations under the Plan
shall be an unfunded and unsecured promise to pay. Masco shall not be obligated
under any circumstances to separately fund its obligations under the Plan.
4.2 Option to Fund Informally. Notwithstanding Section 4.1, Masco
may, at its sole option, or by agreement, informally fund its obligations under
the Plan in whole or in part, provided, however, in no event shall such informal
funding be construed to create any trust fund, escrow account or other security
for an employee with respect to the payment of benefits under the Plan, other
than as permitted under Internal Revenue Service and Department of Labor rules
and regulations for unfunded supplemental retirement plans. Furthermore, if
Masco decides to informally fund the Plan, in whole or in part, by procuring, as
owner, life insurance for its own benefit on the lives of employees, the form of
such insurance and the amounts thereof shall be the sole decision of Masco, and
in no event shall an employee have any incidents of ownership in any such
policies of insurance.
4.3 Physical Examinations. If a physical examination is required
for Masco to obtain insurance for covered employees under Section 4.2, each
employee agrees to undergo such physical examinations as may be required by the
insurance carrier. Such physical examinations shall be conducted by a physician
approved by Masco, at the expense of Masco.
4.4 No Employee Contributions or Loans. No loans or hardship
distributions or contributions by employees are permitted or required under the
Plan.
6
<PAGE>
SECTION 5
ADMINISTRATION
5.1 Plan Administrator and Named Fiduciary. The Plan Administrator
and Named Fiduciary of the Plan for purposes of ERISA shall be Masco Corporation
whose business address is 21001 Van Born Road, Taylor, MI 48180, and whose
telephone number is (313) 274-7400. Masco shall have the right to change the
Plan Administrator and Named Fiduciary of the Plan at any time, and to change
the address and telephone number of the same. Masco shall give each covered
employee written notice of any such change in the Plan Administrator and Named
Fiduciary, or in the address or telephone number of the same.
5.2 Claims Procedure. The Plan Administrator has the power to
interpret all provisions of the Plan and make final determinations concerning
the meaning of the Plan and the right of any person to benefits under the Plan.
Each covered employee, or other person claiming through the employee,
must file a written claim for benefits with the Plan Administrator as a
prerequisite to the payment of benefits under the Plan. Any denial by the Plan
Administrator of a claim for benefits under the Plan by an employee or other
person (collectively referred to as "claimant") shall be stated in writing by
the Plan Administrator and delivered or mailed to the claimant within 90 days
after receipt of the claim, unless special circumstances require an extension of
time for processing the claim. If such an extension of time is required,
written notice of the extension shall be furnished to the claimant prior to the
termination of the initial 90-day period. In no event shall such extension
exceed a period of 90 days from the end of the initial period.
Any notice of denial shall set forth the specific reasons for the
denial, specific reference to pertinent provisions of the Plan upon which the
denial is based, a
7
<PAGE>
description of any additional material or information necessary for the claimant
to perfect his claim, with an explanation of why such material or information is
necessary, and any explanation of claim review procedures under the Plan,
written to the best of the Plan Administrator's ability in a manner that may be
understood without legal or actuarial counsel.
A claimant whose claim for benefits has been wholly or partially
denied by the Plan Administrator may request, within 90 days following the date
of such denial, in a writing addressed to the Plan Administrator, a review of
such denial. The claimant shall be entitled to submit such issues or comments
in writing or otherwise, as he shall consider relevant to a determination of his
claim, and may include a request for a hearing in person before the Plan
Administrator. Prior to submitting his request, the claimant shall be entitled
to review such documents as the Plan Administrator shall agree are pertinent to
his claim. The claimant may, at all stages of review, be represented by
counsel, legal or otherwise, of his choice, provided that the fees and expenses
of such counsel shall be borne by the claimant.
All requests for review shall be promptly resolved. The Plan
Administrator's decision with respect to any such review shall be set forth in
writing and shall be mailed to the claimant not later than 60 days following
receipt by the Plan Administrator of the claimant's request unless special
circumstances, such as the need to hold a hearing, require an extension of time
for processing, in which case the Plan Administrator's decision shall be so
mailed not later than 120 days after receipt of such request.
5.3 Arbitration. Exhaustion of the claim and claim review
procedures of Section 5.2 is prerequisite to any further consideration of a
claim. In the event that any claim remains fully or partially unresolved after
exhaustion of the claim and claim review procedures of Section 5.2, any
remaining dispute shall, within 30 days of the date of the Plan Administrator's
final decision on review, be submitted to arbitration, which shall be the sole
and exclusive remedy. The arbitration decision shall be final and binding on
8
<PAGE>
the Plan, Masco, the claimant, and any other party involved. All claims shall
be arbitrated in Taylor, Michigan. The arbitrator shall be chosen in accordance
with the Voluntary Labor Arbitration Rules of the American Arbitration
Association then in effect, and the expense of the arbitration shall be shared
equally by Masco and the claimant. Any claim shall be deemed waived unless
presented within the time limits specified in Section 5.2 and this Section 5.3.
The arbitrator shall not have jurisdiction or authority to change, add to or
subtract from any of the provisions of the Plan. The arbitrator's sole
authority shall be to interpret or apply the provisions of the Plan. Because
arbitration is the exclusive remedy with respect to any claim hereunder, neither
Masco, the claimant nor any other party has the right to resort to any federal,
state or local court or administrative agency concerning any claim, and the
decision of the arbitrator shall be a complete defense to any suit, action or
proceeding instituted in any federal, state or local court or before any
administrative agency with respect to any dispute which is arbitrable as herein
set forth. The arbitration provisions hereof shall, with respect to any claim,
survive the termination of the Plan.
9
<PAGE>
SECTION 6
LIMITATION OF COVERED EMPLOYEE'S RIGHTS
6.1 No Contract of Employment. The Plan shall not be deemed to
create a contract of employment between Masco or any Masco subsidiary and any
covered employee and shall create no right in any covered employee to continue
in the employ of Masco or any of its subsidiaries for any specific period of
time, or to create any other rights in any covered employee or obligations on
the part of Masco, except as are set forth explicitly herein or in a written
employment contract. In consideration of his coverage hereunder each covered
employee shall be deemed to have agreed that Masco has the right to terminate
him at any time, with or without cause, and nothing in the Plan shall restrict
the right of any covered employee to terminate his employment.
6.2 Unsecured Creditor. The rights of any employee or any person
claiming through the employee under the Plan shall be solely those of an
unsecured general creditor of Masco. Any employee, or any person claiming
through the employee, shall only have the right to receive from Masco those
payments as specified herein. Each covered employee agrees that he or any
person claiming through him shall have no rights or interests in any asset of
Masco, including any insurance policies or contracts which Masco may possess to
informally fund the Plan.
6.3 No Trust. No asset used or acquired by Masco in connection
with the liabilities it has assumed under the Plan shall be deemed to be held
under any trust for the benefit of any employee, nor shall any such asset be
considered security for the performance of the obligations of Masco, but shall
be, and remain, a general unpledged and unrestricted asset of Masco, except as
may be provided by separate agreement and as permitted under Internal Revenue
Service and Department of Labor rules and regulations for unfunded supplemental
retirement plans.
10
<PAGE>
SECTION 7
AMENDMENT OR TERMINATION
7.1 Right to Amend or Terminate Plan. Masco reserves the right to
amend the Plan in any manner deemed appropriate by Masco's Board of Directors,
and Masco reserves the right to terminate the Plan for any reason and at any
time in whole or part by action of the Board of Directors.
7.2 Limitations. Notwithstanding Section 7.1, no such amendment or
termination shall reduce or otherwise affect the benefits payable to or on
behalf of any covered employee that have accrued prior to such amendment or
termination without the written consent of the employee (or beneficiary, if
applicable). In addition, the complete or partial termination of this Plan,
should it occur or be deemed by facts and circumstances to have occurred, shall
have the same effect on the vesting of benefits accrued to date under this Plan
as in the case of a complete or partial termination of a Qualified Plan.
7.3 Payment of Benefits Upon Termination. Upon termination or
partial termination of the Plan Masco may elect the method by which benefits
accrued through the date of such termination or partial termination shall be
provided. Such election may include the payment of the present value of all
such accrued benefits directly to covered employees (or beneficiaries, if
applicable) or any other method of payment or funding which Masco may, in its
sole discretion, determine.
11
<PAGE>
SECTION 8
MISCELLANEOUS PROVISIONS
8.1 Independence of Benefits. Except as otherwise provided herein
or pursuant to the terms of any separate agreement with an employee, the
benefits payable under the Plan shall be independent of, and in addition to, any
other benefits or compensation, whether by salary, or bonus or otherwise,
payable under any employment agreements that now exist or may hereafter exist
from time to time between Masco and any employee. The Plan does not involve a
reduction in salary or foregoing of an increase in future salary by any
employee, nor does the Plan in any way affect or reduce the existing and future
compensation and other benefits of any employee.
8.2 Nonalienation of Benefits. Except insofar as this provision
may be contrary to applicable law (such as an order of divorce or separation),
no sale, transfer, alienation, assignment, pledge, collateralization, or
attachment of any benefits under the Plan shall be valid or recognized by Masco.
8.3 Payments for the Benefit of Employee. In the event that Masco
shall find that any person to whom a benefit is payable under the Plan is unable
to care for his affairs because of illness or accident, is otherwise mentally or
physically incompetent, or is unable to give a valid receipt, Masco may cause
the payments becoming due to such person to be paid to another individual for
such person's benefit, without responsibility on the part of Masco to follow
application of such payment. Any such payment shall be a payment on account of
such person and shall operate as a complete discharge of Masco from all
liability under the Plan.
8.4 Use of Words. Wherever any words are used in the Plan in the
masculine gender, they shall be construed as
12
<PAGE>
though they also were used in the feminine gender in all cases where they would
so apply, and wherever any words are used in the Plan in the singular forms they
shall be construed as though they also were used in the plural form in all cases
where they would so apply, and vice versa.
8.5 Headings. Headings of Sections herein are inserted for
convenience of reference. They constitute no part of the Plan and are not to be
considered in the construction of the Plan.
8.6 Savings Clause. If any provisions of the Plan shall be for any
reason invalid or unenforceable, the remaining provisions nevertheless shall be
carried into effect.
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SECTION 9
DEFINITIONS
Terms capitalized in the text of this Plan shall have the meanings
referred to below, unless the context requires otherwise. Terms not defined
herein shall be construed in reference to the same or similar terms as used in
the applicable Qualified Plan.
9.1 Code. See Section 1.2.
9.2 Effective Date. See Section 1.1.
9.3 ERISA. See Section 1.3.
9.4 Plan. See Section 1.1.
9.5 Masco. See Section 1.1.
14
<PAGE>
SECTION 10
EXECUTION
IN WITNESS WHEREOF, Masco Corporation has caused the Plan to be
executed on , 1995.
Masco Corporation
By:
Its_______________________
15
<PAGE>
APPENDIX A
RETIREMENT PLANS LIST
MASCO CORPORATION
DEFINED BENEFIT PLANS DEFINED CONTRIBUTION PLANS
Berkline Associates Pension Plan Masco Building Products Corporation
Salaried Retirement Plan
Masco Corporation Home Furnishings Masco Corporation Future Service
and Building Products Pension Plan Profit Sharing Plan
Masco Corporation Salaried Masco Corporation Master Defined
Employees' Pension Plan Contribution Plan
16
<PAGE>
Exhibit 11
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Primary and Fully Diluted Per Share Earnings
(Including Effect of Full Dilution)
1994 1993 1992
(In thousands except as indicated)
Shares for computation of primary and
fully diluted earnings per share:
Average number of shares outstanding.... 158,800 152,700 151,700
Common stock equivalents:
Convertible debentures.............. 4,200 4,210 4,210
Stock options....................... 800 1,520 1,210
Total shares............................ 163,800 158,430 157,120
Net income.................................. $193,700 $221,100 $183,100
Addback of debenture interest, net.......... 5,880 5,880 5,970
Net income, as adjusted..................... $199,580 $226,980 $189,070
Primary and fully diluted earnings per
share (in dollar amounts)................. $1.22 $1.45 $1.21
The above dilutive influences are less than 3%.
<PAGE>
Exhibit 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Thousands of Dollars)
Year Ended December 31
1994 1993 1992 1991 1990
Earnings Before Income Taxes
And Fixed Charges:
Income before income taxes $322,600 $362,600 $304,800 $ 97,600 $235,900
Deduct/add equity in
undistributed (earnings)
loss of fifty-percent-
or-less-owned companies 101,310 (18,740) (17,290) 12,640 8,760
Add dividends received from
fifty-percent-or-less-
owned companies 6,720 4,940 4,100 25,450 1,780
Add interest on indebtedness,
net 103,800 104,080 100,490 124,950 125,770
Add amortization of debt
expense 2,220 2,650 2,710 1,630 1,420
Add one-third of rentals 11,180 10,970 10,800 12,530 9,610
Earnings before income
taxes and fixed charges $547,830 $466,500 $405,610 $274,800 $383,240
Fixed charges:
Interest on indebtedness $107,510 $105,420 $113,670 $128,450 $125,770
Amortization of debt expense 2,220 2,650 2,710 1,630 1,420
One-third of rentals 11,180 10,970 10,800 12,530 9,610
$120,910 $119,040 $127,180 $142,610 $136,800
Ratio of earnings to fixed
charges 4.5 3.9 3.2 1.9 2.8
<PAGE>
Exhibit 21
MASCO CORPORATION
(a Delaware Corporation)
Subsidiaries
Jurisdiction of
Incorporation
Name or Organization
Alsons Corporation Michigan
American Metal Products Company Delaware
Ameri-Tec Products Company, Inc. Delaware
A.M.P. Industrial Mexicana S.A. de C.V. Mexico
American Shower & Bath Corporation Michigan
Ametex Fabrics, Inc. Delaware
Aqua Glass Corporation Tennessee
Aqua Glass West, Inc. Delaware
Tombigbee Transport Corporation Tennessee
Auto-Graph Computer Designing Systems, Inc. Kentucky
Baldwin Hardware Corporation Pennsylvania
Baldwin Hardware Service Corp. Delaware
The Berkline Corporation Delaware
Berkline Inc. Quebec
Brass-Craft Manufacturing Company Michigan
Tempered Products, Inc. Taiwan
Plumbers Quality Tool Mfg. Co., Inc. Michigan
Brass-Craft Holding Company Michigan
Brass-Craft Canada, Ltd. Canada
Brass-Craft Western Company Texas
Thomas Mfg. Company Inc. of Thomasville North Carolina
Brush Creek Ranch II, Inc. Missouri
Marge Carson, Inc. California
Cal-Style Furniture Mfg. Co. California
Computer Design, Inc. Michigan
Composite Products Inc. Delaware
Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly-owned.
Certain of these companies may also use tradenames or other assumed names in the
conduct of their business.
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
Drexel Heritage Furnishings Inc. New York
D-H Retail Space, Inc. Delaware
Drexel Heritage Advertising, Inc. Delaware
Drexel Heritage Home Inspiration, Inc. Delaware
Frederick Edward, Inc. North Carolina
Epic Fine Arts Company Delaware
Anderson & Co. Fine Arts Inc. Michigan
Morning Star Gallery, Ltd. New Mexico
Fieldstone Cabinetry, Inc. Iowa
Fieldstone Transportation Company Iowa
Flint & Walling Industries, Inc. Delaware
Gamco Products Company Delaware
Gibraltar Lock Co. Ltd. Canada
Henredon Furniture Industries, Inc. North Carolina
Henredon Transportation Co. North Carolina
Interior Fabric Design, Inc. New York
Intro Europe, Inc. North Carolina
Intro Europe, B.V. Netherlands
J.H. Industries, Inc. California
Fillpro Products, Inc. California
Kenco Communications, Inc. Delaware
KraftMaid Cabinetry, Inc. Ohio
KraftMaid Trucking, Inc. Ohio
La Barge Mirrors, Inc. Michigan
Landex, Inc. Michigan
Landex of Wisconsin, Inc. Wisconsin
Lexington Furniture Industries, Inc. North Carolina
Hickorycraft Transportation Inc. Delaware
Lineage Home Furnishings, Inc. Delaware
Lineage Services Incorporated Delaware
Maitland-Smith U.S., Inc. North Carolina
Maitland-Smith Asia Holdings Limited Vanuatu
Cebu Agency Limited Hong Kong
Design Agency Limited Hong Kong
Maitland-Smith Fine Furnishings Ltd. Hong Kong
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
Maitland-Smith Pacific, Inc. Vanuatu
Maitland-Smith Philippines Philippines
Mandaue Holdings Incorporated - 40% Philippines
Maitland-Smith International Ltd. Vanuatu
P.T. Maitland Smith Indonesia Indonesia
Marbro Lamp Company California
The Marvel Group, Inc. Delaware
Masco Capital Corporation Delaware
Masco Holdings Limited Delaware
Masco Building Products Corp. Delaware
Bowers Manufacturing Corporation California
Computerized Security Systems, Inc. Michigan
Computerized Security Systems of Canada, Inc Canada
Computerized Security Systems (Asia) Ltd. - 50% Asia
Safekeeper Systems, Inc. Michigan
Computerized Security Systems (Asia) Limited-50% Asia
Industrias Weiser, S.A. de C.V. Mexico
Productos Para La Construccion De Mexicali, S.A.
de C.V. Mexico
Thermador Corporation California
Weiser Lock Corporation California
Winfield Locks, Inc. California
Masco Corporation of Indiana Indiana
Damixa A/S Denmark
Damixa AB Sweden
N.V. Damixa S.A. Belgium
Mix-A-Mix A/S Denmark
DAMIXA Armaturen GmbH Germany
Delta Faucet of Oklahoma, Inc. Delaware
Hydrotech, Inc. Michigan
Studio Technico Sviluppo E. Richerche Srl Italy
Masco Canada Limited Ontario
3072002 Ontario Limited Ontario
Masco Corporation Limited United Kingdom
Ametex U.K. Limited United Kingdom
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
Ametex Sarl France
Green & Kirk Ltd. United Kingdom
Herbert Green (Silsden) Ltd. United Kingdom
Berglen Furniture Limited United Kingdom
Berglen Group Limited United Kingdom
Berglen Products Limited United Kingdom
Berglen Distributors Limited United Kingdom
Berglen Associates Limited United Kingdom
CDI Technologies Ltd. United Kingdom
Cebu Limited United Kingdom
Destiny Limited Isle of Man
Hanhill (Great Britain) Limited England
Ramm Son & Crocker Limited England
Damixa Ltd. United Kingdom
Kiloheat Limited United Kingdom
NewTeam Management Services Limited Jersey
NewTeam Electronics Ltd. United Kingdom
NewTeam Export (Jersey) Limited Jersey
NewTeam France SARL France
NewTeam Ltd. United Kingdom
NewTeam Plastics Ltd. United Kingdom
Chromeco Ltd. United Kingdom
Harplace Ltd. United Kingdom
Showerforce Ltd. United Kingdom
Maitland-Smith Limited United Kingdom
Weiser (U.K.) Ltd. United Kingdom
Masco GmbH - 98% Germany
Alfred Reinecke GmbH & Co. KG Germany
Alma Kuchen Aloys Meyer Gmbh Germany
Gebhardt Aktiebolag 90% Sweden
Gebhardt Sarl France
Gebhardt Ventilatoren Gesellschaft mbh Austria
Gebhardt Ventilatoren GmbH & Co. Germany
Gebhardt Ventiladores Srl Spain
Hans Grohe GmbH & Co. KG - 27% Germany
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
HTH Haustechnische Handelsgesellschaft mbh Germany
Hueppe Gesellschaft mbh Austria
Hueppe GmbH & Co. Germany
Hueppe Sarl France
Intermart Insaat Malzemeleri Sanayi ve Ticaret AS Turkey
Jung-Pumpen GmbH Germany
Jung-Pumpen Handelsgesellschaft mbh Austria
Teknomar Insaat Malzemeleri Sanayi ve Ticaret AS Turkey
Masco Europe, Inc. Delaware
N.V. Weiser Europe, S.A. Belgium
Rubinetterie Mariani S.A. Italy
Weiser, Inc. British Columbia
Masco Home Furnishings, Inc. North Carolina
Masco International Sales, Inc. Barbados
Masco International Services, Inc. Delaware
Masco Services, Inc. Delaware
Mascomex S.A. de C.V. Mexico
Melard Manufacturing Corp. Delaware
Merillat Industries, Inc. Michigan
Merillat Corporation Delaware
Merillat Transportation Company Delaware
Morgantown Plastics Company Delaware
Outlet Corp. Delaware
Peerless Faucet Sales Corporation Delaware
Ramm, Son & Crocker, Inc. New York
Robert Allen Fabrics, Inc. Delaware
Robert Allen Fabrics of N.Y., Inc. Delaware
Robert Allen Fabrics (Canada) Ltd. Canada
Sherle Wagner Accessories, Inc. New York
Sherle Wagner International, Inc. New York
StarMark, Inc. South Dakota
SMI Franchising Corp. Delaware
Starmark of Virginia, Inc. Virginia
Sunbury Textile Mills, Inc. Delaware
Universal Furniture Limited Delaware
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
American Furniture Limited Hong Kong
Del Mar Furniture Industries (Singapore) Pte. Ltd. Singapore
H.K.T. (Malaysia) Sdn. Bhd. Malaysia
Hong Kong Teakwood Works Limited Hong Kong
Hong Kong Teakwood Works (Singapore) Pte. Ltd. Singapore
Hong Kong Teakwood Works (Taiwan) Limited Taiwan
Log and Timber Products (Singapore) Pte. Ltd. Singapore
Rigel Enterprises Limited (Singapore) Pte. Ltd. Singapore
Shin Shin Wood Products Co. Ltd. - 51% Taiwan
Sterling Home Furnishings (Singapore) Pte. Ltd. Singapore
Sterling Home Furnishings (Taiwan) Ltd. Taiwan
Swaps Investment Limited Hong Kong
Syarikat Malaysia Wood Industries Sdn. Bhd. Malaysia
Teakwood Property Development Ltd. Hong Kong
Teakwood (U.K.) Ltd. United Kingdom
Universal Furniture Industries (U.K.) Ltd. United Kingdom
Universal Furniture Industries, Inc. Delaware
Blue Mountain Trucking Corporation Mississippi
Custom Truck Tires, Inc. Mississippi
Universal Furniture Industries (Deutschland) GmbH Germany
Universal Furniture Industries (Scandinavia) AB Sweden
Universal Furniture (Japan) Ltd. Japan
Universal Furniture (Taiwan) Co. Ltd. Taiwan
Universal Furniture (Thailand) Ltd. Thailand
Universal Woodfloor (Europe) AB Sweden
World Wide Furniture Sales, Inc. British Virgin Il
Xin Jia Po Huan Mei Furniture Ltd. Hong Kong
Chang Chun Universal Flooring Company Ltd 50% China
Chang Chun Wood Products Company Limited 50% China
Universal Furniture (Tianjin) Co. Ltd. 80% China
Universal Veneer (Tianjin) Co. Ltd. 51% China
Universal Flooring (Tianjin) Co. Ltd. 80% China
Universal Furniture (Guanzhou) Co. Ltd. - 85% China
Vapor Technologies, Inc. Delaware
Watkins Manufacturing Corporation California
<PAGE>
Jurisdiction of
Incorporation
Name or Organization
W/C Technology Corporation Delaware
Zenith Products Corporation Delaware
<PAGE>
Exhibit 23.a
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the prospectuses included
in the registration statements of Masco Corporation on Form S-3 (Registration
Nos. 33-56043, 33-53330, 33-2374, 33-52485, 33-53959 and 33-53985) and Form S-8
(Registration Nos. 2-95969, 33-28142 and 33-42229) of our report dated February
17, 1995, on our audits of the consolidated financial statements and financial
statement schedule of Masco Corporation and subsidiaries as of December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994,
which report is included in this Annual Report on Form 10-K. We also consent to
the reference to our Firm under the caption "Experts" in such prospectuses.
/s/COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 28, 1995
<PAGE>
Exhibit 23.b
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the prospectuses included
in the registration statements of Masco Corporation on Form S-3 (Registration
Nos. 33-56043, 33-53330, 33-2374, 33-52485, 33-53959 and 33-53985) and Form S-8
(Registration Nos. 2-95969, 33-28142 and 33-42229) of our report dated February
17, 1995, on our audits of the consolidated financial statements and financial
statement schedule of MascoTech, Inc. and subsidiaries as of December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994,
which report is included in this Annual Report on Form 10-K. We also consent to
the reference to our Firm under the caption "Experts" in such prospectuses.
/s/COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 28, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S DECEMBER 31, 1994 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 61,160
<SECURITIES> 9,910
<RECEIVABLES> 765,270
<ALLOWANCES> 20,100
<INVENTORY> 948,830
<CURRENT-ASSETS> 1,891,440
<PP&E> 1,917,890
<DEPRECIATION> 686,080
<TOTAL-ASSETS> 4,390,040
<CURRENT-LIABILITIES> 601,290
<BONDS> 1,592,610
<COMMON> 156,990
0
0
<OTHER-SE> 1,955,690
<TOTAL-LIABILITY-AND-EQUITY> 4,390,040
<SALES> 4,468,000
<TOTAL-REVENUES> 4,468,000
<CGS> 3,001,770
<TOTAL-COSTS> 3,001,770
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,720
<INCOME-PRETAX> 322,600
<INCOME-TAX> 128,900
<INCOME-CONTINUING> 322,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193,700
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
