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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, 1997 COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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)
Registrant's telephone number, including area code: 313-274-7400
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, $1.00 Par Value New York Stock Exchange, Inc.
Series A Participating Cumulative New York Stock Exchange, Inc.
Preferred Stock Purchase Rights
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. [ ]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant on March 13, 1998 (based on the closing sale
price of $58 7/8 of the Registrant's Common Stock, as reported on the New York
Stock Exchange Composite Tape on such date) was approximately $9,669,730,000.
Number of shares outstanding of the Registrant's Common Stock at March 13, 1998:
169,634,252 shares of Common Stock, par value $1.00 per share
Portions of the Registrant's definitive Proxy Statement to be filed for its 1998
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<C> <S> <C>
PART I
1. Business.................................................... 2
2. Properties.................................................. 7
3. Legal Proceedings........................................... 9
4. Submission of Matters to a Vote of Security Holders......... 9
Supplementary Item. Executive Officers of Registrant........ 9
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 10
6. Selected Financial Data..................................... 10
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
8. Financial Statements and Supplementary Data................. 20
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 44
PART III
10. Directors and Executive Officers of the Registrant.......... 44
11. Executive Compensation...................................... 44
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 44
13. Certain Relationships and Related Transactions.............. 44
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 45
Signatures.................................................. 49
FINANCIAL STATEMENT SCHEDULES
Masco Corporation Financial Statement Schedule.............. F-1
MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements and Financial Statement Schedule............... F-3
</TABLE>
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PART I
ITEM 1. BUSINESS.
Masco Corporation is engaged principally in the manufacture, sale and
installation of home improvement and building products. Masco believes that it
is the largest domestic manufacturer of faucets, kitchen and bath cabinets and
plumbing supplies and that it is a leading domestic producer of a number of
other home improvement and building 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.
The Company is among the country's largest manufacturers of brand name
consumer products designed for the home improvement and home building
industries. In addition to faucets, kitchen and bath cabinets and plumbing
supplies, the Company manufactures and sells kitchen appliances, bath and shower
enclosure units, spas and hot tubs, other shower, bath 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 through mass merchandisers, home centers, hardware stores, distributors,
wholesalers and other outlets to consumers and contractors. The Company also
supplies and installs insulation and other building products direct to builders
and consumers. The Company's operations are categorized into two industry
segments: Kitchen and Bath Products and Other Specialty Products.
INDUSTRY SEGMENTS
The following table sets forth for the three years ended December 31, 1997,
the contribution of the Company's industry segments to net sales and operating
profit:
<TABLE>
<CAPTION>
NET SALES(1)
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Kitchen and Bath Products.................. $2,940,000 $2,519,000 $2,283,000
Other Specialty Products................... 820,000 718,000 644,000
---------- ---------- ----------
Total.................................... $3,760,000 $3,237,000 $2,927,000
========== ========== ==========
OPERATING PROFIT(1)(2)
------------------------------------
1997 1996 1995
---------- ---------- ----------
Kitchen and Bath Products.................. $ 539,000 $ 462,000 $ 411,000
Other Specialty Products................... 130,000 104,000 82,000
---------- ---------- ----------
Total.................................... $ 669,000 $ 566,000 $ 493,000
========== ========== ==========
</TABLE>
(1) Results exclude the home furnishings products segment, which was classified
as discontinued operations in 1995 and sold in 1996. See the Note to the
Company's Consolidated Financial Statements captioned "Discontinued
Operations," included in Item 8 of this Report.
(2) Amounts are before general corporate expense.
Additional financial information concerning the Company's operations by
industry segments as of and for the three years ended December 31, 1997 is set
forth in the Note to the Company's Consolidated Financial Statements captioned
"Segment Information," included in Item 8 of this Report.
KITCHEN AND BATH PRODUCTS
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 through manufacturers' representatives to major
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retail accounts and to distributors who sell the faucets to plumbers, building
contractors, remodelers, smaller 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) faucets and accessories are
produced for the decorator markets and are sold through wholesalers, distributor
showrooms and other outlets. ALSONS(R) hand showers and shower heads and
MIXET(R) valves and accessories are distributed through manufacturers'
representatives to the wholesale market and to retailers.
Sales of faucets worldwide approximated $815 million in 1997, $757 million
in 1996 and $698 million in 1995. The percentage of operating profit on faucets
is somewhat higher than that on other products offered by the Company. The
Company believes that the simplicity, quality and reliability of its faucet
mechanisms, manufacturing efficiencies and capabilities, its marketing and
merchandising activities, and the development of a broad line of products have
accounted for the continued strength of its faucet sales. Management believes
that Masco's faucet operations hold a leadership position in the United States
market. The faucet market in the United States is very competitive, with Moen,
Price Pfister, Sterling and American Standard as major brand competitors.
Competition from import products is also a factor in the Company's markets.
The Company manufactures economy, 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), QUALITY CABINETS(R), STARMARK(R) and FIELDSTONE(R), with sales to
distributors, home centers, dealers and direct to builders for both the home
improvement and new construction markets. In addition to its domestic
manufacturing, the Company manufactures cabinetry in Germany, where sales are
made primarily through Company-owned showrooms to consumers, and in England,
with sales primarily to builders for the new construction market. Sales of
kitchen and bath cabinets were approximately $1,083 million in 1997, $832
million in 1996 and $758 million in 1995. During 1997, the Company acquired
Texwood Industries, Inc., a domestic manufacturer of kitchen and bath cabinetry.
Management believes that the Company is the largest manufacturer of kitchen and
bath cabinetry in the United States. Significant competitors are American
Woodmark Corporation, Aristokraft, Inc., WCI Group and Triangle Pacific
Corporation.
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 for the wholesale trade under the
BRASSCRAFT(R) trademark and for the "do-it-yourself" market under the PLUMB
SHOP(R), HOME PLUMBER(R) and MELARD(TM) trademarks and are also sold under
private label.
Other Kitchen and Bath 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 AQUA
GLASS(R) acrylic and gelcoat bath and shower units and whirlpools are sold
primarily to wholesale plumbing distributors for use in the home improvement and
new home construction markets. Other bath and shower enclosure units, shower
trays and laundry tubs are sold to the home improvement market through hardware
stores and home centers under the brand names AMERICAN SHOWER & BATH(TM) and
TRAYCO(TM). HUPPE(R) luxury bath and shower enclosures are manufactured and sold
by the Company through wholesale channels primarily in Germany. The Company
manufactures bath and shower accessories, vanity mirrors and bath storage
products and sells these products under the brand name ZENITH PRODUCTS(R) and
other trademarks to home centers, hardware stores and mass merchandisers for the
"do-it-yourself" market. The Company's spas and hot tubs are sold under the
brand name HOT SPRING SPA(R) and other trademarks directly to retailers for sale
to residential customers. In early 1997, the Company acquired Franklin Brass
Manufacturing Company, a leading manufacturer of bath accessories and bath
safety products.
Direct sales to home center retailers in all of the Company's product lines
have been increasing in recent years, and in 1997 sales to The Home Depot were
$392 million, approximately 10 percent of the
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Company's 1997 sales volume. Builders, distributors, wholesalers and other
retailers represent other channels of distribution for the Company's products.
OTHER SPECIALTY PRODUCTS
The Company's Other Specialty Products include premium BALDWIN(R) quality
brass trim and mortise lock sets, knobs and trim and other builders' hardware
which are manufactured and sold for the home improvement and new home
construction markets. WEISER(R) lock sets and related hardware are sold through
contractor supply outlets, hardware distributors and home centers. SAFLOK(TM)
electronic lock sets and WINFIELD(TM) mechanical lock sets are sold primarily to
the hospitality market. During 1997, the Company acquired LaGard Inc., whose
electronic lock sets are used primarily by the banking industry on safes, ATMs,
vaults and cabinetry, and Liberty Hardware Manufacturing Corporation, a producer
of quality cabinet and builders' hardware. Key domestic competitors to Baldwin
and Weiser in the lock set business are Black & Decker Corporation and Schlage
Lock Company. Imported products are also becoming a major factor in this market.
The Company has recently begun to incorporate on many of its decorative
brass faucets and other products a durable coating that offers anti-tarnish
protection, under the trademarks BRILLIANCE(R) and THE LIFETIME FINISH FROM
BALDWIN(R). This innovative finish is currently available on certain of the
Company's kitchen and bath products and door hardware.
The Company manufactures ventilation products under the trademark AMP(R),
including grilles, registers, diffusers and humidifiers which are sold through
wholesale distribution and home centers. GEBHARDT(TM) commercial ventilating
products and JUNG(TM) water pumps are manufactured and distributed by the
Company in Europe. Through local offices of Gale Industries, Inc. in various
parts of the United States, the Company also supplies and installs insulation
and other building products primarily for the residential home building
industry.
COMPETITIVE FACTORS
The major domestic and foreign markets for the Company's products are
highly competitive. Competition in all of the Company's product lines is based
primarily on performance, quality, style, delivery, customer 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.
GENERAL INFORMATION
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 -- Cash Flows from Operating Activities," included in Item
7 of this Report. The Company does not consider backlog orders to be material
and no material portion of its business is 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
Through its subsidiaries, the Company also has home improvement and
building products manufacturing plants in Austria, Belgium, Canada, Denmark,
England, France, Germany, Italy, Mexico, Poland, Spain, Taiwan and Turkey. Home
improvement and building products manufactured by the Company outside of the
United States include faucets and accessory products, bath and shower
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enclosures, bath accessories, kitchen and bath cabinets, decorative accessories,
door lock sets and related hardware, floor registers, humidifiers, ventilating
equipment, submersible water pumps and special insulation materials. The
Company's European operations were expanded through the recent acquisition of
three manufacturers. In 1997, the Company acquired The SKS Group, a leading
German manufacturer and distributor of roller shutters and aluminum balcony
railings, and The Alvic Group, a leading Spanish manufacturer and distributor of
kitchen and bath cabinetry and components. In early 1998, the Company acquired
Vasco Corporation, a leading European manufacturer of residential decorative
hydronic radiators and heat convectors, based in Belgium.
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 export sales and foreign and domestic operations, including the
net sales, operating profit and assets which are attributable to the Company's
operations in North America and in other geographic areas, as of and for the
three years ended December 31, 1997, is set forth in Item 8 of this Report in
the Note to the Company's Consolidated Financial Statements captioned "Segment
Information."
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 tradenames. As a manufacturer of brand name consumer products,
the Company views its trademarks and other proprietary rights as important, but
does not believe that there is any reasonable likelihood of a loss of such
rights that would have a material adverse effect on the Company's present
business as a whole.
EMPLOYEES
At December 31, 1997, the Company employed approximately 28,100 people.
Satisfactory relations have generally prevailed between the Company and its
employees.
EQUITY INVESTMENTS
Information about the Company's equity investments is also set forth in the
Note to the Company's Consolidated Financial Statements captioned "Equity
Investments in Affiliates" included in Item 8 of this Report.
MascoTech, Inc.
In 1984, the Company 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 the Company distributed to
its stockholders certain shares of MascoTech common stock as a special dividend.
In October 1996, the Company reduced its common equity interest in MascoTech
from 45 percent to 21 percent through the sale to MascoTech of MascoTech common
stock and warrants to purchase shares of MascoTech common stock for total
consideration of approximately $266 million. Payment of $115 million of the
purchase price was made in cash at closing and the balance of approximately $151
million was paid by MascoTech on September 30, 1997, in accordance with its
agreement, in the form of 9.9 million shares (approximately 42%) of the
outstanding common stock of Emco Limited and $45.6 million in cash. As part of
that transaction, the Company granted MascoTech a right of first refusal, which
expires September 30, 2000, to purchase the remaining shares of MascoTech common
stock held by the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included in Item 7 of this
Report, regarding the effect of this transaction on the Company. Emco is a
Canadian manufacturer and distributor of home improvement and building products.
See the discussion of "Emco Limited" below. MascoTech's conversion of its
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outstanding preferred stock into MascoTech common stock in mid-1997 further
reduced the Company's ownership in MascoTech to approximately 17 percent.
MascoTech is a leading supplier of metalworked components primarily for
vehicle engine and drivetrain applications and automotive aftermarket products
for the transportation industry. MascoTech's net sales for 1997 were
approximately $922 million. Approximately 72 percent of MascoTech's
transportation-related products sales in 1997 were original equipment automotive
products and services.
In January 1998, MascoTech acquired the remaining 63 percent of TriMas
Corporation that it did not previously own, including approximately 1.6 million
shares (4%) owned by the Company, for approximately $920 million. TriMas is a
diversified proprietary products company with leadership positions in
commercial, industrial and consumer niche markets. TriMas had sales of
approximately $668 million and net income of approximately $66 million for the
twelve months ended December 31, 1997.
TriMas' products include specialty fasteners, towing systems, specialty
container products and other industrial products.
Emco Limited
The Company owns approximately 42 percent of the outstanding common stock
of Emco Limited, as a result of the transactions described above under "Equity
Investments -- MascoTech, Inc." Emco is a leading Canadian distributor and
manufacturer of building products for the residential, commercial and industrial
construction markets, including roofing materials, wood fiber products and
sinks, and a distributor of plumbing and related products. Emco had sales of CDN
$1.26 billion for the twelve months ended December 31, 1997.
Hans Grohe
The Company has a 27 percent partnership interest in Hans Grohe GmbH & Co.
KG, a German manufacturer of faucets, handheld showers, shower heads, shower
cabins and other shower accessories.
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ITEM 2. PROPERTIES.
The following list sets forth the location of the Company's principal
manufacturing facilities and identifies the industry segments utilizing such
facilities.
<TABLE>
<S> <C>
Arizona............... Tucson (2)
California............ Carlsbad (1), Corona (1), Costa Mesa (2), Los Angeles (1),
Pico Rivera (1), Rancho Dominguez (1), Torrance (2) and
Vista (1)
Colorado.............. Longmont (1)
Delaware.............. New Castle (1)
Illinois.............. Chicago (2)
Indiana............... Cumberland (1), Greensburg (1) and Kendallville (2)
Iowa.................. Northwood (1)
Kentucky.............. Henderson (1), Morgantown (1) and Mt. Sterling (1)
Michigan.............. Adrian (1), Hillsdale (1), Lapeer (1), and Troy (2)
Minnesota............. Lakeville (1)
Mississippi........... Olive Branch (2)
Nevada................ Las Vegas (1)
New Jersey............ Moorestown (1), Passaic (1) and West Berlin (2)
North Carolina........ Thomasville (1)
Ohio.................. Jackson (1), Loudonville (1), Middlefield (1) and Orwell (1)
Oklahoma.............. Chickasha (1)
Oregon................ Klamath Falls (1)
Pennsylvania.......... Reading (1 and 2)
South Dakota.......... Rapid City (1) and Sioux Falls (1)
Tennessee............. Adamsville (1), Jackson (1), LaFollette (2) and McEwen (1)
Texas................. Lancaster (1), Cedar Hill (1) and Duncanville (1)
Virginia.............. Atkins (1), Culpeper (1), Lynchburg (1) and Mt. Jackson (1)
Austria............... Furstenfeld (2)
Belgium............... Brussels (2), Dilsen (2) and St. Niklaas (2)
Canada................ Cambridge (1), London (1) and St. Thomas (1), Ontario
Denmark............... Odense (1)
England............... Brownhills (1), Corby (1), Warminster (1) and Wetherby (1)
France................ Sevres (1)
Germany............... Ahaus (1), Bad Zwischenahn (1), Bielefeld (2), Duisburg (2),
Dortmund (2), Iserlohn (1), Kulmbach (2), Netzschkau (2),
Neuwied (1), Steinhagen (2), Stuttgart (2) and Waldenburg
(2)
Italy................. Lacchiarella (1) and Zingonia (1)
Mexico................ Mexicali (2)
Poland................ Krakow (2)
Spain................. Alcaudete (1), Barcelona (1) and Vic (1)
Taiwan................ Tai Chung (1)
Turkey................ Czerkezkoy (1)
</TABLE>
Industry segments identified in the preceding table are: (1) Kitchen
and Bath Products and (2) Other Specialty Products. Multiple footnotes
within the same parentheses indicate that significant activities
relating to both segments are conducted at that location.
The three principal faucet manufacturing plants are located in Greensburg,
Indiana, Chickasha, Oklahoma and Jackson, Tennessee. The faucet manufacturing
plants and the majority of the Company's
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other manufacturing facilities range in size from approximately 10,000 square
feet to 900,000 square feet. The Company owns most of its manufacturing
facilities and none of the Company-owned properties is subject to significant
encumbrances. In addition to its manufacturing facilities, the Company operates
approximately 90 facilities (the majority of which are leased) which supply and
install insulation and other building products. 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 sets forth the location of MascoTech's principal
manufacturing facilities, and reflects its early 1998 acquisition of TriMas.
<TABLE>
<S> <C>
California..................... Commerce
Florida........................ Deerfield Beach and Ocala
Illinois....................... Wood Dale
Indiana........................ Auburn, Elkhart, Frankfort, Fort Wayne,
Goshen and North Vernon
Kentucky....................... Nicholasville
Louisiana...................... Baton Rouge
Massachusetts.................. Plymouth
Michigan....................... Burton, Canton, China Township, Detroit,
Farmington Hills, Fraser, Green Oak Township,
Hamburg, Holland, Livonia, Royal Oak, Troy,
Warren and Ypsilanti
New Jersey..................... Edison and Netcong
Ohio........................... Bucyrus, Canal Fulton, Lakewood, Lima,
Minerva and Port Clinton
Oklahoma....................... Tulsa
Pennsylvania................... Ridgway
Texas.......................... Houston and Longview
Wisconsin...................... Mosinee
Australia...................... Hampton Park, Victoria and Wakerley,
Queensland
Canada......................... Fort Erie and Oakville Ontario
Czech Republic................. Brno
England........................ Leicester and Wolverhampton
Germany........................ Neunkirchen, Nurnberg and Zell am Harmersbach
Italy.......................... Poggio Rusco
Mexico......................... Mexico City
</TABLE>
MascoTech's principal manufacturing facilities range in size from
approximately 10,000 square feet to 420,000 square feet, substantially all of
which are owned by MascoTech and are not subject to significant encumbrances.
The MascoTech 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
requirements.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to 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>
Richard A. Manoogian................... Chairman of the Board and Chief 61 1962
Executive Officer
Raymond F. Kennedy..................... President and Chief Operating Officer 55 1989
Dr. Lillian Bauder..................... Vice President -- Corporate Affairs 58 1996
David A. Doran......................... Vice President -- Taxes 56 1984
Daniel R. Foley........................ Vice President -- Human Resources 56 1996
Eugene A. Gargaro, Jr.................. Vice President and Secretary 55 1993
John R. Leekley........................ Senior Vice President and General 54 1979
Counsel
Richard G. Mosteller................... Senior Vice President -- Finance 65 1962
Robert B. Rosowski..................... Vice President -- Controller and 57 1973
Treasurer
Samuel Valenti, III.................... Vice President -- Investments 52 1971
</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 Messrs.
Foley and Gargaro and Dr. Bauder. Mr. Foley was employed by MascoTech, Inc. as
its Vice President -- Human Resources from 1994 to 1996 and was President of
Executive Business Partners, Inc., a training and consulting firm, from 1993 to
1994. Mr. Gargaro joined the Company as its Vice President and Secretary in
October, 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. From 1984 to 1996, Dr. Bauder
served as President and Chief Executive Officer of Cranbrook Educational
Community.
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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>
1997
Fourth.................................. $53 13/16 $41 7/16 $.21
Third................................... 48 1/4 40 9/16 .21
Second.................................. 43 3/8 35 .20
First................................... 37 5/8 33 3/4 .20
----
Total................................ $.82
====
1996
Fourth.................................. $36 7/8 $28 7/8 $.20
Third................................... 31 1/4 26 5/8 .20
Second.................................. 32 1/8 26 5/8 .19
First................................... 31 3/8 27 7/8 .19
----
Total................................ $.78
====
</TABLE>
On March 13, 1998, there were approximately 6,400 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
for the Company's continuing operations, for the years and dates indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $3,760,000 $3,237,000 $2,927,000 $2,583,000 $2,243,000
Income from continuing operations(1)... $ 382,400 $ 295,200 $ 200,050 $ 172,710 $ 215,210
Per share of common stock:
Income from continuing
operations:(1)(2)
Basic........................ $2.39 $1.87 $1.28 $1.10 $1.43
Diluted...................... $2.30 $1.82 $1.25 $1.08 $1.40
Dividends declared................... $ .82 $ .78 $ .74 $ .70 $ .66
Dividends paid....................... $ .81 $ .77 $ .73 $ .69 $ .65
At December 31:
Total assets......................... $4,333,760 $3,701,650 $3,778,630 $4,177,100 $3,864,850
Long-term debt....................... $1,321,470 $1,236,320 $1,577,100 $1,587,160 $1,413,480
</TABLE>
(1) The year 1994 includes a $79 million after-tax ($.49 per diluted share)
non-cash equity investment charge.
(2) Income from continuing operations per share prior to 1997 have been restated
to conform to the 1997 presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The financial and business analysis below provides information which the
Company believes is relevant to an assessment and understanding of the Company's
consolidated financial position and results of operations. This financial and
business analysis should be read in conjunction with the consolidated financial
statements and related notes.
The following discussion and other sections of this Report on Form 10-K
contain statements reflecting the Company's views about its future performance
and constitute "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. These views involve risks and uncertainties that
are difficult to predict and may cause the Company's actual results to differ
materially from the results discussed in such forward-looking statements.
Readers should consider that various factors including those discussed in the
"Overview" and "Outlook for the Company" sections below may affect the Company's
ability to attain the projected performance. The Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
OVERVIEW
The Company is engaged principally in the manufacture, sale and
installation of home improvement and building products. These products are sold
to the home improvement and home construction markets through mass
merchandisers, home centers, hardware stores, distributors, wholesalers and
other outlets for consumers and contractors.
Factors which affect the Company's results of operations include the levels
of home improvement and residential construction activity principally in the
U.S. and Europe (including repair and remodeling and new construction), cost
management, fluctuations in European currencies (primarily the German Deutsche
Mark and British Pound), the increasing importance of home centers as
distributors of home improvement and building products and the Company's ability
to maintain its leadership positions in its markets with increasing global
competition. Historically, the Company has been able to largely offset cyclical
declines in housing markets through new product introductions and acquisitions
as well as market share gains.
Net sales and operating profit from continuing operations for 1997 were
$3,760 million and $587 million, representing increases of 16 percent and 22
percent, respectively, over 1996. Net income from continuing operations for 1997
was $382 million representing an increase of 30 percent over 1996. Basic and
diluted earnings per share for 1997 were $2.39 and $2.30, respectively,
representing increases of 28 percent and 26 percent, respectively, over 1996
amounts. Increases in net sales typically result in operating profit
improvements that exceed the net sales increases on a percentage basis due to
the allocation of fixed and semi-fixed costs and expenses over a higher sales
base.
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 and expenses 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.
During 1997, the Company acquired Texwood Industries, Inc., a U.S.
manufacturer of kitchen and bath cabinetry, and five other home improvement and
building products companies, including two companies in Europe.
The results of operations for these acquisitions are included in the
consolidated financial statements from the dates of acquisition. Had these
companies been acquired effective January 1, 1996, pro forma unaudited
consolidated net sales and net income would have approximated $3,909 million and
$390 million for 1997 and $3,575 million and $309 million for 1996,
respectively, and pro forma
11
<PAGE> 13
unaudited consolidated diluted earnings per share would have approximated $2.33
and $1.87 for 1997 and 1996, respectively.
The combined purchase price for these acquisitions, including assumed debt,
aggregated approximately $430 million and included approximately 2.9 million
shares of Company common stock valued at approximately $119 million, with the
balance in cash and a short-term note. The acquisitions were accounted for as
purchase transactions.
DISCONTINUED OPERATIONS
In late November 1995, the Company's Board of Directors approved a formal
plan to dispose of the Company's home furnishings products segment. An aggregate
provision of $650 million was recorded in the fourth quarter of 1995 for the
estimated loss on the discontinued operations through the expected disposal
date, the reduction of assets to their estimated net realizable value and the
anticipated liabilities related to the disposal. The majority of the charge from
the disposition of the home furnishings products segment resulted in a capital
loss for tax purposes. The ultimate tax benefit from the disposition cannot be
determined currently and is reported if and when taxable capital gains are
realized.
During August 1996, the Company completed the sale of its home furnishings
products segment to Furnishings International Inc. Total proceeds to the Company
from the sale were $1,050 million with approximately $708 million of the
purchase price in cash. The balance consisted of $285 million of 12 percent
pay-in-kind junior debt securities, and equity securities totalling $57 million,
consisting of 13 percent cumulative preferred stock, with a stated value of $55
million, 15 percent of the common stock of Furnishings International and
convertible preferred stock.
The junior debt securities mature in 2008; the Company is recording the 12
percent pay-in-kind interest income from these securities. The Company records
dividend income from the 13 percent cumulative preferred stock when such
dividends are declared. The convertible preferred stock represents transferable
rights for up to a 25 percent common ownership, although the Company is
restricted from maintaining an ownership in excess of 20 percent of Furnishings
International's common equity. As such, the Company will not acquire additional
common equity, except for purposes of resale only. Of the cash proceeds received
from this sale, approximately $550 million was applied to reduce bank debt.
Under a transitional services agreement, the Company provided
corporate-related services for a fee to Furnishings International through April
1997. Substantially all of these services were discontinued after such date.
PROFIT MARGINS
Operating profit margin, before general corporate expense, improved to 17.8
percent in 1997 from 17.5 percent in 1996 and 16.8 percent in 1995 (general
corporate expense includes those expenses not specifically attributable to the
Company's business segments). The improvement in 1997 is principally due to a
reduction in selling, general and administrative expenses as a percentage of
sales. The Company's operating margin from faucet sales is somewhat higher than
that on other products offered by the Company due to the simplicity, quality and
reliability of its faucet mechanisms, manufacturing efficiencies and
capabilities, extensive marketing and merchandising activities and breadth of
product offering.
General corporate expense in 1997 was $82 million, as compared with $85
million in 1996 and $90 million in 1995. General corporate expense as a
percentage of sales decreased to 2.2 percent in 1997 from 2.6 percent in 1996
and 3.1 percent in 1995. Operating profit margin, after general corporate
expense, was 15.6 percent, 14.8 percent and 13.7 percent in 1997, 1996 and 1995,
respectively.
Net income from continuing operations as a percentage of sales increased to
10.2 percent in 1997 from 9.1 percent and 6.8 percent in 1996 and 1995,
respectively. After-tax profit return on shareholders'
12
<PAGE> 14
equity as measured by net income from continuing operations increased to 20.8
percent in 1997 from 17.8 percent and 9.4 percent in 1996 and 1995,
respectively.
FINANCIAL CONDITION
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,
and by the issuance of common stock for certain acquisitions. At December 31,
1997, the Company's shelf-registration statement permits the issuance of up to a
combined $759 million of debt and equity securities.
Bank credit lines are maintained to ensure availability of short-term funds
on an as-needed basis. At December 31, 1997, the Company had available $750
million under its bank revolving-credit facility. Any outstanding balances under
this facility are due and payable in November 2001. Certain debt agreements
contain limitations on additional borrowings and requirements for maintaining a
certain level of tangible net worth. At December 31, 1997, the Company was in
compliance with these limitations and requirements, and the Company's tangible
net worth exceeded the most restrictive of such provisions by approximately $171
million.
Maintaining high levels of liquidity and cash flow are among the Company's
financial strategies. The Company's long-term debt as a percent of total
capitalization ratio improved to approximately 36 percent at December 31, 1997
from approximately 39 percent at December 31, 1996. (On a pro forma basis, the
Company's long-term debt as a percent of total capitalization ratio would have
been approximately 32 percent, assuming conversion of the Company's $178 million
of convertible debentures; this conversion was completed in February 1998.)
Aggregate short-term and long-term debt at December 31, 1997 was $146 million
higher than the 1996 aggregate amount due primarily to acquisition-related debt.
The Company's working capital ratio was 2.6 to 1 at December 31, 1997 compared
with 2.8 to 1 at December 31, 1996; excluding a $53 million short-term,
acquisition-related note payable which was paid in early 1998, the Company's
working capital ratio was 2.8 to 1 at December 31, 1997.
CASH FLOWS
Significant sources and uses of cash in the past three years are shown in
the following table, in thousands:
<TABLE>
<CAPTION>
CASH SOURCES (USES) 1997 1996 1995
------------------- --------- --------- ---------
<S> <C> <C> <C>
From continuing operations.................... $ 405,030 $ 340,140 $ 260,910
Collection of MascoTech receivable............ 45,580 -- --
Sale of discontinued operations............... -- 707,630 --
Sale of MascoTech investments................. -- 115,000 --
Sale of Formica investment.................... -- -- 74,470
Acquisition of companies, net of cash
acquired.................................... (186,920) (173,110) --
Capital expenditures.......................... (167,400) (138,540) (165,080)
Increase (decrease) in debt, net.............. 7,890 (368,160) (52,180)
Cash dividends paid........................... (131,680) (123,530) (116,350)
From discontinued operations, net............. -- -- 34,560
Other, net.................................... (4,900) 53,830 (12,390)
--------- --------- ---------
Cash increase (decrease)................. $ (32,400) $ 413,260 $ 23,940
========= ========= =========
</TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES
Continuing operations generated $64.9 million and $144.1 million more cash
in 1997 than in 1996 and 1995, respectively, primarily due to increased
earnings. During 1997, the Company's accounts receivable and inventories
increased by $92.2 million and $103.1 million, respectively, primarily as a
13
<PAGE> 15
result of acquisitions and higher actual and anticipated sales volume. 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 benefiting from larger, more cost-effective purchasing.
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
Investing activities of continuing operations used cash of $313.6 million
in 1997 compared with cash provided from investing activities of $564.8 million
in 1996. Cash flows from investing activities for 1996 included an aggregate
$822.6 million of cash proceeds from the sales of discontinued operations and
certain MascoTech, Inc. investments.
During October 1996, the Company completed the sale to MascoTech of 17
million shares of MascoTech common stock and warrants to purchase 10 million
shares of MascoTech common stock. Under the sale agreement, the Company received
approximately $266 million, with $115 million cash paid at closing. The $151
million balance of the consideration was paid by MascoTech to the Company on
September 30, 1997; as provided for in the sale agreement, MascoTech at that
date delivered to the Company 9.9 million shares (approximately 42 percent) of
the outstanding common stock of Emco Limited and $45.6 million in cash.
MascoTech recognized a $29.3 million after-tax gain from the delivery to the
Company of the Emco Limited common stock. The Company's recording of equity
earnings from MascoTech for 1997 excludes the effect of such gain due to the
related-party nature of the transaction. Emco Limited is a leading Canadian
distributor and manufacturer of home improvement and building products.
MascoTech holds an option, expiring in 2002, to require the Company to purchase
up to $200 million aggregate amount of subordinated debt securities of
MascoTech.
For the 1997 acquisitions of Texwood Industries and five other companies,
the combined purchase price was approximately $430 million, including the
assumption of debt and issuance of a short-term note aggregating $123 million,
2.9 million shares of Company common stock valued at approximately $119 million
and $187 million of cash paid.
Capital expenditures totalled $167.4 million in 1997 compared with $138.5
million in 1996. 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 also 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. The Company
expects capital expenditures for 1998, excluding those of potential 1998
acquisitions, to approximate the 1997 level. Depreciation and amortization
expense for 1997 totalled $116.1 million, compared with $99.7 million for 1996;
for 1998, depreciation and amortization expense, excluding 1998 acquisitions, is
expected to be approximately $128 million.
Costs of environmental responsibilities and compliance with existing
environmental laws and regulations have not had, nor in the opinion of the
Company are they expected to have, a materially adverse effect on the Company's
capital expenditures, financial position, or results of operations.
CASH FLOWS FOR FINANCING ACTIVITIES
Cash used for financing activities decreased to $123.8 million in 1997 from
$491.7 million in 1996. During 1996, the Company paid the $250 million of 9
percent notes due April 15, 1996 through borrowings under its bank
revolving-credit agreement and applied approximately $550 million of the
proceeds from the 1996 sale of the home furnishings products segment to reduce
bank debt.
During 1997, the Company increased its dividend rate 5 percent to $.21 per
share quarterly. This marks the 39th consecutive year in which dividends have
been increased.
The Company believes that its present cash balance and cash flows from
operations are sufficient 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 cash
14
<PAGE> 16
flows from operations and, to the extent necessary, future financial market
activities, from proceeds from assets sales and from bank borrowings.
CONSOLIDATED RESULTS OF OPERATIONS
Sales and Operations
Net sales for 1997 were $3,760 million, representing an increase of 16
percent over 1996. After adjusting for acquisitions, net sales for 1997
increased 7 percent over 1996. After adjusting for acquisitions, net sales of
the Company's North American operations for 1997 increased 8 percent over 1996.
Net sales for 1996 increased 11 percent to $3,237 million from $2,927 million in
1995; after adjusting for acquisitions and the divestiture of two small
operations, net sales increased 7 percent in 1996 over 1995.
Cost of sales as a percentage of sales for 1997 remained unchanged at 63.3
percent compared with 1996 when it increased from 63.1 percent for 1995. The
modest increase in the cost of sales percentage for 1997 and 1996 as compared
with 1995 was primarily attributable to softness in the Company's European
markets, expenses associated with manufacturing process improvement initiatives
and product sales mix, which offset the benefits resulting from increased sales
volume and new product introductions.
Excluding amortization of acquired goodwill ($18.7 million, $12.1 million,
and $10.0 million in 1997, 1996 and 1995, respectively), selling, general and
administrative expenses as a percentage of sales were 20.6 percent in 1997
compared with 21.5 percent and 22.8 percent for 1996 and 1995, respectively. The
downward trend in the selling, general and administrative expenses percentage
results from the Company's continuation of cost-containment initiatives, the
substitution of contingent incentive-based compensation for the reduction in
fixed compensation for certain executives and the leverage of fixed and
semi-fixed costs over a higher sales base. The Company expects selling, general
and administrative expenses as a percentage of sales to approximate 20.0 percent
by the end of 1998.
Other Income (Expense), Net
Equity earnings from MascoTech, Inc. in 1997 reflect the Company's mid-1997
and late-1996 reductions in common equity ownership. Equity earnings from
MascoTech were $14.6 million for 1997 as compared with equity earnings of $13.9
million and $18.2 million for 1996 and 1995, respectively. Equity earnings from
MascoTech in 1996 include the Company's $11.7 million pre-tax equity share of
MascoTech's loss from the sale of its metal stamping businesses.
During the second quarter of 1997, MascoTech effected conversion of all of
its publicly held outstanding convertible preferred stock with the issuance of
approximately 10 million shares of its common stock. This conversion reduced the
Company's common equity ownership in MascoTech to 17 percent from 21 percent,
and increased the Company's equity in MascoTech's net book value by
approximately $29.5 million. As a result, the Company recognized a pre-tax gain
of $29.5 million during the second quarter of 1997.
During 1996, the Company recognized a $67.8 million net pre-tax gain ($40.7
million after-tax) from the fourth quarter 1996 sale to MascoTech of 17 million
shares of MascoTech common stock and warrants to purchase 10 million shares of
MascoTech common stock. This gain was largely offset by $36.3 million of fourth
quarter 1996 charges primarily related to adjustments of miscellaneous assets to
their estimated fair value.
Included in other, net under other income (expense), net is income from
cash and cash investments of $17.3 million, $6.9 million and $2.6 million for
1997, 1996 and 1995, respectively; the increase in 1997 resulted from a higher
average cash and cash investments balance during 1997 as compared with 1996 and
1995. The Company's cash balance for 1997 included residual proceeds from
transactions in the latter part of 1996, including the sale of certain MascoTech
investments, the sale of the Company's home furnishings businesses and European
borrowings.
15
<PAGE> 17
Included in other, net under other income (expense), net is interest income
for 1997 and 1996 of $36.8 million and $14.0 million, respectively, from the 12%
pay-in-kind junior debt securities of Furnishings International Inc. Such
interest income began to accrue in August 1996 upon the sale of the Company's
home furnishings businesses. Also included in other, net in 1997 and 1996 is
interest income of $7.5 million and $1.7 million, respectively, from the $151
million note receivable from MascoTech, which was paid on September 30, 1997.
Included in other, net under other income (expense), net in 1997 are $10.8
million of dividend income from the Company's investment in Furnishings
International's 13% cumulative preferred stock, net gains aggregating
approximately $28 million related to the sales of certain assets and charges
aggregating approximately $30 million, principally for the adjustment of the
Company's Payless Cashways investment to its estimated fair value.
Included in other, net under other income (expense), net for 1995 was a
$15.9 million gain from the sale of the Company's investment in Formica
Corporation; this gain was offset primarily by charges for asset disposals.
Net Income and Earnings Per Share
After-tax income from continuing operations for 1997 was $382 million
compared with $295 million for 1996 and $200 million for 1995. Basic and diluted
earnings per share from continuing operations for 1997 were $2.39 and $2.30,
respectively, as compared with basic and diluted earnings per share from
continuing operations of $1.87 and $1.82 and $1.28 and $1.25, respectively, for
1996 and 1995. The Company's effective tax rate decreased to 39.4 percent in
1997 from 41.3 percent in 1996 due to the net utilization of the Company's
capital loss carryforward benefit, recognized primarily in the fourth quarter of
1997. The 1995 tax rate of 43.1 percent was higher due primarily to an increase
in higher-taxed foreign income as a percentage of total income. The Company
estimates that its effective tax rate will approximate 40 percent for 1998.
OUTLOOK FOR THE COMPANY
Assuming that the U.S. economy maintains its present rate of moderate
growth and interest rates remain relatively stable, the Company expects further
increases in both sales and earnings for 1998. The Company believes that its
results will be favorably affected in the future with its efforts to: continue
to invest in new manufacturing technologies and productivity improvement
initiatives in order to contain costs and increase efficiency; maintain a lower
level of selling, general and administrative expenses, as a percent of sales;
introduce new products and marketing initiatives to increase market share and
share of customer; and to actively pursue acquisition candidates that complement
or support the Company's core competencies.
16
<PAGE> 18
NET SALES BY PRODUCT GROUP AND GEOGRAPHIC AREA
The following table sets forth the Company's net sales from continuing
operations by product group and geographic area, in millions.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------
NET SALES 1997 1996
------------------------------ VS. VS.
1997 1996 1995 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Kitchen and Bath Products:
Faucets........................ $ 815 $ 757 $ 698 8% 8%
Cabinets....................... 1,083 832 758 30% 10%
Other.......................... 1,042 930 827 12% 12%
------ ------ ------
2,940 2,519 2,283 17% 10%
Other Specialty Products......... 820 718 644 14% 11%
------ ------ ------
Total....................... $3,760 $3,237 $2,927 16% 11%
====== ====== ======
North America.................... $3,072 $2,680 $2,441 15% 10%
Europe........................... 688 557 486 24% 15%
------ ------ ------
Total....................... $3,760 $3,237 $2,927 16% 11%
====== ====== ======
</TABLE>
BUSINESS SEGMENT RESULTS
Kitchen and Bath Products
Net sales of the Company's Kitchen and Bath Products increased 17 percent
in 1997 over 1996 and 10 percent in 1996 over 1995; after adjusting for
acquisitions, net sales increased 7 percent for each of the last two years, 1997
over 1996 and 1996 over 1995. These increases are largely due to higher unit
sales volume of cabinets, faucets and other kitchen and bath products, and to a
lesser extent, new product introductions and selling price increases.
Operating profit of the Company's Kitchen and Bath Products, before general
corporate expense, was $539 million, $462 million and $411 million in 1997, 1996
and 1995, respectively. Operating margin, before general corporate expense,
remained unchanged at 18.3 percent for 1997 and 1996 compared with 18.0 percent
in 1995. Higher unit sales volumes in 1997 contributed to improved operating
results of the Company's U.S. cabinet, other kitchen and bath and faucet
businesses, including the leveraging of fixed and semi-fixed selling, general
and administrative expenses over a higher sales base. These improved results
were offset by the weaker results of the Company's European operations included
in this segment and the modestly lower margins of companies acquired in 1997.
Operating results of this business segment showed a net improvement in 1996
over 1995 as a result of higher unit sales volume, increased efficiency and
utilization of new and existing manufacturing facilities and the leverage of
fixed and semi-fixed selling, general and administrative expenses over a higher
sales base, which more than offset the modestly weaker results of the Company's
U.S. cabinet businesses and the lower results of European operations. Operating
results of the Company's U.S. cabinet businesses were modestly weaker in 1996
and 1995 due to the influence of a higher percentage of lower margin sales to
total sales and the recognition of certain expenses for various initiatives
undertaken to improve manufacturing processes and customer service and to
shorten product delivery time.
Other Specialty Products
Net sales of the Company's Other Specialty Products increased 14 percent in
1997 over 1996 and 11 percent in 1996 over 1995. After adjusting for
acquisitions, net sales increased 7 percent in 1997 over 1996 and, after
adjusting for acquisitions and divestitures, increased 7 percent in 1996 over
1995. Operating profit of the Company's Other Specialty Products, before general
corporate expense, was
17
<PAGE> 19
$130 million, $104 million, and $82 million in 1997, 1996 and 1995,
respectively. Operating margin, before general corporate expense, improved to
15.9 percent in 1997 from 14.5 percent in 1996 and 12.7 percent in 1995.
The upward trend in operating results for this segment principally includes
the benefits of higher installation sales of fiberglass insulation and higher
unit sales volume of mechanical and electronic lock sets. Operating results of
this segment benefited in 1996 from the leverage of fixed and semi-fixed
selling, general and administrative expenses over a higher sales base and the
divestiture of two underperforming operations. Operating results were negatively
affected in 1997, 1996 and 1995 by lower results of European operations.
GEOGRAPHIC AREA RESULTS
North America
Net sales of North American operations increased 15 percent in 1997 over
1996 and 10 percent in 1996 over 1995. Net sales of North American operations,
after adjusting for acquisitions, increased 8 percent in 1997 over 1996 and,
after adjusting for acquisitions and divestitures, increased 9 percent in 1996
over 1995. Operating profit from North American operations, before general
corporate expense, was $570 million, $479 million and $407 million for 1997,
1996 and 1995, respectively. Operating margin, before general corporate expense,
improved to 18.6 percent in 1997 from 17.9 percent in 1996 and 16.7 percent in
1995.
Operating results of North American operations in 1997 and 1996 benefited
from higher sales volume which was partly driven by an increase in U.S. housing
transactions, including higher levels of new construction and existing home
sales. Operating results of North American operations in 1995 were lower, in
part due to plant start-up costs related to a major new faucet facility and
product sales mix. Operating results of the Company's Canadian operations
improved in 1997 over 1996 after being relatively flat in 1996 over 1995.
Europe
Net sales of European operations increased 24 percent in 1997 over 1996 and
15 percent in 1996 over 1995; after adjusting for acquisitions, net sales
decreased 5 percent in 1997 as compared with 1996 and decreased 1 percent in
1996 as compared with 1995. Operating profit from European operations, before
general corporate expense, was $99 million, $87 million and $86 million for
1997, 1996 and 1995, respectively. Operating margin from European operations,
before general corporate expense, decreased to 14.4 percent in 1997 following a
decline to 15.6 percent in 1996 from 17.7 percent in 1995.
Results of European operations were lower over the past three years, in
part due to softness in the Company's European markets beginning in mid-1995,
competitive pricing pressures on certain products and the influence of a higher
percentage of lower margin sales to total sales. In addition, a stronger U.S.
dollar had a negative effect on the translation of European results in 1997
compared with 1996 and 1996 compared with 1995, lowering European net sales by
approximately 12 percent and 3 percent, respectively. Excluding acquisitions,
net sales of European operations increased approximately 6 percent in local
currencies.
OTHER MATTERS
The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information and other systems. The year 2000 issue is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculations or system failures. Based on
preliminary information, costs of addressing the year
18
<PAGE> 20
2000 issue are not currently expected to have a materially adverse impact on the
Company's financial position, results of operations or cash flows in future
periods.
On January 22, 1998, MascoTech, Inc. announced the completion of its
acquisition of TriMas Corporation. The Company will record in the first quarter
of 1998, as a result of selling its common stock investment in TriMas to
MascoTech in the public tender offer, an approximate $29 million pre-tax gain.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting of
Comprehensive Income," SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information," and SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits," become effective in 1998 and should
not have a material effect on the Company's financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company considered the provisions of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." The Company
had no holdings of derivative financial or commodity-based instruments at
December 31, 1997. A review of the Company's other financial instruments and
risk exposures at that date revealed that the Company had exposure to interest
rate and foreign currency exchange rate risks. At December 31, 1997, the Company
performed sensitivity analyses to assess the potential effect of these risks and
concluded that near-term changes in interest rates and foreign currency exchange
rates should not materially affect the Company's financial position, results of
operations or cash flows.
Other discussion regarding the Company's business risks is presented in the
"Overview" caption above and in Item 1 "Business" of this Form 10-K.
19
<PAGE> 21
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 sheets of Masco
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations and cash flows for each of the three years
in the period ended December 31, 1997 and the financial statement schedule as
listed in Item 14(a)(2) of the 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 audits 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 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 13, 1998
20
<PAGE> 22
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash investments................................. $ 441,330,000 $ 473,730,000
Receivables............................................... 559,050,000 466,900,000
Inventories............................................... 515,000,000 411,940,000
Prepaid expenses and other................................ 111,340,000 77,200,000
-------------- --------------
Total current assets................................. 1,626,720,000 1,429,770,000
Receivable from MascoTech, Inc.............................. -- 151,380,000
Equity investment in MascoTech, Inc......................... 52,780,000 10,150,000
Equity investments in other affiliates...................... 175,300,000 57,680,000
Securities of Furnishings International Inc................. 393,140,000 356,340,000
Property and equipment...................................... 1,037,320,000 940,590,000
Acquired goodwill, net...................................... 729,190,000 457,350,000
Other assets................................................ 319,310,000 298,390,000
-------------- --------------
Total assets......................................... $4,333,760,000 $3,701,650,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ 68,460,000 $ 7,590,000
Accounts payable.......................................... 166,310,000 149,500,000
Accrued liabilities....................................... 385,230,000 361,350,000
-------------- --------------
Total current liabilities............................ 620,000,000 518,440,000
Long-term debt.............................................. 1,321,470,000 1,236,320,000
Deferred income taxes and other............................. 163,270,000 107,080,000
-------------- --------------
Total liabilities.................................... 2,104,740,000 1,861,840,000
-------------- --------------
Shareholders' Equity:
Common shares authorized: 400,000,000;
issued: 1997-165,570,000; 1996-160,870,000............. 165,570,000 160,870,000
Preferred shares authorized: 1,000,000.................... -- --
Paid-in capital........................................... 304,560,000 140,010,000
Retained earnings......................................... 1,784,370,000 1,536,410,000
Cumulative translation adjustments........................ (25,480,000) 2,520,000
-------------- --------------
Total shareholders' equity........................... 2,229,020,000 1,839,810,000
-------------- --------------
Total liabilities and shareholders' equity........... $4,333,760,000 $3,701,650,000
============== ==============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales...................................... $3,760,000,000 $3,237,000,000 $2,927,000,000
Cost of sales.................................. 2,378,250,000 2,048,070,000 1,846,330,000
-------------- -------------- --------------
Gross profit......................... 1,381,750,000 1,188,930,000 1,080,670,000
Selling, general and administrative expenses... 775,930,000 696,290,000 668,310,000
Amortization of acquired goodwill.............. 18,720,000 12,140,000 10,020,000
-------------- -------------- --------------
Operating profit..................... 587,100,000 480,500,000 402,340,000
-------------- -------------- --------------
Other income (expense), net:
Re: MascoTech, Inc.:
Equity earnings........................... 14,580,000 13,860,000 18,200,000
Gain from change in investment............ 29,500,000 -- --
Gain from sale of investments, net........ -- 67,800,000 --
Equity earnings, other affiliates............ 9,560,000 6,230,000 8,010,000
Other, net................................... 70,010,000 8,990,000 (2,960,000)
Interest expense............................. (79,850,000) (74,680,000) (73,800,000)
-------------- -------------- --------------
43,800,000 22,200,000 (50,550,000)
-------------- -------------- --------------
Income from continuing operations
before income taxes................ 630,900,000 502,700,000 351,790,000
Income taxes................................... 248,500,000 207,500,000 151,740,000
-------------- -------------- --------------
Income from continuing operations.... 382,400,000 295,200,000 200,050,000
-------------- -------------- --------------
Discontinued operations (net of income taxes):
Income from operations....................... -- -- 8,270,000
Loss on disposition, net..................... -- -- (650,000,000)
-------------- -------------- --------------
Net income (loss).................... $ 382,400,000 $ 295,200,000 $ (441,680,000)
============== ============== ==============
Earnings per share from continuing operations:
Basic................................ $2.39 $1.87 $1.28
===== ===== =====
Diluted.............................. $2.30 $1.82 $1.25
===== ===== =====
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 24
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From (For):
Operating Activities:
Income from continuing operations.......... $ 382,400,000 $ 295,200,000 $ 200,050,000
Depreciation and amortization.............. 116,050,000 99,680,000 90,090,000
Unremitted equity earnings of affiliates... (19,470,000) (12,310,000) (17,770,000)
Interest accrual on pay-in-kind notes
receivable............................... (36,800,000) (13,970,000) --
Deferred income taxes...................... 34,880,000 28,850,000 18,240,000
Gain from sale of MascoTech investments,
net...................................... -- (67,800,000) --
Gain from change in MascoTech investment... (29,500,000) -- --
Increase in receivables.................... (41,560,000) (7,510,000) (56,660,000)
Increase in inventories.................... (38,770,000) (1,890,000) (13,970,000)
Increase in accounts payable and accrued
liabilities, net......................... 44,960,000 38,410,000 42,110,000
Other, net................................. (7,160,000) (18,520,000) (1,180,000)
------------- ------------- -------------
Net cash from operating activities of
continuing operations............... 405,030,000 340,140,000 260,910,000
Operating activities of discontinued
operations............................... -- -- 60,370,000
------------- ------------- -------------
Net cash from operating activities.... 405,030,000 340,140,000 321,280,000
------------- ------------- -------------
Investing Activities:
Acquisition of companies, net of cash
acquired................................. (186,920,000) (173,110,000) --
Capital expenditures....................... (167,400,000) (138,540,000) (165,080,000)
Cash proceeds from sale of:
Discontinued operations.................. -- 707,630,000 --
MascoTech investments.................... -- 115,000,000 --
Formica investment....................... -- -- 74,470,000
Collection of MascoTech receivable......... 45,580,000 -- --
Other, net................................. (4,900,000) 53,830,000 (12,390,000)
Investing activities of discontinued
operations............................... -- -- (38,290,000)
------------- ------------- -------------
Net cash from (for) investing
activities.......................... (313,640,000) 564,810,000 (141,290,000)
------------- ------------- -------------
Financing Activities:
Retirement of notes........................ -- (250,000,000) (200,000,000)
Increase in other debt..................... 90,550,000 537,380,000 497,830,000
Payment of other debt...................... (82,660,000) (655,540,000) (350,010,000)
Cash dividends paid........................ (131,680,000) (123,530,000) (116,350,000)
Financing activities of discontinued
operations............................... -- -- 12,480,000
------------- ------------- -------------
Net cash (for) financing activities... (123,790,000) (491,690,000) (156,050,000)
------------- ------------- -------------
Cash and Cash Investments:
Increase (decrease) for the year.............. (32,400,000) 413,260,000 23,940,000
At January 1.................................. 473,730,000 60,470,000 36,530,000
------------- ------------- -------------
At December 31................................ $ 441,330,000 $ 473,730,000 $ 60,470,000
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 25
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. The Company
classified its home furnishings products segment as discontinued operations in
1995. (See "Discontinued Operations" note.) Accordingly, the financial
statements and related notes present the home furnishings products segment as
discontinued operations. Certain amounts for prior years have been reclassified
to conform to the current year presentation.
Use of Estimates in the Preparation of Financial Statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from such estimates and
assumptions.
Cash and Cash Investments. The Company considers all highly liquid
investments with a maturity of three months or less to be cash and cash
investments.
Receivables. The Company does significant business with a number of
individual customers, including home centers. The Company monitors its exposure
for credit losses and maintains adequate allowances for doubtful accounts; the
Company does not believe that significant credit risks exist. At December 31,
1997 and 1996 accounts and notes receivable are presented net of allowances for
doubtful accounts of $19.8 million and $17.9 million, respectively.
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 the statement of operations. 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 $81.4
million, $71.7 million and $65.3 million in 1997, 1996 and 1995, respectively.
Acquired goodwill, resulting from acquisitions of companies, is being
amortized using the straight-line method over periods not exceeding 40 years; at
December 31, 1997 and 1996 such accumulated amortization totalled $82.8 million
and $70.2 million, respectively. At each balance sheet date, management
evaluates the recoverability of acquired goodwill by measuring the carrying
value of the asset to the associated current and projected annual sales,
operating profit and undiscounted annual cash flows; management also considers
business prospects, market trends and other economic factors in performing this
evaluation. Based on this evaluation, there was no permanent impairment related
to acquired goodwill at December 31, 1997 and 1996. 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 totalled
$34.6 million, $28.0 million and $24.8 million in 1997, 1996 and 1995,
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 underlying investments. The fair value of the
Company's long-term debt instruments was based principally on
24
<PAGE> 26
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING POLICIES -- (CONCLUDED)
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, 1997 was approximately $509 million and $1,386 million, as
compared with the Company's aggregate carrying value of $498 million and $1,321
million, respectively, and at December 31, 1996 the aggregate market value was
approximately $631 million and $1,248 million, as compared with the Company's
aggregate carrying value of $601 million and $1,236 million, respectively.
ACQUISITIONS
During 1997, the Company acquired Texwood Industries, Inc., a U.S.
manufacturer of kitchen and bath cabinetry, and five other home improvement and
building products companies, including two companies in Europe.
The results of operations for these acquisitions are included in the
consolidated financial statements from the dates of acquisition. Had these
companies been acquired effective January 1, 1996, pro forma unaudited
consolidated net sales and net income would have approximated $3,909 million and
$390 million for 1997 and $3,575 million and $309 million for 1996,
respectively, and pro forma unaudited consolidated diluted earnings per share
would have approximated $2.33 and $1.87 for 1997 and 1996, respectively.
The combined purchase price for these acquisitions, including assumed debt,
aggregated approximately $430 million and included approximately 2.9 million
shares of Company common stock, with the balance in cash and a short-term note.
The acquisitions were accounted for as purchase transactions. The net cash paid
for companies acquired in 1997 is as follows, in thousands:
<TABLE>
<S> <C>
Combined purchase price, excluding $70 million of assumed
debt...................................................... $359,280
Common stock issued......................................... 119,360
Note issued (paid in early 1998)............................ 53,000
--------
Net cash paid............................................... $186,920
========
</TABLE>
DISCONTINUED OPERATIONS
In late November 1995, the Company's Board of Directors approved a formal
plan to dispose of the Company's home furnishings products segment. An aggregate
provision of $650 million was recorded in the fourth quarter of 1995 for the
estimated loss on the discontinued operations through the expected disposal
date, the reduction of assets to their estimated net realizable value and the
anticipated liabilities related to the disposal.
Basic and diluted earnings per share for 1995 from discontinued operations
were both $.05. Basic and diluted loss per share for 1995 from the loss on
disposition of discontinued operations were $4.15 and $4.05, respectively.
25
<PAGE> 27
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DISCONTINUED OPERATIONS -- (CONCLUDED)
During August 1996, the Company completed the sale of its home furnishings
products segment to Furnishings International Inc. Total proceeds to the Company
from the sale were, in millions:
<TABLE>
<S> <C> <C>
Cash........................................................ $ 708
Junior debt securities (12% pay-in-kind).................... 285
Preferred stock (13% cumulative)............................
Common stock (15% ownership)................................ 57
Convertible preferred stock.................................
------
Total proceeds from the sale................................ $1,050
======
</TABLE>
The junior debt securities mature in 2008. The convertible preferred stock
represents transferable rights for up to a 25 percent common ownership, although
the Company is restricted from maintaining an ownership in excess of 20 percent
of Furnishings International's common equity. As such, the Company will not
acquire additional common equity, except for purposes of resale only. Of the
cash proceeds received from this sale, approximately $550 million was applied to
reduce bank debt.
Under a transitional services agreement, the Company provided
corporate-related services for a fee to Furnishings International through April
1997. Substantially all of these services were discontinued after such date.
INVENTORIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-------------------
1997 1996
-------- --------
<S> <C> <C>
Raw material............................................. $229,040 $185,500
Finished goods........................................... 161,920 135,190
Work in process.......................................... 124,040 91,250
-------- --------
$515,000 $411,940
======== ========
</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.
EQUITY INVESTMENTS IN AFFILIATES
Equity investments in affiliates consist primarily of the following common
equity and partnership interests:
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
MascoTech, Inc........................................... 17% 21% 45%
Emco Limited............................................. 42% -- --
Hans Grohe, a German partnership......................... 27% 27% 27%
TriMas Corporation....................................... 4% 4% 5%
</TABLE>
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, 1997 (which may differ from the amounts that could
then have been realized upon disposition), based upon quoted market prices at
that date, was $319 million, as compared with the Company's related aggregate
carrying value
26
<PAGE> 28
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES -- (CONTINUED)
of $182 million. The Company's carrying value in common stock of these equity
affiliates exceeds its equity in the underlying net book value by approximately
$79 million at December 31, 1997. This excess is being amortized over a period
not to exceed 40 years.
During the second quarter of 1997, MascoTech effected conversion of all of
its publicly held outstanding convertible preferred stock with the issuance of
approximately 10 million shares of its common stock. This conversion reduced the
Company's common equity ownership in MascoTech to 17 percent from 21 percent,
and increased the Company's equity in MascoTech's net book value by
approximately $29.5 million.
MascoTech holds an option expiring in 2002 to require the Company to
purchase up to $200 million aggregate amount of subordinated debt securities of
MascoTech.
During the fourth quarter of 1996, the Company completed the sale to
MascoTech of 17 million shares of MascoTech common stock and warrants to
purchase 10 million shares of MascoTech common stock. This transaction reduced
the Company's common equity ownership in MascoTech from 45 percent to 21 percent
and resulted in a fourth quarter 1996 pre-tax gain of $67.8 million ($40.7
million after-tax). Under the sale agreement, the Company received approximately
$266 million, with $115 million paid at closing. The Company earned interest
income at 6.625% on the $151 million balance of the consideration, which was
paid by MascoTech to the Company on September 30, 1997; as provided for in the
sale agreement, MascoTech at that date delivered to the Company 9.9 million
shares (approximately 42 percent) of the outstanding common stock of Emco
Limited and $45.6 million in cash. MascoTech recognized a $29.3 million
after-tax gain from the delivery to the Company of the Emco Limited common
stock. The Company's recording of equity earnings from MascoTech for 1997
excludes the effect of such gain due to the related-party nature of the
transaction. Emco Limited is a leading Canadian distributor and manufacturer of
home improvement and building products.
On January 22, 1998, MascoTech announced the completion of its acquisition
of TriMas Corporation. The Company will record in the first quarter of 1998, as
a result of selling its common stock investment in TriMas to MascoTech in the
public tender offer, an approximate $29 million pre-tax gain.
27
<PAGE> 29
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES -- (CONCLUDED)
Approximate combined condensed financial data of the above-listed
affiliates, including Emco Limited at December 31, 1997 and for the year then
ended, are summarized in U.S. dollars as follows, in thousands:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................................. $2,745,570 $ 2,136,740 $2,488,900
========== =========== ==========
Income from continuing operations before
income taxes............................ $ 333,540 $ 181,710 $ 201,860
========== =========== ==========
Net income attributable to common
shareholders............................ $ 201,990 $ 109,500 $ 115,570
========== =========== ==========
The Company's net equity in above net
income.................................. $ 24,140 $ 20,090 $ 26,210
========== =========== ==========
Cash dividends received by the Company
from affiliates......................... $ 4,670 $ 7,780 $ 8,440
========== =========== ==========
At December 31:
Current assets.......................... $ 973,900 $ 770,980
Current liabilities..................... (436,250) (287,200)
---------- -----------
Working capital...................... 537,650 483,780
Property and equipment.................. 776,470 662,520
Other assets............................ 504,810 571,610
Long-term liabilities................... (980,990) (1,152,980)
---------- -----------
Shareholders' equity................. $ 837,940 $ 564,930
========== ===========
</TABLE>
Equity in undistributed earnings of affiliates of $43 million at December
31, 1997, $32 million at December 31, 1996 and $30 million at December 31, 1995
are included in consolidated retained earnings.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Land and improvements................................. $ 70,120 $ 68,750
Buildings............................................. 465,920 428,860
Machinery and equipment............................... 1,089,330 976,470
---------- ----------
1,625,370 1,474,080
Less, accumulated depreciation........................ 588,050 533,490
---------- ----------
$1,037,320 $ 940,590
========== ==========
</TABLE>
28
<PAGE> 30
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1997 1996
-------- --------
<S> <C> <C>
Salaries, wages and related retirement benefits......... $ 96,160 $ 92,450
Advertising and sales promotion......................... 86,170 51,150
Insurance............................................... 48,930 49,260
Dividends payable....................................... 34,000 31,240
Interest................................................ 26,990 22,130
Property, payroll and other taxes....................... 24,760 26,330
Other................................................... 68,220 88,790
-------- --------
$385,230 $361,350
======== ========
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Notes, 6.625%, due September 15, 1999................. $ 200,000 $ 200,000
Notes, 9%, due October 1, 2001.................... 175,000 175,000
Notes, 6.125%, due September 15, 2003................. 200,000 200,000
Notes, 7.125%, due August 15, 2013.................... 200,000 200,000
European bank debt.................................... 329,300 275,050
Convertible subordinated debentures, 5.25%, due
2012................................................ 177,920 177,920
Other, principally acquisition-related in 1997........ 107,710 15,940
---------- ----------
1,389,930 1,243,910
Less, current portion................................. 68,460 7,590
---------- ----------
$1,321,470 $1,236,320
========== ==========
</TABLE>
All of the notes above are nonredeemable.
European bank debt relates to borrowings of local currency for acquisitions
and expansion, primarily in Germany. At December 31, 1997, approximately $222
million of European debt related to a term loan facility expiring in 2002. The
balance of $107 million represents borrowings under lines of credit primarily
expiring in 2002. Interest is payable on European borrowings based upon various
floating rates as selected by the Company (approximately 4 percent at December
31, 1997).
The Company called the 5.25% subordinated debentures due 2012 for
redemption on February 12, 1998. Substantially all holders exercised their right
to convert these debentures into Company common stock (at the conversion price
of $42.28 per share), resulting in the issuance of approximately 4.2 million
shares of Company common stock in February 1998.
Certain debt agreements contain limitations on additional borrowings and
requirements for maintaining a certain level of tangible net worth. At December
31, 1997, the Company was in compliance with these limitations and requirements,
and the Company's tangible net worth exceeded the most restrictive of such
provisions by approximately $171 million.
29
<PAGE> 31
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT -- (CONCLUDED)
At December 31, 1997, the maturities of long-term debt during each of the
next five years were approximately as follows: 1998-$68.5 million; 1999-$232.0
million; 2000-$16.0 million; 2001-$186.6 million; and 2002-$5.6 million.
The Company has a $750 million bank revolving-credit agreement, with any
outstanding balance due and payable in November 2001. There was no outstanding
balance as of December 31, 1997. Interest is payable on borrowings under this
agreement based upon various floating rates as selected by the Company.
The Company has on file with the Securities and Exchange Commission an
unallocated shelf registration pursuant to which the Company is able to issue up
to a combined $759 million of debt and equity securities.
Interest paid was approximately $75 million, $102 million and $115 million
in 1997, 1996 and 1995, respectively. Amounts paid in 1996 and 1995 include
interest pertaining to discontinued operations.
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Common Shares, $1 Par Value
Balance, January 1....................... $ 160,870 $ 160,380 $ 156,990
Shares issued............................ 4,700 490 3,390
---------- ---------- ----------
Balance, December 31..................... 165,570 160,870 160,380
---------- ---------- ----------
Paid-In Capital
Balance, January 1....................... 140,010 128,550 44,840
Shares issued............................ 164,550 11,460 83,710
---------- ---------- ----------
Balance, December 31..................... 304,560 140,010 128,550
---------- ---------- ----------
Retained Earnings
Balance, January 1....................... 1,536,410 1,366,330 1,924,740
Net income (loss)........................ 382,400 295,200 (441,680)
Cash dividends declared.................. (134,440) (125,120) (116,730)
---------- ---------- ----------
Balance, December 31..................... 1,784,370 1,536,410 1,366,330
---------- ---------- ----------
Cumulative Translation Adjustments
Balance, December 31..................... (25,480) 2,520 170
---------- ---------- ----------
Shareholders' Equity
Balance, December 31..................... $2,229,020 $1,839,810 $1,655,430
========== ========== ==========
</TABLE>
On the basis of amounts paid (declared), cash dividends per share were $.81
($.82) in 1997, $.77 ($.78) in 1996 and $.73 ($.74) in 1995.
In December 1995, the Company's Board of Directors announced the approval
of a Shareholder Rights Plan. The Rights were designed to enhance the Board's
ability to protect the Company's shareholders against, among other things,
unsolicited attempts to acquire control of the Company that do not offer an
adequate price to all shareholders or are otherwise not in the best interests of
the shareholders. The Rights were issued to shareholders of record in December
1995 and will expire in December 2005.
30
<PAGE> 32
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY -- (CONCLUDED)
Financial statements of non-U.S. operations are translated into U.S.
dollars using exchange rates in effect at year-end for assets and liabilities
and using weighted average exchange rates in effect during the year for results
of operations. Adjustments resulting from such translation are reflected as
cumulative translation adjustments in shareholders' equity.
At December 31, 1997, the Company had remaining authorization to repurchase
up to 7.2 million shares of its common stock in open-market transactions or
otherwise.
STOCK OPTIONS AND AWARDS
The Company's 1991 Long Term Stock Incentive Plan (the "Plan") provides for
the issuance of stock-based incentives in various forms. At December 31, 1997,
outstanding stock-based incentives were primarily in the form of restricted
long-term stock awards and stock options.
The Company granted long-term stock awards, net of cancellations, for
790,000, 540,000 and 1,250,000 shares of Company common stock during 1997, 1996
and 1995, respectively, to key employees of the Company and to non-employee
Directors of the Company. These long-term stock awards do not cause net share
dilution inasmuch as the Company reacquires an equal number of shares on the
open market. The weighted average grant date fair value per share of long-term
stock awards granted during 1997, 1996 and 1995 was $42, $31 and $27,
respectively. Compensation expense for the annual vesting of long-term stock
awards was $14.0 million, $14.9 million and $13.3 million in 1997, 1996 and
1995, respectively. The unamortized costs of unvested stock awards, aggregating
approximately $95.5 million at December 31, 1997, are included in other assets
and are being amortized over the typical 10-year vesting periods.
Fixed stock options are granted to key employees of the Company and to
non-employee Directors of the Company, and have a maximum term of 10 years. The
exercise price of each fixed option, other than the option described below to
the Company's Chief Executive Officer granted during 1996 at an exercise price
in excess of the current market price, equals the market price of Company common
stock on the date of grant. These options generally vest in installments
beginning in the third year and extending through the eighth year after grant.
During 1997, the Company granted original stock options for 2,840,000
shares of Company common stock with an exercise price of $39 per share (equal to
the market price on the grant date). Twenty percent of such options became
exercisable in late 1997 when the Company's common stock price exceeded $50 per
share for the required period. An additional twenty percent will become
exercisable if the price of Company common stock exceeds $55 for the required
period by May 2000; the remaining sixty percent (eighty percent if the $55
target was not exceeded) of such options will become exercisable if the price of
Company common stock reaches $60 per share for the required period by May 2001.
If neither target is met, the remaining eighty percent of such options become
exercisable in March 2007; however, the recipients of these options have stated
that they will not exercise them unless they become exercisable earlier as a
result of meeting the price targets. The Company also granted restoration stock
options for 139,000 shares of Company common stock with grant date exercise
prices ranging from $35 to $52 (the market prices on the grant dates) and stock
options for 28,000 shares of Company common stock to non-employee Directors of
the Company with an exercise price of $39.
To demonstrate his commitment to increase the market value of Company
common stock for the benefit of shareholders, in 1996 the Company's Chief
Executive Officer requested that his annual salary and bonus be reduced
indefinitely to $1 per year effective January 1, 1996. The Compensation
Committee of the Board of Directors, in acceding to this request, considered
alternative compensation
31
<PAGE> 33
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONTINUED)
arrangements for the Chief Executive Officer and in April 1996 granted the Chief
Executive Officer a 10-year option, with a $41 exercise price when the market
price was $27 7/8 per share, to purchase one million shares of Company common
stock. This option became exercisable in 1997 when the price of Company common
stock exceeded $41 per share.
As a demonstration of their commitment to enhance shareholder value and
alignment with shareholder interests, in 1996 other officers and certain other
key employees of the Company voluntarily accepted an effective 15 percent salary
reduction with salaries frozen indefinitely at that level. This reduction in
compensation was replaced with stock options and career stock awards. The stock
options were granted with an exercise price of $32 (equal to the market price on
the grant date). Annual vestings of such stock options commenced in 1997 as a
result of the Company common stock price exceeding $41 per share for the
required period. Such options were granted for approximately 1,615,000 shares of
Company common stock. In addition, in 1996 when the market price of Company
common stock was $32 per share, the executive officers were granted career stock
awards; annual vestings of such awards commenced in 1997 as a result of the
Company common stock price exceeding $50 per share for the required period in
late 1997.
A summary of the status of the Company's stock options granted for the
three years ended December 31, 1997 is presented below.
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Option shares outstanding, January 1.................. 7,308 5,456 5,510
Weighted average exercise price..................... $28 $23 $23
Option shares granted................................. 3,007 2,680 205
Weighted average exercise price..................... $39 $35 $28
Option shares exercised............................... 2,138 467 196
Weighted average exercise price..................... $25 $21 $21
Option shares cancelled............................... 77 361 63
Weighted average exercise price..................... $21 $22 $21
Option shares outstanding, December 31................ 8,100 7,308 5,456
Weighted average exercise price..................... $33 $28 $23
Weighted average remaining option term (in years)... 7.2 5.5 4.3
Option shares exercisable, December 31................ 2,294 2,807 2,916
Weighted average exercise price..................... $31 $24 $24
</TABLE>
Of the 2,294,000 option shares exercisable at December 31, 1997, 1,004,000
were exercisable at per share prices ranging from $21 to $25, with a weighted
average exercise price of $21; 290,000 were exercisable at per share prices
ranging from $28 to $39, with a weighted average exercise price of $32; and
1,000,000 were exercisable at $41 per share.
At December 31, 1997, a combined total of 5,668,000 shares of Company
common stock was available for the granting of stock options and long-term stock
awards under the Plan.
During 1997, the Company adopted the "1997 Non-Employee Directors Stock
Plan" (the "Directors Stock Plan"), which provides for the payment of
compensation to non-employee Directors in part in Company common stock.
Approximately 51,000 shares of Company common stock were granted in 1997 in the
form of stock options and long-term stock awards under this plan. Such options
and long-term stock awards are included in the information provided above. At
December 31, 1997, a
32
<PAGE> 34
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONCLUDED)
combined total of 449,000 shares of Company common stock was available for the
granting of stock options and long-term stock awards under the Directors Stock
Plan.
The Company has elected to continue to apply the provisions of Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees," and,
accordingly, the Company's stock options do not constitute compensation expense
in the determination of net income in the statement of operations. Had stock
option compensation expense been determined pursuant to the methodology of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," the pro forma effect would have been a reduction in
the Company's diluted earnings per share of approximately $.05 and $.03 in 1997
and 1996, respectively, with no effect in 1995.
For SFAS 123 calculation purposes, the weighted average grant date fair
values of options granted in 1997, 1996 and 1995 were $12.54, $11.20 and $8.44,
respectively. The fair values of these options were estimated at the grant dates
using a Black-Scholes option pricing model with the following assumptions for
1997, 1996 and 1995, respectively: risk free interest rate -- 6.7%, 6.7% and
6.5%; dividend yield -- 2.5% (all years); volatility factor -- 27%, 25% and 27%;
and expected option life -- 7 years (all years).
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 1997, 1996 or 1995. At December 31, 1997, there were 4,695,000
of such shares available for granting future awards under this plan.
The data in this note include discontinued operations.
EMPLOYEE RETIREMENT PLANS
The Company sponsors defined-benefit pension plans and defined-contribution
retirement plans for most of its employees. In addition, substantially all
salaried employees participate in non-contributory profit-sharing plans, to
which payments are determined annually by the Directors. Aggregate charges to
income under the Company's pension and profit-sharing plans were $23.9 million
in 1997, $24.4 million in 1996 and $24.0 million in 1995.
Net periodic pension cost for the Company's qualified pension plans
includes the following components:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Service cost...................................... $ 7,090 $ 6,220 $ 5,050
Interest cost..................................... 10,170 9,450 8,430
Actual return on assets........................... (6,760) (7,070) (11,550)
Net amortization and deferral..................... (3,900) (2,610) 2,550
------- ------- --------
Net periodic pension cost......................... $ 6,600 $ 5,990 $ 4,480
======= ======= ========
</TABLE>
33
<PAGE> 35
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS -- (CONCLUDED)
The funded status of the Company's qualified pension plans is summarized as
follows, in thousands, at December 31:
<TABLE>
<CAPTION>
1997 1996
--------------- -------------------------------
ACCUMULATED ASSETS EXCEED ACCUMULATED
BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
ASSETS BENEFITS ASSETS
--------------- ------------- ---------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation......................... $115,060 $ 71,060 $30,920
======== ======== =======
Accumulated benefit obligation.................... $123,480 $ 73,400 $32,110
======== ======== =======
Projected benefit obligation...................... $152,320 $ 97,430 $32,110
Assets at fair value................................ 106,520 76,910 25,130
-------- -------- -------
Projected benefit obligation in excess of plan
assets......................................... (45,800) (20,520) (6,980)
Reconciling items:
Unrecognized net loss............................. 40,340 18,830 6,210
Unrecognized prior service cost................... 3,110 60 3,690
Unrecognized net asset at transition.............. (2,800) (2,530) (890)
Requirement to recognize minimum liability........ (16,320) -- (9,010)
-------- -------- -------
Accrued pension cost.............................. $(21,470) $ (4,160) $(6,980)
======== ======== =======
</TABLE>
Major assumptions used in accounting for the Company's pension plans are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- ------
<S> <C> <C> <C>
Discount rate for obligations......................... 7.0% 7.5% 7.25%
Rate of increase in compensation levels............... 5.0% 5.0% 5.0 %
Expected long-term rate of return on plan assets...... 11.0% 11.0% 11.0 %
</TABLE>
In addition to the Company's qualified pension plans, the Company has
non-qualified unfunded supplemental pension plans covering certain employees,
which provide for pension benefits in addition to those provided by the
qualified pension plans. The actuarial present value of accumulated benefit
obligations and projected benefit obligations related to these non-qualified
pension plans totalled $30.8 million and $39.1 million, and $24.7 million and
$30.2 million at December 31, 1997 and 1996, respectively; net periodic pension
cost for these plans was $4.7 million, $4.9 million and $3.7 million in 1997,
1996 and 1995, respectively.
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, 1997,
the aggregate present value of the unfunded accumulated postretirement benefit
obligation approximated $4.0 million.
34
<PAGE> 36
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION
The Company's operations in the industry segments detailed below consist of
the manufacture, installation and sale of the following home improvement and
building products:
Kitchen and Bath Products -- kitchen and bath cabinets; kitchen
appliances; faucets; plumbing fittings; bath and shower tubs and
enclosures; whirlpools and spas; and bath accessories.
Other Specialty Products -- builders' hardware, including mechanical and
electronic lock sets; venting and ventilating equipment; insulation;
rolling shutters; balcony railing systems; and water pumps.
These products are sold to the home improvement and home construction
markets through mass merchandisers, hardware stores, home centers, distributors,
wholesalers and other outlets for consumers and contractors.
The Company's operations are principally located in North America and
Europe.
Corporate assets consist primarily of real property, cash and cash
investments and other investments.
Pursuant to a corporate services agreement to provide MascoTech, Inc. and
TriMas Corporation with certain corporate staff and administrative services, the
Company charges a fee approximating .8 percent of MascoTech and TriMas net
sales. The fees charged to MascoTech and TriMas approximated $6 million and $4
million in 1997, $7 million and $3 million in 1996 and $9 million and $3 million
in 1995, respectively, and are included as a reduction of general corporate
expense.
35
<PAGE> 37
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION -- (CONCLUDED)
The following table presents information about the Company by industry
segment and geographic area:
<TABLE>
<CAPTION>
(IN THOUSANDS)
NET SALES(1)(2)(3) OPERATING PROFIT ASSETS AT DECEMBER 31
------------------------------------ ------------------------------ ------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Company's
operations by
segment were:
Kitchen and Bath
Products...... $2,940,000 $2,519,000 $2,283,000 $539,000 $462,000 $411,000 $2,023,000 $1,646,000 $1,445,000
Other Specialty
Products...... 820,000 718,000 644,000 130,000 104,000 82,000 834,000 632,000 591,000
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
Total......... $3,760,000 $3,237,000 $2,927,000 $669,000 $566,000 $493,000 $2,857,000 $2,278,000 $2,036,000
========== ========== ========== ======== ======== ======== ========== ========== ==========
The Company's
operations by
geographic area
were:
North America... $3,072,000 $2,680,000 $2,441,000 $570,000 $479,000 $407,000 $2,146,000 $1,667,000 $1,623,000
Europe.......... 688,000 557,000 486,000 99,000 87,000 86,000 711,000 611,000 413,000
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
Total......... $3,760,000 $3,237,000 $2,927,000 669,000 566,000 493,000 2,857,000 2,278,000 2,036,000
========== ========== ========== -------- -------- -------- ---------- ---------- ----------
Other (income) expense, net............................... 44,000 22,000 (51,000)
General corporate expense, net............................ (82,000) (85,000) (90,000)
-------- -------- --------
Income from continuing operations before income taxes(4).. $631,000 $503,000 $352,000
======== ======== ========
Equity investments in and receivable from affiliates....................................... 228,000 220,000 265,000
Securities of Furnishings International Inc................................................ 393,000 356,000 --
Corporate assets........................................................................... 856,000 848,000 425,000
Net assets of discontinued operations...................................................... -- -- 1,053,000
---------- ---------- ----------
Total assets......................................................................... $4,334,000 $3,702,000 $3,779,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
PROPERTY ADDITIONS(5)
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
The Company's operations by segment were:
Kitchen and Bath Products.................................................................. $149,000 $116,000 $111,000
Other Specialty Products................................................................... 61,000 42,000 43,000
-------- -------- --------
Total.................................................................................. $210,000 $158,000 $154,000
======== ======== ========
<CAPTION>
DEPRECIATION AND
AMORTIZATION
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
The Company's operations by segment were:
Kitchen and Bath Products............................ $69,000 $58,000 $51,000
Other Specialty Products............................. 28,000 21,000 20,000
---------- ---------- ----------
Total............................................ $97,000 $79,000 $71,000
========== ========== ==========
</TABLE>
(1) Included in net sales in 1997, 1996 and 1995 are export sales from the U.S.
of $58.8 million, $46.2 million and $40.9 million, respectively.
(2) Intra-company sales among segments and geographic areas represented less
than one percent of consolidated net sales in 1997, 1996 and 1995.
(3) Includes net sales to one customer in 1997 of $392 million.
(4) Income from continuing operations before income taxes and net income
pertaining to continuing foreign operations were $93 million and $45
million, $82 million and $40 million, and $96 million and $52 million for
1997, 1996 and 1995, respectively.
(5) Property additions include assets of acquired companies.
36
<PAGE> 38
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Re: MascoTech, Inc.:
Equity earnings............................... $ 14,580 $ 13,860 $ 18,200
-------- -------- --------
Gain from change in investment................ 29,500 -- --
-------- -------- --------
Gain from sale of investments, net............ -- 67,800 --
-------- -------- --------
Equity earnings, other affiliates............... 9,560 6,230 8,010
-------- -------- --------
Other, net:
Income from cash and cash investments......... 17,280 6,910 2,600
Other interest income......................... 47,550 20,710 4,500
Other items................................... 5,180 (18,630) (10,060)
-------- -------- --------
70,010 8,990 (2,960)
-------- -------- --------
Interest expense................................ (79,850) (74,680) (73,800)
-------- -------- --------
$ 43,800 $ 22,200 $(50,550)
======== ======== ========
</TABLE>
During the second quarter of 1997, MascoTech effected conversion of all of
its publicly held outstanding convertible preferred stock with the issuance of
approximately 10 million shares of its common stock. This conversion reduced the
Company's common equity ownership in MascoTech to 17 percent from 21 percent,
and increased the Company's equity in MascoTech's net book value by
approximately $29.5 million. As a result, the Company recognized a pre-tax gain
of $29.5 million during the second quarter of 1997.
Other interest income for 1997 and 1996 includes $36.8 million and $14.0
million, respectively, from the 12% pay-in-kind junior debt securities of
Furnishings International Inc. Such interest income began to accrue in August
1996 upon the sale of the Company's home furnishings businesses. Other interest
income for 1997 and 1996 also includes $7.5 million and $1.7 million,
respectively of interest income from the $151 million note receivable from
MascoTech which was paid on September 30, 1997.
Other items in 1997 include $10.8 million of dividend income from the
Company's investment in Furnishings International's 13% cumulative preferred
stock and net gains aggregating approximately $28 million related to the sales
of certain assets, as well as charges aggregating approximately $30 million
principally for the adjustment of the Company's Payless Cashways investment to
its estimated fair value. Other items in 1996 include $36.3 million of fourth
quarter charges primarily related to adjustments of miscellaneous assets to
their estimated fair value.
Interest expense in 1996 and 1995 is presented net of interest expense
pertaining to discontinued operations of $21.8 million and $44.0 million,
respectively.
37
<PAGE> 39
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income from continuing operations before
income taxes:
Domestic................................... $537,760 $420,560 $256,190
Foreign.................................... 93,140 82,140 95,600
-------- -------- --------
$630,900 $502,700 $351,790
======== ======== ========
Provision for income taxes:
Currently payable:
Federal.................................... $146,940 $119,250 $ 84,230
State and local............................ 25,570 18,280 14,740
Foreign.................................... 41,110 41,120 34,530
Deferred:
Federal.................................... 28,240 27,880 9,300
Foreign.................................... 6,640 970 8,940
-------- -------- --------
$248,500 $207,500 $151,740
======== ======== ========
Deferred tax assets at December 31:
Intangibles................................... $ 24,110 $ 27,350
Inventories................................... 11,380 12,870
Accrued liabilities........................... 54,650 53,660
Capital loss carryforward..................... 149,470 163,960
Other, principally equity investments......... 34,940 46,470
-------- --------
274,550 304,310
Valuation allowance........................... (174,960) (206,310)
-------- --------
99,590 98,000
-------- --------
Deferred tax liabilities at December 31:
Property and equipment........................ 149,220 116,000
Other......................................... 13,830 10,580
-------- --------
163,050 126,580
-------- --------
Net deferred tax liability at December 31....... $ 63,460 $ 28,580
======== ========
</TABLE>
Net deferred tax liability at December 31, 1997 and 1996 consists of net
short-term deferred tax assets of $19.0 million and $14.5 million, respectively,
and net long-term deferred tax liabilities of $82.5 million and $43.1 million,
respectively.
A valuation allowance of approximately $175.0 million and $206.3 million
was recorded at December 31, 1997 and 1996, respectively, primarily due to the
Company's inability to quantify the major portion of its capital loss
carryforward which may ultimately be realized. Such capital loss benefit
resulted from a $149.5 million and $164.0 million after-tax capital loss
carryforward on the disposition of the Company's home furnishings products
segment at December 31, 1997 and 1996, respectively, and a $25.5 million and
$42.3 million after-tax future deductible temporary difference of a capital
nature on the Company's equity and other investments at December 31, 1997 and
1996, respectively.
38
<PAGE> 40
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES -- (CONCLUDED)
The following is a reconciliation of the U.S. federal statutory rate to the
effective tax rate allocated to income from continuing operations before income
tax:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate................................. 35% 35% 35%
State and local taxes, net of federal tax benefit........... 2 2 3
Higher taxes on foreign earnings............................ 3 3 5
Dividends-received deduction................................ (1) -- --
Amortization in excess of tax............................... 1 1 1
Change in valuation allowance............................... (2) 1 --
Other, net.................................................. 1 (1) (1)
-- -- --
Effective tax rate on income from continuing operations... 39% 41% 43%
== == ==
</TABLE>
Income taxes paid were approximately $178 million, $201 million and $170
million in 1997, 1996 and 1995, respectively. Amounts paid in 1996 and 1995
include taxes on discontinued operations.
Earnings of non-U.S. subsidiaries generally become subject to U.S. tax upon
the remittance of dividends and under certain other circumstances. Provision has
not been made at December 31, 1997 for U.S. or additional foreign withholding
taxes on approximately $6.0 million of remaining undistributed net income of
non-U.S. subsidiaries, as such income is intended to be permanently reinvested;
it is not practical to estimate the amount of deferred tax liability on such
income.
EARNINGS PER SHARE
At December 31, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," which replaces the
presentation of primary and fully diluted earnings per share, as computed under
Accounting Principles Board ("APB") Opinion No. 15, with a presentation of basic
and diluted earnings per share. The financial statements have been retroactively
restated to conform with the earnings per share presentation required under SFAS
No. 128.
The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per share, in thousands:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Numerator:
Basic (income from continuing operations)..... $382,400 $295,200 $200,050
Add convertible debenture interest, net (1)... 5,880 5,880 --
-------- -------- --------
Diluted (income from continuing operations)... $388,280 $301,080 $200,050
======== ======== ========
Denominator:
Basic shares (based on weighted average)...... 159,700 157,500 156,800
Add:
Contingently issued shares................. 3,300 3,100 2,800
Stock option dilution...................... 1,600 900 700
Convertible debentures (1)................. 4,200 4,200 --
-------- -------- --------
Diluted shares................................ 168,800 165,700 160,300
======== ======== ========
</TABLE>
(1) Effect of convertible debentures in 1995 was antidilutive. The Company
called these debentures for redemption on February 12, 1998. Substantially
all holders exercised their right to convert these debentures into Company
common stock.
39
<PAGE> 41
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. These combined financial statements present the Company's
former home furnishings products segment as discontinued operations. (See
"Discontinued Operations" note.) Intercompany transactions have been eliminated.
Amounts, except earnings per share, are in thousands.
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
COMBINED BALANCE SHEETS
Assets
Current assets:
Cash and cash investments........................... $ 587,820 $ 599,020
Marketable securities............................... 45,970 37,760
Receivables......................................... 768,030 674,530
Prepaid expenses and other.......................... 85,250 81,320
Deferred income taxes............................... 80,520 53,670
Net current assets of businesses held for
disposition...................................... -- 85,980
Inventories:
Raw material..................................... 286,120 238,250
Finished goods................................... 237,340 209,590
Work in process.................................. 162,460 125,950
---------- ----------
685,920 573,790
---------- ----------
Total current assets........................... 2,253,510 2,106,070
Equity investments in affiliates...................... 280,970 221,380
Securities of Furnishings International Inc........... 393,140 356,340
Property and equipment................................ 1,654,840 1,523,590
Acquired goodwill, net................................ 925,120 660,690
Net non-current assets of businesses held for
disposition......................................... -- 22,850
Other assets.......................................... 421,170 415,280
---------- ----------
Total assets................................... $5,928,750 $5,306,200
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable....................................... $ 72,340 $ 16,620
Accounts payable.................................... 264,980 241,420
Accrued liabilities................................. 535,300 501,800
---------- ----------
Total current liabilities...................... 872,620 759,840
Long-term debt........................................ 1,959,440 2,020,400
Deferred income taxes and other....................... 365,470 300,170
Other interests in combined affiliates................ 502,200 385,980
---------- ----------
Total liabilities.............................. 3,699,730 3,466,390
Equity of shareholders of Masco Corporation........... 2,229,020 1,839,810
---------- ----------
Total liabilities and shareholders' equity..... $5,928,750 $5,306,200
========== ==========
</TABLE>
40
<PAGE> 42
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED)-- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
COMBINED STATEMENTS OF OPERATIONS
Net sales............................................. $ 5,323,450 $ 5,095,710 $ 5,141,160
Cost of sales......................................... (3,535,070) (3,476,820) (3,598,140)
Selling, general and administrative expenses.......... (990,850) (933,250) (938,480)
Gains (charge) on disposition of businesses, net...... 4,980 (31,520) 5,290
----------- ----------- -----------
Operating profit............................... 802,510 654,120 609,830
----------- ----------- -----------
Other income (expense), net:
Interest expense.................................... (114,300) (115,460) (137,230)
Other, net.......................................... 153,290 106,810 26,990
----------- ----------- -----------
38,990 (8,650) (110,240)
----------- ----------- -----------
Income from continuing operations before income
taxes and other interests................... 841,500 645,470 499,590
Income taxes.......................................... (347,110) (279,830) (230,850)
Other interests in combined affiliates................ (111,990) (70,440) (68,690)
----------- ----------- -----------
Income from continuing operations.............. 382,400 295,200 200,050
----------- ----------- -----------
Discontinued operations (net of income taxes):
Income from operations.............................. -- -- 8,270
Loss on disposition, net............................ -- -- (650,000)
----------- ----------- -----------
Net income (loss).............................. $ 382,400 $ 295,200 $ (441,680)
=========== =========== ===========
Earnings per share from continuing operations:
Basic............................................... $2.39 $1.87 $1.28
=========== =========== ===========
Diluted............................................. $2.30 $1.82 $1.25
=========== =========== ===========
</TABLE>
Basic and diluted earnings per share for 1995 from discontinued operations
were both $.05. Basic and diluted loss per share for 1995 from the loss on
disposition of discontinued operations were $4.15 and $4.05, respectively.
41
<PAGE> 43
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------
1997 1996 1995
--------- ----------- ---------
<S> <C> <C> <C>
COMBINED STATEMENTS OF CASH FLOWS
Cash Flows From (For) Operating Activities:
Income from continuing operations........ $ 382,400 $ 295,200 $ 200,050
Depreciation and amortization............ 185,190 167,080 158,640
Interest accrual on pay-in-kind notes
receivable............................ (36,800) (13,970) --
Unremitted equity earnings of
affiliates............................ (9,060) (12,730) (5,860)
Deferred income taxes.................... 57,230 39,590 75,130
(Gains) charge on disposition of
businesses, net....................... (4,980) 31,520 (5,290)
Gain from change in investment........... (4,980) -- (5,100)
Other interests in net income of
combined affiliates, net.............. 111,990 70,440 68,690
(Increase) decrease in receivables....... (40,250) 1,230 (83,240)
(Increase) decrease in inventories....... (41,870) 14,870 (15,250)
Increase in accounts payable and accrued
liabilities, net...................... 46,200 93,700 28,640
Discontinued operations, net............. -- (19,240) 62,560
Other, net............................... (16,360) (26,080) (2,500)
--------- ----------- ---------
Net cash from operating
activities..................... 628,710 641,610 476,470
--------- ----------- ---------
Cash Flows From (For) Investing Activities:
Capital expenditures..................... (250,740) (207,600) (284,350)
Acquisitions, net of cash acquired....... (198,020) (247,800) (23,850)
Cash proceeds from sale of:
Discontinued operations............... -- 707,630 --
Subsidiaries.......................... 76,560 223,720 122,190
Formica investment.................... -- -- 74,470
Other, net............................... (66,920) (34,200) 52,440
Discontinued operations, net............. -- -- (38,290)
--------- ----------- ---------
Net cash from (for) investing
activities..................... (439,120) 441,750 (97,390)
--------- ----------- ---------
Cash Flows From (For) Financing Activities:
Increase in debt......................... 121,380 570,520 577,290
Payment of debt.......................... (155,230) (1,063,720) (855,250)
Repurchase of common stock............... (14,970) (14,040) (13,130)
Cash dividends paid...................... (151,970) (146,340) (137,380)
Discontinued operations, net............. -- -- 12,480
--------- ----------- ---------
Net cash for financing
activities..................... (200,790) (653,580) (415,990)
--------- ----------- ---------
Cash and Cash Investments:
Increase (decrease) for the year......... (11,200) 429,780 (36,910)
At January 1............................. 599,020 169,240 206,150
--------- ----------- ---------
At December 31........................... $ 587,820 $ 599,020 $ 169,240
========= =========== =========
</TABLE>
42
<PAGE> 44
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
QUARTERS ENDED
AUDITED ---------------------------------------------------
YEAR DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
---------- ----------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
1997:
Net sales............. $3,760,000 $990,000 $1,003,000 $913,000 $854,000
Gross profit.......... $1,381,750 $363,450 $ 369,000 $334,800 $314,500
Net income............ $ 382,400 $105,500 $ 101,800 $ 91,600 $ 83,500
Income per share:
Basic............... $2.39 $.65 $.63 $.58 $.53
Diluted............. $2.30 $.62 $.61 $.56 $.51
1996:
Net sales............. $3,237,000 $843,000 $ 843,000 $787,000 $764,000
Gross profit.......... $1,188,930 $293,830 $ 321,000 $290,430 $283,670
Net income............ $ 295,200 $ 83,400 $ 81,800 $ 68,000 $ 62,000
Income per share:
Basic............... $1.87 $.53 $.52 $.43 $.39
Diluted............. $1.82 $.51 $.51 $.42 $.38
</TABLE>
Fourth quarter net income in 1997 benefited (approximately $.02 per diluted
share) from a reduction in the effective tax rate to 38.0% from 40.0% due
primarily to the net utilization of the Company's capital loss carryforward
benefit.
The fourth quarter of 1996 includes a $67.8 million net pre-tax gain from
the sale of certain MascoTech, Inc. investments ($40.7 million after-tax or $.25
per diluted share). This gain was principally offset by fourth quarter charges
aggregating $49.1 million pre-tax ($37.5 million after-tax or $.23 per diluted
share) primarily for adjustments of miscellaneous assets to their estimated fair
value.
43
<PAGE> 45
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 1998 Annual
Meeting of Stockholders, to be filed on or before April 30, 1998, 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 1998 Annual Meeting of Stockholders, to be
filed on or before April 30, 1998, 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 1998 Annual Meeting of Stockholders, to be
filed on or before April 30, 1998, 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 1998 Annual Meeting of Stockholders, to be
filed on or before April 30, 1998, and such information is incorporated herein
by reference.
44
<PAGE> 46
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,
1997 and 1996, and for the years ended December 31, 1997, 1996 and
1995, consist of the following:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
<TABLE>
<S> <C> <C>
(i) Financial Statement Schedule of the Company appended hereto,
as required for the years ended December 31, 1997, 1996 and
1995, consists of the following:
II. Valuation and Qualifying Accounts
(ii) (A) MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements appended hereto, at December 31, 1997 and 1996,
and for the years ended December 31, 1997, 1996 and 1995,
consist of the following:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(B) MascoTech, Inc. and Subsidiaries Financial Statement
Schedule appended hereto, for the years ended December 31,
1997, 1996 and 1995, consists of the following:
II. Valuation and Qualifying Accounts
</TABLE>
(3) Exhibits.
<TABLE>
<S> <C> <C>
3.i Restated Certificate of Incorporation of Masco Corporation
and amendments thereto. (filed herewith)
3.ii Bylaws of Masco Corporation, as amended.(5)
4.a.i Indenture dated as of December 1, 1982 between Masco
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee, and Directors' resolutions establishing Masco
Corporation's: (i) 9% Notes Due October 1, 2001(7), (ii)
6 5/8 Notes Due September 15, 1999 (filed herewith), (iii)
6 1/8 Notes Due September 15, 2003(6), and (iv) 7 1/8%
Debentures Due August 15, 2013.(6)
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.(4)
4.a.iii Supplemental Indenture dated as of July 26, 1994 between
Masco Corporation and The First National Bank of Chicago.(4)
4.b $750,000,000 Amended and Restated Credit Agreement dated as
of November 14, 1996 among Masco Corporation, the banks
party thereto and Morgan Guaranty Trust Company of New York,
as agent(7) and Amendment No. 1 dated April 30, 1997. (filed
herewith)
4.c Rights Agreement dated as of December 6, 1995, between Masco
Corporation and The Bank of New York, as Rights Agent.(2)
</TABLE>
45
<PAGE> 47
<TABLE>
<S> <C> <C>
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(5), 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.(3)
4.e $1,300,000,000 Credit Agreement dated as of January 16, 1998 among MascoTech, Inc.,
MascoTech Acquisition, Inc., the banks party thereto from time to time, The First
National Bank of Chicago, as Administrative Agent, Bank of America NT&SA and NationsBank,
N.A., as Syndication Agents and Amendment No. 1 thereto dated as of February 10, 1998.
(filed herewith)
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.).(2)
10.b Corporate Services Agreement dated as of January 1, 1987 between Masco Corporation and
Masco Industries, Inc. (now known as MascoTech, Inc.) (filed herewith), Amendment No. 1
dated as of October 31, 1996(1), and related letter agreement dated January 22,
1998.(filed herewith)
10.c Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and
Masco Industries, Inc. (now known as MascoTech, Inc.)(2) and Amendment No. 1 dated as of
October 31, 1996(1).
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 letter dated September 20,
1985, Amendment to Stock Repurchase Agreement dated as of December 20, 1990 (7), and
amendment to Stock Repurchase Agreement included in Agreement dated as of November 23,
1993.(5)
NOTE: Exhibits 10.e through 10.r 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 (Amended and Restated April 23,
1997). (filed herewith)
10.f Masco Corporation 1988 Restricted Stock Incentive Plan (Restated December 6, 1995).(2)
10.g Masco Corporation 1988 Stock Option Plan (Restated December 6, 1995).(2)
10.h Masco Corporation 1984 Restricted Stock (Industries) Incentive Plan (Restated December 6,
1995).(2)
10.i Masco Corporation Supplemental Executive Retirement and Disability Plan.(3)
10.j Masco Corporation Benefits Restoration Plan.(3)
10.k Masco Corporation 1997 Annual Incentive Compensation Plan. (filed herewith)
</TABLE>
46
<PAGE> 48
<TABLE>
<S> <C> <C>
10.1 Masco Corporation 1997 Non-Employee Directors Stock Plan.(filed herewith)
10.m MascoTech, Inc. 1991 Long Term Stock Incentive Plan (Amended and Restated April 23,
1997). (filed herewith)
10.n MascoTech, Inc. 1984 Restricted Stock Incentive Plan (Restated December 6, 1995).(2)
10.o MascoTech, Inc. 1984 Stock Option Plan (Restated December 6, 1995).(2)
10.p MascoTech, Inc. 1997 Annual Incentive Compensation Plan.(filed herewith)
10.q MascoTech, Inc. 1997 Non-Employee Directors Stock Plan.(filed herewith)
10.r Description of the Masco Corporation Program for Estate, Financial Planning and Tax
Assistance. (filed herewith)
10.s Amended and Restated Securities Purchase Agreement dated as of November 23, 1993
("Securities Purchase Agreement") between MascoTech, Inc. and Masco Corporation,
including form of Note (5), Agreement dated as of November 23, 1993 relating thereto (5),
and Amendment No. 1 to the Securities Purchase Agreement dated as of October 31, 1996.(1)
10.t Registration Agreement dated as of March 31, 1993, between Masco Corporation and Masco
Industries, Inc. (now known as MascoTech, Inc.).(5)
10.u 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)(7) and Amendment thereto dated May 21, 1997. (filed herewith)
10.v 12% Senior Note Due 2008 by Furnishings International Inc. to Masco Corporation and
Registration Rights Agreement dated as of August 5, 1996 between Furnishings
International Inc. and Masco Corporation.(7)
10.w Stock Purchase Agreement dated as of October 15, 1996 between Masco Corporation and
MascoTech, Inc.(1)
12 Computation of Ratio of Earnings to Fixed Charges. (filed herewith)
21 List of Subsidiaries. (filed herewith)
23.a Consent of Coopers & Lybrand L.L.P. relating to Masco Corporation's Financial Statements
and Financial Statement Schedule. (filed herewith)
23.b Consent of Coopers & Lybrand L.L.P. relating to MascoTech, Inc.'s Financial Statements
and Financial Statement Schedule. (filed herewith)
27.a Financial Data Schedule as of and for the year ended December 31, 1997. (filed herewith)
27.b Financial Data Schedule as of and for the year-to-date periods ended September 30, 1997,
June 30, 1997 and March 31, 1997. (filed herewith)
27.c Financial Data Schedule as of and for the year-to-date periods ended December 31, 1996,
September 30, 1996, June 30, 1996 and March 31, 1996. (filed herewith)
27.d Financial Data Schedule as of and for the year ended December 31, 1995. (filed herewith)
</TABLE>
- -------------------------
(1) Incorporated by reference to the Exhibits filed with Masco Corporation's
Current Report on Form 8-K dated November 13, 1996.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995.
47
<PAGE> 49
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
THE COMPANY WILL FURNISH ITS STOCKHOLDERS A COPY OF ANY OF THE ABOVE
EXHIBITS NOT INCLUDED HEREIN UPON THE WRITTEN REQUEST OF SUCH STOCKHOLDER AND
THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES INCURRED BY THE COMPANY IN
FURNISHING SUCH COPY OR COPIES.
(B) REPORTS ON FORM 8-K.
(1) A Current Report on Form 8-K dated October 9, 1997 was filed by Masco
Corporation during the quarter ended December 31, 1997 reporting under
Item 5, "Other Events" the Company's acquisition of approximately 42%
of the outstanding shares of Emco Limited.
(2) A Current Report on Form 8-K dated February 23, 1998 was filed by Masco
Corporation during the quarter ended March 31, 1998 reporting under
Item 5. "Other Events" the Company's redemption on February 12, 1998 of
all of its outstanding 5 1/4% Convertible Subordinated Debentures Due
2012 and the announcement of its 1997 earnings.
48
<PAGE> 50
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 27, 1998
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>
<C> <S> <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 and
- --------------------------------------------- Treasurer
ROBERT B. ROSOWSKI
/s/ JOSEPH L. HUDSON, JR. Director
- ---------------------------------------------
JOSEPH L. HUDSON, JR.
/s/ VERNE G. ISTOCK Director
- ---------------------------------------------
VERNE G. ISTOCK
/s/ MARY ANN KREY Director
- ---------------------------------------------
MARY ANN KREY
/s/ WAYNE B. LYON Director
- ---------------------------------------------
WAYNE B. LYON
/s/ JOHN A. MORGAN Director
- ---------------------------------------------
JOHN A. MORGAN
/s/ ARMAN SIMONE Director
- ---------------------------------------------
ARMAN SIMONE
/s/ PETER W. STROH Director
- ---------------------------------------------
PETER W. STROH
</TABLE>
March 27, 1998
49
<PAGE> 51
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, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
II. Valuation and Qualifying Accounts....................... F-2
MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements and Financial Statement Schedule............... F-3
</TABLE>
F-1
<PAGE> 52
MASCO CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ----------- ----------------------- ----------- -----------
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------- ----------- ---------- ---------- ----------- -----------
(A) (B)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
deducted from accounts
receivable in the balance
sheet:
1997....................... $17,950,000 $2,650,000 $2,500,000 $(3,340,000) $19,760,000
=========== ========== ========== =========== ===========
1996....................... $16,260,000 $5,060,000 $ 640,000 $(4,010,000) $17,950,000
=========== ========== ========== =========== ===========
1995....................... $12,050,000 $6,450,000 $ 80,000 $(2,320,000) $16,260,000
=========== ========== ========== =========== ===========
</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> 53
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, 1997 and 1996, and the related
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1997 and the financial statement schedule as
listed in Item 14(a)(2)(ii)(A) and (B) 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 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, 1997 and 1996, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, 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.
As discussed in the footnotes to the consolidated financial statements,
effective January 1, 1996, the Company changed its method of accounting for the
impairment of long-lived assets and for long-lived assets to be disposed of.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
February 17, 1998
F-3
<PAGE> 54
MASCOTECH, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash investments................................. $ 41,110,000 $ 19,400,000
Marketable securities..................................... 45,970,000 37,760,000
Receivables............................................... 125,930,000 127,530,000
Inventories............................................... 73,860,000 69,640,000
Deferred and refundable income taxes...................... 36,270,000 39,180,000
Prepaid expenses and other assets......................... 13,310,000 14,480,000
Net current assets of businesses held for disposition..... -- 85,980,000
-------------- --------------
Total current assets................................. 336,450,000 393,970,000
Equity and other investments in affiliates.................. 263,300,000 282,470,000
Property and equipment, net................................. 417,030,000 388,460,000
Excess of cost over net assets of acquired companies........ 65,610,000 69,140,000
Notes receivable and other assets........................... 62,290,000 45,950,000
Net non-current assets of businesses held for disposition... -- 22,850,000
-------------- --------------
Total assets......................................... $1,144,680,000 $1,202,840,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 67,240,000 $ 58,170,000
Accrued liabilities....................................... 114,650,000 96,910,000
Current portion of long-term debt......................... 2,880,000 3,370,000
-------------- --------------
Total current liabilities............................ 184,770,000 158,450,000
Long-term debt held by Masco Corporation.................... -- 151,380,000
Convertible subordinated debentures......................... 310,000,000 310,000,000
Other long-term debt........................................ 282,000,000 291,020,000
Deferred income taxes and other long-term liabilities....... 157,250,000 153,170,000
-------------- --------------
Total liabilities.................................... 934,020,000 1,064,020,000
-------------- --------------
Shareholders' equity:
Preferred stock, $1 par:
Authorized: 25 million; Outstanding: 10.8 million in
1996................................................. -- 10,800,000
Common stock, $1 par:
Authorized: 250 million; Outstanding: 47.3 million and
37.3 million......................................... 47,250,000 37,250,000
Paid-in capital........................................... 34,340,000 41,080,000
Retained earnings......................................... 157,790,000 61,060,000
Other..................................................... 4,160,000 14,770,000
Less: Restricted stock awards............................. (32,880,000) (26,140,000)
-------------- --------------
Total shareholders' equity........................... 210,660,000 138,820,000
-------------- --------------
Total liabilities and shareholders' equity........... $1,144,680,000 $1,202,840,000
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 55
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- --------------- ---------------
<S> <C> <C> <C>
Net sales.................................... $ 922,130,000 $ 1,281,220,000 $ 1,678,210,000
Cost of sales................................ (735,470,000) (1,048,110,000) (1,397,880,000)
------------- --------------- ---------------
Gross profit............................ 186,660,000 233,110,000 280,330,000
Selling, general and administrative
expenses................................... (89,930,000) (132,260,000) (176,810,000)
Gains (charge) on disposition of businesses,
net........................................ 4,980,000 (31,520,000) 5,290,000
------------- --------------- ---------------
Operating profit........................ 101,710,000 69,330,000 108,810,000
------------- --------------- ---------------
Other income (expense), net:
Interest expense, Masco Corporation........ (7,500,000) -- --
Other interest expense..................... (29,030,000) (29,970,000) (49,900,000)
Equity and other income from affiliates.... 43,360,000 40,460,000 31,420,000
Gain from disposition of an equity
affiliate............................... 46,160,000 -- --
Gains from changes in investments in equity
affiliates.............................. 18,190,000 -- 5,100,000
Other, net................................. 17,400,000 (2,600,000) 4,850,000
------------- --------------- ---------------
88,580,000 7,890,000 (8,530,000)
------------- --------------- ---------------
Income before income taxes and
cumulative effect of accounting
change, net........................... 190,290,000 77,220,000 100,280,000
Income taxes................................. 75,050,000 37,300,000 41,090,000
------------- --------------- ---------------
Income before cumulative effect of
accounting change, net................ 115,240,000 39,920,000 59,190,000
Cumulative effect of accounting change
(net of income taxes)...................... -- 11,700,000 --
------------- --------------- ---------------
Net income.............................. $ 115,240,000 $ 51,620,000 $ 59,190,000
============= =============== ===============
Preferred stock dividends.................... $ 6,240,000 $ 12,960,000 $ 12,960,000
============= =============== ===============
Earnings attributable to common stock... $ 109,000,000 $ 38,660,000 $ 46,230,000
============= =============== ===============
</TABLE>
<TABLE>
<CAPTION>
BASIC DILUTED BASIC DILUTED BASIC DILUTED
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings per share:
Income before cumulative effect of
accounting change, net............. $2.70 $2.12 $.54 $.50 $.85 $.81
Cumulative effect of accounting
change, net........................ -- -- .23 .22 -- --
----- ----- ---- ---- ---- ----
Earnings attributable to common
stock.............................. $2.70 $2.12 $.77 $.72 $.85 $.81
===== ===== ==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 56
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------- -------------
<S> <C> <C> <C>
CASH FROM (USED FOR):
OPERATING ACTIVITIES:
Net income.................................. $115,240,000 $ 51,620,000 $ 59,190,000
Adjustments to reconcile net income to net
cash provided by operating activities,
excluding reclassification of businesses
held for disposition:
(Gains) charge on disposition of
businesses, net........................ (4,980,000) 31,520,000 (5,290,000)
Gains from changes in investments in
equity affiliates...................... (18,190,000) -- (5,100,000)
Gain from disposition of an equity
affiliate.............................. (46,160,000) -- --
Depreciation and amortization............. 43,460,000 44,470,000 47,070,000
Equity earnings, net of dividends......... (27,180,000) (31,650,000) (23,360,000)
Deferred income taxes..................... 17,520,000 8,640,000 51,330,000
(Increase) decrease in marketable
securities, net........................ (8,210,000) (24,890,000) 57,990,000
Decrease (increase) in receivables........ 2,670,000 10,200,000 (21,910,000)
Decrease in inventories................... 1,950,000 19,190,000 4,650,000
(Increase) decrease in prepaid expenses
and other current assets............... (1,280,000) 38,650,000 (1,900,000)
Increase (decrease) in accounts payable
and accrued liabilities................ 11,140,000 9,320,000 (9,070,000)
Other, net................................ (7,480,000) (8,820,000) 2,390,000
Net assets of businesses held for
disposition, net, including cumulative
effect of accounting change............... -- (19,240,000) 2,190,000
------------ ------------- -------------
Net cash from operating activities... 78,500,000 129,010,000 158,180,000
------------ ------------- -------------
FINANCING ACTIVITIES:
Increase in debt............................ 7,080,000 5,220,000 79,460,000
Payment of debt............................. (16,590,000) (114,900,000) (253,770,000)
Payment of note due to Masco Corporation.... (45,580,000) -- --
Retirement of preferred stock............... (8,360,000) -- --
Retirement of Company Common Stock.......... (6,610,000) (14,040,000) (13,130,000)
Repurchase of Company Common Stock and
warrants from Masco Corporation for
cash...................................... -- (116,000,000) --
Payment of dividends........................ (15,900,000) (22,940,000) (21,000,000)
Other, net.................................. (9,070,000) (8,610,000) (2,250,000)
------------ ------------- -------------
Net cash used for financing
activities........................ (95,030,000) (271,270,000) (210,690,000)
------------ ------------- -------------
INVESTING ACTIVITIES:
Cash received from sale of businesses....... 76,560,000 223,720,000 122,190,000
Acquisition of businesses................... (11,100,000) (47,200,000) (23,850,000)
Capital expenditures........................ (54,780,000) (42,390,000) (95,800,000)
Receipt of cash from notes receivable....... 17,330,000 9,300,000 6,570,000
Other, net.................................. 10,230,000 1,850,000 (2,170,000)
------------ ------------- -------------
Net cash from investing activities... 38,240,000 145,280,000 6,940,000
------------ ------------- -------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year............ 21,710,000 3,020,000 (45,570,000)
At January 1................................ 19,400,000 16,380,000 61,950,000
------------ ------------- -------------
At December 31....................... $ 41,110,000 $ 19,400,000 $ 16,380,000
============ ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 57
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; ownership
less than 20 percent is accounted for on the cost basis unless the Company
exercises significant influence over the investee. Capital transactions by
equity affiliates, which change the Company's ownership interest at amounts
differing from the Company's carrying amount, are reflected in other income or
expense and the investment in affiliates account.
The consolidated balance sheet at December 31, 1996 reflects the
segregation of net current and net non-current assets related to the disposition
of the Company's Technical Services Group ("TSG").
The Company has a corporate services agreement with Masco Corporation,
which at December 31, 1997 owned approximately 17 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, aggregated approximately $5.5 million
in 1997, $7.1 million in 1996, and $9.1 million in 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Such estimates and assumptions also affect the reported amounts of
revenues and expenses during the reporting periods. Actual results may differ
from such estimates and assumptions.
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's marketable equity securities holdings
are categorized as trading and, as a result, are stated at fair value. Changes
in the fair value of trading securities are recognized in earnings. Derivative
financial instruments, consisting principally of S&P 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 in earnings.
Receivables. Receivables are presented net of allowances for doubtful
accounts of approximately $1.2 million and $2.0 million at December 31, 1997 and
1996, 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
F-7
<PAGE> 58
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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 at December 31, 1997.
At December 31, 1997 and 1996, accumulated amortization of the excess of
cost over net assets of acquired companies and patents was $33.2 million and
$29.4 million, respectively. Amortization expense was $9.3 million, $8.5 million
and $13.7 million in 1997, 1996 and 1995, respectively.
Income Taxes. The Company records income taxes in accordance with Statement
of Financial Accounting Standards ("SFAS") 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. A provision has not been made
for U.S. or additional foreign withholding taxes on approximately $49 million of
undistributed earnings of foreign subsidiaries as those earnings are intended to
be permanently reinvested. Generally, such earnings become subject to U.S. tax
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.
New Accounting Pronouncements and Reclassifications. At December 31, 1997,
the Company adopted SFAS No. 128, "Earnings Per Share," which replaces the
presentation of primary and fully diluted earnings per share, as computed under
Accounting Principles Board Opinion No. 15, with a presentation of basic and
diluted earnings per share. The financial statements have been retroactively
restated to conform with the earnings per share presentation required under SFAS
No. 128.
In addition, the Company has reclassified the unamortized cost of unvested
restricted stock awards from other assets to a separate component of
shareholders' equity (see "Stock Options and Awards" note). Prior periods have
been reclassified to conform to this and other presentations adopted in calendar
year 1997.
At January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which resulted in a pre-tax gain (because the fair value of the businesses being
held for sale at January 1, 1996 exceeded the carrying value for such
businesses) of $16.7 million ($11.7 million after-tax), recorded as the
cumulative effect of an accounting change. The pro forma effect of the
retroactive application of the change on the financial statements for 1995 has
not been presented because the new method did not have a material effect on the
reported earnings.
In 1998, the Company will adopt the disclosure requirements of SFAS No.
130, "Reporting of Comprehensive Income," SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," and SFAS No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits." The
adoption of these disclosures will not impact earnings per common share in 1998.
F-8
<PAGE> 59
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER SHARE:
The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per share:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Weighted average number of shares outstanding............... 40,300 50,190 54,090
======== ======== ========
Income before cumulative effect of accounting change, net... $115,240 $ 39,920 $ 59,190
Less preferred stock dividends.............................. (6,240) (12,960) (12,960)
-------- -------- --------
Earnings used for basic earnings per share
computation....................................... $109,000 $ 26,960 $ 46,230
======== ======== ========
Basic earnings per share before cumulative effect of
accounting change, net.................................... $2.70 $.54 $.85
======== ======== ========
Total shares used for basic earnings per share
computation............................................... 40,300 50,190 54,090
Dilutive securities:
Stock options and warrants................................ 1,250 1,430 860
Assumed conversion of preferred stock at January 1,
1997................................................... 5,210 -- --
Convertible debentures.................................... 10,000 -- --
Contingently issuable shares.............................. 2,160 2,170 2,100
-------- -------- --------
Total shares used for diluted earnings per share
computation....................................... 58,920 53,790 57,050
======== ======== ========
Earnings used for basic earnings per share computation...... $109,000 $ 26,960 $ 46,230
Add back of preferred stock dividends....................... 6,240 -- --
Add back of debenture interest.............................. 9,530 -- --
-------- -------- --------
Earnings used for diluted earnings per share
computation....................................... $124,770 $ 26,960 $ 46,230
======== ======== ========
Diluted earnings per share before cumulative effect of
accounting change, net.................................... $2.12 $.50 $.81
======== ======== ========
</TABLE>
Diluted earnings per share reflect the potential dilution that would occur
if securities or other contracts to issue common stock were exercised or
converted into common stock. The Company's preferred stock and convertible
debentures did not have a dilutive effect on earnings per share in 1996 and
1995.
SUPPLEMENTARY CASH FLOWS INFORMATION:
Significant transactions not affecting cash were: in 1997: the conversion
of the Company's outstanding shares of Dividend Enhanced Convertible Preferred
Stock on June 27, 1997 for approximately 10 million shares of Company Common
Stock (see "Shareholders' Equity" note); the exchange of approximately 9.9
million shares of the outstanding common stock of Emco Limited ("Emco") with a
value of approximately $106 million, in addition to the cash payment of
approximately $46 million, in payment of a promissory note due to Masco
Corporation; in 1996: in addition to cash received, approximately $25 million
comprised of both common stock and warrants (with a portion of the common stock
subsequently sold for approximately $14 million of cash), as consideration from
the sale of MascoTech Stamping Technologies, Inc.; in addition to the cash
payment by the Company of $121 million, notes approximating $159 million were
issued for the purchase of 18 million shares of the Company's Common Stock and
warrants to purchase 10 million shares of the Company's Common Stock (see
"Shareholders' Equity" note); in 1995: in addition to cash received,
approximately
F-9
<PAGE> 60
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$34 million comprised of both notes receivable due from, and a 29 percent equity
interest in, the acquiring company, as consideration for a non-core business
unit.
Income taxes paid (refunded) were $44 million, $(12) million and $11
million in 1997, 1996 and 1995, respectively. Interest paid was $39 million, $30
million and $55 million in 1997, 1996 and 1995, 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 and services
businesses, as part of its long-term strategic plan to increase the focus on its
core operating capabilities. The Company has completed the disposition of such
businesses.
During 1995, the Company divested a number of such businesses, in separate
transactions, for aggregate proceeds of approximately $180 million, which
resulted in net gains of approximately $25 million. These net gains were
substantially offset by reductions in the estimated net proceeds the Company
expected to receive from certain remaining businesses to be sold, aggregating
approximately $12 million, and by certain exit costs incurred in 1995
aggregating approximately $8 million.
In May 1996, the Company sold MascoTech Stamping Technologies, Inc.
("MSTI"), a wholly owned subsidiary, to Tower Automotive, Inc. ("Tower")
resulting in an after-tax loss of approximately $26 million ($.49 per common
share), including after-tax losses of approximately $1 million related to the
closure of a MSTI manufacturing facility not included in the sale. The Company
received initial consideration of approximately $80 million, consisting
principally of $55 million in cash, 785,000 shares of Tower common stock and
warrants to purchase additional Tower common stock (200,000 shares at $18 per
share expiring May 31, 1999). The Company applied the cash proceeds (including
approximately $14 million received from the subsequent sale of 600,000 shares of
Tower common stock) to reduce its indebtedness. The Company may receive
additional consideration (up to $30 million), of which approximately $5 million
was earned in 1997, contingent upon the future earnings of MSTI through May 31,
1999.
On January 3, 1997, the Company sold its Technical Services Group
(comprised of the Company's engineering and technical business services units)
to MSX International, Inc. Also included in this transaction were the net assets
of APX International which were acquired by the Company in November 1996 for
approximately $44 million. The sale resulted in total proceeds to the Company of
approximately $145 million, subject to certain adjustments, consisting of cash,
$30 million of subordinated debentures, $18 million of preferred stock and an
approximate 45 percent common equity interest in MSX International, Inc. valued
at $2 million. In January 1998, the Company received $48 million of cash from
MSX International, Inc. in payment of the subordinated debentures and other
amounts due MascoTech resulting in a realized gain in the first quarter 1998
(gain recognition was deferred at the time of the transaction pending cash
receipt) of approximately $7 million. The remaining deferred gain of
approximately $20 million will be recognized upon the liquidation of the common
and preferred stock holdings for cash. The net assets of the Technical Services
Group and APX International are reflected on the consolidated balance sheet as
net assets of businesses held for disposition at December 31, 1996. The Company
did not reflect any revenues or expenses in the consolidated statement of income
related to APX International from the date of acquisition through January 3,
1997 as control was deemed to be temporary.
The disposition of businesses did not meet the criteria for discontinued
operations treatment for accounting purposes; accordingly, the sales and results
of operations of these businesses were included in continuing operations until
disposition. Businesses held for sale or sold, including MSTI and TSG,
F-10
<PAGE> 61
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
had sales of $0, $412 million and $874 million in 1997, 1996 and 1995,
respectively, and operating income (losses) before gains (charge) on disposition
of businesses, net of $0, $(13) million and $5 million in 1997, 1996 and 1995,
respectively.
Amounts included in the consolidated balance sheet for net assets of
businesses held for disposition consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1996
--------
<S> <C>
Receivables................................................. $ 59,110
Other current assets........................................ 46,050
Current liabilities......................................... (19,180)
--------
Net current assets..................................... 85,980
--------
Property and equipment, net................................. 22,090
Other non-current assets and liabilities, net............... 760
--------
Net non-current assets................................. 22,850
--------
Net assets of businesses held for disposition.......... $108,830
========
</TABLE>
INVENTORIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------
1997 1996
------- -------
<S> <C> <C>
Finished goods............................................. $22,160 $21,020
Work in process............................................ 22,990 20,360
Raw material............................................... 28,710 28,260
------- -------
$73,860 $69,640
======= =======
</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
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
TriMas Corporation.......................................... 37% 41% 41%
Emco Limited................................................ -- 43% 43%
Titan International, Inc. .................................. 15% 12% 15%
Delco Remy International, Inc. (voting)..................... 18% 26% 25%
</TABLE>
TriMas Corporation ("TriMas") is a diversified manufacturer of commercial,
industrial and consumer products (see "Subsequent Event" note). Emco Limited
("Emco") is a Canadian-based manufacturer and distributor of building and other
industrial products. Titan International, Inc. ("Titan") is a manufacturer of
wheels, tires and other products for agricultural, construction and off-highway
equipment markets. Delco Remy International, Inc. ("DRI") is a manufacturer of
automotive electronic motors and other components.
F-11
<PAGE> 62
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The carrying amount of investments in affiliates at December 31, 1997 and
1996 and quoted market values at December 31, 1997 for publicly traded
affiliates (which may differ from the amounts that could have been realized upon
disposition) are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997
QUOTED 1997 1996
MARKET CARRYING CARRYING
VALUE AMOUNT AMOUNT
-------- -------- --------
<S> <C> <C> <C>
Common stock:
TriMas Corporation............................ $522,190 $137,740 $101,880
Emco Limited.................................. -- -- 49,400
Titan International, Inc. .................... 66,110 44,080 42,280
Delco Remy International, Inc. ............... 37,820 9,320 10,440
-------- -------- --------
Common stock holdings........................... 626,120 191,140 204,000
Subordinated debt of Emco Limited............... 35,130
--------
Investments in publicly traded affiliates....... $626,120 191,140 239,130
========
Other non-public affiliates..................... 72,160 43,340
-------- --------
Total........................................... $263,300 $282,470
======== ========
</TABLE>
In June 1995, Titan sold newly issued common stock in a public offering and
issued common stock as a result of the conversion of convertible securities. The
Company recognized pre-tax income of approximately $5.1 million as a result of
the change in the Company's common equity ownership interest in Titan. In
December 1996, Titan called for redemption its 4 3/4% Convertible Subordinated
Notes which resulted in the issuance of approximately 4.5 million common shares,
reducing the Company's common equity ownership interest in Titan to
approximately 12 percent. As a result, the investment in Titan at December 31,
1996 was accounted for as available-for-sale. In March 1997, Titan repurchased
approximately 5.6 million shares of its common stock, increasing the Company's
common equity ownership interest in Titan to approximately 15 percent. As a
result, the investment in Titan has been accounted for under the equity method
of accounting.
In March 1997, TriMas called for redemption its 5% Convertible Subordinated
Debentures which resulted in the issuance of approximately 4.7 million common
shares, reducing the Company's common equity ownership in TriMas to
approximately 37 percent. The Company recognized pre-tax income of approximately
$13 million as a result of the change in the Company's common equity ownership
interest in TriMas.
In September 1997, the Company exercised its option and exchanged its
equity holdings in Emco, with a value approximating $106 million, and
approximately $46 million in cash to satisfy the indebtedness to Masco
Corporation incurred in 1996 in connection with the Company's purchase and
retirement of certain of its securities held by Masco Corporation. This
transaction resulted in a pre-tax gain of approximately $46 million. In
addition, the Company has an investment in Emco subordinated notes which are
classified as available-for-sale and, as a result, are recorded at fair value.
As a result of the sale of Emco equity, the Emco subordinated notes were
reclassified to other assets in 1997. The Company has recorded unrealized gains
of approximately $1 million and $2 million in 1997 and 1996, respectively, which
have been recorded as an adjustment to shareholders' equity.
In December 1997, DRI completed an initial public offering reducing the
Company's common equity ownership interest in DRI to approximately 12 percent on
a diluted basis (the Company owns approximately 18 percent of the voting common
stock). As a result of the change in the Company's
F-12
<PAGE> 63
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
common equity ownership interest in DRI, the Company recognized pre-tax income
of approximately $5 million.
In addition to its equity and other investments in publicly traded
affiliates, the Company has equity and other investment interests in privately
held automotive related companies, including the Company's common equity
ownership in Saturn Electronics & Engineering, Inc., a manufacturer of
electromechanical and electronic automotive components, and MSX International,
Inc., a transportation-focused engineering and technical services company.
Equity in undistributed earnings of affiliates of $68 million at December
31, 1997, $57 million at December 31, 1996 and $38 million at December 31, 1995
are included in consolidated retained earnings.
Approximate combined condensed financial data of the Company's equity
affiliates accounted for under the equity method are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-----------------------
1997 1996
---------- ---------
<S> <C> <C>
Current assets......................................... $1,117,940 $ 839,250
Current liabilities.................................... (520,900) (342,980)
---------- ---------
Working capital...................................... 597,040 496,270
Property and equipment, net............................ 612,060 453,350
Excess of cost over net assets of acquired companies... 371,190 257,160
Other assets........................................... 145,000 78,990
Long-term debt......................................... (702,390) (655,370)
Deferred income taxes and other long-term
liabilities.......................................... (82,610) (73,680)
---------- ---------
Shareholders' equity................................. $ 940,290 $ 556,720
========== =========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $3,484,540 $2,959,980 $2,729,260
========== ========== ==========
Operating profit........................... $ 264,590 $ 269,440 $ 235,510
========== ========== ==========
Earnings attributable to common stock...... $ 108,230 $ 128,820 $ 92,700
========== ========== ==========
</TABLE>
Equity and other income from affiliates consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
---------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
The Company's equity in affiliates' earnings
available for common shareholders............. $31,330 $35,190 $26,230
Interest and dividend income.................... 12,030 5,270 5,190
------- ------- -------
Equity and other income from affiliates......... $43,360 $40,460 $31,420
======= ======= =======
</TABLE>
F-13
<PAGE> 64
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT, NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1997 1996
-------- --------
<S> <C> <C>
Cost:
Land and land improvements............................ $ 19,820 $ 17,530
Buildings............................................. 116,270 109,730
Machinery and equipment............................... 545,590 513,010
-------- --------
681,680 640,270
Less accumulated depreciation........................... 264,650 251,810
-------- --------
$417,030 $388,460
======== ========
</TABLE>
Depreciation expense totalled $34 million, $37 million and $38 million in
1997, 1996 and 1995, respectively.
ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
---------------------
1997 1996
-------- -------
<S> <C> <C>
Salaries, wages and commissions.......................... $ 17,690 $15,930
Income taxes............................................. 7,760 2,810
Interest................................................. 1,740 4,050
Insurance................................................ 24,740 33,940
Property, payroll and other taxes........................ 3,340 5,500
Other.................................................... 59,380 34,680
-------- -------
$114,650 $96,910
======== =======
</TABLE>
F-14
<PAGE> 65
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LONG-TERM DEBT:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1997 1996
-------- --------
<S> <C> <C>
6 5/8% Note held by Masco Corporation................... $ -- $151,380
4 1/2% Convertible Subordinated Debentures, due 2003 and
convertible into Company Common Stock at $31 per
share................................................. 310,000 310,000
Bank revolving credit agreement......................... 245,000 250,000
Other................................................... 39,880 44,390
-------- --------
594,880 755,770
Less current portion of long-term debt.................. 2,880 3,370
-------- --------
Long-term debt.......................................... $592,000 $752,400
======== ========
</TABLE>
The interest rates applicable to the Company's revolving credit agreement
at December 31, 1997 are principally at alternative floating rates provided for
in the agreement (approximately six percent at December 31, 1997).
In connection with the TriMas acquisition in early 1998 (see "Subsequent
Event" note), the Company entered into a new $1.3 billion credit facility. This
facility includes a $500 million term loan with principal payments as follows:
1998 - $25 million; 1999 - $40 million; 2000 - $60 million; 2001 - $75 million;
and 2002 - $190 million. The remainder of the term loan and the $800 million
revolver terminate in 2003. The Company has the ability and intent to refinance
amounts due in 1998 on a long-term basis.
The interest rates applicable to the new credit facility are principally at
alternative floating rates which would have approximated 6.5 percent at December
31, 1997. The new credit facility requires the maintenance of a specified level
of shareholders' equity plus subordinated debt, with limitations on the ratios
of total debt to cash flow (as defined) and cash flow less capital expenditures
(as defined) to interest plus scheduled debt payments. In addition, there are
limitations on dividends, share repurchases and subordinated debt repurchases.
Under the most restrictive of these provisions, approximately $40 million would
have been available at December 31, 1997 for the payment of cash dividends and
the acquisition of Company capital stock. The facility is collateralized by a
pledge of the stock of TriMas.
The note held by Masco Corporation was part of the consideration paid by
the Company in 1996 for the purchase of 17 million shares of MascoTech common
stock and warrants to purchase 10 million shares of MascoTech common stock from
Masco Corporation. In September 1997, the Company exercised its option and
exchanged its equity holdings in Emco Limited, with a value approximating $106
million, and approximately $46 million in cash to Masco Corporation to satisfy
this indebtedness.
The maturities of debt as at December 31, 1997 during the next five years
are as follows (not taking into account the new credit facility) (in millions):
1998 - $3; 1999 - $4; 2000 - $2; 2001 - $.7; and 2002 - $.5.
F-15
<PAGE> 66
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SHAREHOLDERS' EQUITY:
<TABLE>
<CAPTION>
(IN THOUSANDS)
RETAINED RESTRICTED
PREFERRED COMMON PAID-IN EARNINGS STOCK SHAREHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) OTHER AWARDS EQUITY
--------- -------- --------- --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995.... $ 10,800 $ 56,610 $ 318,960 $ (7,590) $ 2,360 $(19,050) $ 362,090
Net income................ -- -- -- 59,190 -- -- 59,190
Preferred stock
dividends.............. -- -- -- (12,960) -- -- (12,960)
Common stock dividends.... -- -- -- (6,260) -- -- (6,260)
Retirement of common
stock.................. -- (1,210) (11,920) -- -- -- (13,130)
Translation adjustments,
net.................... -- -- -- -- 6,210 -- 6,210
Exercise of stock
options................ -- 120 870 -- -- -- 990
Stock award purchases, net
of amortization........ -- -- -- -- -- 2,000 2,000
-------- -------- --------- -------- -------- -------- ---------
Balance, December 31,
1995...................... 10,800 55,520 307,910 32,380 8,570 (17,050) 398,130
Net income................ -- -- -- 51,620 -- -- 51,620
Preferred stock
dividends.............. -- -- -- (12,960) -- -- (12,960)
Common stock dividends.... -- -- -- (9,980) -- -- (9,980)
Retirement of common stock
and warrants........... -- (18,720) (270,320) -- -- -- (289,040)
Translation adjustments
and other.............. -- -- -- -- 6,200 -- 6,200
Exercise of stock
options................ -- 450 3,490 -- -- -- 3,940
Stock award purchases, net
of amortization........ -- -- -- -- -- (9,090) (9,090)
-------- -------- --------- -------- -------- -------- ---------
Balance, December 31,
1996...................... 10,800 37,250 41,080 61,060 14,770 (26,140) 138,820
Net income................ -- -- -- 115,240 -- -- 115,240
Preferred stock
dividends.............. -- 150 2,850 (6,240) -- -- (3,240)
Common stock dividends.... -- -- -- (12,270) -- -- (12,270)
Retirement of common
stock.................. -- (330) (6,280) -- -- -- (6,610)
Retirement of preferred
stock.................. (450) -- (7,910) -- -- -- (8,360)
Conversion of outstanding
preferred stock........ (10,350) 9,750 600 -- -- -- --
Translation adjustments
and other.............. -- -- -- -- (10,610) -- (10,610)
Exercise of stock
options................ -- 430 4,000 -- -- -- 4,430
Stock award purchases, net
of amortization........ -- -- -- -- -- (6,740) (6,740)
-------- -------- --------- -------- -------- -------- ---------
Balance, December 31,
1997...................... -- $ 47,250 $ 34,340 $157,790 $ 4,160 $(32,880) $ 210,660
======== ======== ========= ======== ======== ======== =========
</TABLE>
F-16
<PAGE> 67
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On June 27, 1997, the Company completed the conversion of all remaining
issued and outstanding shares of its Dividend Enhanced Convertible Preferred
Stock (DECS). Holders of DECS received in exchange for each share of DECS .955
of a share of the Company's Common Stock, par value $1.00 per share, resulting
in the issuance of approximately 10 million shares of Company Common Stock.
On October 31, 1996, the Company purchased from Masco Corporation 17
million shares of MascoTech common stock and warrants to purchase 10 million
shares of MascoTech common stock, for cash and notes approximating $266 million.
As part of this 1996 transaction, Richard A. Manoogian, Chairman of both Masco
Corporation and MascoTech, also sold to MascoTech one million shares of
MascoTech common stock (at the then current market price) for approximately
$13.6 million. In addition, as part of this transaction, Masco Corporation's
agreement to purchase from the Company, at the Company's option, up to $200
million of subordinated debentures was extended through 2002, and the corporate
services agreement with Masco Corporation was extended until September 30, 1998.
Masco Corporation also agreed that MascoTech will have the right of first
refusal to purchase the approximate 7.8 million shares of MascoTech common stock
that Masco Corporation continues to hold, should Masco Corporation decide to
dispose of such shares.
In addition, the Company repurchased and retired approximately .3 million
shares of its common stock and approximately .5 million shares of its preferred
stock in 1997, and approximately one million shares of its common stock in each
of 1996 and 1995 in open-market purchases, pursuant to a Board of Directors'
authorized repurchase program. At December 31, 1997, the Company may repurchase
approximately three million additional shares of Company Common Stock pursuant
to this repurchase authorization.
On the basis of amounts paid (declared), cash dividends per common share
were $.22 ($.28) in 1997, $.18 ($.18) in 1996 and $.14 ($.11) in 1995.
STOCK OPTIONS AND AWARDS:
The Company's Long Term Stock Incentive Plan (the "Plan") provides for the
issuance of stock-based incentives in various forms. At December 31, 1997,
outstanding stock-based incentives are in the form of restricted long-term stock
awards and stock options.
Pursuant to the Plan, the Company granted long-term stock awards, net, for
565,000, 480,000 and 461,000 shares of Company Common Stock during 1997, 1996
and 1995, respectively, to key employees of the Company and affiliated
companies. The weighted average fair value per share of long-term stock awards
granted during 1997, 1996 and 1995 on the date of grant was $19, $14 and $12,
respectively. Compensation expense for the vesting of long-term stock awards was
approximately $4.7 million, $2.3 million and $4.8 million in 1997, 1996 and
1995, respectively. The unamortized costs of unvested stock awards, aggregating
approximately $33 million at December 31, 1997, are being amortized over the
ten-year vesting periods and are a deduction from shareholders' equity.
Fixed stock options are granted to key employees of the Company and
affiliated companies and have a maximum term of 10 years. The exercise price of
each fixed option equals the market price of Company Common Stock on the date of
grant. These options either vest no later than 10 years after grant or in
installments beginning in the third year and extending through the eighth year
after grant.
F-17
<PAGE> 68
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of the Company's stock options granted under the
Plan or prior plans for the three years ended December 31, 1997 is presented
below.
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Option shares outstanding, January 1........................ 4,290 3,440 3,620
Weighted average exercise price........................... $10 $ 8 $ 7
Option shares granted....................................... 80 1,370 --
Weighted average exercise price........................... $20 $15 --
Option shares exercised..................................... (500) (450) (120)
Weighted average exercise price........................... $ 8 $ 7 $ 7
Option shares canceled...................................... (100) (70) (60)
Weighted average exercise price........................... $16 $ 5 $ 5
Option shares outstanding, December 31...................... 3,770 4,290 3,440
Weighted average exercise price........................... $10 $10 $ 8
Weighted average remaining option term (in years)......... 4.7 5.3 4.4
Option shares exercisable, December 31...................... 1,430 1,710 1,640
Weighted average exercise price........................... $ 9 $ 9 $ 9
</TABLE>
At December 31, 1997, options have been granted and are outstanding with
exercise prices ranging from $4 1/2 to $25 per share, the fair market values at
the dates of grant.
At December 31, 1997 and 1996, a combined total of 5,223,000 and 4,656,000
shares, respectively, of Company Common Stock were available for the granting of
options and incentive awards under the above plans.
The Company has elected to continue to apply the provisions of Accounting
Principles Board Opinion No. 25 and, accordingly, no stock option compensation
expense is included in the determination of net income in the statement of
income. The weighted average fair value on the date of grant of options granted
was $7.70 and $6.20 in 1997 and 1996, respectively. Had stock option
compensation expense been determined pursuant to the methodology of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the pro forma effects on the Company's earnings per share would
have approximated $.02 and $.01 in 1997 and 1996, respectively, and had no
effect in 1995.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Risk free interest rate................................ 6.5% 6.5% 7.3%
Dividend yield......................................... 1.4% 1.1% 1.1%
Volatility factor...................................... 35.0% 39.0% 39.0%
Expected option life (in years)........................ 5.5 5.5 5.5
</TABLE>
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 million in 1997, $11 million in 1996 and $13 million in 1995.
F-18
<PAGE> 69
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net periodic pension cost for the Company's defined-benefit pension plans
includes the following components for the three years ended December 31, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the year.... $ 3,480 $ 5,230 $ 4,680
Interest cost on projected benefit obligations..... 6,650 6,490 6,330
Actual return on assets............................ (2,830) (3,970) (6,540)
Net amortization and deferral...................... (2,790) (740) 1,600
------- ------- -------
Net periodic pension cost.......................... $ 4,510 $ 7,010 $ 6,070
======= ======= =======
</TABLE>
Major assumptions used in accounting for the Company's defined-benefit
pension plans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Discount rate for obligations............................ 7.25% 7.50% 7.25%
Rate of increase in compensation levels.................. 5.00% 5.00% 5.00%
Expected long-term rate of return on plan assets......... 11.00% 11.00% 11.00%
</TABLE>
The funded status of the Company's defined-benefit pension plans at
December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996
----------- -----------
ACCUMULATED ACCUMULATED
BENEFITS BENEFITS
EXCEED EXCEED
RECONCILIATION OF FUNDED STATUS ASSETS ASSETS
------------------------------- ----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................... $ 81,180 $ 72,450
======== ========
Accumulated benefit obligation...................... $ 87,830 $ 77,380
======== ========
Projected benefit obligation........................ $ 99,150 $ 89,620
Assets at fair value.................................. 63,020 59,710
-------- --------
Projected benefit obligation in excess of plan
assets........................................... (36,130) (29,910)
Reconciling items:
Unrecognized net loss............................... 21,270 14,690
Unrecognized prior service cost..................... 8,290 8,050
Unrecognized net asset at transition................ (810) (930)
Adjustment required to recognize minimum
liability........................................ (17,580) (12,580)
-------- --------
Accrued pension cost.................................. $(24,960) $(20,680)
======== ========
</TABLE>
Postretirement Benefits. The Company provides postretirement medical and
life insurance benefits for certain of its active and retired employees.
The Company records its postretirement benefit plans in accordance with
Statement of Financial Accounting Standards No. 106 ("SFAS No. 106"),
"Employers' Accounting for Postretirement Benefits Other Than Pensions." 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 SFAS No. 106,
the Company recognizes the transition obligation on a
F-19
<PAGE> 70
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
prospective basis with the net transition obligation amortized over its
remaining life. Net periodic postretirement benefit cost includes the following
components for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $ 300 $ 400 $ 300
Interest cost............................................... 1,400 1,600 1,900
Net amortization............................................ 700 800 1,100
------ ------ ------
Net periodic postretirement benefit cost.................... $2,400 $2,800 $3,300
====== ====== ======
</TABLE>
Postretirement benefit obligations, none of which is funded, are summarized
as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees.................................................. $ 8,300 $ 13,900
Fully eligible active plan participants................... 500 800
Other active participants................................. 3,600 5,300
-------- --------
Total accumulated postretirement benefit obligation......... 12,400 20,000
Unrecognized prior service cost........................... (500) (300)
Unrecognized net gain..................................... 9,000 700
Unamortized transition obligation......................... (10,300) (11,000)
-------- --------
Accrued postretirement benefits............................. $ 10,600 $ 9,400
======== ========
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.25 percent in both 1997 and 1996. The change in the
accumulated postretirement benefit obligation and the unrecognized net gain
amounts is the result of the change in the actuarial assumptions concerning the
health care cost trend rate. The assumed health care cost trend rate in 1997 was
nine percent, decreasing to an ultimate rate in the year 2007 of five percent.
If the assumed medical cost trend rates were increased by one percent, the
accumulated postretirement benefit obligation would increase by $.7 million and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost would increase by $.1 million.
F-20
<PAGE> 71
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEGMENT INFORMATION:
The Company's business segments involve the sale of the following products
and services:
Transportation-Related Products and Services:
Precision products, generally produced using advanced metalworking
technologies with significant proprietary content, and
aftermarket products for the transportation industry.
Engineering and technical business services.
Specialty Products:
Other Industrial -- Principally doors, windows, security grilles and
office panels and partitions for commercial and residential
markets.
The Company's export sales approximated $71 million, $75 million and $85
million in 1997, 1996 and 1995, respectively.
Corporate assets consist primarily of cash and cash investments, marketable
securities, equity and other investments in affiliates and notes receivable.
F-21
<PAGE> 72
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NET SALES OPERATING PROFIT(B)
---------------------------------- ------------------------------
1997 1996 1995 1997 1996 1995
-------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
The Company's operations by
industry segment are:
Transportation-Related Products
and Services(A)................. $922,000 $1,151,000 $1,340,000 $124,000 $ 90,000 $144,000
Specialty Products:
Other Industrial................ -- 130,000 338,000 -- 1,000 (3,000)
-------- ---------- ---------- -------- -------- --------
Total......................... $922,000 $1,281,000 $1,678,000 124,000 91,000 141,000
======== ========== ==========
Other income (expense), net....... 88,000 8,000 (9,000)
General corporate expense......... (22,000) (22,000) (32,000)
-------- -------- --------
Income before income taxes and
cumulative effect of accounting
change, net..................... $190,000 $ 77,000 $100,000
======== ======== ========
Corporate assets..................
Total assets..................
Foreign Operations(F)............. $100,000 $ 170,000 $ 166,000 $ 15,000 $ 17,000 $ 22,000
======== ========== ========== ======== ======== ========
<CAPTION>
(IN THOUSANDS)
ASSETS EMPLOYED AT
DECEMBER 31(C)
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
The Company's operations by
industry segment are:
Transportation-Related Products
and Services(A)................. $ 712,000 $ 742,000 $ 870,000
Specialty Products:
Other Industrial................ -- 55,000 150,000
---------- ---------- ----------
Total......................... 712,000 797,000 1,020,000
Other income (expense), net.......
General corporate expense.........
Income before income taxes and
cumulative effect of accounting
change, net.....................
Corporate assets.................. 433,000 406,000 402,000
---------- ---------- ----------
Total assets.................. $1,145,000 $1,203,000 $1,422,000
========== ========== ==========
Foreign Operations(F)............. $ 138,000 $ 155,000 $ 140,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND
PROPERTY ADDITIONS(D) AMORTIZATION(E)
---------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
The Company's operations by
industry segment are:
Transportation-Related Products and Services................ $55,000 $41,000 $ 96,000 $43,000 $44,000 $45,000
Specialty Products:
Other Industrial.......................................... -- 3,000 14,000 -- 2,000 7,000
------- ------- -------- ------- ------- -------
Total................................................... $55,000 $44,000 $110,000 $43,000 $46,000 $52,000
======= ======= ======== ======= ======= =======
</TABLE>
(A) Included within this segment are sales to one customer of $140 million, $232
million and $397 million in 1997, 1996 and 1995, respectively; sales to
another customer of $79 million, $146 million and $182 million in 1997, 1996
and 1995, respectively; sales to a third customer of $62 million, $122
million and $178 million in 1997, 1996 and 1995, respectively; and sales to
a fourth customer of $156 million, $155 million and $136 million in 1997,
1996 and 1995, respectively.
(B) Operating profit in 1996 includes a $32 million pre-tax loss principally
from the sale of MascoTech Stamping Technologies, Inc. ("MSTI"). Operating
profit in 1997 includes approximately $5 million of additional pre-tax
consideration earned from the sale of MSTI which was sold in 1996. These
items impacted the Company's Transportation-Related Products and Services
industry segment. The Company may receive additional consideration
contingent upon the future earnings of MSTI through May 31, 1999. Operating
profit in 1995 includes $25 million in net gains resulting from sales of
non-core businesses. These net gains were substantially offset by reductions
in the estimated proceeds the Company expected to receive from businesses to
be sold, aggregating $12 million, and by certain exit costs incurred in 1995
aggregating approximately $8 million. The net gains (charge) impact the
Company's industry segments as follows: Transportation-Related Products and
Services - $21 million and Specialty Products - $(2) million. The remaining
$(14) million of the net gains (charge) was allocated to General Corporate
Expense.
(C) Assets employed at December 31, 1996 and 1995 include net assets related to
the disposition of certain operations (see "Dispositions of Operations"
note).
(D) Property additions include approximately $2 million and $14 million in 1996
and 1995, respectively, of capital expenditures for those businesses held
for disposition related to the plan adopted in late 1994.
(E) Depreciation and amortization expense includes approximately $5 million in
1995 of expense for those businesses held for disposition related to the
plan adopted in late 1994.
(F) The Company's foreign operations are located principally in Western Europe.
F-22
<PAGE> 73
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Other, net:
Net realized and unrealized gains (losses) from marketable
securities............................................. $13,130 $ (160) $ 730
Interest income........................................... 3,440 1,160 2,390
Dividend income........................................... 650 420 950
Other, net................................................ 180 (4,020) 780
------- ------- ------
$17,400 $(2,600) $4,850
======= ======= ======
</TABLE>
INCOME TAXES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Income before income taxes and cumulative effect of
accounting change, net:
Domestic............................................. $173,410 $59,870 $ 78,870
Foreign.............................................. 16,880 17,350 21,410
-------- ------- --------
$190,290 $77,220 $100,280
======== ======= ========
Provision for income taxes (credit):
Federal, current........................................ $ 40,290 $16,170 $(24,210)
State and local......................................... 6,810 4,650 6,110
Foreign, current........................................ 10,430 7,840 7,860
Deferred, principally federal........................... 17,520 8,640 51,330
-------- ------- --------
Income taxes on income before cumulative effect of
accounting change, net............................. $ 75,050 $37,300 $ 41,090
======== ======= ========
</TABLE>
The components of deferred taxes at December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventories............................................ $ 2,440 $ 2,860
Accrued liabilities.................................... 35,660 35,170
Alternative minimum tax................................ -- 6,750
-------- --------
38,100 44,780
-------- --------
Deferred tax liabilities:
Property and equipment................................. 64,630 59,580
Other, principally equity investments in affiliates.... 62,240 57,370
-------- --------
126,870 116,950
-------- --------
Net deferred tax liability............................... $ 88,770 $ 72,170
======== ========
</TABLE>
F-23
<PAGE> 74
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of tax computed at the U.S. federal
statutory rate to the provision for income taxes allocated to income before
income taxes and cumulative effect of accounting change, net:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
U.S. federal statutory rate....................... 35% 35% 35%
------- ------- --------
Tax at U.S. federal statutory rate................ $66,600 $27,020 $ 35,100
State and local taxes, net of federal tax
benefit......................................... 4,430 3,020 3,970
Higher effective foreign tax rate................. 3,200 2,100 2,710
Non-deductible portion of charge for disposition
of businesses................................... -- 5,780 --
Amortization in excess of tax, net................ (760) (140) 1,630
Other, net........................................ 1,580 (480) (2,320)
------- ------- --------
Income taxes before cumulative effect of
accounting change, net....................... $75,050 $37,300 $ 41,090
======= ======= ========
</TABLE>
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.
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 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. The Company's market
risk is subject to the price differential between the contract market value and
contract cost. The average monthly notional amount of derivative contracts in
1997 was approximately $17 million and there were no contracts outstanding at
December 31, 1997.
F-24
<PAGE> 75
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.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash investments........................... $ 41,110 $ 41,110 $ 19,400 $ 19,400
Marketable securities, notes receivable and other
assets............................................ $ 80,760 $ 81,590 $124,270 $125,460
Long-term debt:
Bank debt......................................... $267,000 $267,000 $265,000 $265,000
4 1/2% Convertible Subordinated Debentures........ $310,000 $269,700 $310,000 $252,650
6 5/8% Note held by Masco Corporation............. -- -- $151,380 $151,380
Other long-term debt.............................. $ 15,000 $ 14,500 $ 26,020 $ 24,490
</TABLE>
F-25
<PAGE> 76
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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> <C> <C> <C> <C>
1997:
- -----
Net sales................................... $233,620 $222,030 $233,040 $233,440
Gross profit................................ $42,020 $ 34,350 $ 53,990 $ 56,300
Net income:
Income.................................... $19,270 $ 38,660 $ 24,650 $ 32,660
Income attributable to common stock....... $19,270 $ 38,660 $ 21,650 $ 29,420
Per common share:
Basic............................. $.43 $.86 $.61 $.83
Diluted........................... $.37 $.70 $.46 $.59
Market price per common share:
High...................................... $21 5/16 $22 1/2 $23 1/2 $21 1/4
Low....................................... $16 1/2 $20 $18 1/2 $16
1996:
- -----
Net sales................................... $271,450 $290,790 $345,060 $373,920
Gross profit................................ $58,160 $ 55,580 $ 57,930 $ 61,440
Income (loss) before accounting change
item...................................... $16,450 $ 19,390 $ (6,660) $ 10,740
Per common share:
Basic............................. $.32 $.30 $(.19) $.14
Diluted........................... $.28 $.28 $(.19) $.13
Net income (loss):
Income (loss)............................. $16,450 $ 19,390 $ (6,660) $ 22,440
Income (loss) attributable to common
stock.................................. $13,210 $ 16,150 $ (9,900) $ 19,200
Per common share:
Basic............................. $.32 $.30 $(.19) $.36
Diluted........................... $.28 $.28 $(.19) $.34
Market price per common share:
High...................................... $17 $15 1/2 $16 1/8 $13 5/8
Low....................................... $13 1/2 $13 $12 1/2 $10 3/8
</TABLE>
Results for the first and fourth quarters 1997 include pre-tax gains of
approximately $13 million and $5 million, respectively, as a result of equity
transactions by affiliates of the Company.
Results for the first, second, third and fourth quarters 1997 include
pre-tax marketable securities gains (losses) of approximately $5.0 million, $4.0
million, $4.4 million and $(.3) million, respectively.
Results for the third quarter 1997 include a pre-tax gain of approximately
$46 million related to the transfer of the Company's equity holdings in Emco
Limited to Masco Corporation. This gain was partially offset by pre-tax costs
approximating $14 million associated with a plant closure and the Company's
share of a special charge recorded by an equity affiliate and other expenses.
Results for the fourth quarter 1997 include approximately $5 million
pre-tax of additional consideration earned from the sale of MascoTech Stamping
Technologies, Inc. which was sold in the second quarter 1996.
F-26
<PAGE> 77
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
Results for the fourth quarter 1997 were negatively impacted by charges
aggregating approximately $10 million pre-tax principally related to severance,
the Company's share of a charge recorded by an equity affiliate, write-off of
deferred charges and loss on disposition of fixed assets.
Convertible securities were anti-dilutive in the first quarter 1996 for
purposes of computing diluted earnings per common share and earnings per common
share on income before accounting change.
Results for the second quarter 1996 include an after-tax loss of
approximately $26 million related to the sale of MascoTech Stamping
Technologies, Inc.
Net income for the first quarter of 1996 includes an after-tax gain of
approximately $12 million as a result of the adoption of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," effective January 1, 1996
which was recorded as a cumulative effect of an accounting change.
The 1997 and 1996 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.
SUBSEQUENT EVENT:
In January 1998, the Company completed its tender offer for all of the
outstanding shares of common stock of TriMas Corporation not held by the Company
for approximately $920 million in accordance with the terms of the Company's
previously announced acquisition agreement with TriMas.
The acquisition will be accounted for as a purchase in 1998. The purchase
price will be allocated to the previously unowned assets acquired and
liabilities assumed based upon their estimated fair values. The excess of the
purchase price over the net assets acquired will be amortized over a period not
exceeding 40 years. The purchase price allocation will be determined during 1998
when appraisals, other studies and additional information become available.
Results of operations for TriMas will be included with those of the Company for
periods subsequent to the date of the acquisition.
TriMas is a diversified proprietary products company with leadership
positions in commercial, industrial and consumer niche markets.
The following is summarized financial data of TriMas as of and for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997
--------
<S> <C>
Current assets.............................................. $290,630
========
Total assets................................................ $708,460
========
Total liabilities........................................... $159,060
========
Net sales................................................... $667,910
========
Operating profit............................................ $113,700
========
</TABLE>
F-27
<PAGE> 78
MASCOTECH, INC.
FINANCIAL STATEMENT SCHEDULE
PURSUANT TO ITEM 14(A)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1997
Schedule, as required for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
II. Valuation and Qualifying Accounts....................... F-29
</TABLE>
F-28
<PAGE> 79
MASCOTECH, INC.
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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:
1997............................ $2,000,000 $500,000 $ 60,000 $1,380,000 $1,180,000
========== ======== ======== ========== ==========
1996............................ $1,880,000 $890,000 $ 20,000 $ 790,000 $2,000,000
========== ======== ======== ========== ==========
1995............................ $1,590,000 $400,000 $410,000 $ 520,000 $1,880,000
========== ======== ======== ========== ==========
</TABLE>
(A) Allowance of companies acquired, and other adjustments, net in 1997 and
1995. Allowance of companies reclassified for businesses held for
disposition, and other adjustments, net in 1996 and 1995.
(B) Deductions, representing uncollectible accounts written off, less recoveries
of accounts written off in prior years.
F-29
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.i Restated Certificate of Incorporation of Masco Corporation
and amendments thereto. (filed herewith)
3.ii Bylaws of Masco Corporation, as amended.(5)
4.a.i Indenture dated as of December 1, 1982 between Masco
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee, and Directors' resolutions establishing Masco
Corporation's: (i) 9% Notes Due October 1, 2001(7), (ii)
6 5/8 Notes Due September 15, 1999 (filed herewith), (iii)
6 1/8 Notes Due September 15, 2003(6), and (iv) 7 1/8%
Debentures Due August 15, 2013.(6)
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.(4)
4.a.iii Supplemental Indenture dated as of July 26, 1994 between
Masco Corporation and The First National Bank of Chicago.(4)
4.b $750,000,000 Amended and Restated Credit Agreement dated as
of November 14, 1996 among Masco Corporation, the banks
party thereto and Morgan Guaranty Trust Company of New York,
as agent(7) and Amendment No. 1 dated April 30, 1997. (filed
herewith)
4.c Rights Agreement dated as of December 6, 1995, between Masco
Corporation and The Bank of New York, as Rights Agent.(2)
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(5),
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.(3)
4.e $1,300,000,000 Credit Agreement dated as of January 16, 1998
among MascoTech, Inc., MascoTech Acquisition, Inc., the
banks party thereto from time to time, The First National
Bank of Chicago, as Administrative Agent, Bank of America
NT&SA and NationsBank, N.A., as Syndication Agents and
Amendment No. 1 thereto dated as of February 10, 1998.
(filed herewith)
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.).(2)
10.b Corporate Services Agreement dated as of January 1, 1987
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.) (filed herewith), Amendment No. 1
dated as of October 31, 1996(1), and related letter
agreement dated January 22, 1998.(filed herewith)
10.c Corporate Opportunities Agreement dated as of May 1, 1984
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(2) and Amendment No. 1 dated as of
October 31, 1996(1).
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
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 letter dated September 20,
1985, Amendment to Stock Repurchase Agreement dated as of
December 20, 1990 (7), and amendment to Stock Repurchase
Agreement included in Agreement dated as of November 23,
1993.(5)
NOTE: Exhibits 10.e through 10.r 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
(Amended and Restated April 23, 1997). (filed herewith)
10.f Masco Corporation 1988 Restricted Stock Incentive Plan
(Restated December 6, 1995).(2)
10.g Masco Corporation 1988 Stock Option Plan (Restated December
6, 1995).(2)
10.h Masco Corporation 1984 Restricted Stock (Industries)
Incentive Plan (Restated December 6, 1995).(2)
10.i Masco Corporation Supplemental Executive Retirement and
Disability Plan.(3)
10.j Masco Corporation Benefits Restoration Plan.(3)
10.k Masco Corporation 1997 Annual Incentive Compensation Plan.
(filed herewith)
10.1 Masco Corporation 1997 Non-Employee Directors Stock
Plan.(filed herewith)
10.m MascoTech, Inc. 1991 Long Term Stock Incentive Plan (Amended
and Restated April 23, 1997). (filed herewith)
10.n MascoTech, Inc. 1984 Restricted Stock Incentive Plan
(Restated December 6, 1995).(2)
10.o MascoTech, Inc. 1984 Stock Option Plan (Restated December 6,
1995).(2)
10.p MascoTech, Inc. 1997 Annual Incentive Compensation
Plan.(filed herewith)
10.q MascoTech, Inc. 1997 Non-Employee Directors Stock
Plan.(filed herewith)
10.r Description of the Masco Corporation Program for Estate,
Financial Planning and Tax Assistance. (filed herewith)
10.s Amended and Restated Securities Purchase Agreement dated as
of November 23, 1993 ("Securities Purchase Agreement")
between MascoTech, Inc. and Masco Corporation, including
form of Note (5), Agreement dated as of November 23, 1993
relating thereto (5), and Amendment No. 1 to the Securities
Purchase Agreement dated as of October 31, 1996.(1)
10.t Registration Agreement dated as of March 31, 1993, between
Masco Corporation and Masco Industries, Inc. (now known as
MascoTech, Inc.).(5)
10.u 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)(7)
and Amendment thereto dated May 21, 1997. (filed herewith)
10.v 12% Senior Note Due 2008 by Furnishings International Inc.
to Masco Corporation and Registration Rights Agreement dated
as of August 5, 1996 between Furnishings International Inc.
and Masco Corporation.(7)
10.w Stock Purchase Agreement dated as of October 15, 1996
between Masco Corporation and MascoTech, Inc.(1)
12 Computation of Ratio of Earnings to Fixed Charges. (filed
herewith)
21 List of Subsidiaries. (filed herewith)
23.a Consent of Coopers & Lybrand L.L.P. relating to Masco
Corporation's Financial Statements and Financial Statement
Schedule. (filed herewith)
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.b Consent of Coopers & Lybrand L.L.P. relating to MascoTech,
Inc.'s Financial Statements and Financial Statement
Schedule. (filed herewith)
27.a Financial Data Schedule as of and for the year ended
December 31, 1997. (filed herewith)
27.b Financial Data Schedule as of and for the year-to-date
periods ended September 30, 1997, June 30, 1997 and March
31, 1997. (filed herewith)
27.c Financial Data Schedule as of and for the year-to-date
periods ended December 31, 1996, September 30, 1996, June
30, 1996 and March 31, 1996. (filed herewith)
27.d Financial Data Schedule as of and for the year ended
December 31, 1995. (filed herewith)
</TABLE>
(1) Incorporated by reference to the Exhibits filed with Masco Corporation's
Current Report on Form 8-K dated November 13, 1996.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
<PAGE> 1
EXHIBIT 3.i
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
<PAGE> 2
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.
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
-2-
<PAGE> 3
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 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 preemptive 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.
-3-
<PAGE> 4
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 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
-4-
<PAGE> 5
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 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.
-5-
<PAGE> 6
(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
-6-
<PAGE> 7
purpose and to abolish any such reserve in the manner in which it was created.
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
-7-
<PAGE> 8
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 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
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<PAGE> 9
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 Corpora- tion's Board of Directors included at
all times representation by 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-
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<PAGE> 10
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 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
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<PAGE> 11
successors and assigns of such persons in any transaction or series of
transactions not involving a public offering of the Corporation'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 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.
-11-
<PAGE> 12
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
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<PAGE> 13
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 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 Corporation, who shall be entitled
to indemnification under Paragraph 1
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<PAGE> 14
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.
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
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<PAGE> 15
ATTEST:
/s/ Gerald Bright
- -----------------------
Gerald Bright
Secretary
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<PAGE> 16
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:
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<PAGE> 17
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
<PAGE> 18
By /s/ Richard G. Mosteller
-------------------------
Richard G. Mosteller
Senior Vice President - Finance
ATTEST:
By /s/ Gerald Bright
------------------------
Gerald Bright
Secretary
<PAGE> 19
Exhibit A
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
MASCO CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
We, Richard G. Mosteller, Senior Vice President - Finance, and Eugene
A. Gargaro, Jr., Vice President and Secretary, of Masco Corporation, a
corporation organized and existing under the General Corporation Law of the
State of Delaware ("Delaware Law"), in accordance with the provisions thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors on
December 6, 1995, adopted the following resolution creating a series of
Preferred Stock in the amount and having the designation, voting powers,
preferences and relative, participating, optional and other special rights and
qualifications, limitations and restrictions thereof as follows:
Section 1. Designation and Number of Shares. The shares of such
series shall be designated as "Series A Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"), and the number of shares constituting
such series shall be 175,106.
<PAGE> 20
Such number of shares of the Series A Preferred Stock may be increased or
decreased by resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number
less than the number of shares then outstanding plus the number of shares
issuable upon exercise or conversion of outstanding rights, options or other
securities issued by the Corporation.
<PAGE> 21
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable on
February 15, May 15, August 15 and November 15 of each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of any share
or fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 and (b) subject
to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends or other distributions and
1,000 times the aggregate per share amount of all non-cash dividends or other
distributions (other than (i) a dividend payable in shares of Common Stock, par
value $1.00 per share, of the Corporation (the "Common Stock") or (ii) a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise)), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. If the Corporation shall at any time after
December 6, 1995 (the "Rights Declaration Date") pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the Common Stock (other than as
described in clauses (i) and (ii) of the first sentence of paragraph (A));
<PAGE> 22
provided that if no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first issuance of
any share or fraction of a share of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Preferred Stock,
unless the date of issue of such shares is on or before the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue and be cumulative from the date of issue of such shares,
or unless the date of issue is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and on or before such Quarterly Dividend Payment
Date, in which case dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall not be more than 60 days prior to the date fixed for
the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of stockholders of the
Corporation. If the Corporation shall at any
<PAGE> 23
time after the Rights Declaration Date pay any dividend on Common Stock payable
in shares of Common Stock or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as a single class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock
then outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock and any other series
of Preferred Stock then entitled as a class to elect directors, voting together
as a single class, irrespective of series, shall have the right to elect two
Directors.
(ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders, provided that
neither such voting right nor the right of the holders of any other series of
Preferred Stock, if any, to increase, in certain cases, the authorized number
of Directors shall be exercised unless the holders of 10% in number of shares
of Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of
<PAGE> 24
holders of Common Stock shall not affect the exercise by holders of Preferred
Stock of such voting right. At any meeting at which holders of Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to elect two
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Preferred
Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of special
meeting of holders of Preferred Stock, which meeting shall thereupon be called
by the President, a Vice President or the Secretary of the Corporation. Notice
of such meeting and of any annual meeting at which holders of Preferred Stock
are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 20 days and not later than
60 days after such order or request or in default of the calling of such
meeting within 60 days after such order or request, such meeting may be called
on similar notice by any stockholder or stockholders owning in the aggregate
not less than 10% of the total number of shares of Preferred Stock outstanding,
irrespective of series. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60
<PAGE> 25
days immediately preceding the date fixed for the next annual meeting of
stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular class
of stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease,
(y) the term of any Directors elected by the holders of Preferred Stock as a
class shall terminate, and (z) the number of Directors shall be such number as
may be provided for in the certificate of incorporation or bylaws irrespective
of any increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation or bylaws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
Directors.
(D) The Certificate of Incorporation of the Corporation shall not be
amended in any manner (whether by merger or otherwise) so as to adversely
affect the powers, preferences or special rights of the Series A Preferred
Stock without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
<PAGE> 26
(E) Except as otherwise provided herein, holders of Series A Preferred
Stock shall have no special voting rights, and their consent shall not be
required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding shares of Series A
Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions
on, any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions
on, any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and
all such other parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock; provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of stock of the
Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon
<PAGE> 27
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
Series A Preferred Stock and all such other parity stock upon such terms
as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for value any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock without designation as to series and may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors as permitted by the Certificate of
Incorporation or as otherwise permitted under Delaware Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
Common
<PAGE> 28
Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such other parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time after the
Rights Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged for or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash or any other property, as the case may be, into which or for
which each share of Common Stock is changed or exchanged. If the Corporation
shall at any time after the Rights Declaration Date pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
<PAGE> 29
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior (as
to dividends and upon liquidation, dissolution and winding up) to all other
series of the Corporation's preferred stock except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
<PAGE> 30
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
this 12th day of December, 1995.
/s/ Richard G. Mosteller
--------------------------------
Richard G. Mosteller
Senior Vice President - Finance
Masco Corporation
Attest:
/s/ Eugene A. Gargaro, Jr.
- -------------------------------
Eugene A. Gargaro, Jr.
Vice President and Secretary
Masco Corporation
<PAGE> 31
CERTIFICATE OF MERGER
OF
LA GARD, 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 are as follows:
State of
Name Incorporation
---- -------------
La Gard, Inc. ("La Gard") California
Masco Corporation ("Masco") Delaware
SECOND: An Agreement and Plan of Reorganization dated February 21,
1997 (the "Agreement"), among Masco, La Gard and the Shareholders of La Gard,
with respect to, among other things, the merger of La Gard into Masco (the
"Merger"), has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with the requirements of
Section 252 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
Corporation, a Delaware corporation which is surviving the merger, shall be the
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 Masco and La
Gard.
SEVENTH: The authorized capital stock of LaGard, Inc., the foreign
corporation which is a party to the merger is 1,000,000 shares of Common Stock,
no par value, of which 134,000 shares are issued, outstanding and owned by the
Stockholders.
<PAGE> 32
EIGHTH: The Merger has been approved by the Shareholders of LaGard,
Inc.
This Certificate of Merger shall be effective as of filing with the
Secretary of State of Delaware.
MASCO CORPORATION
By /s/ Richard G. Mosteller
------------------------
Richard G. Mosteller
Vice President
ATTEST:
By /s/ Eugene A. Gargaro, Jr.
-----------------------------
Eugene A. Gargaro, Jr.
<PAGE> 33
CERTIFICATE OF MERGER
OF
TEXWOOD INDUSTRIES, 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 are as follows:
State of
Name Incorporation
---- -------------
Texwood Industries, Inc. Texas
Masco Corporation Delaware
SECOND: An Agreement and Plan of Reorganization dated July 24, 1997
(the "Agreement") among Masco Corporation, Texwood Industries, Inc. and the
shareholders of Texwood Industries, Inc., with respect to, among other things,
the merger of Texwood Industries, Inc. into Masco Corporation (the "Merger"),
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section 252 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
Corporation, a Delaware corporation which is surviving the merger, shall be the
Certificate of Incorporation of the surviving corporation.
FIFTH: The executed Agreement is on file at the principal place of
business of the surviving corporation, the address of which is 21001 Van Born
Road, Taylor, Michigan 48180.
<PAGE> 34
SIXTH: A copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of either
constituent corporation.
SEVENTH: The authorized capital stock of Texwood Industries, Inc.,
the foreign corporation which is a party to the Merger, is 100,000 shares of
common stock, $1 par value.
EIGHTH: The Merger shall become effective upon filing the
Certificate of Merger with the Secretary of State of Delaware and the Articles
of Merger with the Secretary of State of Texas.
IN WITNESS WHEREOF, Masco Corporation has caused this Certificate of
Merger to be signed by a Vice President and attested by its Secretary this 25th
day of July, 1997.
MASCO CORPORATION
By /s/ John R. Leekley
-------------------------
John R. Leekley
Senior Vice President
ATTEST:
By /s/ Eugene A. Gargaro, Jr.
-----------------------------
Eugene A. Gargaro,Jr.
Secretary
<PAGE> 1
EXHIBIT 4a.i
RESOLUTIONS
OF THE
PRICING COMMITTEE
OF THE
BOARD OF DIRECTORS
OF MASCO CORPORATION
September 10, 1992
In lieu of a meeting, the undersigned being all of the members of the
Pricing Committee of the Board of Directors of Masco Corporation, a Delaware
corporation (the "Company"), adopt the following resolutions:
WHEREAS, the Company has filed a Registration Statement (No. 33-40067) on
Form S-3 with the Securities and Exchange Commission, which is in effect;
WHEREAS, the Company desires to create an additional series of securities
under the Indenture dated as of December 1, 1982 (the "Indenture"), with Morgan
Guaranty Trust Company of New York, as trustee (the "Trustee"), providing for
the issuance from time to time of unsecured debentures, notes or other
evidences of indebtedness of this Company ("Securities") in one or more series
under such Indenture; and
WHEREAS, capitalized terms used in these resolutions and not otherwise
defined are used with the same meaning ascribed to such terms in the Indenture;
THEREFORE RESOLVED, that there is established a series of Securities
under the Indenture, the terms of which shall be as follows:
1. The Securities of such series shall be designated as the
"6-5/8% Notes Due September 15, 1999".
2. The aggregate principal amount of Securities of such series
which may be authenticated and delivered under the Indenture is limited to Two
Hundred Million Dollars ($200,000,000), except for Securities of such series
authenticated and delivered upon registration of, transfer of, or in exchange
for, or in lieu of, other Securities of such series pursuant to Sections 2.07,
2.08, 2.09, 9.04, or 14.03 of the Indenture.
3. The date on which the principal of the Securities of such
series shall be payable is September 15, 1999.
4. The Securities of such series shall bear interest from
September 15, 1992, at the rate of 6-5/8% per annum, payable semi-annually on
March 15 and September 15 of each year commencing on March 15, 1993, until the
principal thereof is paid or made available
<PAGE> 2
for payment. The March 1 or September 1 (whether or not a business day), as
the case may be, next preceding each such interest payment date shall be the
"record date" for the determination of holders to whom interest is payable.
5. The principal of and the interest on the Securities of such
series shall be payable at the office or agency of this Company maintained for
such purpose under Section 3.02 of the Indenture in the Borough of Manhattan,
The City of New York, or at any other office or agency designated by the
Company, for such purpose pursuant to the Indenture; provided, however, that at
the option of the Company payment of interest may be made by check mailed to
the address of the person entitled thereto as such address shall appear on the
Company's registry books.
6. The Securities of such series shall not be redeemable prior
to maturity.
7. The Securities of such series shall be issuable in
denominations of One Thousand dollars ($1,000) and any integral multiples
thereof.
8. The Securities shall be issuable at a price such that this
Company shall receive $197,750,000 (plus accrued interest from September 15,
1992 to the date of delivery) after an underwriting discount of $1,250,000.
FURTHER RESOLVED, that the Securities of such series are declared to be
issued under the Indenture and subject to the provisions hereof;
FURTHER RESOLVED, that the Chairman of the Board, the President or any
Vice President of the Company is authorized to execute, on the Company's
behalf and in its name, and the Secretary or any Assistant Secretary of the
Company is authorized to attest to such execution and under the Company's seal
(which may be in the form of a facsimile of the Company's seal), $200,000,000
aggregate principal amount of the Securities of such series (and in addition
Securities to replace lost, stolen, mutilated or destroyed Securities and
Securities required for exchange, substitution or transfer, all as provided in
the Indenture) in fully registered form in substantially the form of the note
filed as an exhibit to the Company's Registration Statement on Form S-3 (No.
33-40067), but with such changes and insertions therein as are appropriate to
conform the Notes to the terms set forth herein or otherwise as the respective
officers executing the Securities shall approve and as are not inconsistent
with these resolutions, such approval to be conclusively evidenced by such
officer's execution and delivery of such Securities, and to deliver such
Securities to the Trustee for authentication, and the Trustee is authorized and
directed thereupon to authenticate and deliver the same to or upon the written
order of this Company as provided in the Indenture;
FURTHER RESOLVED, that the signatures of the Company officers so
authorized to execute the Securities of such series may be the manual or
facsimile signatures of the present or any future authorized officers and may
be imprinted or otherwise reproduced thereon, and the Company for such purpose
adopts each facsimile signature as binding upon it notwithstanding the fact
that at
-2-
<PAGE> 3
the time the respective Securities shall be authenticated and delivered or
disposed of, the individual so signing shall have ceased to hold such office;
FURTHER RESOLVED, that Salomon Brothers Inc, Smith Barney, Harris Upham &
Co. Incorporated and J.P. Morgan Securities Inc. are appointed as the
underwriters for the issuance and sale of the Securities of such series, and
the Chairman of the Board, the President or any Vice President of the Company
is authorized, in the Company's name and on its behalf, to execute and
deliver an Underwriting Agreement, substantially in the form heretofore
approved by the Company's Board of Directors, with such underwriters, with such
changes and insertions therein as are appropriate to conform such Underwriting
Agreement to the terms set forth herein or otherwise as the officer executing
such Underwriting Agreement shall approve and as are not inconsistent with
these resolutions, such approval to be conclusively evidenced by such
officer's execution and delivery of the Underwriting Agreement;
FURTHER RESOLVED, that Morgan Guaranty Trust Company of New York, the
Trustee under the Indenture, is appointed trustee for Securities of such
series, and as Agent of this Company for the purpose of effecting the
registration, transfer and exchange of the Securities of such series as
provided in the Indenture, and the corporate trust office of Morgan Guaranty
Trust Company of New York in the Borough of Manhattan, The City of New York is
designated pursuant to the Indenture as the office or agency of the Company
where such Securities may be presented for registration, transfer and exchange
and where notices and demands to or upon this Company in respect of the
Securities and the Indenture may be served;
FURTHER RESOLVED, that Morgan Guaranty Trust Company of New York is
appointed Paying Agent of this Company for the payment of interest on and
principal of the Securities of such series, and the corporate trust office of#
Indenture, as the office or agency of the Company where Securities may be
presented for payment; and
FURTHER RESOLVED, that each of the Company's officers is authorized and
directed, on behalf of the Company and in its name, to do or cause to be done
everything such officer deems advisable to effect the sale and delivery of the
Securities of such series pursuant to the Underwriting Agreement and otherwise
to carry out the Company's obligations under the Underwriting Agreement, and
to do or cause to be done everything and to execute and deliver all documents
as such officer deems advisable in connection with the execution and delivery
of the Underwriting Agreement and the execution, authentication and delivery of
such Securities (including, without limiting the generality of the foregoing,
delivery to the Trustee of the Securities for authentication and of requests or
orders for the authentication and delivery of Securities).
-3-
<PAGE> 4
REGISTERED REGISTERED
R
MASCO CORPORATION CUSIP 574599 AM 8
6 5/8% NOTE DUE SEPTEMBER 15, 1999
Masco Corporation, a corporation duly organized and existing under the
laws of the State of Delaware (herein referred to as the "Company"), for value
received, hereby promises to pay to SEE REVERSE FOR CERTAIN DEFINITIONS
6 5/8% 6 5/8%
DUE DUE
1999 1999
or registered assigns, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, the principal sum of
DOLLARS
on September 15, 1999, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, semi-annually on March 15 and September 15
of each year, on said principal sum at said office or agency, in like coin or
currency, at the rate per annum specified in the title of this Note, from the
March 15 or September 15, as the case may be, next preceding the date of this
Note to which interest has been paid or duly provided for, unless the date
hereof is a date to which interest has been paid or duly provided for, in which
case from the date of this Note, or unless no interest has been paid or duly
provided for on the Notes since the original issue date (as defined in the
Indenture referred to on the reverse hereof) of this Note, in which case from
the March 15 or September 15 next preceding such original issue date or if the
original issue date is a March 15 or September 15 then from such original issue
date, until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after March 1 or September
1, as the case may be, and before the following March 15 or September 15, this
Note shall bear interest from such March 15 or September 15; provided, however,
that if the Company shall default in the payment of interest on such March 15
or September 15, then this Note shall bear interest from the next preceding
March 15 or September 15 to which interest has been paid or duly provided for,
or, if no interest has been paid or duly provided for on the Notes since the
original issue date (as defined in such Indenture) of this Note, from the March
15 or September 15 next preceding such original issue date unless the original
issue date is a March 15 or September 15, in which case from the original issue
date hereof. The interest so payable on any March 15 or September 15 will,
subject to certain exceptions provided in such Indenture, be paid to the person
in whose name this Note is registered at the close of business on the March 1
or September 1, as the case may be, next preceding such March 15 or September
15, whether or not such March 1 or September 1 is a business day, and may, at
the option of the Company, be paid by check mailed to the registered address of
such person.
Reference is made to the further provisions of this Note set
forth on the reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by or on behalf
of the Trustee under such Indenture.
In Witness Whereof, Masco Corporation has caused this instrument to be
executed in its corporate name by the facsimile signature of its Chairman of
the Board or its President and imprinted with a facsimile of its corporate
seal, attested by the facsimile signature of its Secretary or an Assistant
Secretary.
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture. Dated
MORGAN GUARANTY TRUST COMPANY OF NEW YORK ATTEST:
BY:
BY AS TRUSTEE
AUTHORIZED OFFICER SECRETARY
CHAIRMAN OF THE BOARD
[Masco Corporation Corporate Seal Delaware]
<PAGE> 5
MASCO CORPORATION
6 5/8% NOTE DUE SEPTEMBER 15, 1999
This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture dated as of December 1, 1982 (herein called
the "Indenture"), duly executed and delivered by the Company to Morgan Guaranty
Trust Company of New York, Trustee (herein called the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and holders of the
Securities. The Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest (if any) at different rates, may
be subject to different redemption provisions (if any), may be subject to
different sinking, purchase or analogous funds (if any), may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided. This Note is one of a series designated as the 6 5/8%
Notes Due September 15, 1999 of the Company, limited in aggregate principal
amount to $200,000,000.
In case an Event of Default with respect to the 6 5/8% Notes Due
September 15, 1999 shall have occurred and be continuing, the principal hereof
may be declared, and upon such declaration shall become, due and payable, in
the manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than 66 2/3% in aggregate principal
amount of the Securities at the time outstanding of all series to be affected
(voting as a class), evidenced as in the Indenture provided, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the
Securities of each such series; provided, however, that no such supplemental
indenture shall (i) extend the final maturity of any Security, or reduce the
rate or extend the time of payment of interest thereon, or reduce the principal
amount thereof or any premium thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that hereinbefore provided,
or impair or affect the right of any holder to institute suit for payment
thereof or the right of repayment, if any, at the option of the holder, without
the consent of the holder of each Security so affected, or (ii) reduce the
aforesaid principal amount of Securities of all series to be affected, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Securities so affected then
outstanding. It is also provided in the Indenture that, with respect to
certain defaults or Events of Default regarding the Securities of any series,
prior to any declaration accelerating the maturity of such Securities, the
holders of a majority in aggregate principal amount of the Securities of such
series at the time outstanding (or, in the case of certain defaults or Events
of Default, all the Securities) may on behalf of the holders of all of the
Securities of such series (or all the Securities, as the case may be) waive any
such past default or Event of Default under the Indenture and its consequences
except a default in the payment of principal of, premium, if any, or interest,
if any, on any of the Securities. Any such consent or waiver by the holder of
this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this Note
and any Notes which may be issued in exchange or transfer hereof or in
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, at the rate and in the coin or currency
herein prescribed.
The Notes are issuable in registered form without coupons in
denominations of $1,000 and any multiple of $1,000. Upon due presentment for
registration of transfer of this Note at the office or agency of the Company
for such registration in the Borough of Manhattan, The City of New York, or any
other location or locations as may be provided for pursuant to the Indenture, a
new Note or Notes of authorized denominations for an equal aggregate principal
amount will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Indenture, without charge except for any tax or
other governmental charge imposed in connection therewith.
<PAGE> 6
The Notes may not be redeemed prior to maturity.
The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the holder hereof as the absolute owner of this Note (whether or
not this Note shall be overdue and notwithstanding any notation of ownership or
other writing hereon), for the purpose of receiving payment of or on account of
the principal hereof and, subject to the provisions on the face hereof,
interest hereon, and for all other purposes, and neither the Company nor the
Trustee nor any such agent shall be affected by any notice to the contrary.
All payments made to or upon the order of such holder shall, to the extent of
the sum or sums paid, effectually satisfy and discharge liability for moneys
payable on this Note.
No recourse for the payment of the principal of, or premium, if any, or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
All terms used in this Note which are defined in the Indenture shall have
the respective meanings ascribed to them therein.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of that State.
<PAGE> 7
The following abbreviations, where such abbreviations appear on this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S><C>
TEN COM --as tenants in common UNIF GIFT MIN ACT..............Custodian.....................
(Cust) (Minor)
TEN ENT --as tenants by the entireties under Uniform Gifts to Minors
JT TEN --as joint tenants with right of
survivorship and not as tenants Act....................................
in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
___________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
___________________________________________________________________________________________________________________
the within Note of MASCO CORPORATION and hereby does irrevocably constitute and appoint
___________________________________________________________________________________________________________Attorney
to transfer the said Note on the books of the within-named Company, with full power of substitution in the premises
Dated_________________________ _____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER
</TABLE>
<PAGE> 1
EXHIBIT 4.b
Memorandum JPMORGAN
_____________________________________________________________________________
Morgan Guaranty To: Robert Rosowski
Trust Company Masco Corporation
Fax: (313)374-6135
From: J.P. Morgan Securities, Inc.
Date: April 30, 1997
Subject: Amendment No I to Masco Corporation's
Amended and Restated Credit Agreement
dated as of November 14, 1996
It has come to our attention that an erroneous cross-reference exists
in Masco Corporation's $750,000,000 Amended and Restated Credit Agreement dated
as of November 14, 1996. Specifically, Section 3.02(d) which requires that all
representations and warranties be true for All Borrowings incorrectly refers to
Section 4.04(b) rather than 4.04(c) for the material adverse change exception
relating to Refunding Borrowings.
Section 3.02(d) n the 1996 Amended and Restated Agreement inadvertently
continued to cross reference Section 4.04(b) which was changed in the Amendment
to address interim financial statements. The material adverse change clause
which was formerly Section 4.04(b) became Section 4.04(c).
Please sign a copy of this letter in the space provided below to
confirm your agreement to amend the 1996 Amended and Restated Credit Agreement
to correct the erroneous cross-reference by changing 4.04(b)" to "4.04(c)" in
Section 3.02(d). We would appreciate your returning this letter to Patricia
Lunka by facsimile at (212)648-5336 no later than Friday, May 9, 1997. Should
you have any questions, please do not hesitate to call Patricia Lunka at
(212)648-7457. We will send you notification of the effectiveness of Amendment
No. I following receipt of signature pages by the Required Banks. Thank you in
advance for attending to this matter.
Very truly yours,
/s/Patricia Lunka
The undersigned agrees to
the foregoing amendment:
- ------------------------------
Masco Corporation
By /s/Robert B. Rosowski
------------------------------
V.P. Controller & Treasurer
<PAGE> 1
EXHIBIT 4.e
MASCOTECH, INC.,
MASCOTECH ACQUISITION, INC.,
and
THE BORROWING SUBSIDIARIES,
as Borrowers
________________________________________________
$1,300,000,000
CREDIT AGREEMENT
dated as of January 16, 1998
______________________________________________
THE FIRST NATIONAL BANK OF CHICAGO
as Administrative Agent
BANK OF AMERICA NT&SA
and
NATIONSBANK, N.A.
as Syndication Agents
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Definitions. . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . .23
1.3 Other Definitions; Rules of Construction . . . . . . .24
ARTICLE II. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
TERMINATION OF EXISTING CREDIT AGREEMENT . . . . . . .24
ARTICLE III.
THE LOANS AND LETTER OF CREDIT ISSUANCES . . . . . . .24
3.1 Revolving Loans . . . . . . . . . . . . . . . . . . .24
3.2 Term Loans . . . . . . . . . . . . . . . . . . . . . .25
3.3 Letters of Credit. . . . . . . . . . . . . . . . . . .25
3.4 Bid-Option Borrowings. . . . . . . . . . . . . . . . .29
3.5 Swing Line Loans . . . . . . . . . . . . . . . . . . .34
3.6 Alternate Currency Syndicated Loans. . . . . . . . . .35
3.7 Notice to Banks; Funding of Loans. . . . . . . . . . .37
3.8 The Notes. . . . . . . . . . . . . . . . . . . . . . .40
3.9 Certain Fees . . . . . . . . . . . . . . . . . . . . .40
3.10 Optional Termination or Reduction of Commitments . . .41
3.11 Mandatory Termination of Commitments . . . . . . . . .41
3.12 Borrowing Subsidiaries . . . . . . . . . . . . . . . .42
ARTICLE IV.
PRINCIPAL PAYMENTS; INTEREST; ETC. . . . . . . . . . .42
4.1 Scheduled Principal Payments . . . . . . . . . . . . .42
4.2 Prepayments of Principal . . . . . . . . . . . . . . .43
4.3 Interest Payments . . . . . . . . . . . . . . . . . .45
4.4 Payment Procedures . . . . . . . . . . . . . . . . . .46
4.5 Computation of Interest and Fees . . . . . . . . . . .48
4.6 No Setoff or Deduction . . . . . . . . . . . . . . . .48
4.7 Types for all Loans. . . . . . . . . . . . . . . . . .48
4.8 Method of Selecting Types and Interest Periods for
Conversion and Continuation of Loans . . . . . . . . .49
(A) Right to Convert. . . . . . . . . . . . . . . . .49
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(B) Automatic Conversion and Continuation . . . . . .49
(C) No Conversion After Default . . . . . . . . . . .49
(D) Conversion/Continuation Notice. . . . . . . . . .49
4.9 Other Provisions Applicable to Alternate Currency
Loans. . . . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE V.
CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . .50
5.1 Impossibility; Interest Rate Inadequate or Unfair. . .50
5.2 Illegality . . . . . . . . . . . . . . . . . . . . . .50
5.3 Increased Cost; Yield Protection . . . . . . . . . . .51
5.4 Substitute Loans . . . . . . . . . . . . . . . . . . .54
5.5 Funding Losses . . . . . . . . . . . . . . . . . . . .54
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . .55
6.1 Corporate Existence and Power. . . . . . . . . . . . .55
6.2 Corporate Authority; No Violations; Governmental
Filings; Etc . . . . . . . . . . . . . . . . . . . . .55
6.3 Binding Effect . . . . . . . . . . . . . . . . . . . .56
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . .56
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . .56
6.6 Financial Condition. . . . . . . . . . . . . . . . . .56
6.7 Compliance with ERISA. . . . . . . . . . . . . . . . .56
6.8 Environmental Matters. . . . . . . . . . . . . . . . .57
6.9 Compliance with Laws . . . . . . . . . . . . . . . . .57
6.10 Subordinated Debt. . . . . . . . . . . . . . . . . . .57
ARTICLE VII.
COVENANTS . . . . . . . . . . . . . . . . . . . . . .58
7.1 Financial Statements . . . . . . . . . . . . . . . . .58
7.2 Certificates of No Default and Compliance. . . . . . .59
7.3 Preservation of Corporate Existence, Etc.. . . . . . .60
7.4 Minimum Capitalization . . . . . . . . . . . . . . . .60
7.5 Fixed Charge Coverage Ratio. . . . . . . . . . . . . .60
7.6 Maximum Leverage Ratio . . . . . . . . . . . . . . . .61
7.7 Subsidiary Indebtedness. . . . . . . . . . . . . . . .62
7.8 Negative Pledge. . . . . . . . . . . . . . . . . . . .62
7.9 Dispositions of Assets; Mergers and Consolidations . .63
7.10 Changes in Subordinated Debt . . . . . . . . . . . . .64
7.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . .64
7.12 Fiscal Year. . . . . . . . . . . . . . . . . . . . . .64
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<PAGE> 4
7.13 Compliance with Laws . . . . . . . . . . . . . . . . .64
7.14 Interest Rate Agreements . . . . . . . . . . . . . . .65
7.15 Restricted Payments. . . . . . . . . . . . . . . . . .65
7.16 Guaranties and Pledges . . . . . . . . . . . . . . . .65
ARTICLE VIII.
CONDITIONS OF BORROWINGS AND LETTER OF CREDIT
ISSUANCES. . . . . . . . . . . . . . . . . . . . . . .66
8.1 Each Borrowing and Letter of Credit Issuance . . . . .66
8.2 Initial Borrowing or Letter of Credit Issuance . . . .67
8.3 Closing . . . . . . . . . . . . . . . . . . . . . . .70
ARTICLE IX.
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . .71
9.1 Events of Default. . . . . . . . . . . . . . . . . . .71
9.2 Remedies . . . . . . . . . . . . . . . . . . . . . . .74
9.3 Set Off. . . . . . . . . . . . . . . . . . . . . . . .74
ARTICLE X.
THE AGENTS AND THE BANKS . . . . . . . . . . . . . . .75
10.1 Appointment and Authorization. . . . . . . . . . . . .75
10.2 Administrative Agent and Affiliates. . . . . . . . . .75
10.3 Scope of Agent's Duties. . . . . . . . . . . . . . . .75
10.4 Reliance by Administrative Agent . . . . . . . . . . .75
10.5 Default. . . . . . . . . . . . . . . . . . . . . . . .76
10.6 Liability of Administrative Agent. . . . . . . . . . .76
10.7 Nonreliance on Administrative Agent and Other Banks. .76
10.8 Indemnification. . . . . . . . . . . . . . . . . . . .77
10.9 Resignation of Administrative Agent. . . . . . . . . .77
10.10 Sharing of Payments. . . . . . . . . . . . . . . . . .78
10.11 Withholding Tax Exemption. . . . . . . . . . . . . . .78
10.12 The Syndication Agents and Arrangers . . . . . . . . .79
ARTICLE XI.
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . .79
11.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . .79
11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . .80
11.3 No Waiver By Conduct; Remedies Cumulative. . . . . . .81
11.4 Reliance on and Survival of Various Provisions . . . .81
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<PAGE> 5
11.5 Expenses and Indemnification . . . . . . . . . . . . .81
11.6 Successors and Assigns . . . . . . . . . . . . . . . .83
11.7 Confidentiality. . . . . . . . . . . . . . . . . . . .86
11.8 Counterparts; Effectiveness of Telecopied Signatures .87
11.9 Table of Contents and Headings . . . . . . . . . . . .87
11.10 Construction of Certain Provisions . . . . . . . . . .87
11.11 Independence of Covenants. . . . . . . . . . . . . . .87
11.12 Interest Rate Limitation . . . . . . . . . . . . . . .87
11.13 Substitution of Banks. . . . . . . . . . . . . . . . .88
11.14 Governing Law. . . . . . . . . . . . . . . . . . . . .88
11.15 Integration and Severability . . . . . . . . . . . . .88
11.16 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . .89
11.17 Alternate Currency Addenda Binding on Each Bank;
Provisions Regarding Alternate Currency Agents . . . .89
11.18 Unification of Certain Currencies. . . . . . . . . . .89
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SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1 - Applicable Margin Chart
Schedule 2 - Certain Industrial Revenue Bonds (see Section 9.1(e) of
the Credit Agreement)
EXHIBITS
Exhibit A-1 - Form of Revolving Note
Exhibit A-2 - Form of Term Note
Exhibit A-3 - Form of Alternate Currency Syndicated Note
Exhibit B-1 - Form of Bid-Option Note
Exhibit B-2 - Form of Swing Line Note
Exhibit C-1 - Notice of Syndicated Borrowing
Exhibit C-2 - Notice of Swing Line Borrowing
Exhibit D - Request for Letter of Credit Issuance
Exhibit E - Bid-Option Quote Request
Exhibit F - Invitation for Bid-Option Quotes
Exhibit G - Bid-Option Quote
Exhibit H - Notice of Disbursement of Alternate Currency Loan
Exhibit I - Notice of Receipt of Alternate Currency Loan Payment
Exhibit J - Securities Purchase Agreement
Exhibit K - Assignment and Acceptance
Exhibit L - Notice of Substitution of Bank(s)
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<PAGE> 7
Exhibit M - Opinion of Counsel for the Borrowers
Exhibit N - Opinion of Special New York Counsel for the Borrowers
Exhibit O - Terms of Subordination
Exhibit P-1 - Form of Alternate Currency Addendum for Pounds Sterling
Exhibit P-2 - Form of Alternate Currency Addendum for Deutsche Marks
Exhibit P-3 - Form of Alternate Currency Addendum for Italian Lire
Exhibit Q - Form of Guaranty
Exhibit R - Form of Pledge Agreement
Exhibit S - Form of Assumption Letter
Exhibit T - Conversion/Continuation Notice
vii
<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of January 16, 1998 (as amended,
supplemented or otherwise modified from time to time, this "Agreement"), is by
and among MASCOTECH, INC., a Delaware corporation (together with its
successors, "MascoTech"), MASCOTECH ACQUISITION, INC., a Delaware corporation
(together with its successors, "Acquisition"), any Borrowing Subsidiaries which
are now or may hereafter become a party hereto from time to time (each
individually a "Borrowing Subsidiary" and collectively, the "Borrowing
Subsidiaries") (MascoTech, Acquisition and each Borrowing Subsidiary referred
to individually as a "Borrower" and collectively as the "Borrowers"), the Banks
party hereto from time to time (collectively, the "Banks" and individually, a
"Bank"), The First National Bank of Chicago (the "Administrative Agent"), Bank
of America NT&SA and NationsBank, N.A. (the "Syndication Agents", and
collectively with the Administrative Agent, the "Agents"), and First Chicago
Capital Markets, Inc., BancAmerica Robertson Stephens, Inc., and NationsBanc
Montgomery Securities, Inc. (each individually an "Arranger" and collectively,
the "Arrangers").
RECITALS:
A. MascoTech, the Existing Banks (as hereinafter defined) and the
Existing Agent (as hereinafter defined) have entered into the Existing Credit
Agreement (as hereinafter defined), pursuant to which the Existing Banks
provided to MascoTech a revolving credit facility in the maximum aggregate
principal amount of $575,000,000 (the "Existing Bank Facility").
B. The Borrowers now desire to replace the Existing Bank Facility
under the Existing Credit Agreement with a new facility evidenced by this
Agreement which shall include a revolving credit facility in an aggregate
principal amount the Dollar Equivalent (as hereinafter defined) of which does
not exceed $800,000,000 and a term loan facility in an aggregate principal
amount the Dollar Equivalent of which does not exceed $500,000,000 to provide
funds (i) to refinance the Existing Bank Facility, (ii) to finance the purchase
of capital stock of TriMas Corporation, a Delaware corporation (the "Target"),
acquired pursuant to a tender offer by Acquisition announced December 11, 1997
(the "Tender Offer"), (iii) to finance the merger of the Target with
Acquisition (the "Merger") and (iv) to refinance the current credit facilities
of the Target.
C. The Banks are willing to provide such a replacement credit
facility on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
<PAGE> 9
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, and in any
certificate, report, other agreement or other document made or delivered
pursuant to this Agreement, the following terms shall have the following
respective meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined unless the context otherwise
requires):
"Absolute Rate Dollar Bid-Option Borrowing" means any Borrowing
consisting of an Absolute Rate Dollar Bid-Option Loan.
"Absolute Rate Dollar Bid-Option Loan" means a Loan which pursuant to
the applicable Notice of Borrowing is made at the Bid-Option Absolute Rate.
"Acquired Debt" means, with respect to any Person who becomes a
Subsidiary after the Closing Date, Debt of such Person which was outstanding
before such Person became a Subsidiary and which was not created in
contemplation of such Person becoming a Subsidiary.
"Additional Bank" shall have the meaning ascribed thereto in Section
11.13(b).
"Adjusted Net Worth" means, as of any date, the sum of (a) Net Worth,
plus (b) the amount of all Subordinated Debt which by its terms matures at
least thirty days after the then existing Scheduled Expiration Date, plus (c),
at any time prior to March 31, 2002, the Available Masco Corporation Funding
Commitment, plus (d) (without duplication) the principal amount of any trust
convertible debt securities or similar securities issued by MascoTech.
"Affiliate", when used with respect to any Person, means any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Alternate Currency" means (i) so long as such currencies remain
Eligible Currencies, Pounds Sterling, Deutsche Marks and Italian Lire, (ii) any
other Eligible Currency which MascoTech requests the Administrative Agent to
include as an Alternate Currency hereunder and which is acceptable to
one-hundred percent (100%) of the applicable Alternate Currency Banks and with
respect to which an Alternate Currency Addendum has been executed among
MascoTech, one or more Alternate Currency Banks and an Alternate Currency Agent
in connection therewith; and, (iii) in the case of Alternate Currency
Bid-Option Loans, any currency acceptable to the applicable Bank.
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<PAGE> 10
"Alternate Currency Addendum" means an addendum (i) substantially in
the form of Exhibit P-1, P-2 or P-3 (ii) or, in the case of any addendum
relating to a currency other than Pounds Sterling, Deutsche Marks and Italian
Lire, in such form as shall be approved by the Administrative Agent, in each
case entered into among MascoTech, one or more Alternate Currency Banks and an
Alternate Currency Agent.
"Alternate Currency Agent" means one or more entities (which may be the
Administrative Agent or its local affiliates), satisfactory to the
Administrative Agent, as specified in the applicable Alternate Currency
Addendum.
"Alternate Currency Bank" means any Bank (or any Affiliate, branch or
agency thereof) party to an Alternate Currency Addendum. If any agency or
Affiliate of a Bank shall be a party to an Alternate Currency Addendum, such
agency or Affiliate shall, to the extent of any commitment extended and any
Loans made by it, have all the rights of such Bank hereunder; provided,
however, that such Bank shall to the exclusion of such agency or Affiliate,
continue to have all the voting rights vested in it by the terms hereof.
"Alternate Currency Bid-Option Borrowing" means any Borrowing
consisting of an Alternate Currency Bid-Option Loan.
"Alternate Currency Bid-Option Loan" means a Bid-Option Loan made in an
Alternate Currency.
"Alternate Currency Bid-Option Percentage" means, with respect to any
Bank and any Alternate Currency Bid-Option Borrowing, the percentage of the
aggregate outstanding principal amount of all the Alternate Currency Bid-Option
Loans comprising such Borrowing represented by the outstanding principal amount
of the Alternate Currency Bid-Option Loan made by such Bank as part of such
Borrowing.
"Alternate Currency Borrowing" means any Borrowing consisting of a Loan
made in an Alternate Currency.
"Alternate Currency Commitment" means, for each Alternate Currency Bank
for each Alternate Currency, the obligation of such Alternate Currency Bank to
make Alternate Currency Syndicated Loans not exceeding the Dollar Equivalent
set forth in the applicable Alternate Currency Addendum, as such amount may be
modified from time to time pursuant to the terms of this Agreement and the
applicable Alternate Currency Addendum.
"Alternate Currency Loan" means an Alternate Currency Bid-Option Loan
or an Alternate Currency Syndicated Loan.
"Alternate Currency Share" means, with respect to any Alternate
Currency Bank for any particular Alternate Currency, the percentage obtained by
dividing (A) such Alternate Currency Bank's
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<PAGE> 11
Alternate Currency Commitment at such time as set forth in the applicable
Alternate Currency Addendum by (B) the aggregate of the Alternate Currency
Commitments at such time of all Alternate Currency Banks with respect to such
Alternate Currency as set forth in the applicable Alternate Currency Addendum.
"Alternate Currency Syndicated Interest Period" means, with respect to
any Alternate Currency Syndicated Loan, the Interest Period as set forth on the
applicable Alternate Currency Addendum.
"Alternate Currency Syndicated Loan" means any Loan denominated in an
Alternate Currency made by one or more of the Alternate Currency Banks to a
Borrower pursuant to Section 3.6 and an Alternate Currency Addendum.
"Alternate Currency Syndicated Note" means a promissory note of any
Borrower, substantially in the form of Exhibit A-3 attached hereto, evidencing
the obligation of such Borrower to repay Alternate Currency Syndicated Loans,
as amended or modified from time to time and together with any promissory note
or notes issued in exchange or replacement therefor.
"Applicable Facility Fee Rate" means, with respect to any Application
Period for Facility Fees, the percentage found in the applicable chart set
forth on Schedule 1 attached hereto by reading down the column of Leverage
Ratio ranges to the row for the range into which the Leverage Ratio as of the
relevant Determination Date falls. For the period from the Closing Date to but
excluding the date that occurs three months after the Closing Date, the
Applicable Facility Fee Rate shall be 0.25% per annum, and for the period from
and including the date that occurs three months after the Closing Date to but
excluding the date that occurs six months after the Closing Date, the
Applicable Facility Fee Rate shall not be less than 0.225% per annum.
"Applicable Lending Office" means, as to any Bank, its Domestic Lending
Office, Eurodollar Lending Office or any other office of such Bank or of any
Affiliate of such Bank selected and notified to the Borrowers and the
Administrative Agent as the applicable lending office for a particular Loan or
type of Loan by such Bank; provided that the Borrowers shall not be responsible
for the increase, if any, in costs hereunder that (a) are due to any Bank
changing its Applicable Lending Office with respect to a particular Loan or
type of Loan and (b) arise because of circumstances existing at the time of
such change.
"Applicable Margin" means, with respect to any Application Period for
Eurodollar Rate Syndicated Loans, Facility Fees and Letters of Credit, the
percentage found in the applicable chart set forth on Schedule 1 attached
hereto by reading down the column of Leverage Ratio ranges to the row for the
range into which the Leverage Ratio as of the relevant Determination Date
falls. For the purpose of this definition of the term "Applicable Margin", the
Leverage Ratio shall be calculated as prescribed in Section 7.6. For purposes
of this definition of the term "Applicable Margin", (a) the term "Application
Period" means a period commencing with and including the 60th day after the end
of the most recently completed fiscal quarter of the Borrowers to and including
the 59th day after the end of the next following fiscal quarter of the
Borrowers, (b) the term "Determination Date" means, with
4
<PAGE> 12
respect to any Application Period, the last day of the Determination Period
for such Application Period, (c) the term "Determination Period" means, with
respect to any Application Period, the period of four consecutive fiscal
quarters of the Borrowers ending with the fiscal quarter ending immediately
preceding such Application Period, and (d) any change in the Applicable Margin
during any Interest Period for any Syndicated Loan or applicable to any Letter
of Credit shall be effective as to such Syndicated Loan or such Letter of
Credit, as the case may be, upon such change in the Applicable Margin taking
effect pursuant to this definition. For the period from the Closing Date to
but excluding the date that occurs three months after the Closing Date, the
Applicable Margin shall be 0.875% per annum and for the period from and
including the date that occurs three months after the Closing Date to but
excluding the date that occurs six months after the Closing Date, the
Applicable Margin shall not be less than 0.775% per annum.
"Application Period" shall have the meaning ascribed thereto in the
definition of the term "Applicable Margin".
"Approximate Equivalent Amount" of any currency with respect to any
amount of Dollars shall mean the equivalent amount of such currency with
respect to such amount of Dollars calculated on the basis of the arithmetical
mean of the buy and sell spot rates of exchange of the Administrative Agent for
such other Alternate Currency at 11:00 a.m. (London time) two Business Days
prior to the date of determination for purposes of this Agreement (i) if such
currency is Pounds Sterling, Deutsche Marks or Italian Lire, rounded up to the
nearest 100,000 of such currency and (ii) if such currency is any other
Alternate Currency, rounded up to the nearest amount of such currency as
determined by the Administrative Agent from time to time.
"Arrangers" means First Chicago Capital Markets, Inc., BancAmerica
Robertson Stephens, Inc. and NationsBanc Montgomery Securities, Inc.
"Asset Sale" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the Equity Interests of any Subsidiary of such
Person); provided that (i) a sale, lease, conveyance, disposition or other
transfer between or among MascoTech and any of its Consolidated Subsidiaries
shall not constitute an Asset Sale and (ii) any sale or other disposition of
any Cash or Cash Equivalents or any Marketable Securities shall not be
construed as an Asset Sale; and provided further that a sale of "margin stock"
(as defined in Regulation U of the Board of Governors of the Federal Reserve
System), to the extent that the value of such margin stock would exceed 25% of
the value of the assets of MascoTech and its Subsidiaries, shall not constitute
an Asset Sale.
"Assignment and Acceptance" is defined in Section 11.6(d).
"Assumption Letter" means a letter agreement of a Subsidiary of
MascoTech addressed to the Banks substantially in the form of Exhibit S hereto
pursuant to which such Subsidiary agrees to become a "Borrowing Subsidiary" and
agrees to be bound by the terms hereof.
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<PAGE> 13
"Authorized Officer" means any of the chief executive officer, chief
financial officer, treasurer, controller, secretary, assistant treasurer or
vice president corporate counsel of MascoTech, acting singly.
"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 $200,000,000, provided that
such "Commitment" relates only to the purchase by Masco Corporation of equity
securities of MascoTech or of Subordinated Debt of MascoTech.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA that is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by a Borrower or any ERISA
Affiliate of a Borrower.
"Bid-Option Absolute Rate" means, with respect to any Absolute Rate
Dollar Bid-Option Loan or Alternate Currency Bid-Option Loan, the Bid-Option
Absolute Rate, as defined in Section 3.4(d)(ii)(D), that is offered for such
Loan.
"Bid-Option Auction" means a solicitation of Bid-Option Quotes setting
forth Bid-Option Absolute Rates or Bid-Option Eurodollar Rate Margins, as the
case may be, pursuant to Section 3.4(b).
"Bid-Option Eurodollar Rate" means the sum of (a) the Bid-Option
Eurodollar Rate Margin plus (b) the Eurodollar Base Rate.
"Bid-Option Eurodollar Rate Margin" means, with respect to any
Eurodollar Rate Bid-Option Loan, the Bid-Option Eurodollar Rate Margin, as
defined in Section 3.4(d)(ii)(E), that is offered for such Loan.
"Bid-Option Interest Period" means (a) with respect to each Eurodollar
Rate Bid-Option Borrowing, the Eurodollar Rate Interest Period applicable
thereto, and (b) with respect to each Absolute Rate Dollar Bid-Option Borrowing
and Alternate Currency Bid-Option Borrowing, the period commencing on the date
of such Borrowing and ending on the date elected by the applicable Borrower in
the applicable Notice of Borrowing, which date shall be not less than 15 and
not more than 360 days after the date of such Borrowing; provided that:
(i) any such Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day; and
(ii) no such Interest Period that would end after the Scheduled
Expiration Date shall be permitted.
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<PAGE> 14
"Bid-Option Loan" means a Loan which is made by a Bank pursuant to a
Bid-Option Auction.
"Bid-Option Note" means a promissory note of a Borrower in
substantially the form of Exhibit B-1 hereto evidencing the obligation of such
Borrower to repay Bid-Option Loans, as amended or modified from time to time
and together with any promissory note or notes issued in exchange or
replacement therefor.
"Bid-Option Quote" means an offer by a Bank to make a Bid-Option Loan
in accordance with Section 3.4(d).
"Bid-Option Quote Request" shall have the meaning ascribed thereto in
Section 3.4(b).
"Borrower" means, as applicable, MascoTech, Acquisition and their
respective successors and assigns and any Borrowing Subsidiary.
"Borrowing" means a borrowing hereunder consisting of Loans made to a
Borrower on a single date, of a single Type and currency and for a single
Interest Period.
"Borrowing Subsidiary" means any Borrowing Subsidiary duly designated
by MascoTech pursuant to Section 3.12 hereof to request Loans hereunder,
provided at least 95% of the Capital Stock of such Subsidiary is owned directly
or indirectly by MascoTech and such Subsidiary shall have delivered to the
Administrative Agent an Assumption Letter in accordance with Section 3.12 and
such other documents, instruments and agreements as may be required pursuant to
the terms of this Agreement.
"Business Day" means any day on which commercial banks are open for
domestic and international business (including dealings in Dollar deposits) in
New York City and Chicago, Illinois and, with respect to Eurodollar Rate Loans
and the related Interest Periods, in London, and with respect only to Alternate
Currency Loans and the related Interest Periods, on which dealings in deposits
in the relevant Alternate Currency are carried out in the relevant interbank
market and in the principal financial center of the country issuing the
relevant Alternate Currency.
"Capital Expenditures" means, for any period, the aggregate amount of
capital expenditures of MascoTech and its Consolidated Subsidiaries during such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Capital Lease" of any Person means any lease which, in accordance with
generally accepted accounting principles, is required to be capitalized on the
books of such Person.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock and (iii) in the case of a partnership,
partnership interests (whether general or limited).
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<PAGE> 15
"Cash and Cash Equivalents" means (a) all cash of MascoTech and its
Consolidated Subsidiaries on hand or on deposit, plus (b) cash equivalents as
determined in accordance with generally accepted accounting principles, plus
(c) all investments of MascoTech and its Consolidated Subsidiaries of the
following generally accepted accounting principles: (i) commercial paper of
any United States issuer having a rating of A1 or better by Moody's Investors
Service, Inc. or P1 or better by Standard & Poor's Ratings Group, (ii) direct
obligations of, and obligations fully guaranteed by, the United States of
America, and (iii) certificates of deposit of (A) any commercial bank which is
a member of the Federal Reserve System and which has capital, surplus and
undivided profits (as shown on its most recently published statement of
condition) aggregating not less than $100,000,000 or (B) any Bank, provided
that each of the foregoing investments has a maturity date not later than 180
days after the date of acquisition thereof by MascoTech or any of its
Consolidated Subsidiaries.
"Closing Date" means the first day on which the initial Borrowing under
this Agreement shall have occurred.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations thereunder.
"Commitment" means, with respect to each Bank, its Revolving Credit
Commitment and its Term Loan Commitment.
"Consolidated" or "consolidated" refers to the consolidation of the
accounts of a Person and its Subsidiaries in accordance with generally accepted
accounting principles.
"Consolidated Subsidiary" of any corporation means any Subsidiary which
would be consolidated on the consolidated balance sheet of such corporation in
accordance with generally accepted accounting principles.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by The First National Bank of Chicago from time
to time, changing when and as said corporate base rate changes.
"Current Assets" means, at any time, the current assets of MascoTech
and its Consolidated Subsidiaries, determined as to amount and classification
on a consolidated basis in accordance with generally accepted accounting
principles.
"Debt" means (a) indebtedness for money borrowed; (b) the capitalized
portion of lease rentals under Capital Leases; (c) other indebtedness incurred
in connection with the acquisition of any real or personal property, stock,
debt or other assets (to the extent that any of the foregoing acquisition
indebtedness is represented by any notes, bonds, debentures or similar
evidences of indebtedness); and (d) obligations in respect of obligations or
indebtedness of others of the types referred to in each of the foregoing
clauses (a)-(c), for the payment of which MascoTech or any Consolidated
Subsidiary is
8
<PAGE> 16
directly or contingently liable, or which is secured by any property of
MascoTech or any Consolidated Subsidiary (whether or not MascoTech or any such
Consolidated Subsidiary is liable therefor); provided, however, any trust
convertible debt securities or similar securities issued by MascoTech shall not
be deemed to be Debt to the extent such securities are not treated as debt of
MascoTech in accordance with generally accepted accounting principles.
"Debt Securities" means any securities (as defined under the Securities
Act of 1933, as amended) evidencing Debt.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Determination Date" shall have the meaning ascribed thereto in the
definition of the term "Applicable Margin".
"Determination Period" shall have the meaning ascribed thereto in the
definition of the term "Applicable Margin".
"Deutsche Marks" or "DM" means the lawful money of the Republic of
Germany.
"Dollar Bid-Option Borrowing" means any Borrowing consisting of a
Dollar Bid-Option Loan.
"Dollar Bid-Option Loan" means a Bid-Option Loan made in Dollars.
"Dollar Bid-Option Percentage" means, with respect to any Bank and any
Dollar Bid-Option Borrowing, the percentage of the aggregate outstanding
principal amount of all the Dollar Bid-Option Loans comprising such Borrowing
represented by the outstanding principal amount of the Dollar Bid-Option Loan
made by such Bank as part of such Borrowing.
"Dollar Equivalent" means, as of any date, (a) with respect to any
amount of Dollars, the amount thereof, and (b) with respect to any amount of
any Alternate Currency, the amount of Dollars that could be purchased with such
amount of such Alternate Currency at the spot rate of exchange quoted by the
Administrative Agent at approximately 10:00 a.m. (Chicago time) on such date or
such number of Business Days before such date as may reasonably be deemed
necessary by the Administrative Agent for purposes of this Agreement.
"Dollars" and "$" shall mean the lawful money of the United States.
"Domestic Lending Office" means, as to any Bank, its office identified
on the signature pages hereof as its Domestic Lending Office or such other
office as such Bank may hereafter designate as its Domestic Lending Office.
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<PAGE> 17
"Domestic Subsidiary" means a Subsidiary that is incorporated under the
laws of the United States of America or any State thereof.
"EBITDA" means, for any rolling four fiscal quarter period, on a
consolidated basis for MascoTech and its Consolidated Subsidiaries, the sum of
the amounts for such period, without duplication, of (i) Net Income for such
period, plus (ii) Interest Charges for such period, plus (iii) charges against
income for taxes (including the Michigan Single Business Tax) to the extent
deducted in computing Net Income during such period, plus (iv) depreciation
expense to the extent deducted in computing Net Income during such period, plus
(v) amortization expense, including without limitation, amortization of
goodwill and other intangible assets, and fees, costs and expenses in
connection with the Tender Offer and the Merger to the extent deducted in
computing Net Income during such period, plus (vi) other non-cash charges
(excluding any non-cash charges that require an accrual or reserve for cash
charges for any future period, other than accruals for future retiree medical
obligations, made pursuant to SFAS No. 87, No. 112 and No. 106, as amended or
modified) to the extent deducted in computing Net Income during such period,
minus (vii) extraordinary gains to the extent they are non-cash items and to
the extent included in computing Net Income during such period, plus (viii)
extraordinary losses to the extent they are non-cash items and to the extent
deducted in computing Net Income during such period; minus (ix) if EBITDA
Certain Items is positive, (a) zero, if EBITDA Certain Items is less than or
equal to $30,000,000 and (b) the amount by which EBITDA Certain Items exceeds
$30,000,000; plus (x) if EBITDA Certain Items is negative, the lesser of (a)
the absolute value of EBITDA Certain Items and (b) $30,000,000; provided
further that in the event MascoTech or any of its Consolidated Subsidiaries
acquires any corporation or business, EBITDA shall be calculated on a pro forma
basis (which, to the extent deemed reasonable to the Administrative Agent, may
include as pro forma adjustments, reasonable eliminations of excess
compensation (including salaries) and other adjustments that are attributable
to the change in ownership or management of the corporation or business) as if
MascoTech or such Subsidiary had owned the acquired corporation or business for
the four fiscal quarters preceding its acquisition.
"EBITDA Certain Items" is the sum (which may be positive or negative)
of (a) non-recurring and (without duplication) extraordinary gains to the
extent they are cash items and to the extent included in computing Net Income
during such period, plus (b) non-cash earnings from equity investments to the
extent included in computing Net Income during such period, minus (c)
non-recurring and (without duplication) extraordinary losses to the extent they
are cash items and to the extent included in computing Net Income during such
period, minus (d) non-cash losses from equity investments to the extent
included in computing Net Income during such period.
"Eligible Currency" means any currency other than Dollars that is
readily available, freely traded, in which deposits are customarily offered to
banks in the London interbank market, convertible into Dollars in the
international interbank market and as to which the Dollar Equivalent may be
readily calculated. If, (i) after the designation by the Administrative Agent
of any currency as an Alternate Currency, currency control or other exchange
regulations are imposed in the country in which such currency is issued with
the result that different types of such currency are introduced, (ii) such
country's currency is, in the determination of the Administrative Agent, no
longer readily available or
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<PAGE> 18
freely traded, or (iii) in the determination of the Administrative Agent, a
Dollar Equivalent for such country's currency is not readily calculable, then
the Administrative Agent shall promptly notify the Alternate Currency Agent and
MascoTech, and such country's currency shall no longer be an Alternate Currency
until such time as the Administrative Agent agrees to reinstate such country's
currency as an Alternate Currency and promptly, but in any event within five
(5) Business Days of receipt of such notice from the Administrative Agent, the
Borrowers with respect to such Alternate Currency shall repay all Loans in such
affected currency or convert such Loans into Loans in Dollars or an Alternate
Currency, as applicable, subject to the other terms contained in Articles III
and IV.
"Environmental Laws" means any and all applicable United States
federal, state and local statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to the environment or
to emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes or the
clean-up or other remediation thereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations thereunder.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414(b), (c) or (m), or the regulations prescribed under
Section 414(o), of the Code.
"Euro" means the lawful currency adopted by the European Economic
Community.
"Eurodollar Base Rate" applicable to any Eurodollar Rate Interest
Period means the per annum rate obtained by dividing (a) the per annum rate of
interest at which deposits in Dollars for such Interest Period and in an
aggregate amount comparable to (i) in the case of Eurodollar Rate Syndicated
Loans, the amount of the related Eurodollar Rate Syndicated Loans to be made by
the Eurodollar Reference Banks in their capacity as Banks hereunder, and (ii)
in the case of Eurodollar Rate Bid-Option Loans, the aggregate amount of the
Eurodollar Rate Bid-Option Borrowing set forth in the related Bid-Option Quote
Request, are offered to the Eurodollar Reference Banks by other prime banks in
the London or Nassau interbank market, selected in the Eurodollar Reference
Banks' discretion, at approximately 11:00 a.m. London or Nassau time, as the
case may be, on the second Business Day prior to the first day of such
Eurodollar Rate Interest Period, by (b) an amount equal to
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<PAGE> 19
one minus the stated maximum rate (expressed as a decimal) of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) that is specified on the first day of
such Eurodollar Rate Interest Period by the Board of Governors of the Federal
Reserve System (or any successor agency thereto) for determining the maximum
reserve requirement with respect to Eurodollar funding (currently referred to
as "Eurodollar liabilities" in Regulation D of such Board) maintained by a
member bank of such System; all as conclusively determined, absent manifest
error, by the Administrative Agent.
"Eurodollar Borrowing" means any Borrowing consisting of a Eurodollar
Rate Loan.
"Eurodollar Lending Office" means, as to any Bank, its office
identified on the signature pages hereof as its Eurodollar Lending Office or
such other branch (or Affiliate) of such Bank as such Bank may hereafter
designate as its Eurodollar Lending Office.
"Eurodollar Rate Bid-Option Borrowing" means any Borrowing consisting
of a Eurodollar Rate Bid-Option Loan.
"Eurodollar Rate Bid-Option Loan" means a Loan which pursuant to the
applicable Notice of Borrowing is made at the Bid-Option Eurodollar Rate.
"Eurodollar Rate Interest Period" means, with respect to each
Eurodollar Rate Syndicated Loan, the period commencing on the date of such
Eurodollar Rate Syndicated Loan and ending one month, two months, three months,
four months, five months or six months thereafter, or twelve months if such
proposed twelve-month Eurodollar Rate Interest Period is specifically agreed
to by all Banks, and with respect to each Eurodollar Rate Bid-Option Loan, the
period commencing on the date of such Eurodollar Rate Bid-Option Loan and
ending on a date between fifteen days and twelve months thereafter, as a
Borrower may request in the applicable Notice of Borrowing; provided that:
(a) any such Interest Period that would otherwise end on a
day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month
in which case such Interest Period shall end on the next preceding
Business Day;
(b) unless such Interest Period is for less than one month,
any such Interest Period that begins on the last Business Day of a
calendar month or on a day for which there is no numerically
corresponding day in the calendar month during which such Eurodollar
Interest Period is to end shall end on the last Business Day of such
calendar month; and
(c) no such Interest Period that would end after the Scheduled
Expiration Date shall be permitted.
"Eurodollar Rate" means with respect to a Eurodollar Rate Loan for the
relevant Interest
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<PAGE> 20
Period, the Eurodollar Base Rate applicable to such Interest Period plus the
then Applicable Margin.
"Eurodollar Rate Loan" means any Eurodollar Rate Bid-Option Loan or
Eurodollar Rate Syndicated Loan.
"Eurodollar Rate Syndicated Loan" means a Syndicated Loan which bears
interest at the Eurodollar Rate.
"Eurodollar Rate Syndicated Revolving Loan" means a Syndicated
Revolving Loan which bears interest at the Eurodollar Rate.
"Eurodollar Reference Bank" means the principal London office of each
of The First National Bank of Chicago, Bank of America NT&SA and NationsBank,
N.A., or such other Eurodollar Reference Banks as may be appointed pursuant to
Section 11.6.
"Events of Default" has the meaning ascribed thereto in Section 9.1.
"Excess Cash Flow" means, for any period, (i) Net Income for such
period minus (ii) scheduled amortization payments of the principal portion of
all Debt (excluding the installment due January 31, 2002) with an original
maturity in excess of one year during such period minus (iii) the aggregate
amount of all dividends in respect of any preferred stock of MascoTech and its
Consolidated Subsidiaries up to an amount not to exceed $15,000,000 in any four
fiscal quarter period. Excess Cash Flow shall be calculated on a quarterly
basis on each Determination Date.
"Existing Agent" means NBD Bank, a Michigan banking corporation,
formerly known as NBD Bank, N.A., in its capacity as agent for the Existing
Banks.
"Existing Banks" means the banks that are parties to the Existing
Credit Agreement.
"Existing Bid-Option Loans" means the "Bid-Option Loans" (as defined in
the Existing Credit Agreement) outstanding on the Closing Date.
"Existing Commitment" means, with respect to each Bank, the amount, if
any, of such Bank's "Commitment" (as defined in the Existing Credit Agreement)
immediately prior to the Closing Date.
"Existing Credit Agreement" means the Credit Agreement dated as of
February 28, 1997, among MascoTech, the Existing Banks and the Existing Agent,
as amended, supplemented or otherwise modified, and as in force immediately
prior to the Closing Date.
"Existing Debt" shall have the meaning ascribed thereto in the
definition of the term "Senior Debt".
"Existing Notes" means the "Notes" (as defined in the Existing Credit
Agreement) held by the
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<PAGE> 21
Existing Banks under the Existing Credit Agreement.
"Facility Fees" means the facility fees payable pursuant to Section
3.9(a).
"Federal Funds Rate" means, as of any day, the per annum rate that is
equal to the average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published by the Federal Reserve Bank of New York for such day (or, in the case
of any day on which the federal funds market is not open, for the immediately
preceding day on which it was open), or, if such rate is not so published for
any day (or, in the case of any day on which the federal funds market is not
open, for the immediately preceding day on which it was open), the average of
the quotations for such rates received by the Administrative Agent from three
federal funds brokers of recognized standing selected by the Administrative
Agent in its discretion; all as conclusively determined, absent manifest error,
by the Administrative Agent, such average to be rounded up, if necessary, to
the nearest whole multiple of one-hundredth of one percent (1/100 of 1%); which
Federal Funds Rate shall change simultaneously with any change in such
published or quoted rates.
"Financing" means, with respect to any Person, the issuance or sale by
such Person of any Equity Interests of such Person or any Debt Securities of
such Person other than (i) any Equity Interests or Debt Securities issued to
MascoTech or any of its Subsidiaries, (ii) any Equity Securities issued in
connection with any employee stock option, employee stock award or any related
benefit plan, (iii) any Debt Securities issued by any Subsidiary to the extent
permitted under Section 7.7 and (iv) any Debt Securities secured by a Lien
permitted pursuant to Section 7.8(c) or (f).
"Fixed Charge Coverage Ratio" has the meaning ascribed thereto in
Section 7.5.
"Fixed Rate Loan" means any Eurodollar Rate Syndicated Loan, Alternate
Currency Syndicated Loan or Bid-Option Loan.
"Floating Rate" means, with respect to any Floating Rate Loan, the
greater of (a) the Corporate Base Rate and (b) the per annum rate equal to the
sum of (i) one-half percent (1/2%) plus (ii) the Federal Funds Rate; which
Floating Rate shall change simultaneously with any change in such Corporate
Base or Federal Funds Rate, as the case may be.
"Floating Rate Borrowing" means any Borrowing consisting of a Floating
Rate Loan.
"Floating Rate Loan" means a Loan which pursuant to the applicable
Notice of Borrowing is made at the Floating Rate.
"Floating Rate Revolving Loan" means a Revolving Loan which bears
interest at the Floating Rate.
"Floating Rate Syndicated Loan" means a Syndicated Loan which bears
interest at the Floating
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<PAGE> 22
Rate.
"Indemnified Person" shall have the meaning ascribed thereto in Section
11.5(a) hereto.
"Interest Charges" means, for any period, the sum of interest that is
expensed (or, under generally accepted accounting principles, would be
expensed) during such period by MascoTech and its Consolidated Subsidiaries on
Debt of MascoTech and its Consolidated Subsidiaries, including any interest
expense in connection with any trust convertible debt securities issued by
MascoTech to the extent it is treated as interest expense in accordance with
generally accepted accounting principles.
"Interest Payment Date" means, with respect to each Floating Rate Loan,
the last Business Day of each month, with respect to each Swing Line Loan, the
date such Loan is repaid, and with respect to each other Loan, the last day of
each Interest Period with respect to such Loan and, in the case of any Interest
Period exceeding (a) with respect to Eurodollar Rate Loans and the Alternate
Currency Syndicated Loans, three months or (b) with respect to Absolute Rate
Dollar Bid-Option Loans, ninety days, those days that occur during such
Interest Period at intervals of three months and ninety days, respectively,
after the first day of such Interest Period.
"Interest Period" means any Eurodollar Rate Interest Period, Bid-Option
Interest Period or Alternate Currency Syndicated Interest Period; provided,
however, notwithstanding anything in this Agreement to the contrary for the
period from the Closing Date to the earlier of (x) the date that is 90 days
after the Closing Date and (y) the date 30 days after the date upon which the
Arrangers confirm that the loan syndication process has been complete but not
later than March 15, 1998 (the "Syndication Period"), "Interest Period" means,
with respect to a Eurodollar Rate Loan (except as the Administrative Agent
otherwise approves), a period of seven (7) or fourteen (14) days.
"Invitation for Bid-Option Quotes" means an Invitation for Bid-Option
Quotes in the form referred to in Section 3.4(c).
"Italian Lire" means the lawful money of Italy.
"Letter of Credit" shall mean a standby letter of credit issued for the
account of MascoTech or any of its Consolidated Subsidiaries pursuant to this
Agreement.
"Letter of Credit Documents" shall have the meaning ascribed thereto in
Section 3.3(f).
"Letter of Credit Issuance" shall mean any issuance by the
Administrative Agent of a Letter of Credit pursuant to Section 3.3.
"Letter of Credit Obligations Amount" means, as of any date, the
amount equal to the sum of (a) the maximum aggregate amount available to be
drawn under all outstanding Letters of Credit at any time on or before the
stated expiry date thereof, plus (b) the amount of any draws under all Letters
of Credit that have not been reimbursed as provided in Section 3.3(e).
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<PAGE> 23
"Leverage Ratio" has the meaning ascribed thereto in Section 7.6.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
security interest or similar encumbrance in respect of such asset; provided
that a subordination agreement shall not be deemed to create a Lien. For the
purposes of this Agreement, MascoTech or any Consolidated Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other similar title retention agreement relating to
such asset.
"Loan" means any (a) Swing Line Loan or (b) Term Loan or (c) Revolving
Loan or (d) Bid-Option Loan or (e) Alternate Currency Loan.
"Marketable Securities" means any securities which are marketable
securities included in current assets in accordance with generally accepted
accounting principles and any future or forward contracts related thereto.
"Masco Corporation" means Masco Corporation, a Delaware corporation.
"Masco Group" means Masco Corporation or any Person who, on the date
hereof, is an Affiliate of Masco Corporation or who hereafter becomes an
Affiliate controlled by Masco Corporation.
"Material Adverse Change" means any event, occurrence, development or
state of circumstances or facts which has had or has a reasonable probability
of having, individually or in the aggregate, a material adverse effect on
MascoTech and its Consolidated Subsidiaries (including the Target and its
Consolidated Subsidiaries, to the extent the Target is owned by MascoTech or
Acquisition, which, with respect to the funding to purchase the shares of the
Target acquired pursuant to the Tender Offer, would take into effect the shares
to be purchased) taken as a whole.
"Merger" means the merger of the Target and Acquisition pursuant to the
Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger
dated as of December 10, 1997, as amended by Amendment No. 1 dated as of
December 15, 1997 and Amendment No. 2 dated as of January 13, 1998, among
Target, MascoTech and Acquisition.
"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.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which a Borrower or any
ERISA Affiliate is then making, or, pursuant to an applicable collective
bargaining agreement, accruing an obligation to make contributions or has
within the preceding five plan years made contributions, including for these
purposes any Person
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<PAGE> 24
which ceased to be an ERISA Affiliate during such five-year period.
"Net Cash Proceeds" means, with respect to any Asset Sale or any
Financing by any Person, (a) cash (freely convertible into Dollars) received
by such Person or any Subsidiary of such Person from such Asset Sale or such
Financing (or, in the case of a Receivables Sale, the Receivables Sale Amount
with respect to such Receivables Sale), after (i) provision for all income or
other taxes measured by or resulting from such Asset Sale, (ii) payment of all
brokerage commissions and other fees and expenses related to such Asset Sale or
such Financing, and (iii) all amounts used to repay Debt secured by a Lien on
any asset disposed of in such Asset Sale or which is or may be required (by the
express terms of the instrument governing such Debt) to be repaid in connection
with such Asset Sale (including payments made to obtain or avoid the need for
the consent of any holder of such Debt); and (b) cash payments in respect of
any other consideration received by such Person or any Subsidiary of such
Person from such Asset Sale upon receipt of such cash payments by such Person
or such Subsidiary.
"Net Income" means, for any period, the consolidated net income of
MascoTech and its Consolidated Subsidiaries (after deduction for income and
other taxes of MascoTech and its Consolidated Subsidiaries determined by
reference to income or profits of MascoTech and its Consolidated Subsidiaries)
for such period, all as determined in accordance with generally accepted
accounting principles.
"Net Worth" means, as of any date, (a) the amount of total
shareholders" equity of MascoTech and its Consolidated Subsidiaries on such
date, determined on a consolidated basis in accordance with generally accepted
accounting principles, minus (or, if the amount determined pursuant to the
following clause (b) is negative, plus the absolute amount thereof) (b) to the
extent included in total shareholders' equity the amount of the foreign
currency translation adjustment account, plus (c) the amount of the foreign
currency translation adjustment account shown on the consolidated balance sheet
of MascoTech and its Consolidated Subsidiaries dated September 30, 1997, which
amount is $4,520,000.
"New Debt" shall have the meaning ascribed thereto in the definition of
the term "Senior Debt".
"Note" means any Revolving Note, Term Loan Note, Bid-Option Note or
Swing Line Note or any note issued to evidence the Alternate Currency Loans.
"Notice of Bid-Option Borrowing" shall have the meaning ascribed
thereto in Section 3.4(f).
"Notice of Borrowing" means any Notice of Syndicated Borrowing or
Notice of Bid-Option Borrowing or Notice of Swing Line Borrowing.
"Notice of Syndicated Borrowing" shall have the meaning ascribed
thereto in Section 3.7(a).
"Overdue Rate" means (a) in respect of the principal of any Loan, the
rate per annum that is
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<PAGE> 25
equal to the sum of two percent (2%) per annum plus the per annum rate
otherwise applicable to such Loan until the end of the then current
Interest Period for such Loan and, thereafter, a rate per annum that is equal
to the sum of two percent (2%) per annum plus the Floating Rate; and (b) in
respect of other amounts payable by the Borrowers hereunder (other than
interest), a per annum rate that is equal to the sum of two percent (2%) per
annum plus the Floating Rate.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, corporation, partnership, joint venture,
trust, association, limited liability company or unincorporated organization,
or a government or any agency or political subdivision thereof.
"Plan" means at any time any employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (a) is
maintained, or contributed to, by a Borrower or any ERISA Affiliate for
employees of such Borrower or any ERISA Affiliate, or (b) has at any time
within the preceding five years been maintained, or contributed to, by a
Borrower or any Person which was at such time an ERISA Affiliate for employees
of such Borrower or any Person which was at such time an ERISA Affiliate.
"Pounds Sterling" means the lawful money of the United Kingdom.
"Pro Rata Share" means, with respect to any Bank, the percentage
obtained by dividing (a) such Bank's Revolving Credit Commitment at such time
(in each case, as adjusted from time to time in accordance with the provisions
of this Agreement) plus the outstanding balance of such Bank's Term Loans by
(b) the aggregate amount of all of the Revolving Credit Commitments at such
time plus the outstanding principal balance of all of the Term Loans; provided,
however, if all of the Revolving Credit Commitments are terminated pursuant to
the terms of this Agreement, then "Pro Rata Share" means the percentage
obtained by dividing (x) the sum of such Bank's Revolving Loans and Term Loans
by (y) the aggregate amount of all Revolving Loans and Term Loans.
"Receivables Sale" means any Asset Sale consisting of the sale of
accounts or notes receivable and associated assets, other than any such sale in
bulk as part of a sale or other disposition of all or substantially all of the
assets or stock of any Person or of any principal division or lines of business
of any Person.
"Receivables Sale Amount" means in the case of a single sale of
receivables, the cash proceeds received by the transferor, and, in the case of
a revolving receivables sales facility, the cash proceeds received by the
seller representing incremental new funding in excess of any previous level of
funding made available under such facility, net of repayments of Debt or
repurchases under, or proceeds otherwise required to refinance, any previous
receivables sales facility.
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"Reference Bank" means any Eurodollar Reference Bank.
"Refunded" shall have the meaning ascribed thereto in the definition of
the term "Senior Debt".
"Refunding Borrowing" means a Borrowing which, after application of the
proceeds of such Borrowing, results in no net increase in the Dollar Equivalent
of the aggregate outstanding principal amount of the Loans made by any Bank.
"Reimbursement Amount" shall have the meaning ascribed thereto in
Section 3.3(e).
"Request for a New Alternate Currency Facility" shall have the meaning
ascribed thereto in Section 3.6(b).
"Request for Letter of Credit Issuance" shall have the meaning ascribed
thereto in Section 3.3(b).
"Required Banks" means Banks having not less than 51% of the aggregate
amount of the Commitments or, if the Commitments have terminated, Banks holding
Notes evidencing not less than 51% of the aggregate unpaid principal amount of
the Loans.
"Restricted Payment" means, without duplication, (i) any dividend or
other distribution on account of any Equity Interest of MascoTech now or
hereafter outstanding, (ii) any redemption, retirement, purchase or other
acquisition for value of any Equity Interests of MascoTech now or hereafter
outstanding, (iii) any redemption, purchase, retirement, defeasance, prepayment
or other acquisition for value, direct or indirect, of any Subordinated Debt or
any trust convertible debt securities or similar securities to the extent such
securities are not treated as debt of MascoTech in accordance with generally
accepted accounting principles, in each case prior to the stated maturity
thereof or (iv) an amendment or modification of any term or provision of any
instrument or agreement relating to any Subordinated Debt such that it would
not constitute Subordinated Debt as defined in this Agreement or would mature
or any principal payment thereunder would be due prior to the Termination Date,
but in the case of any of the foregoing shall exclude issuances of, or
purchases of, Equity Interests, or the payment of dividends, in connection with
employee stock option, employee stock award or any related benefit plans.
"Revolving Credit Commitment" means, with respect to each Bank whose
commitment has not been terminated pursuant to Section 11.13, the commitment of
such Bank to make Revolving Loans pursuant to Section 3.1, to participate in
the risk of Letters of Credit pursuant to Section 3.3 and to participate in the
risk of the Swing Line Loans pursuant to Section 3.5 and Alternate Currency
Loans pursuant to Section 3.6 in an aggregate principal amount the Dollar
Equivalent of which does not exceed (a) in the case of each Bank originally a
party hereto, the amount set forth opposite the name of such Bank on the
signature pages hereof, and (b) in the case of each Bank becoming a party
hereto in accordance with Section 11.6(d) or 11.13, the aggregate amount
assigned to it, in each case (i) less the aggregate amount, if any,
subsequently assigned by it in accordance with Section 11.6(d), (ii) plus the
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aggregate amount, if any, subsequently assigned to it under Section 11.6(d)
or 11.13 and (iii) subject to activation pursuant to Section 3.1, and as such
amount may be reduced from time to time pursuant to Section 3.10.
"Revolving Credit Commitment Percentage" means, with respect to any
Bank, the percent of the aggregate amount of all the Revolving Credit
Commitments represented by the amount of such Bank's Revolving Credit
Commitment.
"Revolving Loan" means any Loan made pursuant to Section 3.1.
"Revolving Note" means a promissory note of any Borrower substantially
in the form of Exhibit A-1 hereto evidencing the obligation of such Borrower to
repay Revolving Loans, as amended or modified from time to time and together
with any promissory note or notes issued in exchange or replacement therefor.
"S&P" means Standard & Poor's Ratings Group 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.
"Scheduled Expiration Date" means November 15, 2003.
"Securities Purchase Agreement" means the Amended and Restated
Securities Purchase Agreement dated as of November 23, 1993, as amended by that
certain Amendment No. 1 to Amended and Restated Securities Purchase Agreement
made as of October 31, 1996, between MascoTech and Masco Corporation, as in
effect on the Closing Date in the form attached hereto as Exhibit J, and as
heretofore or hereafter amended, supplemented or otherwise modified from time
to time. Nothing in this Agreement shall prohibit MascoTech 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, and, provided,
that MascoTech delivers a copy of any such amendment to the Administrative
Agent within 30 days of the date of such amendment.
"Securitization Amount" means, as of any date, the aggregate amount of
proceeds received by MascoTech or any of its Consolidated Subsidiaries, as the
transferor, with respect to any Receivables Sale at such date to the extent the
related transferee is entitled at such time to the recovery of such amount out
of the proceeds of the assets transferred pursuant thereto.
"Senior Debt" means all Debt of MascoTech and its Consolidated
Subsidiaries, determined on a consolidated basis, except Subordinated Debt,
provided that, for purposes of this definition, if any Debt ("Existing Debt")
is to be Refunded (as hereinafter defined) with the proceeds of other money
borrowed ("New Debt"), the Existing Debt to be so Refunded shall be excluded
from Senior Debt when the New Debt is incurred. For purposes of this
definition, Existing Debt is to be "Refunded" by New Debt if, and to the extent
that, (i) no later than five (5) Business Days after the New Debt is
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incurred, MascoTech delivers to the Administrative Agent written notice
stating that the purpose of such New Debt is to refund Existing Debt and
specifying the Existing Debt to be refunded, (ii) the proceeds of such New Debt
are held in the form of Cash and Cash Equivalents (free of any Lien except a
Lien securing the specified Existing Debt to be refunded and no other
indebtedness or obligations) until such specified Existing Debt is repaid and
(iii) such specified Existing Debt is repaid within 45 (forty-five) days after
the New Debt is incurred.
"Senior Debt Coverage Ratio" means, at any time from and including the
last day of any fiscal quarter of MascoTech to but excluding the last day of
the following fiscal quarter of MascoTech, the ratio of (a) Senior Debt as of
the end of such fiscal quarter to (b) EBITDA for the immediately preceding four
fiscal quarters.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of MascoTech as defined in Rule 1-02 of Regulation S-X under the
Securities Exchange Act of 1934, except that during fiscal year 1998, TriMas
Corporation shall be treated as if it were a Subsidiary of MascoTech as of
December 31, 1997, determined on a pro forma basis.
"Subordinated Debt" means, without duplication, (a) all Debt now
outstanding or hereafter created, issued, guaranteed, incurred or assumed by
any of the Borrowers which is subordinated to payment of principal, premium, if
any, and interest on the Notes by provisions not less favorable in any material
respect to the holders of the Notes than the provisions set forth on Exhibit O;
(b) Debt evidenced by MascoTech's 4-1/2% Convertible Subordinated Debentures
due 2003, in the original principal amount of $345,000,000 and (c) Debt
hereafter issued pursuant to the Securities Purchase Agreement; provided,
however, that any of such Debt shall cease to be "Subordinated Debt" upon and
to the extent of the Borrowers' repurchase or redemption of such Debt as
permitted hereunder or the Borrowers' transfer, conveyance, assignment or
delivery to any trustee, paying agent or other fiduciary for the benefit of the
holder(s) of such Debt of any cash, securities or other assets of the
Borrowers in payment or on account of, or as provision for, the principal of
such Debt; provided further, however, that any of such Debt referred to in
clauses (b) and (c) of this definition shall cease to be "Subordinated Debt"
upon any amendment or other modification to the Debentures referred to in such
clause (b) or any instrument issued pursuant to the Securities Purchase
Agreement referred to in clause (c) evidencing such Debt, relating to the
subordination thereof, unless, in any such case, the provisions of such
Debentures after giving effect to such amendment or modification are not less
favorable in any material respect to the holders of the Notes than the
provisions set forth on Exhibit O.
"Subsidiary" of any Person means (a) any limited partnership (whether
now existing or hereafter organized) of which such Person or another Subsidiary
of such Person is the general partner, (b) any general partnership or limited
liability company (whether now existing or hereafter organized) of which such
Person or one or more of the other Subsidiaries of such Person own at least a
majority of the ownership or membership interests and (c) any corporation
(whether now existing or hereafter organized or acquired) in which (other than
directors' qualifying shares required by law) at least a majority of the
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency), at the time as of which
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any determination is being made, is owned, beneficially and of record, by such
Person or by one or more of the other Subsidiaries of such Person or by any
combination thereof. Unless the context otherwise requires, references to
"Subsidiary" or "Subsidiaries" herein refer to MascoTech's Subsidiaries.
"Substitute Loan" means any Loan made by a Bank pursuant to Section
5.4.
"Swing Line Bank" means The First National Bank of Chicago.
"Swing Line Borrowing" means any Borrowing consisting of a Swing Line
Loan.
"Swing Line Commitment" means the obligation of the Swing Line Bank to
make Swing Line Loans up to a maximum principal amount of $25,000,000 at any
one time outstanding.
"Swing Line Loan" means a loan made available to any of the Borrowers
by the Swing Line Bank pursuant to Section 3.5.
"Swing Line Loan Note" means a Note in substantially the form of
Exhibit B-2 hereto duly executed by the applicable Borrowers and payable to the
order of the Swing Line Bank in the amount of the Swing Line Commitment.
"Syndicated Loan" means any Revolving Loan or Term Loan.
"Syndicated Revolving Credit Borrowing" means any Borrowing consisting
of a Revolving Loan made to a Borrower on a syndicated basis.
"Syndication Period" shall have the meaning ascribed thereto in the
definition of the term "Interest Period".
"Synthetic Lease Agreement" shall have the meaning ascribed thereto in
the definition of the term "Synthetic Lease Amount".
"Synthetic Lease Amount" means, as of any date, 85% of the aggregate
fair market value of all real property subject to an agreement (a "Synthetic
Lease Agreement") for the use or possession of such real property by MascoTech
or any of its Consolidated Subsidiaries in effect at such date creating
obligations which do not appear on the balance sheet of any such Person but
which, upon the insolvency of such Person, would be characterized as Debt of
such Person (without regard to accounting treatment). For purposes of this
definition, the fair market value of each real property subject to a Synthetic
Lease Agreement shall be determined at the time of execution of such Synthetic
Lease Agreement.
"Term Loan" means a Loan made pursuant to Section 3.2(a).
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"Term Loan Commitment" means, with respect to each Bank whose
commitment has not been terminated pursuant to Section 11.13, the commitment of
such Bank to make Term Loans pursuant to Section 3.2, in an aggregate principal
amount which does not exceed, (a) in the case of each Bank originally a party
hereto, the amount set forth opposite the name of such Bank on the signature
pages hereof, and (b) in the case of each Bank becoming a party hereto in
accordance with Section 11.6(d) or 11.13, the aggregate amount assigned to it,
in each case (i) less the aggregate amount, if any, subsequently assigned by it
in accordance with Section 11.6(d) and (ii) plus the aggregate amount, if any,
subsequently assigned to it under Section 11.6(d) or 11.13.
"Term Note" means a promissory note, in substantially the form of
Exhibit A-2 hereto, duly executed by a Borrower and payable to the order of
Bank in the amount of its Term Loan Commitment, including any amendment,
restatement modification, renewal or replacement of such Term Note.
"Termination Date" means the earlier to occur of (a) the Scheduled
Expiration Date and (b) the date on which the Commitments shall be terminated
pursuant to Section 3.11 or 9.1.
"Type" means, with respect to any Loan, its nature as a Floating Rate
Loan or Eurodollar Rate Loan.
"Unfunded Benefit Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of
all Plan assets allocable to such benefits (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a Borrower or any ERISA Affiliate to the PBGC or any other Person
under Title IV of ERISA.
1.2 Accounting Terms. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required
to be delivered hereunder shall be prepared in accordance with generally
accepted accounting principles as in effect from time to time, on a basis
consistent, to the extent required by such principles, with the most recent
audited consolidated financial statements of MascoTech and its Consolidated
Subsidiaries filed with the Securities and Exchange Commission on Form 10-K and
delivered to the Banks prior to the Closing Date; provided that, if MascoTech
notifies the Administrative Agent that the Borrowers wish to amend any covenant
in Article VII to eliminate the effect of any change in generally accepted
accounting principles in the operation of such covenant (or if the
Administrative Agent notifies the Borrowers that the Required Banks wish to
amend Article VII for such purpose), then the Borrowers' compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrowers
and the Required Banks. Without limiting the foregoing, all transfers of
receivables shall be recognized as sales, and not as Debts or Liens, if they
would be recognized as sales in accordance with generally accepted accounting
principles, provided
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that all probable adjustments in connection with the recourse provisions are
accrued, all as more specifically described in Statement of Financial
Accounting Standards No. 125.
1.3 Other Definitions; Rules of Construction. As used herein, the
terms "Acquisition", "Administrative Agent", "Agents", "Bank", "Banks",
"Borrowers", "MascoTech", "Syndication Agents", "Target" and "this Agreement"
shall have the respective meanings ascribed thereto in the introductory
paragraph of this Agreement. Use of the terms "herein", "hereof" and
"hereunder" shall be deemed references to this Agreement in its entirety and
not solely to the Section or clause in which such term appears. Unless
otherwise specified herein, references to "Sections" and "subsections" shall be
to Sections and subsections, respectively, of this Agreement.
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.
ARTICLE II.
TERMINATION OF EXISTING CREDIT AGREEMENT
Termination. The Borrowers and the Banks acknowledge and agree that,
effective as of the initial Borrowing pursuant to Section 8.2(b), the Existing
Commitment of each Existing Bank shall hereby be terminated. Each Existing
Bank that is a party hereto shall cancel all Existing Notes (other than notes
evidencing Existing Bid-Option Loans that the holder thereof has agreed may
remain outstanding past the Closing Date) held by it and return them to
MascoTech promptly after all amounts payable thereunder have been paid in full.
Notwithstanding the foregoing, MascoTech and each of the Banks acknowledge and
agree that each Existing Bid-Option Loan made by any of the Banks which has
agreed that such Loan may remain outstanding past the Closing Date shall
continue with its existing principal amount, interest rate and Interest Period,
except that each such Existing Bid-Option Loan shall be deemed a Bid-Option
Loan under this Agreement and shall be governed by the provisions of this
Agreement.
ARTICLE III.
THE LOANS AND LETTER OF CREDIT ISSUANCES
3.1 Revolving Loans. Each Bank agrees, for itself only, subject to
the terms and conditions set forth in this Agreement, to make Revolving Loans
in Dollars to any Borrower from time to time from the Closing Date to but
excluding the Termination Date; provided that the aggregate outstanding
principal amount of such Bank's Revolving Loans shall not at any time exceed
the excess of (a) the amount of its Revolving Credit Commitment, over (b) the
sum of (i) its Revolving Credit
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Commitment Percentage of the Letter of Credit Obligations Amount plus
(ii) its Revolving Credit Commitment Percentage of the aggregate outstanding
principal balance of the Swing Line Loans plus (iii) its Revolving Credit
Commitment Percentage of the Dollar Equivalent of the aggregate outstanding
principal amount of all Bid-Option Loans made by the Banks (using for purposes
of such determination, in the case of any Alternate Currency Loans, the Dollar
Equivalent as determined on the last Business Day of the month then most
recently ended); provided, however, that at no time shall the aggregate
outstanding principal balance of the Revolving Loans, Swing Line Loans,
Alternate Currency Loans, Bid-Option Loans and Letter of Credit Obligations
exceed $800,000,000. Each Eurodollar Borrowing shall be in an aggregate
principal amount of $10,000,000 or any larger multiple of $5,000,000 and each
Floating Rate Borrowing shall be in an aggregate principal amount of $5,000,000
or any larger multiple of $5,000,000; provided that any such Borrowing may be
in the aggregate amount of the unused Revolving Credit Commitments. Each such
Borrowing shall be made by the several Banks ratably in accordance with their
respective Revolving Credit Commitment Percentages. Within the foregoing
limits, each Borrower may borrow Revolving Loans under this Section 3.1, repay
such Revolving Loans, prepay such Loans to the extent permitted or required by
this Agreement and reborrow under this Section 3.1. Default by any Bank with
respect to its obligations hereunder shall not excuse any non-performance by
any other Bank, provided that no Bank shall be liable for the non-performance
by any other Bank of its obligations hereunder.
3.2 Term Loans.
Subject to the terms and conditions set forth in this Agreement,
each Bank on the Closing Date severally and not jointly agrees to make
a term loan, in Dollars, to one or more of the Borrowers in an aggregate amount
not to exceed such Bank's Term Loan Commitment (each individually, a "Term
Loan" and, collectively, the "Term Loans"). All Term Loans shall be made by
the Banks on the Closing Date simultaneously and pro rata, it being understood
that no Bank shall be responsible for any failure by any other Bank to perform
its obligation to make any Term Loan hereunder nor shall the Term Loan
Commitment of any Bank be increased or decreased as a result of any such
failure.
3.3 Letters of Credit.
(a) Subject to the terms and conditions set forth in this
Agreement, the Administrative Agent agrees to issue for the account of and
upon the application of any of the Borrowers, and each Bank further agrees for
itself only to participate in the risk of, Letters of Credit from time to time
from the Closing Date to but excluding the Termination Date; provided that the
Letter of Credit Obligations Amount shall not at any time exceed the lesser of
(i) $150,000,000 and (ii) the excess of (A) the aggregate amount of the
Revolving Credit Commitments over (B) the aggregate outstanding principal
amount of the Revolving Loans plus the outstanding principal amount of the
Swing Line Loans plus the outstanding principal balance of the Bid-Option Loans
plus the aggregate outstanding principal amount of the Alternate Currency
Syndicated Loans. No Letter of Credit shall have a stated expiry date earlier
than 30 days after the date of its issuance, and no Letter of Credit shall have
a stated expiry date or, if by its terms it is periodically renewable, be
subject to being terminated by the Administrative Agent (unless renewal is
permitted by the Administrative Agent in its sole discretion, in which case the
Administrative Agent will not permit renewal to a date beyond that
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determined in accordance with the following portion of this sentence),
later than the earlier of (i) the one year anniversary of its issuance (or, if
renewable and renewal has been permitted, the one year anniversary of its last
renewal) and (ii) the fifth Business Day before the Scheduled Expiration Date.
Each Letter of Credit shall be in a minimum amount of $1,000,000 or as
otherwise agreed to by the Administrative Agent. Subject to the terms and
conditions set forth in this Agreement, the Administrative Agent shall, on the
date any Letter of Credit is requested to be issued, issue the related Letter
of Credit for the pro rata risk of the Banks. Notwithstanding anything herein
to the contrary, the Administrative Agent may decline to issue any Letter of
Credit if the beneficiary or the conditions of drawing are reasonably
unacceptable to the Administrative Agent, or if the purpose of issuance is
illegal or is in contravention of any law, rule, regulation or public policy or
any judgment, decree, writ, injunction, order or award of any arbitrator, court
or governmental authority.
(b) The applicable Borrower shall give the Administrative Agent
written notice in substantially the form attached hereto as Exhibit D (a
"Request for Letter of Credit Issuance") not later than 10:00 a.m. (Detroit
time) on the fifth Business Day before each requested Letter of Credit Issuance
or such later time as is acceptable to the Administrative Agent.
(c) The applicable Borrower agrees (i) to pay to the
Administrative Agent for the account of the Banks a fee computed at the per
annum rate equal to the Applicable Margin for Letters of Credit based on the
maximum amount available to be drawn from time to time under the related Letter
of Credit for the period from and including the date of such Letter of Credit
Issuance to but excluding the stated expiry date of such Letter of Credit, and
(ii) to pay an additional fee to the Administrative Agent for its own account
computed at the rate of one-eighth of one percent (1/8 of 1%) per annum of such
maximum amount for such period, such fees with respect to any Letter of Credit
to be paid quarterly in arrears, in each case with respect to each calendar
quarter or portion thereof not later than the tenth day after the end of each
March, June, September and December, commencing with the first such calendar
quarter-end after the Closing Date, and on the Termination Date, based upon the
Applicable Margin for Letters of Credit in effect from time to time during such
period. The applicable Borrower further agrees to pay to the Administrative
Agent, on demand, such other customary administrative fees, charges and expenses
of the Administrative Agent in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such Letter of
Credit is issued.
(d) Nothing in this Agreement shall be construed to require or
authorize any Bank to issue any Letter of Credit, it being recognized that the
Administrative Agent has the sole obligation under this Agreement to issue
Letters of Credit for the risk of the Banks. Upon each Letter of Credit
Issuance, each Bank shall automatically acquire a pro rata risk participation
interest in the related Letter of Credit based on its respective Revolving
Credit Commitment Percentage. If the Administrative Agent shall honor a draft
or other demand for payment presented or made under any Letter of Credit, the
Administrative Agent shall provide notice thereof to each Bank on the date such
draft or demand is honored unless the applicable Borrower shall have satisfied
its reimbursement obligation under subsection (e) of this Section 3.3 by payment
to the Administrative Agent on such date. Each Bank,
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on such date, shall make an amount equal to its Revolving Credit
Commitment Percentage of the amount paid by the Administrative Agent available
in immediately available funds at the principal office of the Administrative
Agent for the account of the Administrative Agent. If and to the extent such
Bank shall not have made such amount available to the Administrative Agent,
such Bank and the applicable Borrower severally agree to pay to the
Administrative Agent forthwith on demand such amount, together with interest
thereon for each day from the date such amount was paid by the Administrative
Agent until such amount is so made available to the Administrative Agent at (i)
in the case of such Bank, the Federal Funds Rate and (ii) in the case of the
applicable Borrower, the per annum rate equal to the interest rate applicable
during such period to the related Borrowing deemed (or that could have been
deemed) disbursed under subsection (e) of this Section 3.3 in respect of the
reimbursement obligation of the applicable Borrower. If such Bank shall pay
such amount to the Administrative Agent together with such interest, if any,
accrued, such amount so paid shall constitute a Revolving Loan by such Bank as
part of the Borrowing disbursed in respect of the reimbursement obligation of
the applicable Borrower under subsection (e) of this Section 3.3 for purposes
of this Agreement. The failure of any Bank to make an amount equal to its
Revolving Credit Commitment Percentage of any such amount paid by the
Administrative Agent available to the Administrative Agent shall not relieve
any other Bank of its obligation to make available an amount equal to such
other Bank's Revolving Credit Commitment Percentage of such amount, but no Bank
shall be responsible for failure of any other Bank to make its share available
to the Administrative Agent.
(e)(i) Whether a Letter of Credit was issued for the account of
any Borrower or any Consolidated Subsidiary of such Borrower, and without
limiting the reimbursement obligation of such other Consolidated Subsidiary,
such Borrower agrees to pay to the Administrative Agent, not later than
3:00 p.m. (Detroit time) on the date on which the Administrative Agent
shall honor a draft or other demand for payment presented or made under such
Letter of Credit, an amount equal to the amount paid by the Administrative
Agent in respect of such draft or other demand under such Letter of Credit and
all expenses paid or incurred by the Administrative Agent relative thereto (the
"Reimbursement Amount"). The Administrative Agent shall, on the date of each
demand for payment under any Letter of Credit, give such Borrower notice
thereof and of the amount of such Borrower's reimbursement obligation and
liability for expenses relative thereto; provided that the failure of the
Administrative Agent to give such notice shall not affect the reimbursement and
other obligations of such Borrower under this Section 3.3. Unless such
Borrower shall have made such payment to the Administrative Agent on such day,
upon each such payment by the Administrative Agent, such Borrower shall be
deemed to have elected to satisfy its reimbursement obligation by a Floating
Rate Borrowing of a Revolving Loan in an amount equal to the amount so paid by
the Administrative Agent in respect of such draft or other demand under such
Letter of Credit, and the Administrative Agent shall be deemed to have
disbursed to such Borrower, for the account of the Banks, the Revolving Loans
comprising such Floating Rate Borrowing, and each Bank shall make its share of
each such Floating Rate Borrowing available to the Administrative Agent in
accordance with Section 3.7(d). Such Revolving Loans shall be deemed disbursed
notwithstanding any failure to satisfy any conditions for disbursement of any
Loan set forth in Article VIII and, to the extent of the Revolving Loans so
disbursed, the reimbursement obligation of such Borrower under this subsection
(e)(i) shall be deemed satisfied.
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(ii) If, for any reason (including without limitation as a
result of the occurrence of an Event of Default with respect to any of the
Borrowers pursuant to Section 9.1(f) or (g)), Revolving Loans may not be made by
the Banks as described in Section 3.3(e)(i), then (A) such Borrower agrees that
each Reimbursement Amount not paid pursuant to the first sentence of Section
3.3(e)(i) shall bear interest, payable on demand by the Administrative Agent, at
the interest rate then applicable to Revolving Loans, and (B) effective on the
date each such Revolving Loans would otherwise have been made, each Bank
severally agrees that it shall unconditionally and irrevocably, without regard
to the occurrence of any Default, to the extent of such Bank's Revolving Credit
Commitment Percentage, purchase a participating interest in each Reimbursement
Amount. Each Bank will immediately transfer to the Administrative Agent, in
same day funds, the amount of its participation. Each Bank shall share on a pro
rata basis (calculated by reference to its Revolving Credit Commitment
Percentage) in any interest which accrues thereon and in all repayments
thereof. If and to the extent that any Bank shall not have so made the
amount of such participating interest available to the Administrative Agent,
such Bank agrees to pay to the Administrative Agent forthwith on demand such
amount together with interest thereon, for each day from the date of demand by
the Administrative Agent until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate.
(f) The reimbursement obligation of the Borrowers under this
Section 3.3 with respect to each Letter of Credit shall be absolute,
unconditional and irrevocable and shall remain in full force and effect until
all such obligations of the Borrowers to the Banks and the Administrative Agent
with respect to such Letter of Credit shall have been satisfied, and such
obligations of the Borrowers shall not be affected, modified or impaired upon
the happening of any event, including without limitation, any of the following,
whether or not with notice to, or the consent of, the Borrowers:
(i) Any lack of validity or enforceability of any Letter of
Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of
Credit Documents");
(ii) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest
in collateral or security, with respect to any of the Letter of Credit
Documents;
(iii) The existence of any claim, setoff, defense or other right
which the Borrowers may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), the
Administrative Agent or any Bank or any other Person, whether in
connection with any of the Letter of Credit Documents, the transactions
contemplated herein or therein or any unrelated transactions;
(iv) Any draft or other statement or document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(v) Payment by the Administrative Agent to the beneficiary under
any Letter of Credit against presentation of documents which do not
comply with the terms of the Letter of Credit, including failure
of any documents to bear any reference or adequate reference to such
Letter of Credit;
(vi) Any failure, omission, delay or lack on the part of the
Administrative Agent or any Bank or any party to any of the Letter of
Credit Documents to enforce, assert or exercise any right, power or
remedy conferred upon the Administrative Agent, any Bank or any
such party; or
(vii) Any other event or circumstance that would, in the absence
of this clause, result in the release or discharge by operation of law
or otherwise of the Borrowers from the performance or observance of any
obligation, covenant or agreement contained in this Section 3.3.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Borrowers have or may have against the
beneficiary of any Letter of Credit shall be available hereunder to the
Borrowers against the Administrative Agent or any Bank. Nothing in this
Section 3.3 shall limit the liability, if any, of the Administrative Agent to
the Borrowers pursuant to Section 11.5(c).
3.4 Bid-Option Borrowings.
(a) The Bid-Option. In addition to Syndicated Borrowings that
are made pursuant to Sections 3.1 and 3.2, so long as the most recently
determined Senior Debt Coverage Ratio is less than 3.0 to 1.0 (except as
provided in Article II with respect to Existing Bid-Option Loans), the
Borrowers 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 any one or more of the Borrowers. 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 such
limitation shall not be less than the minimum amounts required hereunder for
Bid-Option Loans and the applicable Borrower may choose among the Bid-Option
Loans if such limitation is imposed. The applicable Borrower 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 (using for purposes of such determination,
in the case of any Alternate Currency Loans, the Dollar Equivalent determined
on the last Business Day of the month then most recently ended) shall not, at
any time exceed the lesser of (i) the excess of (A) the aggregate amount of the
Revolving Credit Commitments over (B) the sum of the aggregate outstanding
principal amount of Revolving Loans plus the Letter of Credit Obligations
Amount plus the outstanding principal balance of the Swing Line Loans plus the
outstanding principal balance of the Alternate Currency Syndicated Loans, or
(ii) fifty percent (50%) of the sum of the aggregate amount of the Revolving
Credit Commitments and the aggregate principal amount of the Term Loans (as the
same may be reduced in accordance with the terms of this
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Agreement during any applicable Bid-Option Interest Period); and
provided, further, that the Dollar Equivalent of the aggregate outstanding
principal amount of Alternate Currency Bid-Option Loans shall not exceed
$200,000,000 (when taken together with the Alternate Currency Syndicated
Loans).
(b) Bid-Option Quote Requests. When the applicable Borrower
wishes to request offers to make Bid-Option Loans under this Section, it shall
transmit to the Administrative Agent by telex or telecopy a request
substantially in the form attached hereto as Exhibit E (a "Bid-Option Quote
Request") so as to be received no later than 10:00 a.m. (Detroit time) on (i)
the Business Day next preceding the date of the Borrowing proposed therein, in
the case of a Bid-Option Auction for Absolute Rate Dollar Bid-Option Loans, (ii)
the fifth Business Day next preceding the date of the Borrowing in the case of a
Bid-Option Auction for Eurodollar Rate Bid-Option Loans, or (iii) the fifth
Business Day prior to the date of Borrowing proposed therein, in the case of a
Bid-Option Auction for Alternate Currency Bid-Option Loans, specifying:
(A) the proposed date of the Borrowing, which shall
be a Business Day;
(B) whether the Borrowing is to be an Absolute Rate
Dollar Bid-Option Borrowing, a Eurodollar Rate Bid-Option
Borrowing or an Alternate Currency Bid-Option Borrowing
and, if an Alternate Currency Bid-Option Borrowing, the
desired Alternate Currency;
(C) the aggregate amount of such Borrowing, which shall
be (A) $25,000,000 or a larger multiple of $5,000,000,
in the case of a Dollar Bid-Option Borrowing, or (B) not
less than the Dollar Equivalent of $5,000,000, in the case
of a Alternate Currency Bid-Option Borrowing; and
(D) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
the applicable Interest Period.
The Borrowers may request offers to make Bid-Option Loans for more than one
Interest Period in a single Bid-Option Quote Request. The Borrowers may not
request offers to make Bid-Option Loans in more than one currency in any Bid-
Option Quote Request and may not make more than five Bid-Option Borrowings
during any month without the consent of the Administrative Agent.
(c) Invitation for Bid-Option Quotes. Promptly upon receipt of
a Bid-Option Quote Request, the Administrative Agent shall send to the Banks by
telex or telecopy (or telephone promptly confirmed by telex or telecopy) an
Invitation for Bid-Option Quotes substantially in the form attached hereto as
Exhibit F, which shall constitute an invitation by the applicable Borrower to
each
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Bank to submit Bid-Option Quotes offering to make the Bid-Option Loans to which
such Bid-Option Quote Request relates in accordance with this Section.
(d) Submission and Contents of Bid-Option Quotes. (i) Each Bank
may submit a Bid-Option Quote containing an offer or offers to make Bid-Option
Loans in response to any Invitation for Bid-Option Quotes. Each Bid-Option
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telex or telecopy (or by telephone
promptly confirmed by telex or telecopy) not later than (A) 9:00 a.m. (Detroit
time) on the proposed date of the Borrowing, in the case of a Bid-Option Auction
for Absolute Rate Dollar Bid-Option Loans, (B) 10:00 a.m. (Detroit time) on the
fourth Business Day prior to the proposed date of the Borrowing, in the case of
a Bid-Option Auction for Eurodollar Rate Bid-Option Loans, or (C) 2:00 p.m.
(Detroit time) on the third Business Day prior to the proposed date of the
Borrowing, in the case of a Bid-Option Auction for Alternate Currency Bid-Option
Loans; provided that Bid-Option Quotes submitted by the Administrative Agent (or
any Affiliate of the Administrative Agent) in its capacity as a Bank may be
submitted, and may only be submitted, if the Administrative Agent or such
Affiliate notifies the applicable Borrower of the terms of the offer or offers
contained therein not later than (A) 8:45 a.m. (Detroit time) on the proposed
date of the Borrowing, in the case of a Bid-Option Auction for Absolute Rate
Dollar Bid-Option Loans, (B) 9:45 a.m. (Detroit time) on the fourth Business Day
prior to the proposed date of the Borrowing, in the case of a Bid-Option Auction
for Eurodollar Rate Bid-Option Loans, or (C) 1:00 p.m. (Detroit time) on the
third Business Day prior to the proposed date of the Borrowing in the case of a
Bid-Option Auction for Alternate Currency Bid-Option Loans. Subject to Section
3.4(e), Article VIII and Article IX, any Bid-Option Quote so made shall be
irrevocable except with the written consent of the Administrative Agent given on
the instructions of the applicable Borrower.
(ii) Each Bid-Option Quote shall be in substantially the
form attached hereto as Exhibit G and shall in any case specify:
(A) the proposed date of the Borrowing;
(B) whether the Bid-Option Loans for which the offers
are made are Absolute Rate Dollar Bid-Option Loans,
Eurodollar Rate Bid-Option Loans or Alternate Currency
Bid-Option Loans, which must match the type of Borrowing
stated in the related Invitation for Bid-Option Quotes;
(C) the principal amount of the Bid-Option Loan for
which each such offer is being made, the Dollar Equivalent
of which (1) may, together with the Dollar Equivalent of
the aggregate outstanding principal amount of all
other Loans made by the quoting Bank, exceed the amount of
the Commitment of the quoting
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Bank, (2) must be (y) in the case of any Dollar Bid-
Option Loan, $5,000,000 or a larger multiple thereof,
or (z) in the case of any Alternate Currency Bid-Option
Loan, not less than $1,000,000, and (3) may not
exceed the Dollar Equivalent of the aggregate principal
amount of the Bid-Option Borrowing specified in the
related Invitation for Bid-Option Quotes;
(D) in the case of a Bid-Option Auction for
Absolute Rate Dollar Bid-Option Loans or Alternate
Currency Bid-Option Loans, the rate of interest per annum
(the "Bid-Option Absolute Rate") offered for each such
Bid-Option Loan;
(E) in the case of a Bid-Option Auction for Eurodollar
Rate Bid-Option Loans, the applicable margin, which
may be positive or negative (the "Bid-Option Eurodollar
Rate Margin"), expressed as a percentage, offered for each
such Bid-Option Loan;
(F) the Interest Period(s) for which each such Bid-
Option Absolute Rate or Bid-Option Eurodollar Rate Margin,
as the case may be, is offered; and
(G) the identity of the quoting Bank.
(iii) Any Bid-Option Quote shall be disregarded if it:
(A) is not substantially in the form of Exhibit G
hereto or does not specify all of the information required
by subsection (d)(ii) above;
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Bid-Option
Quotes; or
(D) arrives after the time set forth in subsection (d)(i);
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provided that a Bid-Option Quote shall not be disregarded pursuant to
clause (B) or (C) above solely because it indicates that an allocation that
might otherwise be made to it pursuant to Section 3.4(g) would be unacceptable.
(e) Notice to Borrowers. The Administrative Agent shall
promptly notify the applicable Borrower of the terms (i) of any
Bid-Option Quote submitted by a Bank that is in accordance with subsection (d)
of this Section and (ii) of any Bid-Option Quote that amends, modifies or is
otherwise inconsistent with a previous Bid-Option Quote submitted by such Bank
with respect to the same Bid-Option Quote Request. Any such subsequent
Bid-Option Quote shall be disregarded by the Administrative Agent unless such
subsequent Bid-Option Quote is submitted solely to correct a manifest error in
such former Bid-Option Quote. The Administrative Agent's notice to the
applicable Borrower shall specify (i) the Dollar Equivalent of the aggregate
principal amount of Bid-Option Loans for which offers have been received for
each Interest Period specified in the related Bid-Option Quote Request and (ii)
the respective Dollar Equivalent of the principal amounts and respective
Bid-Option Absolute Rates or Bid-Option Eurodollar Rate Margins, as the case
may be, so offered.
(f) Acceptance and Notice by Borrowers. Not later than
10:00 a.m. (Detroit time) on (i) the proposed date of the Borrowing, in the
case of a Bid-Option Auction for Absolute Rate Dollar Bid-Option Loans, (ii)
the third Business Day prior to the proposed date of the Borrowing, in the
case of a Bid-Option Auction for Eurodollar Rate Bid-Option Loans, or (iii) the
second Business Day prior to the proposed date of the Borrowing, in the
case of a Bid-Option Auction for Alternate Currency Bid-Option Loans, the
applicable Borrower shall notify the Administrative Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection (e) of
this Section 3.4. In the case of acceptance, such notice (a "Notice of
Bid-Option Borrowing") shall specify the aggregate principal amount of accepted
offers for the applicable Interest Period(s). The applicable Borrower may
accept any Bid-Option Quote in whole or in part; provided that:
(A) the Dollar Equivalent of the aggregate principal
amount of each Bid-Option Borrowing may not exceed the
applicable amount set forth in the related Bid-Option Quote
Request;
(B) the Dollar Equivalent of the aggregate principal
amount of each Bid-Option Borrowing must be (1) in the case
of Dollar Bid-Option Borrowings, $25,000,000 or a larger
multiple of $5,000,000, unless the aggregate amount of the
related Bid-Option Loans for which Bid-Option Quotes were
received is less than $25,000,000, in which case the
aggregate principal amount of the Dollar Bid-Option
Borrowing may be any amount less than $25,000,000, and (2)
in the case of Alternate Currency Bid-Option Loans, not
less than $5,000,000 (or, if less, the aggregate amount of
the
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<PAGE> 41
related Bid-Option Loans for which Bid-Option Quotes were
received);
(C) acceptance of offers may only be made on the basis
of ascending Bid-Option Absolute Rates or Bid-Option
Eurodollar Rate Margins, as the case may be; and
(D) a Borrower may not accept any offer that is
described in clause (iii) of subsection (d) of this Section
or that otherwise fails to comply with the requirements of
this Agreement.
(g) Allocation by Administrative Agent. If offers are made by
two or more Banks with the same Bid-Option Absolute Rates or Bid-Option
Eurodollar Rate Margins, as the case may be, for a greater aggregate
principal amount than the amount in respect of which offers are accepted for the
related Interest Period, the principal amount of Bid-Option Loans in respect of
which such offers are accepted shall be allocated by the Administrative Agent
among such Banks as nearly as possible (in such multiples, not greater than the
Dollar Equivalent of $500,000, as the Administrative Agent may deem
appropriate) in proportion to the aggregate principal amount of such offers
(excluding any Bank that has indicated in its offer that an allocation which
otherwise would be made to it is unacceptable). Determinations by the
Administrative Agent of the amounts of Bid-Option Loans shall be conclusive in
the absence of manifest error.
3.5 Swing Line Loans. (a) Amount of Swing Line Loans. Upon the
satisfaction of the conditions precedent set forth in Sections 8.1 8.2 and 8.3,
from and including the date of this Agreement and prior to the Termination
Date, the Swing Line Bank agrees, on the terms and conditions set forth in this
Agreement, to make Swing Line Loans in Dollars to the Borrowers from time to
time in an amount not to exceed the lesser of (i) $25,000,000 (minus the
outstanding principal balance of all Swing Line Loans then outstanding) or (ii)
an amount equal to the aggregate amount of the Revolving Credit Commitments
minus the outstanding principal balance of the Revolving Loans minus the Letter
of Credit Obligations Amount minus the outstanding principal balance of the
Bid-Option Loans minus the outstanding principal balance of all Swing Line
Loans at such time minus the outstanding principal balance of the Alternate
Currency Syndicated Loans at such time, in each case after giving effect to the
application of the proceeds of any Swing Line Loans made at such time (using
for purposes of such determination, in the case of any Alternate Currency
Loans, the Dollar Equivalent determined on the last Business Day of the month
then most recently ended). Each Swing Line Loan shall be in a minimum amount
of not less than $1,000,000 (or such lesser amount as may be agreed to by the
Swing Line Bank) or an integral multiple of $1,000,000 (or such lesser amount
as may be agreed to by the Swing Line Bank) in excess thereof, and all interest
payable on the Swing Line Loans shall be payable to the Swing Line Bank for its
account.
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(b) Borrowing Notice. The applicable Borrower shall deliver to
the Administrative Agent and the Swing Line Bank a Borrowing Notice
in substantially the form attached hereto as Exhibit C-2 ("Notice of Swing Line
Borrowing") signed by it not later than 2:00 p.m. (Detroit time) (or such
later time as shall be agreed upon between such Borrower and the Swing Line
Bank) on the Borrowing Date of each Swing Line Loan specifying (i) the
applicable Borrowing Date (which shall be a Business Day) and (ii) the aggregate
amount of the requested Swing Line Loan. The Swing Line Loans shall at all
times be at rates agreed to between the applicable Borrower and the Swing Line
Bank.
(c) Repayment of Swing Line Loans. The Swing Line Loans shall be
evidenced by the Swing Line Loan Notes and each Swing Line Loan shall be paid in
full on or before the sixth Business Day after the Borrowing Date for such Swing
Line Loan (or such longer period as may be agreed to by the Swing Line Bank).
Outstanding Swing Line Loans may be repaid from the proceeds of Revolving Loans
or Swing Line Loans. Any repayment of a Swing Line Loan shall be accompanied by
accrued interest thereon and shall be in the minimum amount of $1,000,000 (or
such lesser amount as may be agreed to by the Swing Line Bank) and in increments
of $1,000,000 (or such lesser amount as may be agreed to by the Swing Line Bank)
in excess thereof or the full amount of such Swing Line Loan. If the applicable
Borrower at any time fails to repay a Swing Line Loan on the applicable date
when due, the applicable Borrower shall be deemed to have elected to borrow a
Floating Rate Loan under Section 3.1 as of such date equal in amount to the
unpaid amount of such Swing Line Loan (notwithstanding the minimum amount of
Floating Rate Loans as provided in Section 3.1). The proceeds of any such Loan
shall be used to repay such Swing Line Loan. Unless the Administrative Agent
upon the request of or with the consent of the Required Banks shall have
notified the Swing Line Bank prior to making any Swing Line Loan, that the
applicable conditions precedent set forth in Article VIII have not then been
satisfied, each Bank's obligation to make Loans pursuant to Section 3.1 and to
repay such Swing Line Loan pursuant to this Section 3.5 shall be unconditional,
continuing, irrevocable and absolute and shall not be affected by any
circumstances, including the occurrence or continuance of a Default. In
the event that any Bank fails to make payment to the Administrative Agent of
any amount due under this Section 3.5(c), the Administrative Agent shall be
entitled to receive, retain and apply against such obligation the principal and
interest otherwise payable to such Bank hereunder until the Administrative
Agent receives such payment from such Bank or such obligation is otherwise
fully satisfied. In addition to the foregoing, if for any reason any Bank
fails to make payment to the Administrative Agent of any amount due under this
Section 3.5(c), such Bank shall be deemed, at the option of the Administrative
Agent, to have unconditionally and irrevocably purchased from the Swing Line
Bank, without recourse or warranty, an undivided interest in and participation
in the Swing Line Loan in the amount of the Loan such Bank was required to make
pursuant to this Section 3.5(c) and such interest and participation may be
recovered from such Bank together with interest thereon at the Federal Funds
Rate for each day during the period commencing on the date of demand by the
Administrative Agent and ending on the date such obligation is fully satisfied.
3.6 Alternate Currency Syndicated Loans.
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(a) Upon the satisfaction of the conditions precedent set forth in
Sections 8.1, 8.2 and 8.3 hereof and set forth in the applicable Alternate
Currency Addendum, from and including the later of the date of this Agreement
and the date of execution of the applicable Alternate Currency Addendum and
prior to the Termination Date (unless an earlier termination date shall be
specified in the applicable Alternate Currency Addendum), each applicable
Alternate Currency Bank agrees, on the terms and conditions set forth in this
Agreement and in the applicable Alternate Currency Addendum, to make Alternate
Currency Syndicated Loans under such Alternate Currency Addendum to the
applicable Borrower party to such Alternate Currency Addendum from time to time
in the applicable Alternate Currency, in an amount not to exceed each such
Alternate Currency Bank's applicable Alternate Currency Commitment; provided,
however, at no time shall the Dollar Equivalent of the outstanding principal
amount of the Alternate Currency Loans for all Alternate Currencies exceed
$200,000,000 other than as a result of currency fluctuations and then only to
the extent permitted in Section 4.2(h); provided, further, at no time shall the
Dollar Equivalent of the Alternate Currency Syndicated Loans for any specific
Alternate Currency exceed the maximum amount specified as the maximum amount
for such Alternate Currency in the applicable Alternate Currency Addendum other
than as a result of currency fluctuations and then only to the extent permitted
in Section 4.2(h). Each Alternate Currency Syndicated Loan under this Section
3.6 shall consist of Alternate Currency Syndicated Loans made by each
applicable Alternate Currency Bank ratably in proportion to such Alternate
Currency Bank's respective Alternate Currency Share. Subject to the terms of
this Agreement and the applicable Alternate Currency Addendum, the Borrowers
may borrow, repay and reborrow Alternate Currency Syndicated Loans at any time
prior to the Termination Date. On the Termination Date, the outstanding
principal balance of the Alternate Currency Loans shall be paid in full by the
applicable Borrower and prior to the Termination Date prepayments of the
Alternate Currency Loans shall be made by the applicable Borrower if and to the
extent required in Section 4.2.
(b) MascoTech may, by written notice to the Administrative Agent
request the establishment of additional Alternate Currency Commitments in
additional Alternate Currencies other than Pounds Sterling, Deutsche Marks and
Italian Lire, provided the Dollar Equivalent of the aggregate amount of all of
the Alternate Currency Commitments does not exceed $200,000,000 ("Request for a
New Alternate Currency Facility"). The Administrative Agent will promptly
forward to the Banks any Request for a New Alternate Currency Facility received
from MascoTech; provided each Bank shall be deemed not to have agreed to such
request unless its written consent thereto has been received by the
Administrative Agent within ten (10) Business Days from the date of such
notification by the Administrative Agent to such Bank. In the event that
sufficient Banks consent to such Request for a New Alternate Currency Facility,
upon execution of the applicable Alternate Currency Addendum and the other
documents, instruments and agreements required pursuant to this Agreement and
such Alternate Currency Addendum, the Alternate Currency Loans with respect
thereto may be made.
(c) Except as otherwise required by applicable law, in no event shall
the Alternate Currency Agent or Alternate Currency Banks have the right to
accelerate the Alternate Currency Loans outstanding under any Alternate
Currency Addendum or to terminate their commitments (if any)
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<PAGE> 44
thereunder to make Alternate Currency Loans prior to the stated termination
date in respect thereof, except that such Alternate Currency Agent and
Alternate Currency Banks shall, in each case, have such rights upon an
acceleration of the Loans and a termination of the Revolving Credit Commitments
pursuant to Article IX.
(d) Each Alternate Currency Agent shall furnish to the Administrative
Agent and the applicable Alternate Currency Banks, not less frequently than
monthly, and at any other time at the reasonable request of the Administrative
Agent, a statement setting forth the outstanding Alternate Currency Loans made
and repaid during the period since the last such report under such Alternate
Currency Addendum.
(e) Immediately and automatically upon the occurrence of an Event of
Default under Section 9.1(a), (f) or (g), each Bank shall be deemed to have
unconditionally and irrevocably purchased from each Alternate Currency Bank,
without recourse or warranty, an undivided interest in and participation in
each Alternate Currency Syndicated Loan ratably in accordance with such Bank's
Revolving Credit Commitment Percentage of the amount of such Loan, and
immediately and automatically all Alternate Currency Syndicated Loans shall be
converted to and redenominated in Dollars equal to the Dollar Equivalent of
each such Alternate Currency Loan determined as of the date of such conversion.
Each of the Banks shall pay to the applicable Alternate Currency Bank not later
than two (2) Business Days following a request for payment from such Alternate
Currency Bank, in Dollars, an amount equal to the undivided interest in and
participation in the Alternate Currency Syndicated Loan purchased by such Bank
pursuant to this Section 3.6(e). In the event that any Bank fails to make
payment to the applicable Alternate Currency Bank of any amount due under this
Section 3.6(e), the Administrative Agent shall be entitled to receive, retain
and apply against such obligation the principal and interest otherwise payable
to such Bank hereunder until the Administrative Agent receives from such Bank
an amount sufficient to discharge such Bank's payment obligation as prescribed
in this Section 3.6(e) together with interest thereon at the Federal Funds Rate
for each day during the period commencing on the date of demand by the
Administrative Agent and ending on the date such obligation is fully satisfied.
The Administrative Agent will promptly remit all payments received as provided
above to the applicable Alternate Currency Bank.
3.7 Notice to Banks; Funding of Loans.
(a) Notice of Syndicated Borrowings. The applicable Borrower
shall give the Administrative Agent or the applicable Alternate Currency
Agent, as required, written notice in substantially the form attached hereto as
Exhibit C-1 (a "Notice of Syndicated Borrowing") signed by an Authorized
Officer or person designated by an Authorized Officer not later than 12:00 noon
(Detroit time) on the Business Day of each Borrowing of a Floating Rate
Revolving Loan, not later than 11:00 a.m. (Detroit time) on the third Business
Day before each Borrowing of a Eurodollar Rate Syndicated Loan, and not later
than 11:00 a.m. (Detroit time) on the fourth Business Day before each Borrowing
of an Alternate Currency Syndicated Loan, or as specified in the applicable
Alternate Currency Addendum, specifying: (i) the date of such Borrowing, which
shall be a Business Day, (ii)
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whether such Borrowing is pursuant to a Term Loan, a Revolving Credit
Syndicated Loan or an Alternate Currency Syndicated Loan, (iii) the
aggregate amount of such Borrowing and, in the case of each Alternate Currency
Syndicated Loan, the Dollar Equivalent of such Borrowing and the currency in
which such Borrowing is denominated, (iv) whether the Loans comprising such
Borrowing are to be, in the case of Term Loans or Revolving Loans, Floating
Rate Loans or Eurodollar Rate Syndicated Loans or Alternate Currency Syndicated
Loans and (v) in the case of each Eurodollar Rate Syndicated Borrowing or
Alternate Currency Syndicated Loan, the duration of the Interest Period
applicable thereto, which shall comply with the provisions of the definition of
the applicable Interest Period.
(b) Request for Letter of Credit Issuance; Notice of Bid-Option
Borrowing; Notice of Swing Line Borrowing. The applicable Borrower shall give
the Administrative Agent or the applicable Alternate Currency Agent, as
required, written notice in conformity with the Section 3.3(b) in the case of a
Request for Letter of Credit Issuance, Section 3.4(f) in the case of a Notice of
Bid-Option Borrowing and Section 3.5(b) in the case of a Notice of Swing Line
Borrowing.
(c) Upon receipt of a Notice of Borrowing or Request for Letter
of Credit Issuance, the Administrative Agent or the Alternate Currency Agent, as
applicable, shall promptly notify each applicable Bank of the contents thereof
and of such Bank's share, if any, of such Borrowing or the related Letter of
Credit risk, as the case may be. A Notice of Borrowing or Request for Letter of
Credit Issuance shall be irrevocable by the applicable Borrower once the
Administrative Agent, or the applicable Alternate Currency Agent, begins
notifying any Bank of the contents thereof.
(d) Each Bank, not later than 1:00 p.m. (Detroit time) on the
date any Borrowing is requested to be made, other than an Alternate Currency
Borrowing or a Borrowing of a Swing Line Loan, shall make its share, if any, of
such Borrowing available to the Administrative Agent in immediately available
funds, at the Administrative Agent's address specified in or pursuant to Section
11.2, for disbursement to the applicable Borrower. Unless the Administrative
Agent determines that any applicable condition specified in Article VIII has not
been satisfied, the Administrative Agent will make funds actually so received
from the Banks available to the applicable Borrower at the Administrative
Agent's aforesaid address. Unless the Administrative Agent shall have received
notice from any Bank prior to the date such Borrowing is requested to be made
that such Bank will not make available to the Administrative Agent such Bank's
share of such Borrowing, the Administrative Agent may assume that such Bank has
made such share available to the Administrative Agent on the date such Borrowing
is requested to be made in accordance with this Section 3.7. If and to the
extent such Bank shall not have so made such share available to the
Administrative Agent, the Administrative Agent may (but shall not be obligated
to) make such amount available to the applicable Borrower, and such Bank and the
applicable Borrower severally agree to pay to the Administrative Agent forthwith
on demand such amount, together with interest thereon for each day from the date
such amount is made available to the applicable Borrower by the Administrative
Agent until the date such amount is repaid to the Administrative Agent at (i) in
the case of such Bank, the Federal Funds Rate and (ii) in the case of the
applicable Borrower, a rate per annum equal to the interest rate applicable to
such Borrowing during such period. If such Bank shall pay such amount to the
Administrative Agent together with interest, such amount so paid shall
constitute a Loan by such Bank as a part of the related
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Borrowing for purposes of this Agreement. The failure of any Bank to make its
share of any Borrowing available to the Administrative Agent shall not relieve
any other Bank of its obligation to make available to the Administrative Agent
its share, if any, of such Borrowing on the date such Borrowing is requested to
be made, but no Bank shall be responsible for failure of any other Bank to make
such share available to the Administrative Agent on the date of such Borrowing.
(e)(i) Each Bank making an Alternate Currency Bid-Option Loan
shall make its share, if any, of such Borrowing available to the
applicable Borrower not later than 11:00 a.m. (local time in the principal
financial center of the country issuing the Alternate Currency) on the date any
Alternate Currency Bid-Option Borrowing is requested to be made by depositing
the proceeds thereof in an account maintained and designated by the applicable
Borrower at an office or branch of such Bank (or of an Affiliate of such Bank)
located in the principal financial center of the country issuing the Alternate
Currency in which such Borrowing is denominated or, if neither such Bank nor
any Affiliate of such Bank has an office or branch in such financial center, at
such Bank's Eurodollar Lending Office or Domestic Lending Office as selected by
such Bank, or by such other means requested by the applicable Borrower and
acceptable to such Bank. Promptly upon any such disbursement of an Alternate
Currency Bid-Option Loan, the Bank making such Loan shall give written notice
to the Administrative Agent by telex or telecopy of the making of such Loan,
which notice shall be substantially in the form attached hereto as Exhibit H.
(ii) Subject to the procedures set forth in the applicable
Alternate Currency Addendum, each Alternate Currency Bank shall make available
its Alternate Currency Syndicated Loan or Loans, in funds immediately available
to the Alternate Currency Agent at its office designated in the Alternate
Currency Addendum for payments of such Alternate Currency in the Alternate
Currency. The Alternate Currency Agent will promptly make the funds so received
from the Alternate Currency Banks available to the applicable Borrower. Promptly
upon any such disbursement of an Alternate Currency Syndicated Loan, the
Alternate Currency Agent, shall give written notice to the Administrative Agent
by telex or telecopy of the making of such Loan, which notice shall be
substantially in the form attached hereto as Exhibit H.
(iii) If for any reason any applicable Alternate Currency Bank
fails to make payment to the applicable Alternate Currency Agent of any amount
due under Section 3.7(e)(ii) and the applicable Alternate Currency Addendum, the
applicable Alternate Currency Agent shall be entitled to receive, retain and
apply against such obligation the principal and interest otherwise payable to
such Alternate Currency Bank hereunder until the Alternate Currency Agent
receives such payment from such Alternate Currency Bank or such obligation is
otherwise fully satisfied. In addition to the foregoing, if for any reason any
Alternate Currency Bank fails to make payment to the applicable Alternate
Currency Agent of any amount due under Section 3.7(e)(ii) and the applicable
Alternate Currency Addendum, such Alternate Currency Bank shall be deemed, at
the option of the applicable Alternate Currency Agent, to have unconditionally
and irrevocably purchased from the applicable Alternate Currency Agent, without
recourse or warranty, an undivided interest in and participation in the
applicable Alternate Currency Loan in the amount such Alternate Currency Bank
was required to pay pursuant to Section 3.7(e)(ii) and the applicable Alternate
Currency Addendum, and such interest
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and such participation may be recovered from such Alternate Currency Bank
together with interest thereon at the Federal Funds Rate for each day
during the period commencing on the date of demand by the applicable Alternate
Currency Agent and ending on the date such obligation is fully satisfied.
3.8 The Notes.
(a) The Revolving Loans of each Bank shall be evidenced by a
Revolving Credit Note payable to the order of such Bank in an amount equal to
the Revolving Credit Commitment of such Bank.
(b) The Term Loans of each Bank shall be evidenced by a Term
Loan Note payable to the order of such Bank in an amount equal to the
Term Loan Commitment of such Bank.
(c) The Bid-Option Loans of each Bank shall be evidenced by a
single Bid-Option Note payable to the order of such Bank in an amount equal to
the Dollar Equivalent of the aggregate unpaid principal amount of such Bank's
Bid-Option Loans.
(d) The Alternate Currency Syndicated Loans of each Alternate
Currency Bank shall be evidenced by a single Alternate Currency Syndicated Note
payable to the order of such Bank in an amount equal to the Alternate Currency
Commitment of such Bank.
(e) Upon receipt of each Bank's Notes pursuant to Section 8.2,
the Administrative Agent shall forward such Notes to such Bank. Each Bank shall
record on its books and records, and prior to any transfer of its Notes shall
endorse on the schedules forming a part thereof appropriate notations to
evidence, the date of disbursement, amount and maturity of each Loan made by it,
the interest rate and Interest Period applicable thereto and the date and amount
of each payment of principal made by the applicable Borrowers with respect
thereto. Any notations made by such Bank shall be prima facie evidence of the
matters so recorded or endorsed. Each Bank is hereby irrevocably authorized by
the Borrowers to make such records, so to endorse schedules to its Notes and to
attach to and make a part of any Note a continuation of any such schedule as
and when required. Failure by any Bank to make such records or so to endorse
the schedules to its Notes, or any error in recording or so endorsing any such
information, shall not affect the Borrowers' liability hereunder or under any
Note.
3.9 Certain Fees.
(a) Facility Fee. MascoTech will pay to the Administrative
Agent for the respective accounts of the Banks a facility fee, for each
calendar quarter or portion thereof from the Closing Date to but not
including the Termination Date, on the amount of each Bank's Revolving Credit
Commitment and Term Loans, whether used or unused, during such period, at a rate
equal to the Applicable Facility Fee Rate. All accrued facility fees
hereunder shall be payable in arrears with respect to each calendar quarter or
portion thereof not later than the tenth day after the end of each March, June,
September and December, commencing with the first such calendar quarter-end
after the
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Closing Date, and on the Termination Date. Promptly upon receipt of such
facility fees for any calendar quarter or portion thereof, the Administrative
Agent shall distribute such facility fees to the Banks ratably in accordance
with their respective Pro Rata Shares.
(b) AgentS' and Arrangers' Fees and Closing Fee. MascoTech will
pay to the Agents and to the Arrangers fees in such amounts and at such times as
are agreed to in the Agents and Arrangers Fee Letter and the Administrative
Agent Fee Letter, each dated as of December 10, 1997 and the Administrative
Agent shall distribute out of such fees, closing fees to the Banks on the
Closing Date.
3.10 Optional Termination or Reduction of Commitments.
Subject to Section 5.5, the Borrowers shall have the right at any
time and from time to time, upon one Business Day's prior written notice
to the Administrative Agent, to terminate or proportionately reduce the amount
of the Revolving Credit Commitments or the Alternate Currency Commitments,
provided, that (i) any partial reduction of the amount of the Revolving Credit
Commitments shall be in the amount of $5,000,000 or a multiple of $1,000,000 in
excess thereof and any partial reduction of any Alternative Currency Commitment
shall be in the Approximate Equivalent Amount of $1,000,000 or any integral
multiple thereof, (ii) no such reduction shall be permitted with respect to any
portion of the Revolving Credit Commitments not in excess of the sum of the
Dollar Equivalent of the aggregate outstanding principal amount of all
Revolving Loans, Bid-Option Loans plus Alternative Currency Syndicated Loans
and Swing Line Loans, plus the Letter of Credit Obligations Amount, plus the
Dollar Equivalent of the aggregate amount of all Borrowings for which a Notice
of Borrowing is then pending, plus the aggregate amount of all Letters of
Credit for which a Request for Letter of Credit Issuance is then pending, (iii)
the Commitments may not be terminated if any Loans or Letters of Credit are
then outstanding or any Notice of Borrowing or Request for Letter of Credit
Issuance is then pending and (iv) no such termination or reduction shall be
permitted if, after giving effect thereto, the Dollar Equivalent of the
aggregate principal amount of the outstanding Bid-Option Loans would exceed
fifty percent (50%) of the aggregate amount of the sum of the Revolving Credit
Commitments and the outstanding aggregate principal amount of the Term Loans.
The Revolving Credit Commitments or any portion thereof terminated or reduced
pursuant to this Section may not be reinstated. The accrued facility fees with
respect to the terminated Revolving Credit Commitments or the amount of any
reduction therein shall be payable on the effective date of such notice. Upon
receipt of any notice from the Borrowers pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof
and of such Bank's share of any reduction of the Commitments. Each such notice
shall be irrevocable by the Borrowers once the Administrative Agent begins
notifying any Bank of the contents thereof.
3.11 Mandatory Termination of Commitments. The Revolving Credit
Commitments shall terminate on the Termination Date. The Term Loan Commitments
shall terminate upon disbursement of the Term Loans on the Closing Date.
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3.12 Borrowing Subsidiaries. MascoTech may at any time or from time
to time, with the consent of the Administrative Agent, which consent shall not
be unreasonably withheld, add as a party to this Agreement any Subsidiary to be
a "Borrowing Subsidiary" hereunder by the execution and delivery to the
Administrative Agent of a duly completed Assumption Letter by such Subsidiary,
with the written consent of MascoTech at the foot thereof. Upon such
execution, delivery and consent, such Subsidiary shall for all purposes be a
party hereto as a Borrowing Subsidiary as fully as if it had executed and
delivered this Agreement. So long as the principal of and interest on any
Loans made to any Borrowing Subsidiary under this Agreement shall have been
repaid or paid in full, all Letters of Credit issued for the account of such
Borrowing Subsidiary have expired or been returned and terminated and all other
obligations (other than contingent indemnification obligations) of such
Borrowing Subsidiary under this Agreement shall have been fully performed,
MascoTech may, by not less than five Business Days' prior notice to the
Administrative Agent (which shall promptly notify the Banks thereof), terminate
such Borrowing Subsidiary's status as a Borrowing Subsidiary.
ARTICLE IV.
PRINCIPAL PAYMENTS; INTEREST; ETC
4.1 Scheduled Principal Payments. (a) General. Unless earlier
payment is required under this Agreement or is made pursuant to Section 4.1(b)
or Section 4.2, on the last day of the Interest Period applicable to each Loan,
the Borrowers shall continue or convert such Loan in accordance with Section
4.8 or repay such Loan.
(b) Repayment of the Term Loans. (i) The Term Loans shall be repaid
by the Borrowers in twenty-five (25) installments payable on the dates set
forth below in the amounts set forth below corresponding to such dates and the
Term Loans shall be permanently reduced by the amount of each installment on
the date payment thereof is made hereunder.
Installment Date Installment Amount
March 31, 1998 $6,250,000
June 30, 1998 $6,250,000
September 30, 1998 $6,250,000
December 31, 1998 $6,250,000
March 31, 1999 $10,000,000
June 30, 1999 $10,000,000
September 30, 1999 $10,000,000
December 31, 1999 $10,000,000
March 31, 2000 $15,000,000
June 30, 2000 $15,000,000
September 30, 2000 $15,000,000
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December 31, 2000 $15,000,000
March 31, 2001 $18,750,000
June 30, 2001 $18,750,000
September 30, 2001 $18,750,000
December 31, 2001 $18,750,000
January 31, 2002 $100,000,000
March 31, 2002 $22,500,000
June 30, 2002 $22,500,000
September 30, 2002 $22,500,000
December 31, 2002 $22,500,000
March 31, 2003 $25,000,000
June 30, 2003 $25,000,000
September 30, 2003 $25,000,000
November 15, 2003 $35,000,000
Notwithstanding the foregoing, the final installment shall be in the amount of
the then outstanding principal balance of the Term Loans. In addition, the
then outstanding principal balance of the Term Loans, if any, shall be due and
payable on the Termination Date. No installment of any Term Loan shall be
reborrowed once repaid.
4.2 Prepayments of Principal. The following provisions apply in
respect of prepayment of the Loans, other than Swing Line Loans, by any
Borrower:
(a) The Borrowers may prepay Floating Rate Loans in whole or in part
on any Business Day in amounts aggregating $5,000,000 or multiples of
$1,000,000 in excess thereof (unless such prepayment would cause the aggregate
outstanding principal amount of Floating Rate Loans to be less than $5,000,000,
in which event prepayment may only be made in an amount equal to the entire
outstanding principal amount of Floating Rate Loans), by paying the principal
amount being prepaid together with accrued interest thereon to the date of
prepayment. Each prepayment in part of such Loans shall be applied to such
Loans of the Banks ratably in accordance with their respective shares of the
aggregate outstanding principal amount of the Floating Rate Loans.
(b) The Borrowers may, upon at least three Business Days' notice to
the Administrative Agent, prepay any Eurodollar Rate Syndicated Loan in whole
or in part on any Business Day in the amount of $5,000,000 or the Approximate
Equivalent Amount of $1,000,000 of any Alternate Currency Syndicated Loan or
multiples of $1,000,000 or the Approximate Equivalent Amount of $1,000,000 of
any Alternate Currency in excess thereof (unless, in the case of prepayment of
any Eurodollar Rate Syndicated Loan, such prepayment would cause the aggregate
outstanding principal amount of such Eurodollar Rate Syndicated Loan to be
less than $5,000,000, in which event prepayment may only be made in an amount
equal to the outstanding unpaid principal amount of such Eurodollar Rate
Syndicated Loan), by paying the principal amount being prepaid together with
accrued interest thereon to the date of prepayment; provided, however, that the
Borrowers shall
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compensate the Banks pursuant to Section 5.5 for any losses or expenses
incurred as a result thereof. Each prepayment in part of any Eurodollar Rate
Syndicated Loan shall be applied to the Eurodollar Rate Syndicated Loans
comprising such Borrowing of the Banks ratably in accordance with their
respective shares of the aggregate outstanding principal amount of such Loans.
(c) Unless otherwise required by this Agreement, the Borrowers may
not prepay any Bid-Option Loan in whole or in part without the consent of the
Bank that made such Bid-Option Loan.
(d) Notwithstanding Section 4.2(a), (b) and (c), if on any date:
(i) the sum of (A) the Dollar Equivalent of
the aggregate outstanding principal amount of Loans plus (B)
the Letter of Credit Obligations Amount exceeds the sum of
the aggregate amount of the Revolving Credit Commitments and
the outstanding aggregate principal amount of the Term Loans;
or
(ii) the Dollar Equivalent of the aggregate outstanding
principal amount of Bid-Option Loans exceeds fifty percent
(50%) of the sum of the Revolving Credit Commitments and the
aggregate outstanding principal amount of the Term Loans; or
(iii) the Dollar Equivalent of the aggregate outstanding
principal amount of Alternate Currency Bid-Option Loans and the
Alternate Currency Syndicated Loans exceeds $200,000,000,
then the Borrowers shall pay forthwith the principal amount of such excess,
together with accrued interest thereon to the date of payment; provided,
however, that the Borrowers shall compensate the Banks pursuant to Section 5.5
for any losses or expenses incurred as a result thereof; and provided further,
however, that (A) no such payment otherwise required under clause (i) of this
Section 4.2(d) solely because of currency exchange rate fluctuations affecting
the Dollar Equivalent of the aggregate outstanding principal amount of
Alternate Currency Syndicated Loans or Alternate Currency Bid-Option Loans
shall be required unless such payment is due on a date when a payment of
principal of any Loan is otherwise due hereunder, and (B) notwithstanding
clause (A) of this proviso, no such payment otherwise required under subsection
(ii) or (iii) of this Section 4.2(d) shall be required if due solely because of
currency exchange rate fluctuations affecting the Dollar Equivalent of the
aggregate outstanding principal amount of Alternate Currency Syndicated Loans
and Alternate Currency Bid-Option Loans since the last date on which any of
such Alternate Currency Syndicated Loans or Alternate Currency Bid-Option
Loans, as the case may be, were made.
(e) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (in accordance with Section 4.4) of such
prepayment. Each such notice shall be irrevocable by the Borrowers once the
Administrative Agent begins notifying any Bank of the contents thereof.
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(f) At any time that the most recently determined Senior Debt
Coverage Ratio is greater than 3.0 to 1.0 (after giving pro forma effect to the
application of proceeds prescribed herein below), upon the consummation of any
Asset Sale or any Financing by MascoTech or any of its Consolidated
Subsidiaries (other than (i) sales of inventory in the ordinary course of
business and (ii) sales or other dispositions of equipment which in the
reasonable judgment of MascoTech is no longer used or useful in the business of
MascoTech) except to the extent that the Net Cash Proceeds of such Asset Sale,
when combined with the Net Cash Proceeds of all such Asset Sales during the
immediately preceding twelve-month period, do not exceed $25,000,000, and
except as provided in the immediately succeeding sentence, within three (3)
Business Days after MascoTech's or any of its Subsidiaries' receipt of any Net
Cash Proceeds from any such Asset Sale or Financing, the Borrowers shall make a
mandatory prepayment in an amount equal to one hundred percent (100%) of such
Net Cash Proceeds or such lesser amount as is sufficient to reduce the Senior
Debt Coverage Ratio (calculated using EBITDA for the most recently concluded
four fiscal quarter period and using Debt as of the last day of such four
fiscal quarter period, taking into account the reduction in such Debt as a
result of such mandatory prepayment on a pro forma basis) to 3.0 to 1.0. Net
Cash Proceeds of Asset Sales of capital assets with respect to which the
Borrowers shall have given the Agent written notice of its intention to replace
such capital assets within six months following such Asset Sale shall not be
subject to the provisions of the preceding sentence unless and to the extent
that such applicable period shall have expired without such replacement having
been made. Each such mandatory prepayment shall be applied first to the Term
Loan installment due January 31, 2002 and after such installment is paid in
full to each of the then remaining installments payable under the Term Loans in
the inverse order of maturity; and following the payment in full of the Term
Loans, the amount of each such prepayment shall be applied to repay Revolving
Loans (but shall reduce Revolving Loan Commitments only at the option of the
Borrowers). Subject to the preceding provisions of this Section 4.2(f), all of
the mandatory prepayments made pursuant to this Section 4.2(f) shall be applied
first to Floating Rate Loans and to any Eurodollar Rate Loans maturing on such
date. The Administrative Agent shall hold the remaining portion of such
mandatory prepayment as cash collateral in an interest bearing deposit account
and shall apply funds from such account to Eurodollar Rate Loans at the end of
the applicable Interest Period.
(g) All voluntary prepayments of the Term Loans shall be applied, at
the Borrowers' option, either to the installment due January 31, 2002 or to the
other remaining installments of the Term Loans, pro rata, or any combination of
the foregoing.
(h) If on the last Business Day of any month, the Dollar Equivalent
of all outstanding Alternate Currency Syndicated Loans under the Alternate
Currency Addenda exceeds 105% of the aggregate Alternate Currency Commitments
with respect thereto, the applicable Borrowers shall on such date prepay
Alternate Currency Syndicated Loans in an aggregate amount such that after
giving effect thereto the Dollar Equivalent of all such Alternate Currency
Syndicated Loans is less than or equal to the aggregate Alternate Currency
Commitments with respect thereto.
4.3 Interest Payments. The Borrowers shall pay interest to the Banks
on the unpaid principal amount of each Loan, for the period commencing on the
date such Loan is made until such
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Loan is paid in full, on each Interest Payment Date and at maturity
(whether at stated maturity, by acceleration or otherwise), and thereafter on
demand, at the following rates per annum (subject, however, to the provisions
of Section 11.12):
(a) With respect to each Floating Rate Loan, at the Floating Rate.
(b) With respect to each Loan which bears interest at the Eurodollar
Rate, the Eurodollar Rate, provided that if any Eurodollar Rate Syndicated
Revolving Loan or any portion thereof shall, as a result of clause (c) of the
definition of Eurodollar Rate Interest Period, have an Interest Period of less
than one month, such Loan or portion thereof shall bear interest during such
Interest Period at the Floating Rate.
(c) With respect to each Eurodollar Rate Bid-Option Loan, the
Bid-Option Eurodollar Rate, provided that if any Eurodollar Rate Bid-Option
Loan or any portion thereof shall, as a result of clause (c) of the definition
of Eurodollar Rate Interest Period, have an Interest Period of less than one
month, in the case of a Eurodollar Rate Syndicated Loan, or fifteen days, in
the case of a Eurodollar Rate Bid-Option Loan, such Loan or portion thereof
shall bear interest during such Interest Period at the Floating Rate.
(d) With respect to each Absolute Rate Dollar Bid-Option Loan and
Alternate Currency Bid-Option Loan, the Bid-Option Absolute Rate quoted for
such Loan by the Bank making such Loan.
(e) With respect to each Alternate Currency Syndicated Loan, the rate
prescribed in the applicable Alternate Currency Addendum.
(f) Notwithstanding the foregoing subsections (a) through (e), the
Borrowers shall (subject to the provisions of Section 11.12), at the option of
the Required Banks, pay interest on demand at the Overdue Rate on the
outstanding principal amount of all Loans and any other amount payable by the
Borrowers hereunder after the occurrence and during the continuance of an Event
of Default under Section 9.1(a), (b), (d), (e), (f), (g) or (k).
4.4 Payment Procedures.
(a) All payments of any facility fees, closing fees, Letter of
Credit fees, Agent's fees, or other fees hereunder and of principal of, and
interest on, the Loans, other than Alternate Currency Loans, and of
reimbursement obligations in respect of Letters of Credit shall be made in
Dollars and in funds immediately available at the Administrative Agent's
principal office in Detroit, Michigan not later than 1:00 p.m. (Detroit time) on
the date on which such payment shall become due. All payments of principal of,
and interest on, the Alternate Currency Loans shall be made in the currencies in
which such Loans are denominated and in funds immediately available, freely
transferable and cleared at the office or branch from which the Loan was made
under Section 3.4(a) and 3.6 not later than 3:00 p.m. local time on the date on
which such payment shall become due. Promptly upon receipt of any payment of
principal of the Alternate Currency Loans the Bank receiving
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such payment shall give written notice to the Administrative Agent by telex or
telecopy of the receipt of such payment, which notice shall be substantially
in the form attached hereto as Exhibit I. Whenever any payment of principal
of, or interest on, the Loans or of any fee shall be due on a day which is not
a Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day (unless as a result thereof, in respect of Eurodollar
Rate Loans and Alternate Currency Syndicated Loans, such date would fall in the
next calendar month, in which case it shall be advanced to the next preceding
Business Day) and, in the case of a payment of principal, interest thereon
shall be payable for any such extended time.
(b) Payments of principal of Syndicated Loans that comprise a
Syndicated Borrowing, including any Substitute Loan made by a Bank as part of
any Borrowing of a Eurodollar Rate Syndicated Revolving Loan, shall be promptly
distributed by the Administrative Agent to the Banks that made such Syndicated
Loans ratably in proportion to their respective shares of the outstanding
principal amount of such Syndicated Borrowing. Payments of interest on
Syndicated Loans that comprise a Syndicated Borrowing, including any Substitute
Loan made by a Bank as part of any Borrowing of a Eurodollar Rate Syndicated
Revolving Loan, shall be promptly distributed by the Administrative Agent to the
Banks that made such Syndicated Loans so that each such Bank receives a portion
of such payment equal to the amount of interest then owing to such Bank on such
Loans multiplied by a fraction, the denominator of which is the total amount of
interest then owing to all such Banks on such Loans and the numerator of which
is the amount of such payment. Payments of principal of any Dollar Bid-Option
Loans that comprise a Dollar Bid-Option Borrowing shall be promptly distributed
by the Administrative Agent to the Banks that made such Dollar Bid-Option Loans
ratably in accordance with their respective Dollar Bid-Option Percentages
together with interest ratably in accordance with the respective interest rates
applicable to such Loans.
(c) During any period when Dollar Bid-Option Loans are
outstanding, if the Administrative Agent cannot reasonably determine
whether a particular payment received by the Administrative Agent from the
applicable Borrower was intended to be applied to the principal of or interest
on one or more Dollar Bid-Option Borrowings or to the principal of or interest
on Syndicated Borrowings, or if the amount of any payment by the Borrowers is
insufficient to pay all amounts then due and payable with respect to Dollar
Bid-Option Loans and Syndicated Loans (including Substitute Loans), the
Administrative Agent shall first apportion such payment between the Dollar Bid-
Option Loans and the Syndicated Loans (including Substitute Loans) (i) if such
payment is of principal, ratably in accordance with the aggregate principal
amount of each such type of Loans on which payment is then due, and (ii) if
such payment is of interest, ratably in accordance with the aggregate amount of
interest that is then due on each such type of Loans. After such
apportionment, (i) the Administrative Agent shall distribute the portion of the
payment received and allocated to the Syndicated Loans (including Substitute
Loans) to the Banks as provided for payments of principal of or interest on, as
the case may be, Syndicated Loans under Section 4.4(b), and (ii) the portion of
the payment received and allocated to the Dollar Bid-Option Loans on which a
payment is then due shall first be allocated among the different Dollar
Bid-Option Borrowings of which such Dollar Bid-Option Loans are a part (A) if
such payment is of principal, ratably in accordance with the aggregate
principal amount of each such Dollar Bid-Option Borrowing, and (B) if such
payment is of interest, ratably in accordance with the
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aggregate amount of interest that is then due on each such Dollar Bid-Option
Borrowing. After such allocation, the Administrative Agent shall
distribute the amount allocated to each Dollar Bid-Option Borrowing to the
Banks that made the Dollar Bid-Option Loans comprising such Dollar Bid-Option
Borrowing ratably in accordance with their respective Dollar Bid-Option
Percentages.
(d) Any prepayments of Bid-Option Loans made under Section
4.2(d) may be applied to any one or more Bid-Option Borrowings as the
Borrowers may select; provided that such payments of principal shall be applied
by the Administrative Agent, in the case of Dollar Bid-Option Loans, or
made directly by the Borrowers, in the case of Alternate Currency Bid-Option
Loans, to the Banks participating in any such Bid-Option Borrowing ratably in
accordance with their respective Dollar Bid-Option Percentages or Alternate
Currency Bid-Option Percentages, as the case may be together with interest
ratably in accordance with the respective interest rates applicable to such
Loans.
4.5 Computation of Interest and Fees. Except as may be otherwise
prescribed in the applicable Alternate Currency Addendum, facility fees,
Administrative Agent fees and Letter of Credit fees, and interest on the
Floating Rate Loans and Alternate Currency Syndicated Loans and other amounts
due hereunder, other than Fixed Rate Loans (other than Alternate Currency
Syndicated Loans), shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed. Interest on the Fixed Rate Loans
shall be computed on the basis of a year of 360 days and actual days elapsed.
4.6 No Setoff or Deduction. All payments of principal of and
interest on the Loans and other amounts payable by the Borrowers hereunder
shall be made by the Borrowers without setoff or counterclaim, and free and
clear of, and without deduction or withholding for, or on account of, any
present or future taxes, levies, imposts, duties, fees, assessments, or other
charges of whatever nature, imposed by any governmental authority, or by any
department, agency or other political subdivision or taxing authority.
4.7 Types for all Loans. The Syndicated Loans (other than Alternate
Currency Syndicated Loans) may be Floating Rate Loans or Eurodollar Rate Loans,
or a combination thereof, selected by the applicable Borrower in accordance
with Section 4.8. The Term Loans and Revolving Loans made on the Closing Date
shall initially be Floating Rate Loans and thereafter may be continued as
Floating Rate Loans or converted into Eurodollar Rate Loans as provided in
Section 4.8. The applicable Borrower may select, in accordance with Section
4.8, Types and Interest Periods applicable to portions of the Revolving Loans
and the Term Loans. Notwithstanding anything herein to the contrary, the
Borrower may not, without the written consent of the Administrative Agent,
select the Eurodollar Rate with Interest Periods other than seven (7) or
fourteen (14) days for any Loans during the Syndication Period.
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4.8 Method of Selecting Types and Interest Periods for Conversion and
Continuation of Loans.
(A) Right to Convert. The Borrowers may elect from time to time,
subject to the provisions of Section 4.7 and this Section 4.8, to convert all
or any part of a Loan (other than a Swing Line Loan, an Alternate Currency
Syndicated Loan or a Bid-Option Loan) of any Type into any other Type or Types
of Loans; provided that any conversion of any Eurodollar Rate Syndicated Loan
shall be made on, and only on, the last day of the Interest Period applicable
thereto, unless the applicable Borrower makes the payments required pursuant to
Section 5.5.
(B) Automatic Conversion and Continuation. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans are
converted into Eurodollar Rate Syndicated Loans. Eurodollar Rate Syndicated
Loans shall continue as Eurodollar Rate Syndicated Loans until the end of the
then applicable Interest Period therefor, at which time such Eurodollar Rate
Syndicated Loans shall be automatically converted into Floating Rate Loans
unless the Borrower shall have given the Administrative Agent notice requesting
that, at the end of such Interest Period, such Eurodollar Rate Syndicated Loans
continue as a Eurodollar Rate Syndicated Loan.
(C) No Conversion After Default. Notwithstanding anything to the
contrary contained in Section 4.8(A) or Section 4.8(B), no Loan may be
converted into or continued as a Eurodollar Rate Syndicated Loan if the
Required Banks so direct after any Default or Event of Default has occurred and
is continuing.
(D) Conversion/Continuation Notice. The Borrowers shall give the
Administrative Agent irrevocable notice (a "Conversion/Continuation Notice"),
in substantially the form attached hereto as Exhibit T or Exhibit C-1, as
applicable, of each conversion of a Floating Rate Loan into a Eurodollar Rate
Syndicated Loan or continuation of a Eurodollar Rate Syndicated Loan not later
than 11:00 a.m. (Detroit time) three Business Days prior to the date of the
requested conversion or continuation, specifying: (1) the requested date
(which shall be a Business Day) of such conversion or continuation; (2) the
amount and Type of the Loan to be converted or continued; and (3) the amounts
of Eurodollar Rate Syndicated Loan(s) into which such Loan is to be converted
or continued and the duration of the Interest Periods applicable thereto.
4.9 Other Provisions Applicable to Alternate Currency Loans. The
specification of payment of Alternate Currency Loans in the related Alternate
Currency at a specific place pursuant to this Agreement is of the essence.
Such Alternate Currency shall be the currency of account and payment of such
Loans under this Agreement and the Notes. Notwithstanding anything in this
Agreement, the obligation of the applicable Borrower in respect of such Loans
shall not be discharged by an amount paid in any other currency or at another
place, whether pursuant to a judgment or otherwise, to the extent the amount so
paid, on prompt conversion into the applicable Alternate Currency and transfer
to such Bank under normal banking procedure, does not yield the amount of such
Alternate Currency due under this Agreement and the Notes. In the event that
any payment, whether pursuant to a judgment or otherwise, upon conversion and
transfer, does not result in payment
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of the amount of such Alternate Currency due under this Agreement and the
Notes, such Bank shall have an independent cause of action against the
Borrowers for the currency deficit.
ARTICLE V.
CHANGE IN CIRCUMSTANCES
5.1 Impossibility; Interest Rate Inadequate or Unfair. (a) If before
the beginning of any Eurodollar Rate Interest Period:
(i) the Administrative Agent is advised by any Reference Bank
that deposits in Dollars (in the applicable amounts) are not
being offered to such Reference Bank in the relevant market for
such Eurodollar Rate Interest Period, or
(ii) the Required Banks advise the Administrative Agent that the
Eurodollar Base Rate will not adequately and fairly reflect the
cost to such Banks of maintaining, making or funding, for such
Eurodollar Rate Interest Period, Eurodollar Rate Syndicated Loans
to which such Eurodollar Rate Interest Period applies,
the Administrative Agent shall forthwith give notice thereof to the Borrowers
and the Banks, whereupon until the Administrative Agent notifies the
Borrowers that the circumstances giving rise to such suspension no longer
exist, the obligations, if any, of the Banks to make Eurodollar Rate Loans, as
the case may be, shall be suspended. In the case of Eurodollar Rate Loans,
unless the Borrowers notify the Administrative Agent not later than 3:00 p.m.
(Detroit time) on the Business Day before the beginning of such Eurodollar Rate
Interest Period that the Borrowers elect not to borrow on such date, such
Borrowing shall, subject to the provisions of Section 8.1, be a Floating Rate
Borrowing. Promptly after the Administrative Agent receives any such notice
from the Borrowers under this Section 5.1(a), the Administrative Agent shall
notify each Bank of the contents thereof. Any such notice from the Borrowers
shall be irrevocable once the Administrative Agent begins notifying any Bank of
the contents thereof.
(b) If deposits in Dollars (in the applicable amounts) are not
being offered to a Reference Bank in the relevant market for any Eurodollar Rate
Interest Period, by reason of circumstances affecting such Reference Bank and
not affecting the London or Nassau Interbank Market, generally, the
Administrative Agent shall, in consultation with the Borrowers and with the
consent of the Required Banks, appoint another Bank to act as a Reference Bank
hereunder.
5.2 Illegality. If, after the date of this Agreement, the
introduction of, or any change in, any applicable law, rule or regulation or in
the interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof or compliance by any
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Bank (or its Applicable Lending Office) with any request or directive (whether
or not having the force of law) of any such authority shall make it
unlawful or impossible for such Bank (or its Applicable Lending Office) to
honor its binding legal obligations, if any, hereunder to make, maintain or
fund any type of Fixed Rate Loans, such Bank shall so notify the Administrative
Agent, and the Administrative Agent shall forthwith give notice thereof to the
Borrowers, whereupon until such Bank notifies the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation,
if any, of such Bank to make such type of Fixed Rate Loans shall be suspended.
Before any Bank gives any notice of unlawfulness or impossibility to the
Administrative Agent under this Section 5.2, such Bank shall designate a
different Applicable Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. Upon receipt of such notice, the applicable
Borrowers shall prepay in full the then outstanding principal amount of each
affected Fixed Rate Loan of such Bank together with accrued interest thereon
(a) on the last day of the then current Interest Period applicable to such Loan
if such Bank may lawfully continue to maintain and fund such Loan to such day,
or (b) immediately if such Bank may not lawfully continue to fund and maintain
such Loan to such day. Concurrently with prepaying each such Fixed Rate Loan,
the applicable Borrowers shall borrow a Floating Rate Loan (or, if the
applicable Borrowers so elect by at least three Business Days' notice to the
Administrative Agent and such Bank, a Eurodollar Rate Syndicated Loan of an
unaffected type) in an equal principal amount from such Bank, for an Interest
Period coinciding with the remaining term of the Interest Period applicable to
such Fixed Rate Loan, and such Bank shall make such a Loan, provided that there
has been no acceleration of the amounts due under the Notes pursuant to Article
IX.
5.3 Increased Cost; Yield Protection.
(a) If, after the date hereof, the introduction of, or any
change in, any applicable law, treaty, rule or regulation (whether domestic
or foreign and including, without limitation, the Federal Deposit
Insurance Act, as amended, and Regulation D of the Board of Governors of the
Federal Reserve System) or in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive of any such authority,
central bank or comparable agency (whether or not having the force of law),
(i) shall subject any Bank (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its obligation to
make any Loans, its Notes, any of its Loans or any of the
Letters of Credit or shall change the basis of taxation of
payments to any Bank (or its Applicable Lending Office) of the
principal of or interest on any of its Fixed Rate Loans or in
respect of its obligation, if any, to make any Loans or to
participate in the risk of Letters of Credit (except for changes
in the rate of tax on the overall net income of such Bank or its
Applicable Lending Office imposed by the jurisdiction in which
such Bank's principal executive office or Applicable Lending
Office is located), or
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(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System, but excluding with
respect to any Eurodollar Rate Syndicated Loan any reserve
requirements to the extent included in clause (b) of the
definition of Eurodollar Base Rate when calculating the
Eurodollar Base Rate with respect to such Eurodollar Rate
Syndicated Loan), special deposit or similar requirement
(including, without limitation, any deposit insurance assessment
in respect of deposits held outside the United States, against
assets of, deposits with or for the account of, or credit
extended by, any Bank's Applicable Lending Office, or shall
impose on any Bank (or its Applicable Lending Office or the
relevant interbank market or the United States certificate of
deposit market) any other condition affecting its obligation, if
any, to make Loans or to participate in the risk of Letters of
Credit or affecting its Loans or the Letters of Credit or
affecting the Borrowers' obligations under the Notes in respect
of such Loans,
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining its existing or future
Fixed Rate Loans or of participating in the risk of Letters of Credit, or to
reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under the Notes (in respect
of Fixed Rate Loans or Letters of Credit) by an amount deemed by such Bank to
be material, then such Bank may notify the Borrowers (with a copy of any such
notice to be provided to the Administrative Agent) of any such fact of which it
has knowledge and demand compensation therefor; provided that, if such Bank
fails to demand such compensation (or notify the Borrowers that it will or may
demand such compensation) promptly upon becoming aware of the facts entitling
it to do so or, if such Bank is contesting the cause of such increased cost or
reduced sum received or receivable, promptly after the earlier of (A) the final
determination of such contest or (B) an officer of such Bank who is responsible
for the administration of the credit outstanding under this Agreement from such
Bank to the Borrowers becoming aware of such facts, such Bank shall not be
entitled to such compensation for the period before the date on which it
actually demands (or notifies the Borrowers that it will or may demand) such
compensation; provided, further, that if such Bank is contesting the cause of
such increased cost or reduced sum received or receivable, such Bank shall not
in any event be entitled to such compensation for any period prior to six
months before it notifies the Borrowers that such Bank may or will demand such
compensation. The Borrowers agree to pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or reduction
within 15 days after demand by such Bank. A certificate of such Bank setting
forth the basis for determining such additional amount or amounts necessary to
compensate such Bank shall be conclusive in the absence of manifest error.
Each such Bank will designate a different Applicable Lending Office if such
designation would avoid the need for, or reduce the amount of such compensation
and would not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. In the event that any Borrower is required to compensate any Bank
for any increased cost to such Bank pursuant to this Section 5.3(a), such
Borrower shall have the right, upon at least five Business Days' prior notice
to such Bank through the Administrative Agent,
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to prepay in full any outstanding Fixed Rate Loans that are related to such
increased cost of such Bank, together with accrued interest thereon to the
date of prepayment; provided that prepayment of such Fixed Rate Loans shall not
relieve such Borrower of its obligation to compensate such Bank in accordance
with this Section 5.3(a), the amount of which compensation shall be due at the
time of such prepayment, notwithstanding any other provision of this Section
5.3(a). Concurrently with prepaying each such Fixed Rate Loan of such Bank,
such Borrower shall borrow a Floating Rate Loan (or, if such Borrower shall so
elect in its notice of prepayment, a Fixed Rate Loan of another Type) in an
equal principal amount from such Bank for an Interest Period coinciding with
the remaining term of the Interest Period applicable to such Fixed Rate Loan,
and such Bank shall make such a Floating Rate Loan (or Fixed Rate Loan of the
other Type), provided that there has been no acceleration of the amount due
under the Notes pursuant to Article IX. The Borrowers shall pay compensation
owing to any Bank(s) under this Section 5.3(a) notwithstanding any subsequent
replacement (pursuant to Section 11.13) of the Bank(s) making demand for such
compensation.
(b) In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to any Bank or Administrative Agent, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Bank or
Administrative Agent with any guideline, request or directive of any such
authority (whether or not having the force of law), including any risk-based
capital guidelines, affects or would affect the amount of capital required or
expected to be maintained by such Bank or the Administrative Agent (or any
corporation controlling such Bank or the Administrative Agent) and such Bank or
the Administrative Agent, as the case may be, determines that the amount of
such capital is increased by or based upon the existence of such Bank's or
Agent's obligations or Loans hereunder and such increase has the effect of
reducing the rate of return on such Bank's or Agent's (or such controlling
corporation's) capital as a consequence of such obligations or Loans hereunder
to a level below that which such Bank or the Administrative Agent (or such
controlling corporation) could have achieved but for such circumstances (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank or the Administrative Agent to be material, then such Bank
or the Administrative Agent may notify the Borrowers of any such fact of which
it has knowledge and the Borrowers shall pay to such Bank or the
Administrative Agent, as the case may be, from time to time, upon request by
such Bank (with a copy of such request to be provided to the Administrative
Agent) or the Administrative Agent, additional amounts sufficient to compensate
such Bank or Administrative Agent (or such controlling corporation) for any
increase in the amount of capital and reduced rate of return which such Bank or
the Administrative Agent reasonably determines to be allocable to the existence
of such Bank's or Agent's obligations or Loans hereunder; provided that, if
such Bank or the Administrative Agent fails to notify the Borrowers of any such
fact promptly upon becoming aware thereof or, if such Bank or the
Administrative Agent is contesting the cause of such increase in the amount of
capital or reduced rate of return, promptly after the earlier of (A) the final
determination of such contest or (B) an officer of such Bank who is responsible
for the administration of the credit outstanding under this Agreement from such
Bank to the Borrowers becoming aware of any such fact, such Bank or the
Administrative Agent, as the case may be, shall not be entitled to such
compensation for the period before the date on which it actually notifies the
Borrowers of such fact; provided, further, that if such Bank or the
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Administrative Agent is contesting the cause of such increase in the amount of
capital or reduced rate of return, such Bank or the Administrative Agent,
as the case may be, shall not in any event be entitled to such compensation for
any period prior to six months before it notifies the Borrowers that such Bank
or the Administrative Agent, as the case may be, may or will demand such
compensation. A statement as to the amount of such compensation, prepared in
good faith and in reasonable detail by such Bank or the Administrative Agent,
as the case may be, and submitted by such Bank or Administrative Agent to the
Borrowers, shall be conclusive in the absence of manifest error in computation.
The Borrowers shall pay such compensation for the periods covered by such
notice notwithstanding any replacement (pursuant to Section 11.13) of the
Bank(s) making demand for such compensation.
5.4 Substitute Loans. If (a) the obligation, if any, of any Bank to
make any type of Fixed Rate Loans has been suspended pursuant to Section 5.2 or
(b) any Bank has demanded compensation under Section 5.3(a) and the Borrowers
shall, by at least five Business Days' prior notice to such Bank through the
Administrative Agent, have elected that the provisions of this Section 5.4
shall apply to such Bank, then, unless and until such Bank notifies the
Borrowers that the circumstances giving rise to such suspension or demand for
compensation no longer apply:
(i) all Loans which would otherwise be made by such Bank as the
affected type of Fixed Rate Loans shall be made instead as Floating Rate Loans,
for an Interest Period coincident with the related Fixed Rate Borrowing, and
(ii) after each of its affected Fixed Rate Loans has been repaid,
all payments of principal which would otherwise be applied to repay such Fixed
Rate Loans shall be applied to repay its Substitute Loans instead.
5.5 Funding Losses. If any Borrower makes any payment of principal
with respect to any Fixed Rate Loan on any other date than the last day of an
Interest Period applicable thereto (whether pursuant to Section 3.10, 4.2
(other than 4.2(f)), 5.1, 5.2, 5.3 or 5.4, Article IX or otherwise), or if the
applicable Borrower fails to borrow any Fixed Rate Loan after the related
Notice of Borrowing has been given to the Administrative Agent, or if the
applicable Borrower fails to make any payment of principal or interest in
respect of a Fixed Rate Loan when due, the applicable Borrower shall reimburse
each Bank on demand for any resulting loss or expense incurred by such Bank,
including without limitation any loss incurred in obtaining, liquidating or
employing deposits from third parties, whether or not such Bank shall have
funded or committed to fund such Loan. A statement as to the amount of such
loss or expense, prepared in good faith and in reasonable detail by such Bank
and submitted by such Bank to the applicable Borrower, shall be conclusive and
binding for all purposes absent manifest error in computation. Calculation of
all amounts payable to each Bank under this Section 5.5 shall be made as though
such Bank shall have actually funded or committed to fund the relevant Fixed
Rate Loan through the purchase of an underlying deposit in an amount equal to
the amount of such Loan and having a maturity comparable to the related
Interest Period; provided, however, that such Bank may fund any Fixed Rate Loan
in any manner it sees fit and the foregoing assumption shall be utilized only
for the purpose of calculation of amounts payable under this Section 5.5. In
connection with any
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assignment by any Bank of any portion of the Loans made pursuant to Section
11.6 and made during the Syndication Period, and if, notwithstanding the
provisions of Section 4.7, the Borrowers have requested and the Administrative
Agent has consented to the use of the Eurodollar Rate with an Interest Period
other than seven (7) or fourteen (14) days, the Borrowers shall be deemed to
have repaid all outstanding Eurodollar Rate Loans as of the effective date of
such assignment and reborrowed such amount as a Floating Rate Loan and/or
Eurodollar Rate Loan (chosen in accordance with the provisions of Section 4.7)
and the indemnification provisions under this Section 5.5 shall apply.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to the Administrative
Agent and the Banks that:
6.1 Corporate Existence and Power. Each of MascoTech and its
Domestic Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of its incorporation, and is duly
qualified as a foreign corporation in each State or other jurisdiction in the
United States of America in which the conduct of its operations or the
ownership of its properties requires such qualification and failure so to
qualify would materially and adversely affect MascoTech and its Subsidiaries
taken as a whole. All of such corporations have all requisite corporate power
to own their properties and to carry on their businesses, considered as a
whole, substantially as now owned and as now being conducted. Each of the
Borrowers has full power, authority and legal right to execute and deliver this
Agreement and the Notes, to perform and observe the terms and provisions hereof
and thereof, and to borrow hereunder.
6.2 Corporate Authority; No Violations; Governmental Filings; Etc.
The execution, delivery and performance by each of the Borrowers of this
Agreement, the issuance of the Notes and the borrowings hereunder 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 by-laws of MascoTech 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
MascoTech or any Subsidiary pursuant to, any indenture or other agreement or
instrument to which MascoTech or any Subsidiary is a party or by which
MascoTech or any Subsidiary or its property may be bound or affected. Neither
the execution, delivery and performance of this Agreement nor the issuance of
the Notes nor any borrowing hereunder requires, for the validity thereof, nor
does the enforceability of this Agreement or any of the Notes 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 or which, in the case of any such borrowing, will be
made or obtained prior to the due date for such filing, consent or approval.
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6.3 Binding Effect. This Agreement constitutes, and the Notes when
executed and delivered by each Borrower for value will constitute, the legal,
valid and binding obligations of such Borrower, enforceable against such
Borrower in accordance with their respective terms.
6.4 Litigation. There are no suits, proceedings, or actions at law
or in equity or by or before any governmental commission, board, bureau, or
other administrative agency, pending or, to the knowledge of the Borrowers,
threatened against MascoTech or any of its Subsidiaries or affecting MascoTech
or any of its Subsidiaries, which, in the reasonable opinion of MascoTech,
either (i) are likely to have a material adverse effect on the financial
condition or business of MascoTech and its Subsidiaries taken as a whole or
(ii) will in any manner affect the enforceability or validity of this Agreement
or any Note.
6.5 Taxes. MascoTech and each Subsidiary has filed (or has obtained
extensions of the time by which it is required to file) all United States
federal income tax returns, and all other tax returns which are required to be
filed and are material to the business, operations or financial position of
MascoTech and its Subsidiaries taken as a whole, and has paid all taxes shown
due pursuant to such returns or pursuant to any assessment received by
MascoTech or any Subsidiary, except such taxes, if any, as are being contested
in good faith and as to which, in the reasonable opinion of MascoTech, adequate
reserves have been provided in accordance with generally accepted accounting
principles. MascoTech does not know of any proposed tax assessment against it
or any Subsidiary or of any basis for one, except to the extent any such
assessment has been, in the reasonable opinion of MascoTech, adequately
provided for in the consolidated tax reserves of MascoTech and its Subsidiaries
in accordance with generally accepted accounting principles.
6.6 Financial Condition. The consolidated balance sheet of MascoTech
and its Consolidated Subsidiaries and consolidated statements of income,
shareholders' equity and cash flows of MascoTech and its Consolidated
Subsidiaries for the fiscal year ended December 31, 1996, certified by Coopers
& Lybrand, independent certified public accountants, and the interim unaudited
consolidated balance sheet and interim unaudited consolidated statements of
income, shareholders' equity and cash flows of MascoTech and its Consolidated
Subsidiaries, as of or for the nine-month period ended on September 30, 1997,
copies of which have been furnished to the Banks, fairly present the
consolidated financial position of MascoTech and its Consolidated Subsidiaries
as at the dates thereof, and the consolidated results of operations of
MascoTech and its Consolidated Subsidiaries for the respective periods
indicated, all in accordance with generally accepted accounting principles
consistently applied (except as disclosed in the notes thereto and subject, in
the case of interim statements, to year-end audit adjustments). Except as
disclosed in the financial statements as of or for the nine-month period ended
September 30, 1997, there has been no material adverse change in the
consolidated operations or condition, financial or otherwise, of MascoTech and
its Consolidated Subsidiaries considered as a whole, since December 31, 1996.
6.7 Compliance with ERISA. Each of MascoTech and each ERISA
Affiliate of MascoTech (a) has fulfilled its obligations under the minimum
funding standards of ERISA and the
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Code with respect to each Plan and (b) is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code with
respect to each Plan. Neither MascoTech nor any ERISA Affiliate of MascoTech
has (x) sought a waiver of the minimum funding standard under Section 412 of
the Code in respect of any Plan, (y) failed to make any contribution or payment
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or
made any amendment to any Plan or Benefit Arrangement, which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Code, in each case securing an amount greater than
$10,000,000, or (z) incurred any liability under Title IV of ERISA, other than
a liability to the PBGC for premiums under Section 4007 of ERISA, which could
materially adversely affect the business, consolidated financial position or
consolidated results of operations of MascoTech and its Consolidated
Subsidiaries.
6.8 Environmental Matters. In the ordinary course of its business,
MascoTech conducts appropriate reviews of the effect of Environmental Laws on
the business, operations and properties of MascoTech and its Subsidiaries, in
the course of which it identifies and evaluates pertinent liabilities and costs
(including, without limitation, capital or operating expenditures required for
clean-up or closure of properties presently or previously owned or for the
lawful operation of its current facilities, required constraints or changes in
operating activities, and evaluation of liabilities to third parties, including
employees, together with pertinent costs and expenses). On the basis of this
review, MascoTech has reasonably concluded that Environmental Laws are not
likely to have a material adverse effect on the business, financial position or
results of operations of MascoTech and its Consolidated Subsidiaries,
considered as a whole.
6.9 Compliance with Laws. MascoTech complies, and has caused each
Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder), except where (a) the necessity of compliance therewith
is contested in good faith by appropriate proceedings and MascoTech has
established appropriate reserves for liability for noncompliance therewith in
accordance with generally accepted accounting principles, (b) no officer of
MascoTech is aware that MascoTech or the relevant Subsidiary has failed to
comply therewith, or (c) MascoTech has reasonably concluded that failure to
comply is not likely to have a material adverse effect on the business,
financial position or results of operations of MascoTech and its Consolidated
Subsidiaries, taken as a whole.
6.10 Subordinated Debt. The existing Subordinated Debt evidenced by
the 41/2% Convertible Subordinated Debentures due 2003 in the original
principal amount of $345,000,000 is and shall be subordinated to all Loans
under this Agreement on the same terms that are applicable to the Existing Bank
Facility.
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ARTICLE VII.
COVENANTS
Until all the Commitments and Letters of Credit have expired or been
terminated and all Loans and reimbursement and other obligations (other than
contingent indemnification obligations) of the Borrowers hereunder have been
paid in full, each of the Borrowers covenants that:
7.1 Financial Statements. MascoTech will deliver to each of the
Banks:
(a) as soon as practicable and in any event within 50 days after
the end of each of the first three fiscal quarters of each fiscal year of
MascoTech, (i) an unaudited consolidated balance sheet of MascoTech and its
Consolidated Subsidiaries, as at the end of each such quarter, and (ii)
unaudited consolidated statements of income and cash flows of MascoTech and its
Consolidated Subsidiaries, for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, setting forth in each of
the statements required by this subsection (a), in comparative form,
corresponding figures as of the end of and for the corresponding period of the
preceding fiscal year, all in reasonable detail and duly certified (subject to
year-end audit adjustments) by the chief financial officer or chief accounting
officer of MascoTech as having been prepared in all material respects in
accordance with generally accepted accounting principles and as to fairness of
presentation;
(b) as soon as practicable and in any event within 95 days after
the end of each fiscal year of MascoTech, (i) a consolidated balance sheet of
MascoTech and its Consolidated Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, shareholders' equity, and cash flows of
MascoTech and its Consolidated Subsidiaries for such year, setting forth in
each of the statements required by this subsection (b), in comparative form,
corresponding figures as of the end of and for the preceding fiscal year, and
all in reasonable detail and certified without material qualifications by
Coopers & Lybrand, or by other independent certified public accountants of
recognized national standing selected by MascoTech and reasonably acceptable to
the Administrative Agent;
(c) as soon as practicable and in any event within 30 days after
the sending or filing thereof, copies of all such financial statements and
reports as it shall send to its security holders and of all final
prospectuses under the Securities Act of 1933 (other than form S-8), reports on
forms 10-Q, 10-K and 8-K and all similar regular and periodic reports filed by
it (i) with any federal department, bureau, commission or agency from time to
time having jurisdiction with respect to the sale of securities or (ii) with
any securities exchange;
(d) if and when MascoTech or any ERISA Affiliate of MascoTech
(i) gives or is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given
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to the PBGC; (ii) receives notice of complete or partial withdrawal
liability under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails
to make any payment or contribution to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of MascoTech setting forth
details as to such occurrence and action, if any, which MascoTech or applicable
ERISA Affiliate is required or proposes to take; provided that no such
certificate shall be required unless the aggregate unpaid actual or potential
liability of MascoTech and the ERISA Affiliates involved in all events referred
to in clauses (ii) through (vii) above of which officers of MascoTech have
obtained knowledge and have not previously reported under this subparagraph (d)
exceeds $15,000,000; and
(e) with reasonable promptness, such other information
regarding the financial condition of MascoTech or any of its Subsidiaries
as any Bank may from time to time reasonably request.
7.2 Certificates of No Default and Compliance.
(a) Concurrently with each delivery of the financial statements
pursuant to subsections (a) and (b) of Section 7.1, MascoTech will deliver to
the Administrative Agent (with a copy delivered to each Bank) a certificate,
signed by the chief accounting officer or chief financial officer of MascoTech
(i) stating that to the best of his knowledge after due inquiry, at the date of
such financial statements no Default had occurred and was continuing, or, if a
Default had occurred and was continuing, specifying the nature and period of
existence thereof and what action MascoTech has taken or proposes to take with
respect thereto; (ii) setting forth as of the date of such financial statements,
in reasonable detail, the calculations employed to determine compliance with
Sections 4.2(f) (but, in the case of any Asset Sale, only to the extent that the
aggregate amount of Net Cash Proceeds during the immediately preceding twelve
months exceeds $25,000,000), 7.4, 7.5, 7.6, 7.7, 7.8, 7.9 and 7.15 and an
explanation in reasonable detail of any differences between generally accepted
accounting principles as then in effect and generally accepted accounting
principles used in making such calculations, as may be permitted under Section
1.2. The certificate will be accompanied by a calculation of the Senior Debt
Coverage Ratio as of the end of such fiscal quarter (calculated on a pro forma
basis as appropriate).
(b) Within 60 days after the end of each fiscal quarter of each
fiscal year of MascoTech (including the last fiscal quarter of each fiscal
year), MascoTech will deliver to the Administrative Agent (with a copy delivered
to each Bank) a certificate, signed by the chief accounting
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officer, chief financial officer, treasurer or assistant treasurer of
MascoTech, setting forth in reasonable detail the calculation of the
Leverage Ratio, as of the Determination Date with respect to the next
forthcoming Application Period, and identifying the Applicable Margin for such
Application Period as a result of such calculations.
(c) Within fifteen Business Days after any officer of MascoTech
obtains knowledge of a Default, MascoTech will, unless the same shall have been
cured within such fifteen Business Day period, give written notice to each of
the Banks thereof, specifying the nature thereof, the period of existence
thereof and what action MascoTech proposes to take with respect thereto.
7.3 Preservation of Corporate Existence, Etc. MascoTech will preserve
and maintain its corporate existence, and qualify and remain qualified as a
validly existing corporation in good standing in each jurisdiction in which the
conduct of its operations or the ownership of its properties requires such
qualification and failure so to qualify would materially and adversely affect
MascoTech and its Subsidiaries taken as a whole.
7.4 Minimum Capitalization. MascoTech shall not permit its Adjusted
Net Worth at any time to be less than the sum of (a) $650,000,000 plus (b)
sixty percent (60%) of (i) Net Income calculated separately for each fiscal
year of MascoTech ending after the Closing Date minus (ii) the aggregate amount
of dividends paid on any preferred stock of MascoTech during such period to the
extent permitted by Section 7.15 minus (c) on or after March 31, 2002,
$200,000,000; provided however, that if such Net Income is negative in any
fiscal year, the amount added for such fiscal year shall be zero and such
negative Net Income shall not reduce the amount of such Net Income added for
any other fiscal year.
7.5 Fixed Charge Coverage Ratio. MascoTech shall maintain a ratio
("Fixed Charge Coverage Ratio") as of the end of each fiscal quarter of (i)
EBITDA minus Capital Expenditures to (ii) the sum of the amounts of (a)
Interest Charges plus (b) scheduled amortization payments of the principal
portion of the Term Loans (exclusive of the installment due January 31, 2002)
and scheduled amortization payments of the principal portion of all other Debt
of MascoTech and its Consolidated Subsidiaries with an original maturity in
excess of one year plus (c) cash taxes paid by MascoTech and its Consolidated
Subsidiaries (excluding cash taxes with respect to gains not included in
EBITDA) of at least:
(i) 1.10 to 1.00 as of the last day of each fiscal
quarter ending during the period commencing with the fiscal quarter
ending March 31, 1998 through the fiscal quarter ending June 30, 2000;
and
(ii) 1.15 to 1.00 as of the last day of each fiscal quarter ending
thereafter until the Termination Date.
In each case, the Fixed Charge Coverage Ratio shall be determined as of
the last day of each fiscal quarter for the four fiscal quarter period ending
on such day, except that Capital Expenditures shall be
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calculated using an amount equal to fifty percent of the Capital Expenditures
during the eight fiscal quarter period ending on such day.
7.6 Maximum Leverage Ratio. MascoTech shall not, as of the last day
of each fiscal quarter, permit the ratio (the "Leverage Ratio") of (i) the sum
of (a) the aggregate principal amount of Debt of MascoTech and its Consolidated
Subsidiaries outstanding at such date plus (b) the amount by which the sum of
the outstanding Synthetic Lease Amount and the outstanding Securitization
Amount exceeds $50,000,000 as of such date minus (c) the aggregate amount of
Cash and Cash Equivalents maintained in the United States in excess of
$10,000,000 as of such date to (ii) EBITDA plus an amount equal to any
reduction in EBITDA attributable to any interest, rental or servicing expense
related to any Synthetic Lease Agreement or Receivables Sale to the extent such
amounts are included in the amount in excess of $50,000,000 determined as
provided in clause (i)(b) of this Section 7.6, for the four fiscal quarters
then most recently ended, to be greater than the ratio set forth below opposite
such date:
Quarter Ending Ratio
March 31, 1998 4.85 to 1.00
June 30, 1998 4.85 to 1.00
September 30, 1998 4.75 to 1.00
December 31, 1998 4.50 to 1.00
March 31, 1999 4.50 to 1.00
June 30, 1999 4.50 to 1.00
September 30, 1999 4.50 to 1.00
December 31, 1999 4.25 to 1.00
March 31, 2000 4.25 to 1.00
June 30, 2000 4.00 to 1.00
September 30, 2000 4.00 to 1.00
December 31, 2000 3.75 to 1.00
March 31, 2001 3.75 to 1.00
June 30, 2001 3.50 to 1.00
September 30, 2001 3.50 to 1.00
December 31, 2001 3.00 to 1.00
and the last day of
each fiscal quarter
thereafter
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7.7 Subsidiary Indebtedness. MascoTech will not permit or suffer the
aggregate principal amount of Debt of its Subsidiaries (other than Debt owing
to MascoTech or any of its Subsidiaries or Debt outstanding under this
Agreement or any Note) at any time to be greater than $100,000,000.
7.8 Negative Pledge. MascoTech shall not, nor shall MascoTech permit
any Consolidated Subsidiary to create, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal
amount not exceeding $25,000,000;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Consolidated Subsidiary and not created in
contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring
such asset (or acquiring a corporation or other entity which owned such
asset), provided that such Lien attaches to such asset concurrently
with or within 90 days after such acquisition;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into MascoTech
or a Consolidated Subsidiary and not created in contemplation of such
event;
(e) any Lien existing on any asset prior to the acquisition
thereof by MascoTech or a Consolidated Subsidiary and not created in
contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased and is not secured by any additional assets;
(g) any Lien in favor of the holder of Debt (or any Person acting
for or on behalf of such holder) arising pursuant to any order of
attachment, distraint or similar legal process arising in connection
with court proceedings so long as the execution or other enforcement
thereof is effectively stayed and the claims secured thereby are being
contested in good faith by appropriate proceedings and MascoTech or
such Consolidated Subsidiary, as the case may be, has established
appropriate reserves against such claims in accordance with generally
accepted accounting principles;
(h) Liens incidental to the normal conduct of its business or the
ownership of its assets which (i) do not secure Debt and (ii) do
not in the aggregate materially detract (due to the amount of the
liability secured by such Liens or otherwise) from the value of the
assets of MascoTech and its Consolidated Subsidiaries taken as a whole
or in the aggregate materially
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impair the use thereof in the operation of the business of
MascoTech and its Consolidated Subsidiaries taken as a whole;
(i) any Lien securing Debt incurred under this Agreement; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section; provided that (i) the aggregate outstanding principal amount
of Debt secured by all such Liens on Current Assets shall not at any
time exceed 10% of Current Assets and (ii) the aggregate outstanding
principal amount of Debt secured by all such Liens (including Liens
referred to in clause (i) of this proviso) shall not at any time exceed
the sum of 5% of Net Worth plus 10% of Current Assets, provided,
further, that for purposes of this Section 7.8(i), Current Assets
shall not include any assets that are classified as Current Assets
solely because they are held for sale;
provided, however, that the restrictions set forth in this Section 7.8 shall
not apply to "margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), if and to the extent that the value
of the margin stock with respect to which the rights of MascoTech and its
Subsidiaries are restricted by this Section 7.8 would otherwise exceed 25% of
the value of all assets with respect to which the rights of MascoTech and its
Subsidiaries are restricted by this Section 7.8.
7.9 Dispositions of Assets; Mergers and Consolidations.
(a) (i) MascoTech will not merge or consolidate with any other
Person, unless MascoTech shall be the continuing or surviving corporation of
such merger or consolidation. (ii) No Consolidated Subsidiary of MascoTech
will merge or consolidate with any Person other than MascoTech (subject to
subsection (a)(i)) or another Consolidated Subsidiary, unless such Consolidated
Subsidiary shall be the continuing or surviving corporation, except to the
extent the sale of such Consolidated Subsidiary would be permitted pursuant to
subsection (b) of this Section.
(b) MascoTech will not, and will not permit any Consolidated
Subsidiary to, directly or indirectly sell, lease, transfer or otherwise
dispose of its assets (other than the sale of inventory in the ordinary course
of business) if, immediately after giving effect thereto, the aggregate amount
of such assets (including the Receivables Sales Amount in the case of
Receivables Sales) sold, leased, transferred or otherwise disposed of by
MascoTech and its Consolidated Subsidiaries in the twelve months then ended
would exceed 10% of the total assets of MascoTech and its Consolidated
Subsidiaries as shown on the most recent balance sheet delivered to the Banks
under Section 7.1; provided, however, that the restrictions set forth in this
Section 7.9(b) shall not restrict or prohibit sales of "margin stock" (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System) for fair value as determined in good faith by the Board of Directors of
MascoTech, if and to the extent that the value of the margin stock with respect
to which the rights of MascoTech and its Subsidiaries are restricted by this
Section 7.9(b) would otherwise exceed 25% of the value of all assets with
respect to which the rights of MascoTech and its Subsidiaries are restricted by
this Section 7.9(b). Other than margin stock consisting of the stock of TriMas
Corporation, MascoTech will not own,
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directly or through one or more of its Subsidiaries, margin stock with a
value in excess of 25% of the value of all assets of MascoTech and its
Subsidiaries.
(c) Notwithstanding any other provision of this Section 7.9, no
disposition of assets, merger or consolidation referred to in subsection (a) or
(b) of this Section shall be permitted if, immediately after giving effect
thereto, any Default would exist.
7.10 Changes in Subordinated Debt. MascoTech will not (a) transfer,
convey, assign or deliver to any holder of any Subordinated Debt, or to any
trustee, paying agent or other fiduciary for the benefit of the holder of any
Subordinated Debt (including any defeasance), any cash, securities (other than
securities constituting Subordinated Debt) or other assets of MascoTech or any
Subsidiary in payment or on account of, or as provision for, principal,
premium, if any, or interest on any Subordinated Debt which is not required
under the instruments and agreements relating to such Subordinated Debt
(provided that any payment which is blocked by any creditors of MascoTech or
any of its Subsidiaries pursuant to the terms of the applicable instrument or
agreement shall not be deemed to be required) or (b) or amend, modify or waive
any term or provision of any instrument or agreement relating to any
Subordinated Debt such that it would not constitute "Subordinated Debt" as
defined herein if at the time of any such transfer, conveyance, assignment,
delivery, amendment, modification or waiver there shall exist and be
continuing, or if immediately after giving effect thereto as a reasonably
foreseeable result thereof on a pro forma basis there would exist or would be
caused thereby, a Default.
7.11 Use of Proceeds. (a) None of the proceeds of the Loans made
under this Agreement will be used in violation of any applicable law or
regulation including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System, provided that a Federal Reserve Form
U-1 shall have been completed by the Administrative Agent on behalf of each
Bank and reviewed and approved by the Banks in form and substance satisfactory
to MascoTech and the Administrative Agent on or prior to the Closing.
(b) The proceeds of the Loans made under this Agreement shall be
used (i) to refinance the Existing Bank Facility, (ii) to finance the
purchase of capital stock of the Target acquired pursuant to the Tender Offer,
(iii) to finance the Merger, (iv) to refinance the current credit facilities of
the Target and (v) for general corporate purposes of the Borrowers.
7.12 Fiscal Year. MascoTech will not change its fiscal year from
beginning on January 1 of the calendar year and ending on December 31 of the
calendar year.
7.13 Compliance with Laws. MascoTech will comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except where (a) the necessity of compliance therewith
is contested in good faith by appropriate proceedings, (b) no officer of
MascoTech is aware that MascoTech or the relevant Subsidiary has failed to
comply therewith or (c) MascoTech has reasonably concluded that
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failure to comply is not likely to have a material adverse effect on the
business, financial position or results of operations of MascoTech and its
Consolidated Subsidiaries, taken as a whole.
7.14 Interest Rate Agreements. Not later than 180 days after the
Closing Date, the Borrowers shall enter into, and shall thereafter maintain
interest rate swap or hedging agreements or other agreements (including (i) new
Financing of either debt securities bearing a fixed rate of interest or equity
securities) which effectively protect the Borrowers against increases in
interest rates that the Borrowers may be required to pay on a notional amount
of not less than $200,000,000 for not less than the first two years following
the Closing Date.
7.15 Restricted Payments. At any time that MascoTech's Leverage Ratio
(calculated as prescribed in Section 7.6 for the most recently completed four
fiscal quarter period, but adjusted to reflect on a pro forma basis the effect
on the Debt of MascoTech and its Consolidated Subsidiaries as a result of any
issuance of Equity Interests or trust convertible debt securities or similar
securities made subsequent to such period but on or prior to the date such
Restricted Payment is to be made) is greater than or equal to 3.0 to 1.0,
MascoTech shall not make any Restricted Payment except: (i) the payment of
dividends on preferred stock in an amount not to exceed $3,750,000 in any one
fiscal quarter, (ii) other Restricted Payments not to exceed in the aggregate
during the term of this Agreement an amount equal to the sum of (a) $40,000,000
plus (b) an amount equal to 75% of any proceeds received by MascoTech in
connection with its issuance of Equity Interests or trust convertible debt
securities or similar securities to the extent such securities are not treated
as debt of MascoTech in accordance with generally accepted accounting
principles to the extent that, after giving pro forma effect to the application
of a portion of such proceeds to Senior Debt, the Senior Debt Coverage Ratio is
less than 3.0 to 1.0 plus (c) an amount equal to 60% of any proceeds received
by MascoTech in connection with the issuance of Subordinated Debt or trust
convertible debt securities or similar securities to the extent such securities
are treated as debt of MascoTech in accordance with generally accepted
accounting principles to the extent that, after giving pro forma effect to the
application of a portion of such proceeds to Senior Debt, the Senior Debt
Coverage Ratio is less than 3.0 to 1.0 plus (d) an amount equal to 50% of the
aggregate amount of the Excess Cash Flow of MascoTech and its Consolidated
Subsidiaries in each fiscal quarter following the Closing Date and ending with
the most recently completed fiscal quarter (or, 100% of such Excess Cash Flow
for any fiscal quarter ending on or after the Senior Debt Coverage Ratio is
less than 3.0 to 1.0), provided, however, that the Restricted Payments
described in clauses (i) and (ii) above shall not be permitted if either an
Event of Default or a Default shall have occurred and be continuing at the date
of declaration or payment thereof or would result therefrom, except that any
dividends on the common or preferred stock of MascoTech which are declared at a
time when no Default or Event of Default shall have occurred and be continuing
or would result therefrom, MascoTech shall be entitled to pay such dividend
within sixty (60) days of such declaration.
7.16 Guaranties and Pledges. (a) Prior to the consummation of the
Merger, MascoTech will (and, if at the expiration of the Tender Offer,
MascoTech and Acquisition have not obtained sufficient shares of the Target to
effect a short-form merger, MascoTech Sintered Components, Inc. ("Sintered"),
MascoTech Sintered Components of Indiana, Inc. ("Sintered Indiana") and
MascoTech
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Tubular Products, Inc. ("Tubular Products") will within five business days of
the initial funding to purchase shares of the Target pursuant to the Tender
Offer) guaranty the indebtedness under this Agreement pursuant to a guaranty
substantially in the form of Exhibit Q. The guaranties by Sintered, Sintered
Indiana and Tubular Products will be released automatically after the
consummation of the Merger unless Sintered, Sintered Indiana and Tubular
Products are Significant Subsidiaries. Within five Business Days after the
Merger becomes effective, the entity resulting from the Merger and all
Significant Subsidiaries will guaranty the indebtedness under this Agreement
pursuant to a guaranty substantially in the form of Exhibit Q. Any subsidiary
that thereafter becomes a Significant Subsidiary will guaranty the indebtedness
under this Agreement promptly upon receiving written demand from the
Administrative Agent. MascoTech will notify the Administrative Agent within
ninety-five (95) days of the date it is determined that any Subsidiary has
become a Significant Subsidiary. The guaranty of any such Subsidiary will be
automatically released upon the sale of such Subsidiary if all Net Cash
Proceeds of the sale are applied to the Term Loans, or, if the Term Loans have
been paid in full, to the Revolving Loans, as prescribed in Section 4.2(f).
The guaranty of any Subsidiary that ceases to be a Significant Subsidiary will
be automatically released upon the determination by MascoTech, in the
preparation of its annual financial statements, that such Subsidiary is no
longer a Significant Subsidiary.
(b) All stock of the Target owned by MascoTech, Acquisition and
NI Industries, Inc., a Delaware corporation, including the stock acquired
in the Tender Offer, will be pledged concurrently with the initial Borrowing.
The pledged stock will be released upon MascoTech's achievement of an implied
or actual senior unsecured debt rating of BB+ by S&P or Ba1 by Moody's or a
Senior Debt Coverage Ratio of less than 2.5 to 1.0, but not before the
consummation of the Merger.
ARTICLE VIII.
CONDITIONS OF BORROWINGS AND LETTER OF CREDIT ISSUANCES
The obligation of the Administrative Agent to issue any Letter of
Credit, the obligation of each Bank to make a Syndicated Loan on the occasion
of each Syndicated Borrowing hereunder, and the willingness of any Bank to
consider, in its sole discretion, making any Bid-Option Loan hereunder, is
subject to the performance by the Borrowers of all their obligations under this
Agreement and to the satisfaction of the following further conditions:
8.1 Each Borrowing and Letter of Credit Issuance. In the case of
each Borrowing (other than a Floating Rate Borrowing deemed disbursed under
Section 3.3(e) and any Borrowing subject to the conditions precedent in
Sections 8.2 and 8.3) and Letter of Credit Issuance hereunder:
(a) Receipt by the Administrative Agent of (i) in the case of
each Borrowing, the Notice of Borrowing from the applicable Borrower
containing any information required by Section 3.4, 3.5, 3.6 or 3.7 as the case
may be, and (ii) in the case of each Letter of Credit Issuance, the Request for
Letter of Credit Issuance from the applicable Borrower as required by Section
3.3, in each case signed by an Authorized Officer or person designated (by
written notification from such Authorized Officer to the Administrative Agent)
by such Authorized Officer, and, in the case of each Letter of Credit
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Issuance, together with an application for the related Letter of Credit and
other related documentation requested by and acceptable to the Administrative
Agent appropriately completed and duly executed by such designated officer or
other person.
(b) The fact that both before and at the conclusion of the
Borrowing or Letter of Credit Issuance: (i) in the case of a Refunding
Borrowing, no Event of Default shall have occurred and be continuing and (ii) in
the case of any other Borrowing or any Letter of Credit Issuance, no Default
shall have occurred and be continuing;
(c) The fact that the representations and warranties contained
in this Agreement (except, in the case of a Refunding Borrowing, the
representations and warranties set forth in Section 6.4(i), Section 6.5, the
last sentence of Section 6.6, clause (a) of the first sentence of Section 6.7
and Sections 6.8 and 6.9) shall be true and correct in all material respects
or, with respect to such representations and warranties that include a
materiality standard, in all respects, on and as of the date of such Borrowing
or Letter of Credit Issuance with the same force and effect as if made on and
as of such date; and
(d) Receipt by the Administrative Agent of such other opinions,
documents, evidence, materials and information with respect to the matters
contemplated hereby as the Administrative Agent or the Required Banks may
reasonably request.
Each Borrowing by the Borrowers and Letter of Credit Issuance pursuant to this
Agreement, including the first such Borrowing or Letter of Credit Issuance,
shall be deemed to be a representation and warranty by the Borrowers on the
date of such Borrowing or Letter of Credit Issuance as to the facts specified
in clauses (b) and (c) of this Section 8.1.
8.2 Initial Borrowing or Letter of Credit Issuance. In the case of
the initial Borrowing or Letter of Credit Issuance pursuant to this Agreement:
(a)(1)General Conditions. Receipt by the Administrative Agent for the
account of each Bank of a duly executed Revolving Note, a duly
executed Term Loan Note and a duly executed Bid-Option Note, each
dated on or before the date of such Borrowing or Letter of Credit
Issuance; and
(2) Receipt by the Administrative Agent of all the items, and
completion of all the matters, required by Section 8.3.
(3) Regulation U Requirements. The Administrative Agent shall
have received on behalf of the Banks a purpose statement on FR Form U-1
referred to in Regulation U in form and substance satisfactory to the
Administrative Agent.
(b) Initial Loans to Finance the Tender Offer. In addition to
satisfying the conditions precedent set forth in Section 8.2(a), in the case of
the initial Borrowing or Letter of Credit Issuance
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under the Revolving Credit Facility or the initial Borrowing under the Term
Loan Facility to finance the purchase of capital stock of the Target acquired
by Acquisition pursuant to the Tender Offer:
(1) (i) Receipt by the Agents of evidence that MascoTech's
directors shall have approved the Tender Offer and Merger and
that the Target's directors shall have approved and recommended
acceptance of the Tender Offer and shall have approved the Merger.
(ii) MascoTech, Acquisition and the Target shall have made all filings
with and obtained all approvals and authorizations from any
governmental body, agency, official or authority, and any applicable
waiting period related thereto shall have expired or been terminated,
which filings, approvals or authorizations (or the expiration of such
waiting periods) are legally required to be obtained or made by them
(or to have expired or terminated) prior to the consummation of the
Tender Offer and which, if not obtained or made (or expired or
terminated) would, individually or in the aggregate, have a reasonable
probability of having a material adverse effect on MascoTech or the
Target.
(2) No law or regulation shall have made consummation of the Tender
Offer or the Merger illegal or otherwise prohibited and no judgment,
injunction, order or decree shall have enjoined MascoTech, Acquisition
or the Target from consummating the Tender Offer or the Merger.
(3) The amounts and forms of the consideration to be paid in the
Tender Offer and the Merger shall be acceptable to the Agents if higher
than $34.50 per share, together with evidence of such consideration to
be paid satisfactory to the Agents.
(4) (i) All conditions precedent to Acquisition's consummation of
the Tender Offer shall have been satisfied or waived with the
approval of the Agents. (ii) The terms of the Tender Offer shall not
be amended without the consent of the Agents. (iii) The number of the
Target's shares of capital stock validly tendered pursuant to the
Tender Offer and not properly withdrawn prior to expiration of the
Tender Offer shall represent not less than the minimum number of
shares, determined on a fully diluted basis necessary to effectuate the
Merger in accordance with the provisions of any applicable corporate
statute, anti-takeover statute or provision in the Target's certificate
of incorporation or by-laws in order to consummate the Merger.
(5) The Merger Agreement shall not have been amended or modified or
any of its provisions waived by MascoTech in any respect material
to the Banks without the approval of the Agents and there shall not
have occurred or exist any breach or default by MascoTech material to
the Banks under the Merger Agreement. Except for such inaccuracies or
omissions the consequences of which do not singly or in the aggregate
constitute a material adverse effect on the Target, the representations
and warranties of the Target contained in the Merger Agreement shall be
true in all respects at and as of the time shares are accepted for
payment pursuant to the Tender Offer as if made at and as of such time
(except as to those representations and warranties which are made as of
a specified date, which shall be true and correct as of such date).
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(6) Receipt by the Agents of a copy of any fairness opinion relating
to the Tender Offer.
(7) The Agents shall have received evidence confirming the solvency
and other appropriate factual information in form and substance
satisfactory to them from the chief financial officer of MascoTech
supporting the conclusion that after giving effect to the Tender Offer
and the Merger, MascoTech and its Consolidated Subsidiaries, including
the Target, taken as a whole, is solvent and will be solvent subsequent
to incurring the indebtedness in connection with the Tender Offer and
the Merger, will be able to pay its debts as they become due and will
not be left with unreasonably small capital.
(8) All outstanding payment obligations of the Borrowers under the
Existing Bank Facility shall have been repaid in full with the
indebtedness incurred under this Agreement except Existing Bid-Option
Loans permitted pursuant to Article II.
(9) Compliance with all applicable requirements of Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System.
(10) No Default or Event of Default shall have occurred and be
continuing on the funding date and no Material Adverse Change shall
have occurred.
(11) No event, occurrence, development or state of circumstances or
facts which has had or has a reasonable probability of having,
individually or in the aggregate, a material adverse effect on the
Target shall have occurred.
(12) All guaranties, in the form of Exhibit Q attached hereto, and
pledges, in the form of Exhibit R attached hereto, required pursuant to
Section 7.16 shall have been executed.
(13) The representations and warranties contained in Sections 6.1,
6.2 and 6.3 shall be true and correct.
(c) Initial Loans to Finance the Merger. In addition to satisfying
the conditions precedent set forth in Section 8.2(a), in the case of a
Borrowing or Letter of Credit Issuance under the Revolving Credit Facility or
a Borrowing under the Term Loan Facility to finance the Merger:
(1) The Merger shall have become effective in accordance with all
applicable laws and regulations and the Merger Agreement, the
provisions of which shall not have been amended, waived or modified by
MascoTech in any manner material to the Banks without the prior consent
of the Required Banks, and each of the conditions precedent to
MascoTech's obligation to consummate the Merger material to the Banks
set forth in the Merger Agreement shall have been satisfied to the
satisfaction of the Required Banks.
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(2) No law or regulation shall have made consummation of the Merger
illegal or otherwise prohibited and no judgment, injunction, order or
decree shall have enjoined MascoTech, Acquisition or the Target from
consummating the Merger.
(3) After giving effect to consummation of the Merger, no Default
shall have occurred and be continuing and no Material Adverse Change
shall have occurred since the funding of the Tender Offer.
(4) After giving effect to any Loans made on the date of
consummation of the Merger, all outstanding payment obligations of
TriMas Corporation under its existing $350,000,000 Credit Agreement
shall have been paid in full and such Credit Agreement shall have been
terminated.
8.3 Closing. On or prior to the Closing Date, the Borrowers shall
furnish to the Banks the following items, and the following matters shall be
completed:
(a) An opinion of each of David Liner, counsel to MascoTech, and
Davis Polk & Wardwell, special New York counsel to MascoTech, substantially in
the form of Exhibit M and Exhibit N, respectively, hereto, and covering such
other matters as any Bank may reasonably request, dated the Closing Date;
(b) Certified copies of all corporate action taken by each
Borrower to authorize the execution, delivery and performance of this Agreement
and the Notes, and the Borrowings and Letter of Credit Issuances hereunder, and
such other corporate documents and other papers as any Bank may reasonably
request, including, without limitation, certified copies of the Borrower's
articles of incorporation and by-laws;
(c) A certificate of a duly authorized officer of each Borrower,
dated the Closing Date, as to the incumbency, and setting forth a specimen or
facsimile signature, of each of the persons (i) who has signed this Agreement on
behalf of the applicable Borrower, (ii) who has signed the Notes on behalf of
the applicable Borrower, and (iii) who will, until replaced by other persons
duly authorized for that purpose, act as the representatives of the applicable
Borrower for the purpose of signing documents in connection with this Agreement
and the transactions contemplated hereby;
(d) A certificate of a senior officer of MascoTech to the effect
set forth in Section 8.2(b)(10), (11) and (13); and
(e) The closing fees payable under Section 3.9, which shall be
paid to the Administrative Agent for the account of the Banks.
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ARTICLE IX.
EVENTS OF DEFAULT AND REMEDIES
9.1 Events of Default. If any one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) Any Borrower shall fail to pay when due any installment of
principal of any Note or shall fail to pay within five days of the due
date thereof any interest on any Note or any facility fee, closing
fee, Letter of Credit fee, or Agents and Arrangers fee payable under
this Agreement, or any reimbursement obligation under Section 3.3
(unless satisfied by the deemed disbursement of Floating Rate Loans);
or
(b) Any Borrower shall fail to observe or perform any covenant
contained in any of Sections 7.3 to 7.10 inclusive and 7.14 to 7.16
inclusive; or
(c) Any Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered
by clauses (a) and (b) above) for thirty (30) days after written notice
thereof has been given to such Borrower by any Bank or the
Administrative Agent; or
(d) Any representation or warranty of a Borrower or any officer
of a Borrower to the Banks contained herein or in any certificate,
statement or report furnished to the Banks hereunder shall prove to
have been incorrect or misleading in any material respect on the date
when made or deemed made, provided that, if any representation and
warranty deemed to have been made by a Borrower pursuant to the last
sentence of Section 8.1 as to the satisfaction of the condition of
borrowing set forth in clause (b)(i) of Section 8.1 shall have been
incorrect solely by reason of the existence of an Event of Default of
which such Borrower was not aware when such representation and warranty
was deemed to have been made and which was cured before or promptly
after the Borrower became aware thereof, then such representation and
warranty shall be deemed not to have been incorrect in any material
respect; or
(e) Any Borrower or any Significant Subsidiary (i) shall fail to
pay at maturity, or within any applicable period of grace, any Debt
(other than a Loan and other than Acquired Debt in an aggregate
outstanding principal amount not exceeding $15,000,000) having an
aggregate principal amount in excess of $10,000,000, and such failure
has not been waived, or (ii) shall fail to observe or perform any term,
covenant or agreement (other than such a term, covenant or agreement to
or for the benefit of a Bank or Affiliate thereof restricting the sale,
pledge or other disposition by a Borrower or any Significant Subsidiary
of "margin stock" having a value in excess of 25% of the value of the
assets referred to in Section 221.2(g)(2)(i)
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of Regulation U unless the Board of Governors of the Federal Reserve
System or its staff advises the Administrative Agent in writing that
the existence of this subsection (e) without this parenthetical
exception would not in such circumstances render this Agreement
"secured directly or indirectly by margin stock" within the meaning of
its Regulation U), contained in any agreement (other than this
Agreement) by which it is bound evidencing or securing indebtedness for
borrowed money (other than Acquired Debt in an aggregate
outstanding principal amount not exceeding $15,000,000) for such period
of time as would cause or permit the holder or holders (or any Persons
acting for or on behalf of such holder or holders) thereof or of any
obligations issued thereunder to accelerate the maturity thereof or of
any such obligations in an aggregate principal amount in excess of
$10,000,000, and such failure has not been waived; provided that for
purposes of this subsection (e), a failure by any Borrower or any
Significant Subsidiary to observe or perform any term, covenant or
agreement in respect of the industrial revenue bonds identified on
Schedule 2 attached hereto, or to pay on the due date therefor the debt
outstanding thereunder, shall not be deemed a Default or contribute to
the $10,000,000 aggregate limitation set forth above, so long as such
Borrower or Significant Subsidiary satisfies all obligations to pay
premium, if any, principal of, and interest when due on such bonds
(whether or not related to an acceleration of maturity) within five
days after the due date therefor; or
(f) Any Borrower or any Significant Subsidiary shall (i) apply
for or consent to the appointment of a receiver, custodian,
trustee, liquidator or the like of itself or of a significant portion
of its assets; (ii) be unable or admit in writing its inability to pay
its debts as they mature; (iii) make a general assignment for the
benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; or
(v) file a voluntary petition in bankruptcy or a petition or an answer
seeking reorganization or an arrangement with creditors or to take
advantage of any insolvency law, or any answer admitting the material
allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceedings, or a resolution of either the
shareholders or the Board of Directors of such corporation shall be
adopted for the purpose of effecting any of the foregoing; or
(g) A proceeding shall be instituted without the application,
approval or consent of a Borrower or any Significant Subsidiary in any
court of competent jurisdiction seeking, in respect of such Borrower or
Significant Subsidiary, adjudication in bankruptcy, dissolution,
winding up, reorganization, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a receiver,
custodian, trustee, liquidator or the like of the Borrower or such
Significant Subsidiary or of a significant portion of its assets, or
other like relief in respect of the Borrower or Significant Subsidiary
under any insolvency or bankruptcy law, and the same shall continue
undismissed or unstayed and in effect for any period of sixty
consecutive days; or
(h) Final judgment for the payment of money in excess of
$5,000,000 in amount shall be rendered by a court of record against any
Borrower or Significant Subsidiary and such Borrower or Significant
Subsidiary shall not discharge the same or provide for its discharge,
or
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procure a stay of execution thereof, within sixty days from the date of
entry thereof, and within said period of sixty days or such longer
period during which execution of such judgment shall have been stayed,
move to vacate said judgment or appeal therefrom and cause the
execution thereof to be stayed pending determination of such motion or
during such appeal; or
(i) Any Borrower or any ERISA Affiliate of any Borrower shall
fail to pay when due an amount or amounts aggregating in excess of
$5,000,000 which it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan
or Plans having aggregate Unfunded Benefit Liabilities in excess of
$25,000,000 (collectively, a "Material Plan") shall be filed under
Title IV of ERISA by any Borrower or any ERISA Affiliate of any
Borrower, any plan administrator or any combination of the foregoing;
or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any
Material Plan and such proceeding shall not have been dismissed within
thirty days thereafter; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or
(j)(i) Any Person or "group" (within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended), other
than any Person in the Masco Group or any group that includes any
Person in the Masco Group (A) shall have acquired beneficial ownership
of 25% or more of the capital stock having ordinary voting power in the
election of directors of MascoTech or (B) shall obtain the power
(whether or not exercised) to elect a majority of MascoTech's directors
or (ii) the Board of Directors of MascoTech shall not consist of a
majority of Continuing Directors; "Continuing Directors" shall mean the
directors of MascoTech on the Closing Date and each other director, if
such other director's nomination for election to the Board of Directors
of MascoTech is recommended by a majority of the then Continuing
Directors; or
(k) Acquisition and Target shall fail to consummate the Merger
within 180 days of the initial funding of Loans;
then, and in each such case, the Administrative Agent upon being directed to do
so by the Required Banks, shall, by written notice to the Borrowers, (i)
immediately terminate the Commitments, the Swing Line Commitment and the
Alternate Currency Commitments, (ii) declare the principal of and interest
accrued on all the Notes, all unpaid reimbursement obligations in respect of
drawings under Letters of Credit, and all other amounts owing under this
Agreement to be immediately due and payable or (iii) demand immediate delivery
of cash collateral, and the Borrowers agree to deliver such cash collateral
upon demand, in an amount equal to the maximum amount that may be available to
be drawn at any time prior to the stated expiry of all outstanding Letters of
Credit, or any one or more of the foregoing, whereupon the Commitments shall
terminate forthwith and all such amounts, including such cash collateral, shall
become immediately due and payable without presentment or demand for payment,
notice of non-payment, protest or further notice or demand of any kind, all of
which are expressly waived by the Borrowers; provided, however, that in the
case of the occurrence of any event
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described in the foregoing clauses (f) and (g) with respect to MascoTech or
with respect to the Target provided the Target is at such time a Borrower,
the Commitments shall automatically terminate forthwith and all such amounts,
including such cash collateral, shall automatically become immediately due and
payable without action upon the part of the Required Banks and without the
requirement of any such notice, and without presentment, demand, protest or
other notice of any kind, all of which are hereby waived. Such cash collateral
delivered in respect of outstanding Letters of Credit shall be deposited in a
special cash collateral account to be held by the Administrative Agent as
collateral security for the payment and performance of the applicable
Borrower's obligations under this Agreement and the Notes to the Banks and the
Administrative Agent.
9.2 Remedies. The Administrative Agent upon being directed to do so
by the Required Banks, shall, in addition to the remedies provided in Section
9.1, exercise and enforce any and all other rights and remedies available to it
or the Banks, whether arising under this Agreement, the Notes or under
applicable law, in any manner deemed appropriate by the Administrative Agent,
including suit in equity, action at law, or other appropriate proceedings,
whether for the specific performance (to the extent permitted by law) of any
covenant or agreement contained in this Agreement or in the Notes or in aid of
the exercise of any power granted in this Agreement or the Notes.
9.3 Set Off. Upon the failure of the Borrowers to pay any
indebtedness under this Agreement or the Notes at its maturity (whether at
stated maturity, by acceleration or otherwise) or, in the case of such
indebtedness other than principal of the Loans, when due (after allowing for
any grace period provided with respect thereto under Section 9.1(a)), each Bank
may at any time and from time to time, without notice to the Borrowers (any
requirement for such notice being expressly waived by the Borrowers) set off
and apply against any and all of the obligations of the Borrowers now or
hereafter existing under this Agreement and the Notes, whether owing to such
Bank or any other Bank or the Administrative Agent, any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Borrowers and any property of the Borrowers from time to time in
possession of such Bank, regardless of whether or not such Bank shall have made
any demand hereunder or any indebtedness owing by such Bank may be contingent
and unmatured. The rights of the Banks under this Section 9.3 are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which the Banks may have.
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ARTICLE X.
THE AGENTS AND THE BANKS
10.1 Appointment and Authorization. Each Bank hereby irrevocably
appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Administrative Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto. The
provisions of this Article X are solely for the benefit of the Administrative
Agent and the Banks, and the Borrowers shall not have any rights as third party
beneficiaries of any of the provisions hereof. In performing its functions and
duties under this Agreement, the Administrative Agent shall act solely as agent
of the Banks and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the
Borrowers.
10.2 Administrative Agent and Affiliates. The Administrative Agent in
its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise or refrain from exercising the
same as though it were not the Administrative Agent. The Administrative Agent
and its Affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, and generally engage in any kind of banking,
trust, financial advisory or other business with MascoTech or any Subsidiary of
MascoTech as if it were not acting as Administrative Agent hereunder, and may
accept fees and other consideration therefor without having to account for the
same to the Banks.
10.3 Scope of Agent's Duties. The Administrative Agent shall have no
duties or responsibilities except those expressly set forth herein, and shall
not, by reason of this Agreement, have a fiduciary relationship with any Bank,
and no implied covenants, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or shall otherwise exist against the
Administrative Agent. As to any matters not expressly provided for by this
Agreement (including, without limitation, collection and enforcement action
under the Notes), the Administrative Agent shall not be required to exercise
any discretion or take any action, but may request instructions from the
Required Banks. The Administrative Agent shall in all cases be fully protected
from liability to the Banks in acting, or in refraining from acting, pursuant
to the written instructions of the Required Banks or, when expressly required
by this Agreement, all the Banks, which instructions and any action or omission
pursuant thereto shall be binding upon all of the Banks; provided, however,
that the Administrative Agent shall not be required to act or omit to act if,
in the judgment of the Administrative Agent, such action or omission may
expose the Administrative Agent to personal liability or is contrary to this
Agreement, any Note, or applicable law.
10.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon any certificate, notice, document or other
communication (including any cable, telegram, telex, facsimile transmission or
oral communication) believed by it to be genuine and correct and to have been
sent or given by or on behalf of a proper person. The Administrative Agent may
treat the payee
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of any Note as the holder thereof. The Administrative Agent may employ agents
(including, without limitation, collateral agents) and may consult with legal
counsel (who may be counsel for the Borrowers), independent public accountants
and other experts selected by it and shall not be liable to the Banks, except
as to money or property received by it or its authorized agents, for the
negligence or misconduct of any such agent selected by it with reasonable care
or for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
10.5 Default. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of any Default, unless the Administrative Agent has
received written notice from a Bank or the Borrowers specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
give written notice thereof to the Banks.
10.6 Liability of Administrative Agent. Neither the Administrative
Agent nor any of its directors, officers, agents, or employees shall be liable
to the Banks for any action taken or not taken by it or them in connection
herewith with the consent or at the request of the Required Banks or, when
expressly required by this Agreement, all the Banks or in the absence of its or
their own gross negligence or willful misconduct. Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (a) any
recital, statement, warranty or representation contained in this Agreement or
any Note, or in any certificate, report, financial statement or other document
furnished in connection with this Agreement, (b) the performance or observance
of any of the covenants or agreements of the Borrowers, (c) the satisfaction of
any condition specified in Article VIII, except as to the delivery to the
Administrative Agent of documents that appear on their face to conform to the
requirements of Article VIII (other than requirements of any Bank under Section
8.3(b) that are not known to the Administrative Agent), or (d) the validity,
effectiveness, legal enforceability, value or genuineness of this Agreement,
the Notes, or any other instrument or document furnished in connection
herewith.
10.7 Nonreliance on Administrative Agent and Other Banks. Each Bank
acknowledges and agrees that it has, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
MascoTech and its Subsidiaries and its own decision to enter into this
Agreement, and that it will, independently and without reliance upon the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decision in taking or not taking action under this Agreement. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrowers of this Agreement, the Notes or any
other documents referred to or provided for herein or to inspect the properties
or books of the Borrowers and, except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the
Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Bank with any information concerning the
affairs, financial condition or business of MascoTech or any of its
Subsidiaries which may come into the possession of the Administrative Agent or
any of its Affiliates.
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10.8 Indemnification. The Banks agree to indemnify the Administrative
Agent (to the extent not reimbursed by the Borrowers, but without limiting any
obligation of the Borrowers to make such reimbursement), ratably according to
their respective Pro Rata Shares from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature whatsoever
(including, without limitation, fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or the transactions
contemplated hereby or any action taken or omitted by the Administrative Agent
under this Agreement; provided, however, that no Bank shall be liable for any
portion of such claims, damages, losses, liabilities, costs or expenses
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Bank agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including, but not limited to, reasonable fees and expenses of counsel)
incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Administrative Agent is not reimbursed for such expenses by the
Borrowers, but without limiting the obligation of the Borrowers to make such
reimbursement; provided, however, that no Bank shall be liable for any portion
of such expenses incurred as a result of the Agent's gross negligence or
willful misconduct. Each Bank agrees to reimburse the Administrative Agent
promptly upon demand for its ratable share of any amounts owing to the
Administrative Agent by the Banks pursuant to this Section; provided that no
Bank shall be responsible for failure of any other Bank to make such share
available to the Administrative Agent. If the indemnity furnished to the
Administrative Agent under this Section shall, in the reasonable judgment of
the Administrative Agent, be insufficient or become impaired, the
Administrative Agent may call for additional indemnity from the Banks (other
than for the Agent's gross negligence or willful misconduct) and cease, or not
commence, to take any action until such additional indemnity is furnished.
10.9 Resignation of Administrative Agent. The Administrative Agent
may resign as such at any time upon thirty days' prior written notice to the
Borrowers and the Banks. In the event of any such resignation, the Required
Banks shall, by an instrument in writing delivered to the Borrowers and the
Administrative Agent, appoint a successor, which shall be (a) a Bank or (b) a
commercial bank organized under the laws of the United States or any State
thereof and having a combined capital and surplus of at least $500,000,000. If
a successor is not so appointed or does not accept such appointment before the
Agent's resignation becomes effective, the resigning Administrative Agent may
appoint a temporary successor to act until such appointment by the Required
Banks is made and accepted or if no such temporary successor is appointed as
provided above by the resigning Administrative Agent, the Required Banks shall
thereafter perform all the duties of the Administrative Agent hereunder until
such appointment by the Required Banks is made and accepted. Any successor to
the Administrative Agent shall execute and deliver to the Borrowers and the
Banks an instrument accepting such appointment and thereupon such successor
Administrative Agent, without further act, deed, conveyance or transfer shall
become vested with all of the properties, rights, interests, powers,
authorities and obligations of its predecessor hereunder with like effect as if
originally named as Administrative Agent hereunder. Upon request of such
successor Administrative Agent, the
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Borrowers and the resigning Administrative Agent shall execute and deliver such
instruments of conveyance, assignment and further assurance and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in such successor Administrative Agent all such properties, rights,
interests, powers, authorities and obligations. The provisions of this Article
X shall thereafter remain effective for such resigning Administrative Agent
with respect to any actions taken or omitted to be taken by such
Administrative Agent while acting as the Administrative Agent hereunder.
10.10 Sharing of Payments. The Banks agree among themselves that, in
the event that any Bank shall obtain payment in respect of any Loan or Letter
of Credit reimbursement obligation owing to such Bank under this Agreement
through the exercise of a right of set-off, banker's lien, counterclaim or
otherwise in excess of its ratable share as provided for in this Agreement,
such Bank shall promptly purchase from the other Banks participations in such
Loans and other obligations in such amounts, and make such other adjustments
from time to time, as shall be equitable to the end that all of the Banks share
such payment in accordance with their respective ratable shares as provided
for in this Agreement. The Banks further agree among themselves that if
payment to a Bank obtained by such Bank through the exercise of a right of
set-off, banker's lien, counterclaim or otherwise as aforesaid shall be
rescinded or must otherwise be restored, each Bank which shall have shared the
benefit of such payment shall, by repurchase of participations theretofore
sold, return its share of that benefit to each Bank whose payment shall have
been rescinded or otherwise restored, together with interest thereon at the per
annum rate, if any, at which such Bank whose payment shall have been restored
is liable with respect to such restored payment. The Borrowers agree that any
Bank so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including set-off, banker's lien or
counterclaim, with respect to such participation as fully as if such Bank were
a holder of such Loan or other obligation in the amount of such participation.
The Banks further agree among themselves that, in the event that amounts
received by the Banks and the Administrative Agent hereunder are insufficient
to pay all such obligations when due, the fees and other amounts owing to the
Administrative Agent in such capacity shall be paid therefrom before payment of
obligations owing to the Banks under this Agreement. Except as otherwise
expressly provided in this Agreement, if any Bank or the Administrative Agent
shall fail to remit to the Administrative Agent or any other Bank an amount
payable by such Bank or the Administrative Agent to the Administrative Agent or
such other Bank pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the
Administrative Agent or such other Bank at a rate per annum equal to the rate
at which borrowings are available to the payee in its overnight federal funds
market.
10.11 Withholding Tax Exemption. Each Bank agrees to file with the
Administrative Agent and the Borrowers, in duplicate, (a) on or before the
later of (i) the Closing Date and (ii) the date such Bank becomes a Bank under
this Agreement, (b) on the date such Bank becomes an Alternate Currency Bank
with respect to an Alternate Currency and (c) thereafter as frequently as
required by applicable law unless not legally able to do so as a result of a
change in applicable tax law enacted, or treaty promulgated, after the date
specified in the preceding clause (a) or (b), as applicable, on or prior to the
immediately following due date of any payment by the Borrowers hereunder, a
properly
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completed and executed copy of any form, certification or similar
documentation, if any, necessary for claiming complete exemption from
withholding taxes, including in the case of taxes imposed by the United States,
either Internal Revenue Service Form 4224 or Internal Revenue Service Form 1001
and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and
any additional form necessary for claiming complete exemption from United
States withholding taxes (or such other form as is required to claim complete
exemption from United States withholding taxes), if and as provided by the Code
or other pronouncements of the United States Internal Revenue Service, and such
Bank warrants to the Borrowers that the form so filed will be true and
complete; provided that such Bank's failure to complete, execute and file such
form, certification or similar documentation shall not relieve the Borrowers of
any of their obligations under this Agreement, other than their obligation
under Section 5.3(a) with respect to increased costs that are a result of such
failure.
10.12 The Syndication Agents and Arrangers. Each Syndication Agent
and Arranger, in such capacities, shall have no authority, duties,
responsibilities, obligations, liabilities or functions under this Agreement or
the Notes.
ARTICLE XI.
MISCELLANEOUS
11.1 Amendments, Etc.
(a) No amendment, modification, termination or waiver of any
provision of this Agreement nor any consent to any departure therefrom shall
be effective unless the same shall be in writing and signed by the Borrowers
(except with respect to waivers by the Required Banks or all the Banks) and the
Required Banks and, to the extent any rights or duties of the Administrative
Agent may be affected thereby, by the Administrative Agent, provided, however,
that no such amendment, modification, termination, waiver or consent shall,
without the consent of all of the Banks, (i) authorize or permit the extension
of time for, or any reduction of the amount of, any payment of the principal
of, or interest (including the Applicable Margin) on, any Loan, or any fees or
other amount payable hereunder (except with respect to any modifications of the
provisions relating to prepayments of Loans and except with respect to waiving
the application of the Overdue Rate), or (ii) except as expressly authorized
hereunder, amend, extend or terminate the respective Commitment of any Bank
(other than any Alternate Currency Commitment and except for an extension
beyond the Termination Date), or (iii) modify the provisions of this Section
regarding the taking of any action under this Section, or the definition of
Required Banks, or (iv) permit the Borrowers to assign their rights under this
Agreement, or (v) release all or substantially all of any collateral securing
the extension or maintenance of the credit provided for in this Agreement or
release any guaranty thereof (except as expressly provided in Section 7.16), or
(vi) modify the several nature of the obligations of the Banks hereunder,
modify the sharing provisions among the Banks in Section 10.10, modify this
Section 11.1 or the first sentence of Section 11.6, or modify any other
provision of this Agreement which by its terms requires the consent of all the
Banks.
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(b) Any such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, no Bank
that is in default of any of its obligations, covenants or agreements under
this Agreement shall be entitled to vote (whether to consent or to withhold its
consent) with respect to any amendment, modification, termination or waiver of
any provision of this Agreement or any departure therefrom or any direction
from the Banks to the Administrative Agent, and, for purposes of determining
the Required Banks at any time when any Banks are in default under this
Agreement, the Commitments and Loans of such defaulting Banks shall be
disregarded; provided that no action of a type described in the proviso in
Section 11.1(a) shall be binding on a defaulting Bank without its written
consent thereto.
11.2 Notices.
(a) Except as otherwise provided in subsection 11.2(c) hereof,
all notices and other communications to or upon the parties hereto shall be
deemed to have been duly given or served if sent in writing (including
telecommunications) to the party to which such notice or other communication is
required or permitted to be given or served under this Agreement, to the
address or telex or telecopy number set forth below the name of such party on
the signature pages hereof, or at such other address or telex or telecopy
number as the parties hereto may hereafter specify to the others in writing.
If for purposes of receiving Invitations for Bid-Option Quotes and information
regarding Notices of Bid-Option Rate Borrowings, a Bank wishes to receive such
communications at an address or telex or telecopy number different from its
address or telex or telecopy number for other purposes under this Agreement,
the Administrative Agent shall communicate with such Bank for such purposes at
such different address, telex or telecopy number following the Administrative
Agent's receipt of a written notice from such Bank requesting that the
Administrative Agent do so. All mailed notices or other communications shall
be by registered or certified mail, postage prepaid, with return receipt
requested. All notices or other communications sent by means of telecopy,
telex or other wire transmission shall be made with request for assurance of
receipt in a manner typical with respect to communications of that type.
Written notices or other communications shall be deemed delivered upon receipt
if delivered by hand, 3 Business Days after mailing if mailed, or 1 Business
Day after deposit with an overnight courier service if delivered by overnight
courier. Notices or other communications provided by any of the other means
referred to above shall be deemed delivered upon receipt. Notwithstanding the
foregoing, all notices to the Administrative Agent shall be effective only when
actually received by the Administrative Agent, and all notices from the
Administrative Agent to any Bank regarding such Bank's obligation to fund Loans
or to make payment under Section 3.3(d) shall be effective only when actually
received by such Bank.
(b) Notices by the Borrowers to the Administrative Agent with
respect to terminations or reductions of the Revolving Credit Commitments
pursuant to Section 3.10, requests for Loans and Letter of Credit Issuances
pursuant to Section 3.3, 3.4, 3.5, 3.6 or 3.7 and notices of prepayment pursuant
to Section 4.2 shall be irrevocable and binding on the Borrowers.
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(c) Any notice to be given by the Administrative Agent or any
Bank to the Administrative Agent or any Bank hereunder, may be given by
telephone, and shall be promptly confirmed in writing upon the request of
the recipient. Any such notice so given by telephone shall be deemed effective
upon receipt thereof by the party to whom such notice is to be given.
11.3 No Waiver By Conduct; Remedies Cumulative. No course of
dealing on the part of the Administrative Agent or any Bank, nor any delay or
failure on the part of the Administrative Agent or any Bank in exercising any
right, power or privilege hereunder or under any Note shall operate as a waiver
of such right, power or privilege or otherwise prejudice the Agent's or such
Bank's rights and remedies hereunder; nor shall any single or partial exercise
thereof preclude any further exercise thereof or the exercise of any other
right, power or privilege. No right or remedy conferred upon or reserved to
the Administrative Agent or any Bank under this Agreement, or any Note, is
intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right or remedy
granted hereunder or thereunder or now or hereafter existing under any
applicable law. Every right and remedy granted by this Agreement or by
applicable law to the Administrative Agent or any Bank may be exercised from
time to time and as often as may be deemed expedient by the Administrative
Agent or any Bank and, unless contrary to the express provisions of this
Agreement, or the Notes, irrespective of the occurrence or continuance of any
Default.
11.4 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, including, without limitation, under Sections 5.3, 5.5
and 11.5, representations and warranties of the Borrowers made herein or in any
certificate, report, financial statement or other document furnished by or on
behalf of the Borrowers pursuant to this Agreement shall be deemed to be
material and to have been relied upon by the Banks, notwithstanding any
investigation heretofore or hereafter made by any Bank or on such Bank's
behalf, and shall survive the repayment in full of the Loans and the
termination of the Commitments.
11.5 Expenses and Indemnification.
(a) The Borrowers shall pay, or reimburse the Administrative
Agent, Syndication Agents, Arrangers or any Bank, as the case may be
(each an "Indemnified Person"), for (i) all reasonable out-of-pocket expenses
of the Administrative Agent, Syndication Agents and Arrangers, including
reasonable fees and disbursements of special counsel for the Administrative
Agent, Syndication Agents and Arrangers, in connection with the preparation of
this Agreement, any waiver or consent hereunder or any amendment hereof or any
Default, (ii) all reasonable costs and expenses of the Indemnified Person,
including reasonable fees and disbursements of counsel, in connection with any
action or proceeding relating to a court order, injunction or other process or
decree restraining or seeking to restrain the Administrative Agent from paying
any amount under, or otherwise relating in any way to, any Letter of Credit and
any and all costs and expenses which it may incur relative to any payment under
any Letter of Credit, provided, that the Borrowers shall not be liable under
this clause (ii) to the extent, but only to the extent, any such costs and
expenses of the Indemnified Person are caused by the Indemnified Person's
breach of this Agreement or gross negligence or willful misconduct, and (iii)
if an Event of Default occurs, all reasonable expenses incurred by the
Indemnified Person,
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including reasonable fees and disbursements of counsel (including
in-house counsel), in connection with such Event of Default and collection and
other enforcement proceedings resulting therefrom. The Borrowers shall
indemnify each Bank against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution and
delivery of this Agreement or the Notes.
(b) The Borrowers shall indemnify each Indemnified Person, and
its respective officers, directors, employees and agents, and hold each
Indemnified Person, and its respective officers, directors, employees and
agents, harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind (including, without limitation, the reasonable
fees and disbursements of counsel for any Indemnified Person or any such Person
in connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnified Person or any such Person, as the case may be,
shall be designated a party thereto) which may be incurred by any Indemnified
Person or by any such Person, substantially relating to or arising out of any
actual or proposed use of proceeds of Loans or Letters of Credit for the
purpose of acquiring assets or capital stock of any other Person; provided that
no Indemnified Person or any such Person shall have the right to be indemnified
hereunder for its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction.
(c) The Borrowers hereby further indemnify and agree to hold the
Indemnified Persons, and their respective officers, directors, employees and
agents harmless from and against any and all claims, damages, losses,
liabilities, costs and expenses of any kind or nature whatsoever which the
Indemnified Persons or any such Person may incur or which may be claimed
against any of them by reason of or in connection with any Letter of Credit,
and no Indemnified Person or any of its respective officers, directors,
employees or agents shall be liable or responsible for: (i) the use which may
be made of any Letter of Credit or for any acts or omissions of any beneficiary
in connection therewith; (ii) the validity, sufficiency or genuineness of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
(iii) payment by the Administrative Agent to the beneficiary under any Letter
of Credit against presentation of documents which do not comply with the terms
of any Letter of Credit, including failure of any documents to bear any
reference or adequate reference to such Letter of Credit; (iv) any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit; or (v) any other event or circumstance whatsoever arising in connection
with any Letter of Credit; provided, however, that the Borrowers shall not be
liable hereunder to the Indemnified Persons and such other Persons and the
Administrative Agent shall be liable to the Borrowers to the extent, but only
to the extent, of any direct, as opposed to consequential or incidental,
damages suffered by the Borrowers which were caused by (A) the Administrative
Agent's wrongful dishonor of any Letter of Credit after the presentation to it
by the beneficiary thereunder of a draft or other demand for payment and other
documentation strictly complying with the terms and conditions of such Letter
of Credit, or (B) the Administrative Agent's payment under any Letter of Credit
to the extent, but only to the extent, that such payment constitutes gross
negligence or willful misconduct of the Administrative Agent. The inclusion of
any event in clauses (i) - (vii) of Section 3.3(f) shall not by itself preclude
a finding that such event
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constitutes gross negligence or willful misconduct of the Administrative Agent.
It is understood that in making any payment under a Letter of Credit the
Administrative Agent will rely on documents presented to it under such Letter
of Credit as to any and all matters set forth therein without further
investigation and regardless of any notice or information to the contrary, and
such reliance and payment against documents presented under a Letter of Credit
substantially complying with the terms thereof shall not be deemed gross
negligence or willful misconduct of the Administrative Agent in connection with
the payment.
11.6 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
provided that the Borrowers may not, without the prior written consent of all
the Banks, assign its rights or obligations hereunder or under the Notes, and
the Banks shall not be obligated to make any Loan hereunder to any Person other
than the Borrowers, and the Administrative Agent shall not be obligated to
issue any Letter of Credit for the account of any Person other than MascoTech
or any Consolidated Subsidiary of MascoTech.
(b) The Administrative Agent from time to time in its sole
discretion may appoint one of its affiliates as its agent for the purpose
of servicing and administering this Agreement and the transactions contemplated
hereby and enforcing or exercising any rights or remedies of the Administrative
Agent provided under this Agreement, the Notes or otherwise. In furtherance of
such agency, the Administrative Agent may from time to time direct that the
Borrowers provide notices, reports and other documents contemplated by this
Agreement (or duplicates thereof) to such agent. The Borrowers hereby consent
to the appointment of such agent and agrees to provide all such notices,
reports and other documents and to otherwise deal with such agent acting on
behalf of the Administrative Agent in the same manner as would be required if
dealing with the Administrative Agent itself.
(c) Any Bank may sell a participation interest to any financial
institution(s), and such financial institution(s) may further sell a
participation interest (undivided or divided) to any financial institution(s),
in its Commitment and the Loans and risk of the Letters of Credit, Swing Line
Loans and Alternate Currency Syndicated Loans and such Bank's or such
participating financial institution's, as the case may be, rights and benefits
under this Agreement and the Notes, and to the extent of that participation,
such participant or participants shall have, to the extent permitted by law,
the same rights and benefits against the Borrowers under Section 9.3 as it or
they would have had if such participant or participants were the Bank making
the Loans to the Borrowers hereunder, provided, however, that in purchasing
such participation interest(s) each such participant shall be deemed to have
agreed to share with the Banks the proceeds thereof as provided in Section
10.10 as fully as if such participant were a Bank hereunder; and provided
further, however, that (i) the obligations under this Agreement of each Bank
selling a participation interest hereunder shall remain unmodified and fully
effective and enforceable against such Bank, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of its Notes for all
purposes of this Agreement, (iv) the Borrowers, the Administrative Agent and
the other Banks shall
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continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, and (v) such Bank shall not
grant to its participant(s) any rights to consent or withhold consent to any
action taken by such Bank or the Administrative Agent under this
Agreement other than action requiring the consent of all of the Banks
hereunder. Each Bank shall give the Borrowers prior written notice of each
sale by such Bank of a participation interest under this Section 11.6(c). Each
participant shall be entitled to the benefits of Sections 5.3 and 5.5 with
respect to its participation interest as if it were a Bank; provided that no
participant shall be entitled to receive any greater amount pursuant to such
Sections 5.3 and 5.5 than the Bank that originally sold such participation
interest would have been entitled to receive in respect of such participation
interest had no such sale taken place.
(d) Any Bank may, with the prior written consent of the
Borrowers and the Administrative Agent (which consent in each case will not
unreasonably be withheld or delayed, and which consent in the case of
MascoTech may not be withheld if there is any Event of Default under Section
9.1(a), (f) or (g)) assign on a pro rata or non-rata basis to one or more banks
or other financial institutions all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Syndicated Loans owing to it, its share of the risk of Letters
of Credit, Swing Line Loans and Alternate Currency Syndicated Loans, and the
Syndicated Notes held by it); provided, however, that (i) the amount of the
Commitment of any assignee Bank as of any date, after giving effect to each
assignment to such assignee that is effective on such date, shall in no event be
less than $10,000,000, (ii) except in the case of an assignment of all of a
Bank's rights and obligations under this Agreement, (A) the amount of the
Commitment of the assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to each
such assignment) shall in no event be less than $5,000,000 or an integral
multiple of $5,000,000, or such lesser amount as the Borrowers and the
Administrative Agent may consent to and (B) after giving effect to each such
assignment, the amount of the Commitment of the assigning Bank shall in no
event be less than $10,000,000, (iii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register (as hereinafter defined), an Assignment and
Acceptance in the form of Exhibit K hereto (an "Assignment and Acceptance"),
together with the Notes subject to such assignment and a processing and
recordation fee of $3,500, (iv) any Bank may without the consent of the
Borrowers or the Administrative Agent assign to any affiliate of such Bank all
of its rights and obligations under this Agreement and (v) any Bank may without
the consent of the Borrowers or the Administrative Agent assign any or all of
its rights and obligations under this Agreement to another Bank, as such term
is defined in this Agreement. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such Assignment and
Acceptance, (i) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and (ii) the Bank assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto).
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(e) By executing and delivering an Assignment and Acceptance,
(i) the Bank assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (A) other than
as provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any instrument or other document furnished pursuant hereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any instrument or other document furnished pursuant
hereto; and (B) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrowers or the performance or observance by the Borrowers of any of their
obligations under this Agreement or any instrument or other document furnished
pursuant hereto, and (ii) the assignee thereunder confirms to the assignor
thereunder and the other parties hereto as follows: (A) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 6.6 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (B) such assignee will,
independently and without reliance upon the Administrative Agent, such
assigning Bank or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (C) such
assignee appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers and discretion under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (D) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are required
to be performed by it as a Bank and agrees that shall be bound by all the terms
and provisions of this Agreement.
(f) The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to and accepted by it and a register for
the recordation of the names and addresses of the Banks and the Commitment of,
and principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
all purposes, absent demonstrable error, and the Borrowers, the Administrative
Agent and the Banks may treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrowers or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an assignee and, unless such assignment is of only a
portion of such assigning Bank's rights and obligations hereunder, the Notes
subject to such assignment, the Administrative Agent shall, if such Assignment
and Acceptance has been completed and the Administrative Agent and the
Borrowers have given their written consent under Section 11.6(d) (if required),
(i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrowers. Within five Business Days after its receipt of such notice, the
Borrowers, at their own expense, shall execute and deliver to the
Administrative Agent (in exchange for the surrendered Notes unless such
assignment is of only a portion of such assigning Bank's rights and
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obligations hereunder) new Revolving Note and Term Note to the order of such
assignee and a new Bid-Option Note to the order of such assignee. Such new
Notes shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibits A-1, A-2 and B-1
hereto, as applicable.
(h) If any Reference Bank makes an assignment of all of its
Commitment and Syndicated Loans to an unaffiliated institution pursuant to
subsection (d) above, or if the Fixed Rate Loans of any Reference Bank are
repaid pursuant to Section 5.2 or 5.3, the Administrative Agent shall, with the
consent of the Required Banks and the Borrowers, appoint another Bank to act as
Reference Bank hereunder. No assignee of any Bank shall be entitled to receive
any greater payment under Section 5.3 than such Bank would have been entitled
to receive with respect to the rights assigned or otherwise transferred, unless
such assignment is made by reason of the provisions of Section 5.2 or 5.3
requiring such Bank to designate a different lending office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
(i) Each Bank may assign to one or more banks or other
financial institutions any Bid-Option Note held by it. Any such Bank
assigning a Bid-Option Note shall for all purposes of this Agreement be deemed
to be the holder of such Note, and no assignee under this Section 11.6(i) shall
as a result of such assignment become a "Bank" under this Agreement.
(j) Notwithstanding any other provision set forth in this
Agreement, any Bank may at any time create a security interest in, or assign,
all or any portion of its rights under this Agreement (including, without
limitation, the Loans owing to it and the Note or Notes held by it) in favor of
any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System; provided that such creation of a
security interest or assignment shall not release such Bank from its
obligations under this Agreement.
11.7 Confidentiality. Each Bank agrees that all documentation and
other information made available by the Borrowers to such Bank under the terms
of this Agreement shall (except (a) to the extent required by legal or
governmental process or otherwise by law, or (b) if such documentation and
other information is publicly available or hereafter becomes publicly available
other than by action of such Bank, or was theretofore known to such Bank
independent of any disclosure thereto by the Borrowers, or (c) to the extent of
necessary disclosure to such Bank's accountants, attorneys or regulators, or
(d) in any litigation or similar proceedings related to this Agreement, the
Notes or any Letter of Credit) be held in the strictest confidence by such Bank
and disclosed only to those officers, employees and agents of such Bank or of
any Affiliate of such Bank involved in the administration of the credit from
time to time outstanding from such Bank to the Borrowers or otherwise involved
in servicing, maintaining or further developing the relationship between such
Bank and the Borrowers, each of which officers, employees and agents shall,
except as permitted under this Section 11.7 generally with respect to such
Bank, hold such documentation and other information in the strictest confidence
and to be used only in connection with this Agreement; provided that (i) such
Bank may disclose such documentation and other information, and all other
information that has been delivered to such Bank by or on behalf of the
Borrowers prior to the Closing Date (including, without limitation,
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the Confidential Information Memorandum dated January, 1998 concerning
MascoTech) in connection with such Bank's credit evaluation of MascoTech and
its Subsidiaries, to any other financial institution to which such Bank sells
or proposes to sell a participation or other interest in any of its Loans
hereunder (or under any other credit agreement with the Borrowers), if such
other financial institution, prior to such disclosure, agrees for the benefit
of the Borrowers to comply with the provisions of this Section 11.7 (including
the provisions of this Section 11.7 allowing further disclosure to other
financial institutions to whom a sale of a participation or other interest is
proposed), or to any Federal Reserve Bank and (ii) such Bank may disclose the
provisions of this Agreement and the Notes and the amounts, maturities and
interest rates of its Loans and the amounts of Letters of Credit (and similar
information relating to any other credit agreement with the Borrowers) to any
purchaser or potential purchaser of any interest of such Bank in any Loan to
the Borrowers.
11.8 Counterparts; Effectiveness of Telecopied Signatures. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such counterpart. Delivery of
a telecopied signature on this Agreement shall be as effective against the
signer as delivery of its original signature.
11.9 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for the convenience of
reference only and shall in no way modify any of the terms or provisions
hereof.
11.10 Construction of Certain Provisions. If any provision of this
Agreement refers to any action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person, whether or not expressly
specified in such provision.
11.11 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or any event or condition which
with notice or lapse of time, or both, could become such a Default if such
action is taken or such condition exists.
11.12 Interest Rate Limitation. Notwithstanding any provisions of this
Agreement or the Notes, in no event shall the amount of interest paid or agreed
to be paid by the Borrowers exceed an amount computed at the highest rate of
interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement or the Notes at the
time performance of such provision shall be due, shall involve exceeding the
interest rate limitation validly prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then, ipso facto, the obligations to
be fulfilled shall be reduced to an amount computed at the highest rate of
interest permissible under applicable law, and if for any reason whatsoever any
Bank shall ever receive as interest an amount which would be deemed unlawful
under such applicable law such interest shall be automatically applied to the
payment of principal of the Loans outstanding hereunder (whether or not
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then due and payable) and not to the payment of interest, or shall be
refunded to the Borrowers if such principal and all other obligations of the
Borrowers to the Banks have been paid in full.
11.13 Substitution of Banks.
(a) After payment by the Borrowers to any Bank of any amount
due pursuant to Section 5.3 or 5.5 that the Borrowers reasonably deem
material, and upon five Business Days' written notice in the form of Exhibit L
delivered to the Administrative Agent and the applicable Bank, the Borrowers
may replace any one or more of the Banks. Upon the date of its effectiveness,
such notice shall terminate the Commitment of such Bank entirely, provided that
the Borrowers shall prepay each Loan of such Bank (if any) in full on the
effective date of such termination, together with accrued interest thereon, all
amounts due pursuant to Sections 5.3 and 5.5, all accrued facility fees with
respect to such Bank and all other amounts owing to such Bank hereunder to such
effective date.
(b) If the Borrowers shall terminate the Commitment of any
Bank pursuant to the provisions of subsection (a) of this Section 11.13, the
Borrowers shall designate another bank or other banks (which may be one of the
Banks) (in either case, an "Additional Bank") to be parties to this Agreement,
provided, that (i) without the consent of the Administrative Agent, the total
number of Additional Banks (other than those that were already Banks) may not
exceed the total number of Banks whose Commitments are terminated pursuant to
Section 11.13(a) plus six, (ii) the amount of the Commitment of any Additional
Bank may not be less than $10,000,000, (iii) the amount of the Commitment(s) of
the Additional Bank(s) (or, if any such Additional Bank already is a Bank, the
added portion of such Bank's Commitment) shall in the aggregate equal the
amount of the Commitment so terminated and (iv) the Borrowers or the Additional
Bank, and not the Bank being terminated pursuant to subsection (a) of this
Section 11.13, shall pay the processing and recordation fee required under
Section 11.6(d)(iv). Any Additional Bank shall become a party to this
Agreement and be considered a Bank hereunder for all purposes if (i) it shall
agree in writing to be bound by all of the terms and provisions of this
Agreement, such agreement to specify the amount of the Commitment of such
Additional Bank and to be otherwise in form and substance satisfactory to the
Administrative Agent, (ii) it shall make Syndicated Loans to the Borrowers in
principal amounts which bear the same ratio to the amounts of the Syndicated
Loans of other Banks (including other Additional Banks) then outstanding or to
be concurrently outstanding as the amount of the Commitment of such Additional
Bank bears to the then aggregate amount of the Commitments of such other Banks
(including other Additional Banks), and (iii) a copy of such agreement and of
evidence satisfactory to the Administrative Agent of the making of such Loans
shall be furnished to the Administrative Agent.
11.14 Governing Law. This Agreement is a contract made under, and
shall be governed by and construed in accordance with, the law of the State of
New York applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State.
11.15 Integration and Severability. This Agreement and the Notes
embody the entire agreement and understanding among the Borrowers, the
Administrative Agent, and the Banks, and
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supersede all prior agreements and understandings, relating to the subject
matter hereof and thereof. In case any one or more of the obligations of the
Borrowers under this Agreement or any Note shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining obligations of the Borrowers shall not in any way be affected or
impaired thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of the Borrowers under this Agreement or any Note in any other
jurisdiction.
11.16 WAIVER OF JURY TRIAL. THE BANKS, THE ADMINISTRATIVE AGENT, THE
SYNDICATION AGENTS AND THE BORROWERS, AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF
THEM RELATED HERETO OR THERETO. NONE OF THE BANKS, THE ADMINISTRATIVE AGENT,
THE SYNDICATION AGENTS OR THE BORROWERS SHALL, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
11.17 Alternate Currency Addenda Binding on Each Bank; Provisions
Regarding Alternate Currency Agents. Each of the Banks agrees that it shall be
bound by the provisions of each Alternate Currency Addendum entered into in
connection herewith, in particular as it relates to the provisions applicable
to the Alternate Currency Agent appointed thereunder.
11.18 Unification of Certain Currencies. If the Euro (or some other
similar unit of account) becomes a currency in its own right in connection with
European monetary union contemplated by the Maastricht Treaty, then each of the
Borrowers, the Banks and the Administrative Agent agrees to negotiate in good
faith an amendment to this Agreement satisfactory in form and substance to the
Borrowers, the Banks and the Administrative Agent to account therefor. The
introduction of the Euro shall not have the effect of altering any term of any
Note or other instrument or discharging or excusing performance by any party
under any such Note or instrument or giving any party the right to terminate
any such Note or instrument.
89
<PAGE> 97
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
Closing Date, notwithstanding the date and year first above written.
MASCOTECH, INC.,
as Borrower
By:/s/Timothy Wadhams
--------------------------------------
TIMOTHY WADHAMS
Its: Vice President - Controller
and Treasurer
21001 Van Born Road
Taylor, Michigan 48180
Attention: Jim Tompkins
Telephone: (313) 792-6403
Fax: (313) 792-6118
MASCOTECH ACQUISITION, INC.
as Borrower
By:/s/Timothy Wadhams
--------------------------------------
TIMOTHY WADHAMS
Its: Vice President
and Treasurer
21001 Van Born Road
Taylor, Michigan 48180
Attention: Jim Tompkins
Telephone: (313) 792-6403
Fax: (313) 792-6118
Credit Agreement
<PAGE> 98
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and Bank
By:/s/Richard H. Huttonlocher
--------------------------------------
RICHARD H. HUTTONLOCHER
Its: First Vice President
c/o NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Richard H. Huttonlocher
Telephone: (312) 225-2259
Fax: (313) 225-2290
Total Commitment: $300,000,000
Term Loan Commitment: $115,384,615.40
Revolving Credit Commitment: $184,615,384.60
Credit Agreement
<PAGE> 99
BANK OF AMERICA NT&SA,
as Syndication Agent and Bank
By:/s/Lewis B. Fisher
--------------------------------------
Lewis B. Fisher
Its: Managing Director
231 South LaSalle Street, 9th Floor
Chicago, Illinois 60697
Attention: Lewis B. Fisher
Telephone: (312) 828-3137
Fax: (312) 987-7384
Total Commitment: $225,000,000
Term Loan Commitment: $86,538,461.54
Revolving Credit Commitment: $138,461,538.46
Credit Agreement
<PAGE> 100
NATIONSBANK, N.A.,
as Syndication Agent and Bank
By:/s/Wallace Harris Jr.
--------------------------------------
Its: V.P.
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Wallace Harris, Vice President
Telephone: 312-234-5626
Fax: 312-234-5601
Total Commitment: $225,000,000
Term Loan Commitment: $86,538,461.54
Revolving Credit Commitment: $138,461,538.46
Credit Agreement
<PAGE> 101
COMERICA BANK,
as Bank
By:/s/A.J. Anderson
--------------------------------------
A.J. Anderson
Its: First Vice President
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Nicholas G. Mester
Telephone: (313) 222-9168
Fax: (312) 222-3776
Total Commitment; $100,000,000
Term Loan Commitment: $38,461,538.46
Revolving Credit Commitment: $61,538,461.54
Credit Agreement
<PAGE> 102
CIBC INC.,
as Bank
By:/s/Stephanie E. DeVane
--------------------------------------
Stephanie E. DeVane
Its: Executive Director, CIBC
Oppenheimer Corp., as Agent
425 Lexington Avenue
New York, NY 10017
Attention: Stephanie E. DeVane
Telephone: (212) 856-3727
Fax: (212) 856-3991
Total Commitment: $75,000,000
Term Loan Commitment: $28,846,153.85
Revolving Credit Commitment: $46,153,846.15
Credit Agreement
<PAGE> 103
FIRST UNION NATIONAL BANK,
as Bank
By:/s/Glenn F. Edwards
--------------------------------------
Its: Vice President
One First Union Center, 5th Floor
Charlotte, North Carolina 28288
Attention: Glenn F. Edwards
Telephone: 704-383-3810
Fax; 704-374-2802
Total Commitment; $75,000,000
Term Loan Commitment: $28,846,153.85
Revolving Credit Commitment: $46,153,846.15
Credit Agreement
<PAGE> 104
KEYBANK NATIONAL ASSOCIATION,
as Bank
By:/s/Thomas A. Crandell
--------------------------------------
Thomas A. Crandell
Its: Vice President
127 Public Square, 6th Floor
Cleveland, Ohio 44114
Attention: Thomas A. Crandell
Telephone: (216) 689-3589
Fax: (216) 689-4981
Total Commitment: $75,000,000
Term Loan Commitment: $28,846,153.85
Revolving Credit Commitment: $46,153,846.15
Credit Agreement
<PAGE> 105
PNC BANK, NATIONAL ASSOCIATION
as Bank
By:/s/Peter F. Stack
--------------------------------------
Peter F. Stack
Its: Assistant Vice President
500 West Madison Street, Suite 3140
Chicago, Illinois 60606
Attention: Peter Stack
Telephone: (312) 906-9426
Fax: (312) 906-3420
Total Commitment: $75,000,000
Term Loan Commitment: $28,846,153.85
Revolving Credit Commitment: $46,153,846.15
Credit Agreement
<PAGE> 106
THE BANK OF NEW YORK,
as Bank
By:/s/Edward J. Dougherty
--------------------------------------
Edward J. Dougherty III
Its: Vice President
U.S. Commercial Banking
One Wall Street, 22nd Floor
New York, New York 10286
Attention: Edward J. Dougherty III
Telephone: (212) 635-1066
Fax: (212) 635-6434
Total Commitment: $75,000,000
Term Loan Commitment: $28,846,153.85
Revolving Credit Commitment: $46,153,846.15
Credit Agreement
<PAGE> 107
THE BANK OF NOVA SCOTIA,
as Bank
By:/s/F.C.H. Ashby
--------------------------------------
F.C.H. Ashby
Its: Senior Manager Loan Operations
Atlanta Agency
Suite 2700
600 Peachtree Street NE
Atlanta, Georgia 30308
Attention: Shannon Dancila
Telephone: (404) 877-1561
Fax: (404) 888-8998
Total Commitment: $75,000,000
Term Loan Commitment: $28,846,153.85
Revolving Credit Commitment: $46,153,846.15
Credit Agreement
<PAGE> 108
SCHEDULE 1
TO
CREDIT AGREEMENT
Pricing Grid
<TABLE>
<CAPTION>
Applicable Margin over Applicable Margin for Applicable
Leverage Ratio Eurodollar Rate Letters of Credit Facility Fee
Rate
<S> <C> <C> <C>
Greater than or equal
to 4.50 to 1.0 1.000% 1.000% 0.250%
Less than 4.50 to 1.0
and greater than or
equal to 4.25 to 1.0 0.875% 0.875% 0.250%
Less than 4.25 to 1.0
and greater than or
equal to 3.75 to 1.0 0.775% 0.775% 0.225%
Less than 3.75 to 1.0
and greater than or
equal to 3.25 to 1.0 0.675% 0.675% 0.200%
Less than 3.25 to 1.0
and greater than or
equal to 2.5 to 1.0 0.575% 0.575% 0.175%
Less than 2.5 to 1.0
and greater than or
equal to 2.0 to 1.0 0.350% 0.350% 0.150%
Less than 2.0 to 1.0 0.225% 0.225% 0.150%
</TABLE>
Credit Agreement
<PAGE> 109
SCHEDULE 2
TO
CREDIT AGREEMENT
INDUSTRIAL REVENUE BONDS
1. City of Fort Wayne, Indiana Industrial Development Revenue Bonds (ND Tech
Project)
2. Trust Indenture between Clinton County Redevelopment Authority and Fort
Wayne National Bank, Trustee, dated February 1, 1997
3. Guaranty Agreement dated as of February 1, 1997, between TriMas
Corporation and Fort Wayne National Bank, Trustee
Credit Agreement
<PAGE> 110
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT ("Amendment") is
entered into and dated as of February 10, 1998 by and among MascoTech, Inc.,
a Delaware corporation (together with its successors, "MascoTech"), TriMas
Corporation, a Delaware corporation (successor by merger to MascoTech
Acquisition, Inc., a Delaware corporation, and, together with its successors,
"TriMas"), any Borrowing Subsidiaries which are now or may hereafter become a
party hereto from time to time (each individually a "Borrowing Subsidiary" and
collectively, the "Borrowing Subsidiaries") (MascoTech, TriMas and each
Borrowing Subsidiary referred to individually as a "Borrower" and collectively
as the "Borrowers"), the Banks party hereto from time to time (collectively, the
"Banks" and individually, a "Bank"), The First National Bank of Chicago (the
"Administrative Agent") and Bank of America NT&SA and NationsBank, N.A. (the
"Syndication Agents", and collectively with the Administrative Agent, the
"Agents") under that certain Credit Agreement among the parties referred to
above dated as of January 16, 1998 (the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the meaning given to them in
the Credit Agreement.
WHEREAS, the Borrowers, the Banks and the Agents have entered
the Credit Agreement; and
WHEREAS, the Borrowers, the Banks and the Agents have agreed to
amend the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Banks and the
Agents agree as follows:
1. Amendment to the Credit Agreement. Effective as of
February 10, 1998 and subject to the satisfaction of the conditions precedent
set forth in Section 2 below, the Credit Agreement shall be and hereby is
amended as follows:
(a) The following definitions in Section 1.1 shall be
amended:
(1) The definition of "Revolving Credit
Commitment" shall be amended to delete the reference to
"Section 3.10" and substitute therefor "Section 3.10(a)" at the
end thereof.
(2) The definition of "Term Loan Commitment" shall be
amended to delete the word "and" before "(ii)" and to insert a
comma in its place, and to add "and (iii) as such amount may be
reduced from time to time pursuant to Section 3.10(b)" before
the period at the end thereof.
<PAGE> 111
(b) Section 3.2 is amended in its entirety as follows:
3.2 Term Loans. Subject to the terms and conditions
set forth in this Agreement, each Bank on and after the
Closing Date severally and not jointly agrees to make a term
loan, in Dollars, to one or more of the Borrowers in an
aggregate amount not to exceed such Bank's Term Loan
Commitment (each individually, a "Term Loan" and,
collectively, the "Term Loans"). All Term Loans shall be
made by the Banks on or after the Closing Date
simultaneously and pro rata, it being understood that no
Bank shall be responsible for any failure by any other Bank
to perform its obligation to make any Term Loan hereunder
nor shall the Term Loan Commitment of any Bank be increased
or decreased as a result of any such failure, it being
further understood that all or part of the initial Term
Loans extended to the Borrowers on the Closing Date may be
refinanced after the Closing Date with Term Loans made to
one or more of the Borrowers. Each Bank's Term Loan
Commitment shall be reinstated as of the date any Borrower
requests a Term Loan to refinance an existing Term Loan
originally made to a different Borrower.
(c) Section 3.7(a) is amended to delete the word
"Revolving" in the fifth line thereof.
(d) Section 3.8(b) is amended to add the following
sentence at the end thereof:
Upon any refinancing of a Term Loan, the applicable
Borrower or Borrowers shall execute a new Term Loan
Note payable to each Bank in an amount equal to the
Term Loan Commitment of such Bank.
(e) Section 3.10 is amended (1) to add "(a)" prior to
the first word thereof and (2) to add a new Section 3.10(b) as follows:
Subject to Section 5.5, the Borrowers shall have the
right at any time and from time to time, upon one Business
Day's prior written notice to the Administrative Agent, to
terminate or proportionately reduce the amount of the Term
Loan Commitments, provided, that any partial reduction of
the amount of the Term Loan Commitments shall be in the
amount of $5,000,000 or a multiple of $1,000,000 in excess
thereof, provided that after giving effect to any such
voluntary reduction, the Dollar Equivalent of the
outstanding Term Loans shall not exceed the amount of the
Term Loan Commitments, as reduced from time to time. The
Term Loan Commitments or any portion thereof terminated or
reduced pursuant to this Section may not be reinstated.
Upon receipt of any notice from the Borrowers pursuant to
this Section, the Administrative Agent shall promptly notify
each Bank of the contents thereof and of such Bank's share
of any reduction of the Term Loan Commitments. Each such
notice shall be irrevocable by the Borrowers once the
Administrative Agent begins notifying any Bank of the
contents thereof.
2
<PAGE> 112
(f) Section 3.11 is amended (1) to delete words "The
Revolving Credit Commitments" in the first line and to substitute therefor
"All Commitments" and (2) to delete the last sentence thereof.
(g) Section 4.1(b)(i) is amended (1) to add the words
"and the Term Loan Commitments" after the words "Term Loans" in the third line
thereto and (2) to add the following sentence after the word "hereunder" in
the fourth line thereto:
The principal amount of the installments may be paid by any or all
of the Borrowers at their discretion provided that each of the quarterly
installments shall be in the aggregate amounts set forth below:
(h) Section 4.1(b)(i) is further amended to insert the
words ", except that the initial Term Loans extended to the Borrowers on the
Closing Date may be refinanced with Term Loans made subsequently to one or more
of the Borrowers" after the word "repaid" at the end thereof.
(i) The following Section 4.1(b)(ii) is added:
A repayment made within five (5) Business Days prior to
the scheduled installment date for such repayment, as set
forth in Section 4.1(b)(i), shall be applied to the
installment due within such five (5) Business Days and shall
not be deemed a prepayment. Any such repayment shall be
subject to the provisions of Section 5.5.
(j) Section 4.2(g) is amended to add the words "(other
than repayments made within five (5) Business Days prior to the scheduled
installment date for such repayments as permitted by Section 4.1(b)(ii))" after
the words "Term Loans" in the first line thereof.
(k) Section 7.11(b) shall be amended to delete the words
"and (v)" in the last line thereof and to substitute the words ", (v) to
refinance the Term Loans made to the Borrowers on the Closing Date with Term
Loans made to one or more of the Borrowers and (vi)".
(l) Section 7.14 is amended to delete "(i)" in the third
line thereof.
(m) Section 11.1(a)(ii) is amended in its entirety as
follows:
except as expressly authorized hereunder, amend, extend or
terminate the respective Commitment of any Bank (other than any
amendment, extension or termination of any Alternate Currency Commitment
other than an extension of any Alternate Currency Commitment beyond the
Termination Date.)
(n) Section 11.6(c) is amended to insert the words "or
special purpose funding entity" after each appearance of the words "financial
institution(s)" in the first, second and third
3
<PAGE> 113
lines thereof and to insert the words "or special purpose funding
entity's" after the words "financial institution's" in the fourth line thereof.
(o) Section 11.6(d) is amended to delete the reference
to "the Borrowers" in the first line thereof and to substitute therefor the
word "MascoTech".
(p) Section 11.6(e) is amended to insert the word "it"
after the word "that" in the last line thereof.
(q) Section 11.6(g) is amended to insert the word "a"
before the words "new Revolving Note" and before the words "Term Note" in the
tenth line thereof.
(r) Section 11.7 is amended to insert the words "or
special purpose funding entity" after each appearance of the words "financial
institution" in the eighteenth and twentieth lines thereof and after the word
"institutions" in the twenty-third line thereof.
2. Conditions Precedent. This Amendment shall become
effective as of the date above written, if, and only if, the Administrative
Agent has received duly executed originals of this Amendment from the Borrowers
and the Required Banks.
3. Representations and Warranties of the Borrowers.
The Borrowers hereby represent and warrant as follows:
(a) This Amendment and the Credit Agreement, as amended
hereby, constitute legal, valid and binding obligations of the Borrowers and
are enforceable against the Borrowers in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the
Borrowers hereby reaffirm all representations and warranties made in the
Credit Agreement, and to the extent the same are not amended hereby, agree that
all such representations and warranties shall be deemed to have been remade as
of the date of delivery of this Amendment, unless and to the extent that any
such representation and warranty is stated to relate solely to an earlier date,
in which case such representation and warranty shall be true and correct as of
such earlier date.
4. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and
after the date hereof, each reference in the Credit Agreement to "this Credit
Agreement," "hereunder," "hereof," "herein" or words of like import shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) The Credit Agreement, as amended hereby, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
4
<PAGE> 114
(c) Except as expressly provided herein, the execution,
delivery and effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of the Administrative Agent or the Banks, nor
constitute a waiver of any provision of the Credit Agreement or any other
documents, instruments and agreements executed and/or delivered in connection
therewith.
5. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws (as opposed to the conflict
of law provisions) of the State of New York.
6. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or
more of the parties to the Amendment on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
5
<PAGE> 115
IN WITNESS WHEREOF, this Amendment has been duly
executed and delivered on the date first above written.
MASCOTECH, INC., as a Borrower
By: /s/Timothy Wadhams
---------------------------------------
Name: Timothy Wadhams
Title: Vice President/Controller and
Treasurer
TRIMAS CORPORATION, as a Borrower
By: /s/Timothy Wadhams
---------------------------------------
Name: Timothy Wadhams
Title: Senior Vice President
and CFO
Amendment No. 1 to Credit Agreement
<PAGE> 116
THE FIRST NATIONAL BANK OF
CHICAGO, as Administrative
Agent and Bank
By: /s/Richard H. Huttenlocher
-----------------------------------
Name: Richard H. Huttenlocher
Title: First Vice President
BANK OF AMERICA NT&SA, as
Syndication Agent and Bank
By: /s/Lewis B. Fisher
-----------------------------------
Name: Lewis B. Fisher
Title: Managing Director
NATIONSBANK, N.A., as
Syndication Agent and Bank
By: /s/Wallace Harris Jr.
-----------------------------------
Name: Wallace Harris Jr.
Title: Vice President
BANKS: COMERICA BANK
By: /s/A.J. Anderson
-----------------------------------
Name: A.J. Anderson
Title: First Vice President
CIBC INC.
By: /s/Stephanie E. DeVane
-----------------------------------
Name: Stephanie E. DeVane
Title: Executive Director, CIBC
Oppenheimer Corp., as Agent
Amendment No. 1 to Credit Agreement
<PAGE> 117
FIRST UNION NATIONAL BANK
By: /s/Glenn F. Edwards
-----------------------------------
Name: Glenn F. Edwards
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/Thomas A. Crandell
-----------------------------------
Name: Thomas A. Crandell
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By:
-----------------------------------
Name: Peter F. Stack
Title: Assistant Vice President
THE BANK OF NEW YORK
By: /s/Edward J. Dougherty III
-----------------------------------
Name: Edward J. Dougherty III
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/F.C.H. Ashby
-----------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
Amendment No. 1 to Credit Agreement
<PAGE> 1
EXHIBIT 10.b
CORPORATE SERVICES AGREEMENT
This Agreement is made as of January 1, 1987 between Masco Corporation,
a Delaware corporation ("Masco"), and Masco Industries, Inc., a Delaware
corporation ("Industries").
WHEREAS, Masco and Industries desire to amend and restate that certain
Corporate Services Agreement between them dated as of May 1, 1984 (the "1984
Corporate Services Agreement"); and
WHEREAS, Masco and Industries desire to terminate that certain
Corporate Services Agreement dated as of July 1, 1985 (the "1985 Corporate
Services Agreement") between Masco's wholly-owned subsidiary Masco Building
Products Corp., a Delaware corporation ("MBPC"), and NI Industries, Inc. a
Delaware corporation and currently an indirect wholly-owned subsidiary of
Industries ("NI"); and
WHEREAS, Industries desires that Masco provide, and Masco is willing to
provide, either directly or through its subsidiaries, certain services and
facilities on the terms and conditions hereinafter set forth; and
WHEREAS, Masco desires that Industries provide, and Industries is
willing to provide, either directly or through NI, certain facilities on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree to amend and restate the 1984 Corporate
Services Agreement and take certain other action as follows:
<PAGE> 2
1. Masco shall provide to Industries and its subsidiaries corporate
support staff and administrative services of those personnel which Masco
maintains internally for its own officers, operating executives and business
operations and which Masco has heretofore provided to Industries' headquarters
and businesses pursuant to the 1984 Corporate Services Agreement, such as
accounting, legal, treasury, tax, corporate development, data processing,
research and development and human resources, provided that Masco shall not be
obligated to provide any services which would be in contravention of law.
Masco shall furnish such services at the reasonable request of Industries,
provided that Masco shall not be required to disrupt the provisions of services
for its own business purposes and shall not be obligated to retain additional
employees in order to accommodate Industries' requirements for services other
than in the ordinary course of business. In addition, Masco shall provide to
Industries headquarters office space and data processing equipment in Masco's
corporate office in Taylor, Michigan.
2. Industries shall provide to MBPC headquarters office space at the
corporate offices of NI in Long Beach, California, as heretofore provided
pursuant to the 1985 Corporate Services Agreement.
3. Industries will pay Masco a fee for the services and office space
provided under Section 1 hereof, irrespective of Industries' or its
subsidiaries' actual use thereof, equal to eight tenths of one percent of
Industries' consolidated annual net sales (pro rated for any partial year), as
shown in Industries' annual audited financial statements, less (in
consideration of the facilities provided by Industries to MBPC pursuant to
Section 2 hereof) the real estate related costs incurred by NI to maintain
headquarters office space for MBPC in NI's Long Beach, California headquarters,
including, but not limited to, depreciation expense, maintenance, repairs and
taxes related to such
2
<PAGE> 3
facility. Such fee shall be payable monthly in arrears within 30 days of the
end of each month, based upon Industries' consolidated unaudited net sales for
each month, with such timely adjustment as may be required following the
preparation of such audited financial statements. Industries shall be
responsible for the payment of fees and expenses for services rendered by
third parties retained by Masco on behalf of Industries and its subsidiaries.
In addition, Industries shall pay for material utilized and purchased
components in research and development projects, in accordance with Masco's
customary practice. The parties recognize that Industries may, in the future,
hire certain support and administrative staff to be employed solely by
Industries and incur other expenses for equipment, services or space, and to
the extent any such support and administrative staff are employed by
Industries or such expenses are incurred, Masco shall review the resulting
cost savings, if any, to Masco in providing support staff and administrative
services, equipment and headquarters office space hereunder and if, in Masco's
good faith judgment, such a cost savings has resulted, Masco shall reflect
such savings by a corresponding reduction in the subsequent fees to be paid
hereunder.
4. Additional services, facilities and other items made available by
Masco to its operating units which are not covered by the base fee will
similarly be made available to Industries except if the provision of such
services, facilities and other items would be in contravention of law. The
charges for additional services, facilities and other items shall be determined
form time to time by Masco, but Industries shall have no obligation to purchase
or use any such additional services, facilities or other times.
3
<PAGE> 4
5. The term of this agreement shall be from the date hereof through
December 31, 1988. the term shall be extended automatically for a period of
one year each January 1 thereafter, provided that Masco may give notice of
non-renewal not less than 90 days prior to any such January 1. This Agreement
may be terminated by Industries at any time, without cause, on 90 days written
notice, provided that such termination shall not relieve Industries of its
obligations accruing hereunder through the effective date of such termination.
6. In providing services, equipment and facilities hereunder, Masco
and Industries shall each have a duty to act, and to cause their respective
employees to act, in a reasonable and prudent manner. Subject to the
provisions of the Research and Development Undertaking attached as Annex A
hereto, neither Masco or its subsidiaries, nor any officer, Director, employee
or agent of Masco or its subsidiaries, nor Industries or its subsidiaries, nor
any officer, director, employee or agent of Industries or its subsidiaries,
shall be liable for any loss incurred in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance or bad
faith.
7. The selection of Masco employees to provide services hereunder
shall be determined by Masco and such employees shall be the employees of
Masco. All work performed hereunder by Masco shall be performed by Masco as an
independent contractor.
8. Masco and Industries shall take reasonable measures to keep
confidential all information concerning the other which is acquired in the
course of performing services hereunder and which is of a nature customarily
considered to be confidential by them. Research and development services
provided by Masco shall be subject to the additional provisions set forth in
Annex A hereto.
4
<PAGE> 5
9. This Agreement shall not be assigned by Industries without the
express written consent of Masco, except for an assignment by Industries to a
successor to substantially all of its business.
10. The 1985 Corporate Services Agreement is hereby terminated.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MASCO CORPORATION MASCO INDUSTRIES, INC.
By /s/Richard G. Mosteller By /s/Erwin H. Billig
----------------------------- ---------------------------------
Senior Vice President - President
Finance
The termination of the 1985 Corporate Services Agreement is accepted and
agreed to as of the day and year first above written.
NI INDUSTRIES, INC.
By /s/James Shaffer
---------------------------
5
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January 22, 1998
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Gentlemen:
As you are aware, MascoTech, Inc. completed its acquisition of TriMas
Corporation on Thursday, January 22, 1998 (the "Effective Date"). This will
confirm our agreement that the Corporate Services Agreement, dated as of
December 27, 1988, between Masco Corporation ("Masco") and TriMas Corporation
(the "TriMas Corporate Services Agreement"), is terminated effective as of the
end of business on the Effective Date, except with respect to rights and
obligations of the parties thereto which have accrued as a result of services
rendered thereunder prior to the Effective Date. Furthermore, Masco agrees
that the period for which a fee is payable under the TriMas Corporate Services
Agreement will terminate on the earlier of (i) the Effective Date, or (ii) the
date immediately preceding the date that the consolidated net sales of TriMas
are included in the consolidated net sales of MascoTech, Inc. After such date,
Masco will be compensated for work performed for the TriMas companies under
Masco's Corporate Services Agreement with MascoTech (the "MascoTech Corporate
Services Agreement"). Finally, Masco agrees that, in calculating the fee
payable under the MascoTech Corporate Services Agreement, MascoTech is entitled
to the credits that were historically permitted to TriMas under the TriMas
Corporate Services Agreement of up to $250,000 per year for occupancy costs at
TriMas' Ann Arbor headquarters (consisting of rent, utilities, maintenance and
property taxes), office supplies and postage costs at TriMas' Ann Arbor
headquarters and the credit historically provided for the Norris management
services that had been discontinued by you when Masco Building Products shut
down its operations.
If the foregoing is your understanding of our Agreement, please
acknowledge by signing below on the attached copy of this letter, and returning
same to the undersigned.
Very truly yours,
MASCOTECH, INC.
By /s/David B. Liner
--------------------------
The foregoing is acknowledged
and agreed to:
MASCO CORPORATION
By /s/John R. Leekley
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EXHIBIT 10.e
MASCO CORPORATION
1991 LONG TERM STOCK INCENTIVE PLAN
(Amended and Restated April 23, 1997)
SECTION 1. PURPOSES
The purposes of the 1991 Long Term Stock Incentive Plan (the "Plan")
are to encourage selected employees of and consultants to Masco Corporation
(the "Company") and its Affiliates to acquire a proprietary interest in the
Company in order to create an increased incentive to contribute to the
Company's future success and prosperity, and enhance the ability of the Company
and its Affiliates to attract and retain exceptionally qualified individuals
upon whom the sustained progress, growth and profitability of the Company
depend, thus enhancing the value of the Company for the benefit of its
stockholders.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Affiliate" shall mean any entity in which the Company's direct or
indirect equity interest is at least twenty percent, and any other entity in
which the Company has a significant direct or indirect equity interest, whether
more or less than twenty percent, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean a committee of the Company's directors
designated by the Board of Directors to administer the Plan and composed of not
less than two directors, each of whom is a "non-employee director" within the
meaning of Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section
6(e) of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Stock Option" shall mean an Option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of
the Code, or any successor provision thereto.
(i) "Non-Qualified Stock Option" shall mean an Option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
(l) "Participant" shall mean an employee of or consultant to the
Company or any Affiliate designated to be granted an Award under the Plan.
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(m) "Performance Award" shall mean any right granted under Section 6(d)
of the Plan.
(n) "Restricted Period" shall mean the period of time during which
Awards of Restricted Stock or Restricted Stock Units are subject to
restrictions.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(p) "Restricted Stock Unit" shall mean any right granted under Section
6(c) of the Plan that is denominated in Shares.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act, or any successor rule or
regulation.
(r) "Section 16" shall mean Section 16 of the Exchange Act, the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder, or any successor provision, rule or regulation.
(s) "Shares" shall mean the Company's common stock, par value $1.00 per
share, and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(c) of the Plan.
(t) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan, and subject to the terms of
the Plan and applicable law, the Committee's authority shall include without
limitation the power to:
(i) designate Participants;
(ii) determine the types of Awards to be granted;
(iii) determine the number of Shares to be covered by Awards and any
payments, rights or other matters to be calculated in connection
therewith;
(iv) determine the terms and conditions of Awards and amend the
terms and conditions of outstanding Awards;
(v) determine how, whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or
suspended;
(vi) determine how, whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property
and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee;
(vii) determine the methods or procedures for establishing the fair
market value of any property (including, without limitation, any Shares or
other securities) transferred, exchanged, given or received with respect
to the Plan or any Award;
(viii) prescribe and amend the forms of Award Agreements and other
instruments required under or advisable with respect to the Plan;
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(ix) designate Options granted to key employees of the Company or
its subsidiaries as Incentive Stock Options;
(x) interpret and administer the Plan, Award Agreements, Awards and
any contract, document, instrument or agreement relating thereto;
(xi) establish, amend, suspend or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the
administration of the Plan;
(xii) decide all questions and settle all controversies and disputes
which may arise in connection with the Plan, Award Agreements and Awards;
(xiii) delegate to directors of the Company the authority to
designate Participants and grant Awards, and to amend Awards granted to
Participants;
(xiv) make any other determination and take any other action that
the Committee deems necessary or desirable for the interpretation,
application and administration of the Plan, Award Agreements and Awards.
All designations, determinations, interpretations and other decisions
under or with respect to the Plan, Award Agreements or any Award shall be
within the sole discretion of the Committee, may be made at any time and shall
be final, conclusive and binding upon all persons, including the Company,
Affiliates, Participants, beneficiaries of Awards and stockholders of the
Company.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section
4(c):
(i) Initial Authorization. There shall be 8,000,000 Shares
initially available for issuance under the Plan.
(ii) Acquired Shares. In addition to the amount set forth above, up
to 8,000,000 Shares acquired by the Company subsequent to the 1997 Annual
Meeting of Stockholders as full or partial payment for the exercise price
for an Option or any other stock option granted by the Company, or
acquired by the Company, in open market transactions or otherwise, in
connection with the Plan or any Award hereunder or any other employee
stock option or restricted stock issued by the Company may thereafter be
included in the Shares available for Awards. If any Shares covered by an
Award or to which an Award relates are forfeited, or if an Award expires,
terminates or is cancelled, then the Shares covered by such Award, or to
which such Award relates, or the number of Shares otherwise counted
against the aggregate number of Shares available under the Plan by reason
of such Award, to the extent of any such forfeiture, expiration,
termination or cancellation, may thereafter be available for further
granting of Awards and included as acquired Shares for purposes of the
preceding sentence.
(iii) Shares Under Prior Plans. In addition to the amounts set
forth above, shares remaining available for issuance upon any termination
of authority to make further awards under both the Company's 1988
Restricted Stock Incentive Plan and its 1988 Stock Option Plan shall
thereafter be available for issuance hereunder.
(iv) Accounting for Awards. For purposes of this Section 4,
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(A) if an Award (other than a Dividend Equivalent) is
denominated in Shares, the number of Shares covered by such Award,
or to which such Award relates, shall be counted on the date of
grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan to the extent
determinable on such date and insofar as the number of Shares is
not then determinable under procedures adopted by the Committee
consistent with the purposes of the Plan; and
(B) Dividend Equivalents and Awards not denominated in Shares
shall be counted against the aggregate number of Shares available
for granting Awards under the Plan in such amount and at such time
as the Committee shall determine under procedures adopted by the
Committee consistent with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards or restricted stock awards or stock options
granted under any other plan of the Company may be counted or not counted
under procedures adopted by the Committee in order to avoid double
counting. Any Shares that are delivered by the Company or its Affiliates,
and any Awards that are granted by, or become obligations of, the
Company, through the assumption by the Company of, or in substitution
for, outstanding restricted stock awards or stock options previously
granted by an acquired company shall not, except in the case of Awards
granted to Participants who are directors or officers of the Company for
purposes of Section 16, be counted against the Shares available for
granting Awards under the Plan.
(v) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of
authorized but unissued Shares or of Shares reacquired by the Company,
including but not limited to Shares purchased on the open market.
(b) Individual Stock-Based Awards. Subject to adjustment as provided
in Section 4(c), no Participant may receive Options or Stock Appreciation
Rights under the Plan in any calendar year that relate to more than 1,000,000
Shares in the aggregate; provided, however, that such number may be increased
with respect to any Participant by any Shares available for grant to such
Participant in accordance with this Paragraph 4(b) in any prior years that were
not granted in such prior year beginning on or after January 1, 1997. No
provision of this Paragraph 4(b) shall be construed as limiting the amount of
any other stock-based or cash-based Award which may be granted to any
Participant.
(c) Adjustments. Upon the occurrence of any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), change in the capital or shares of capital stock, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Shares or other securities of the Company or extraordinary transaction or event
which affects the Shares, then the Committee shall have the authority to make
such adjustment, if any, in such manner as it deems appropriate, in (i) the
number and type of Shares (or other securities or property) which thereafter
may be made the subject of Awards, (ii) outstanding Awards including without
limitation the number and type of Shares (or other securities or property)
subject thereto, and (iii) the grant, purchase or exercise price with respect
to outstanding Awards and, if deemed appropriate, make provision for cash
payments to the holders of outstanding Awards; provided, however, that the
number of Shares subject to any Award denominated in Shares shall always be a
whole number.
SECTION 5. ELIGIBILITY
Any employee of or consultant to the Company or any Affiliate,
including any officer of the Company (who may also be a director, any person
who serves only as a director of the Company and any consultant to the Company
or an Affiliate who is also a director of the Company and who is not rendering
services pursuant to a written agreement with the entity in question), as may
be selected from time to time by the Committee or by the directors to whom
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authority may be delegated pursuant to Section 3 hereof in its or their
discretion, is eligible to be designated a Participant.
SECTION 6. AWARDS
(a) Options. The Committee is authorized to grant Options to
Participants.
(i) Committee Determinations. Subject to the terms of the Plan, the
Committee shall determine:
(A) the purchase price per Share under each Option, provided,
however, that such price shall be not less than 100% of the fair
market value of the Shares underlying such Option on the date of
grant;
(B) the term of each Option; and
(C) the time or times at which an Option may be exercised, in
whole or in part, the method or methods by which and the form or
forms (including, without limitation, cash, Shares, other
Awards or other property, or any combination thereof, having a fair
market value on the exercise date equal to the relevant exercise
price) in which payment of the exercise price with respect thereto
may be made or deemed to have been made. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects
with the provisions of Section 422 of the Code, or any successor
provision thereto, and any regulations promulgated thereunder.
Subject to the terms of the Plan, the Committee may impose such conditions
or restrictions on any Option as it deems appropriate.
(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant 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 the number of Shares elected for ex-
ercise, such notice to be accompanied by such instruments or
documents as may be required by the Committee, and shall tender the
purchase price of the Shares elected for exercise.
(B) At the time of exercise of an Option payment in full in
cash or in Shares (that have been held by the Participant for at
least six months) or any combination thereof, at the option of the
Participant, shall be made for all Shares then being purchased.
(C) The Company shall not be obligated to issue any Shares
unless and until:
(I) if the class of Shares at the time is listed upon any
stock exchange, the Shares 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 Shares 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 the Company's counsel 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 Shares will be made only in such manner as shall
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be in accordance with law and that the Participant will notify the
Company of any intent to make any disposition of the Shares 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 have been actually issued to the Participant pursuant to the
Plan.
(D) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by
reason of the fact that an entity is no longer an Affiliate) other
than the Participant's death, the Participant may thereafter
exercise the Option as provided below, except that the Committee
may terminate the unexercised portion of the Option concurrently
with or at any time following termination of the employment or
consulting arrangement (including termination of employment upon a
change of status from employee to consultant) if it shall determine
that the Participant has engaged in any activity detrimental to the
interests of the Company or an Affiliate. If such termination is
voluntary on the part of the Participant, the Option may be
exercised only within ten days after the date of termination. If
such termination is involuntary on the part of the Participant, if
an employee retires on or after normal retirement date or if the
employment or consulting relationship is terminated by reason of
permanent and total disability, the Option may be exercised within
three months after the date of termination or retirement. For
purposes of this Paragraph (D), a Participant's employment or
consulting arrangement shall not be considered ter- minated (i) in
the case of approved sick leave or other bona fide leave of absence
(not to exceed one year), (ii) in the case of a transfer of
employment or the consulting arrangement among the Company and
Affiliates, or (iii) by virtue of a change of status from employee
to consultant or from consultant to employee, except as provided
above.
(E) If a Participant dies at a time when entitled to exercise
an Option, then at any time or times within one year after death
such Option may be exercised, as to all or any of the Shares which
the Participant was entitled to purchase immediately prior to
death. The Company may decline to deliver Shares to a designated
beneficiary until it receives indemnity against claims of third
parties satisfac- tory to the Company. Except as so exercised such
Option shall expire at the end of such period.
(F) An Option may be exercised only if and to the extent such
Option was exercisable at the date of termination of employment or
the consulting arrangement, and an Option may not be exercised at
a time when the Option would not have been exercisable had the
employment or consulting arrangement continued.
(iii) Restoration Options. The Committee may grant a Participant
the right to receive a restoration Option with respect to an Option or
any other stock option granted by the Company. Unless the Committee
shall otherwise determine, a restoration Option shall provide that the
underlying option must be exercised while the Participant is an employee
of or consultant to the Company or an Affiliate and the number of Shares
which are subject to a restoration Option shall not exceed the number of
whole Shares exchanged in payment for the exercise of the original
option.
(b) Stock Appreciation Rights. The Committee is authorized to grant
Stock Appreciation Rights to Participants. Subject to the terms of the Plan, a
Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the fair
market value of one Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related to any Incentive
Stock Option, at any time during a specified period before or after the date of
exercise over (ii) the grant price of the right as specified by the Committee.
Subject to the terms of the Plan, the Committee shall determine the grant
price, term, methods of exercise and settlement and any other terms and
conditions of any Stock Appreciation Right and may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it may deem
appropriate.
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(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is authorized to grant to Participants
Awards of Restricted Stock, which shall consist of Shares, and Restricted
Stock Units which shall give the Participant the right to receive cash,
other securities, other Awards or other property, in each case subject to
the termination of the Restricted Period determined by the Committee.
(ii) Restrictions. The Restricted Period may differ among
Participants and may have different expiration dates with respect to
portions of Shares covered by the same Award. Subject to the terms of the
Plan, Awards of Restricted Stock and Restricted Stock Units shall have
such restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the
right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or
times, in installments or otherwise. Unless the Committee shall otherwise
determine, any Shares or other securities distributed with respect to
Restricted Stock or which a Participant is otherwise entitled to receive
by reason of such Shares shall be subject to the restrictions contained
in the applicable Award Agreement. Subject to the aforementioned
restrictions and the provisions of the Plan, Participants shall have all
of the rights of a stockholder with respect to Shares of Restricted
Stock.
(iii) Registration. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate, including,
without limitation, book-entry registration or issuance of stock certifi-
cates.
(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by
reason of the fact that any entity is no longer an Affiliate),
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, all Shares of Restricted Stock theretofore
awarded to the Participant which are still subject to restrictions
shall upon such termination of employment or the consulting
relationship be forfeited and transferred back to the Company.
Notwithstanding the foregoing or Paragraph (C) below, if a
Participant continues to hold an Award of Restricted Stock
following termination of the employment or consulting arrangement
(including retirement and termination of employment upon a change
of status from employee to consultant), the Shares of Restricted
Stock which remain subject to restrictions shall nonetheless be
forfeited and transferred back to the Company if the Committee at
any time thereafter determines that the Participant has engaged in
any activity detrimental to the interests of the Company or an
Affiliate. For purposes of this Paragraph (A), 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), (ii) in the case of
a transfer of employment or the consulting arrangement among the
Company and Affiliates, or (iii) by virtue of a change of status
from employee to consultant or from consultant to employee, except
as provided above.
(B) If a Participant ceases to be employed or retained by the
Company or an Affiliate by reason of death or permanent and total
disability or if following retirement a Participant continues to
have rights under an Award of Restricted Stock and thereafter dies,
the restrictions contained in the Award shall lapse with respect to
such Restricted Stock.
(C) If an employee ceases to be employed by the Company or an
Affiliate by reason of retirement on or after normal retirement
date, the restrictions contained in the Award of Restricted Stock
shall continue to lapse in the same manner as though employment had
not terminated.
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(D) At the expiration of the Restricted Period as to Shares
covered by an Award of Restricted Stock, the Company shall deliver
the Shares as to which the Restricted Period has expired, as
follows:
(1) if an assignment to a trust has been made in
accordance with Section 6(g)(iv)(B)(2)(c), 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.
(d) Performance Awards. The Committee is authorized to grant
Performance Awards to Participants. Subject to the terms of the Plan, a
Performance Award granted under the Plan (i) may be denominated or payable in
cash, Shares (including, without limitation, Restricted Stock), other
securities, other Awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee and payable to, or
exercisable by, the holder of the Performance Award, in whole or in part, upon
the achievement of such performance goals during such performance periods as
the Committee shall establish. Subject to the terms of the Plan, the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted, the amount
of any payment or transfer to be made pursuant to any Performance Award and
other terms and conditions shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to
Participants Awards under which the holders thereof shall be entitled to
receive payments equivalent to dividends or interest with respect to a number
of Shares determined by the Committee, and the Committee may provide that such
amounts (if any) shall be deemed to have been reinvested in additional Shares
or otherwise reinvested. Subject to the terms of the Plan, such Awards may have
such terms and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to
Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to or otherwise based on or related to Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purposes of the Plan,
provided, however, that such grants to persons who are subject to Section 16
must comply with the provisions of Rule 16b-3. Subject to the terms of the
Plan, the Committee shall determine the terms and conditions of such Awards.
Shares or other securities delivered pursuant to a purchase right granted under
this Section 6(f) shall be purchased for such consideration, which may be paid
by such method or methods and in such form or forms, including, without
limitation, cash, Shares, other securities, other Awards or other property or
any combination thereof, as the Committee shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in
the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted un- der any other plan of the Company or any Affiliate. Awards
granted in addition to or in tandem with other Awards or in addition to
or in tandem with awards granted under another plan of the Company or any
Affiliate, may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
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(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise, or payment
of an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other securities,
other Awards, or other property, or any combination thereof, and may be
made in a single payment or transfer, in installments, or on a deferred
basis, in each case in accordance with rules and procedures established
by the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award
or right under any Award may be sold, encumbered, pledged,
alienated, attached, assigned or transferred in any manner and any
attempt to do any of the foregoing shall be void and unenforceable
against the Company.
(B) Notwithstanding the provisions of Paragraph (A) above:
(1) An Option may be transferred:
(a) to a beneficiary designated by the Participant
in writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by
the Participant for the sole benefit of the Participant
during the Participant's life, 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 such an Award does not meet the criteria of a
trust to which an assignment is permitted by the terms
hereof, 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 such Options
shall revert to and remain solely in the Participant.
Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under
such an Option may be as signed, for the purpose of
determining compensation arising by reason of the
Option shall continue to be considered an employee or
consultant, as the case may be, of the Company or an
Affiliate, but such trust and the Participant shall be
bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of
and delivered to such trust shall be conclusively
considered issuance and delivery to the Participant.
(2) A Participant may assign or transfer rights under an
Award of Restricted Stock or Restricted Stock Units:
(a) to a beneficiary designated by the Participant
in writing on a form approved by the Committee;
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(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by
the Participant for the sole benefit of the Participant
during the Participant's life, 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 such an Award does not meet the criteria of a
trust to which an assignment is permitted by the terms
hereof, 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 such Awards shall
revert to and remain solely in the Participant.
Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under
such 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 or an
Affiliate, but such trust and the Participant shall be
bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of
and delivered to such trust shall be conclusively
considered issuance and delivery to the Participant.
(3) The Committee shall not permit directors or officers
of the Company for purposes of Section 16 to transfer or
assign Awards except as permitted under Rule 16b-3.
(C) 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, the personal representatives of the Participant's
estate and all persons asserting a claim based on an Award. The
delivery by a Participant of a beneficiary designation, or an
assignment of rights under an Award as permitted hereunder, 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 on 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.
(v) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities
are then listed and any applicable Federal or state securities laws, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(vi) Change in Control. (A) Notwithstanding any of the provisions
of this Plan or instruments evidencing Awards granted hereunder, upon a
Change in Control of the Company (as hereinafter defined) the vesting of
all rights of Participants under outstanding Awards shall be accelerated
and all restrictions thereon shall terminate in order that Participants
may fully realize the benefits thereunder. Such acceleration shall
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include, without limitation, the immediate exercisability in full of all
Options and the termination of restrictions on Restricted Stock and
Restricted Stock Units. Further, in addition to the Committee's authority
set forth in Section 4(c), the Committee, as constituted before such
Change in Control, is authorized, and has sole discretion, as to any
Award, either at the time such Award is made hereunder or any time
thereafter, to take any one or more of the following actions: (i) provide
for the purchase of any such Award, upon the Participant's request, for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Award or realization of the Participant's rights had
such Award been currently exercisable or payable; (ii) make such
adjustment to any such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; and (iii) cause any such
Award then outstanding to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation after such Change in
Control.
(B) With respect to any Award granted hereunder prior to December
6, 1995, a Change in Control shall occur if:
(1) any "person" or "group of persons" as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act, other than
pursuant to a transaction or agreement previously approved by the
Board of Directors of the Company, 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 percent 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.
(C) Notwithstanding the provisions of subparagraph (B), with
respect to Awards granted hereunder on or after December 6, 1995, a
Change in Control shall occur only if the event described in this
subparagraph (C) shall have occurred. With respect to any other Award
granted prior thereto, a Change in Control shall occur if any of the
events described in subparagraphs (B) or (C) shall have occurred, unless
the holder of any such Award shall have consented to the application of
this subparagraph (C) in lieu of the foregoing subparagraph (B). A
Change in Control for purposes of this subparagraph (C) shall occur 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 (other than Excluded Directors,
as hereinafter defined), 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. For purposes hereof,
"Excluded Directors" are directors whose election by the Board or
approval by the Board for stockholder election occurred within one year
of any "person" or "group of persons", as such terms are used in Sections
13(d) and 14(d) of the Exchange Act, commencing a tender offer for, or
becoming the beneficial owner of, voting securities representing 25
percent or more of the combined voting power of all outstanding voting
securities of the Company, other than pursuant to a tender offer approved
by the Board prior to its commencement or pursuant to stock acquisitions
approved by the Board prior to their representing 25 percent or more of
such combined voting power.
(D) (1) In the event that subsequent to a Change in Control it
is determined that any payment or distribution by the Company to or for
the benefit of a Participant, whether paid or payable or distributed or
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distributable pursuant to the terms of this Plan or otherwise, other than
any payment pursuant to this subparagraph (D) (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then such Participant
shall be entitled to receive from the Company, within 15 days following
the determination described in (2) below, an additional payment ("Excise
Tax Adjustment Payment") in an amount such that after payment by such
Participant of all applicable Federal, state and local taxes (computed at
the maximum marginal rates and including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed
upon the Excise Tax Adjustment Payment, such Participant retains an
amount of the Excise Tax Adjustment Payment equal to the Excise Tax
imposed upon the Payments.
(2) All determinations required to be made under this Section
6(g)(vi)(D), including whether an Excise Tax Adjustment Payment is
required and the amount of such Excise Tax Adjustment Payment, shall be
made by Coopers & Lybrand L.L.P., or such other national accounting firm
as the Company, or, subsequent to a Change in Control, the Company and
the Participant jointly, may designate, for purposes of the Excise Tax,
which shall provide detailed supporting calculations to the Company and
the affected Participant within 15 business days of the date of the
applicable Payment. Except as hereinafter provided, any determination by
Coopers & Lybrand L.L.P., or such other national accounting firm, shall
be binding upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code that may exist
at the time of the initial determination hereunder, it is possible that
(x) certain Excise Tax Adjustment Payments will not have been made by the
Company which should have been made (an "Underpayment"), or (y) certain
Excise Tax Adjustment Payments will have been made which should not have
been made (an "Overpayment"), consistent with the calculations required
to be made hereunder. In the event of an Underpayment, such Underpayment
shall be promptly paid by the Company to or for the benefit of the
affected Participant. In the event that the Participant discovers that
an Overpayment shall have occurred, the amount thereof shall be promptly
repaid to the Company.
(3) This Section 6(g)(vi)(D) shall not apply to any Award (x) that
was granted prior to February 17, 1993 and (y) the holder of which is an
executive officer of the Company, as determined under the Exchange Act.
(vii) Cash Settlement. Notwithstanding any provision of this Plan
or of any Award Agreement to the contrary, any Award outstanding
hereunder may at any time be cancelled in the Committee's sole discretion
upon payment of the value of such Award to the holder thereof in cash or
in another Award hereunder, such value to be determined by the Committee
in its sole discretion.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend the Plan and the Board of Directors or the Committee may amend any out-
standing Award; provided, however, that (i) no Plan amendment shall be
effective until approved by stockholders of the Company insofar as stockholder
approval thereof is required in order for the Plan to continue to satisfy the
conditions of Rule 16b-3, and (ii) without the consent of affected Participants
no amendment of the Plan or of any Award may impair the rights of Participants
under outstanding Awards, and (iii) no Option may be amended to reduce its
initial exercise price other than in connection with an event described in
Section 4(c) hereof.
(b) Waivers. The Committee may waive any conditions or rights under
any Award theretofore granted, prospectively or retroactively, without the
consent of any Participant.
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(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(c) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits to be made
available under the Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to effectuate the Plan.
SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant or other person shall have
any claim to be granted any Award under the Plan, and there is no obligation
for uni- formity of treatment of Participants or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards of the same type and
the determination of the Committee to grant a waiver or modification of any
Award and the terms and conditions thereof need not be the same with respect to
each Participant.
(b) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under any
Award or under the Plan the amount (in cash, Shares, other securities, other
Awards or other property) of withholding taxes due in respect of an Award, its
exercise or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, including the grant of
op- tions and other stock-based awards, and such arrangements may be either
generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement or other written agreement with the Participant.
(e) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable Federal law.
(f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be
so construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, person or Award, and the remainder of the
Plan and any such Award shall remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other person. To the extent that any person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
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(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares, or whether such fractional Shares or any
rights thereto shall be cancelled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the
Company's stockholders.
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EXHIBIT 10.k
MASCO CORPORATION 1997 ANNUAL INCENTIVE
COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Masco Corporation 1997 Annual Incentive Compensation
Plan (the "Plan") is to provide selected executive officers of Masco
Corporation (the "Company") with incentive compensation based upon the
achievement of established annual performance goals.
SECTION 2. ELIGIBILITY
The individuals eligible to participate in the Plan (the
"Participants") are the executive officers of the Company.
SECTION 3. PERFORMANCE PERIODS
Each Performance Period for purposes of the Plan shall have a duration
of one calendar year, commencing January 1 and ending December 31.
SECTION 4. ADMINISTRATION
The Compensation Committee of the Board of Directors of the Company
(the "Committee") shall have the full power and authority to administer and
interpret the Plan and to establish rules for its administration.
SECTION 5. PERFORMANCE GOALS
On or before the 90th day of each Performance Period, the Committee
shall establish in writing one or more performance criteria for the Performance
Period and the weighting of the performance criteria if more than one. The
performance criteria shall consist of one or more of the following: net
income, earnings per share, cash flow, revenues, return on assets or total
shareholder return.
SECTION 6. AWARDS
On or before the 90th day of each Performance Period, the Committee
shall establish in writing a performance incentive award for such Participants
as shall be designated by the Company and in such amounts as the Committee
shall determine, subject to the limitations of the Plan. No award to any
Participant shall be greater than $2 million. The Committee shall have the
power and authority to reduce or eliminate for any reason the amount of the
award that would otherwise be payable to a Participant based on the performance
criteria.
SECTION 7. CERTIFICATION AND PAYMENT
As soon as practicable after release of the Company's financial results
for the Performance Period, the Committee will certify the Company's attainment
of the criteria established for such Performance Period pursuant to Section 5,
will calculate the possible payment of an award for each Participant and will
certify the amount of the award to each Participant for such Performance
Period. Payments of the awards shall be made in cash. To the extent net
income is used alone or as a component of another performance criteria, it
shall mean net income as reported to stockholders, but before losses resulting
from discontinued operations, extraordinary losses (in accordance with
generally accepted accounting principles, as currently in effect), the
cumulative effect of changes in accounting principles and other unusual,
non-recurring items of loss that are separately identified and quantified in
the Company's audited financial statements.
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SECTION 8. AMENDMENT
The Committee shall have the right to suspend or terminate this Plan at
any time and may amend or modify the Plan at any time.
SECTION 9. ADOPTION AND DURATION
The Plan was approved by the Committee on February 18, 1997, subject to
the approval of the stockholders of the Company at the 1997 Annual Meeting of
Stockholders. The effective date of the Plan shall be January 1, 1997 and the
Plan shall remain in effect for a period of five years.
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EXHIBIT 10.L
MASCO CORPORATION
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to ensure that the non-employee Directors
of Masco Corporation (the "Company") have an equity interest in the Company and
thereby have a direct and long term interest in the growth and prosperity of
the Company by payment of part of their compensation in the form of common
stock of the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
This Plan will be administered by the Company's Board of Directors
(the "Board"). The Board shall be authorized to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's interpretation of the terms and
provisions of this Plan shall be final and conclusive. The Secretary of the
Company shall be authorized to implement the Plan in accordance with its terms
and to take such actions of a ministerial nature as shall be necessary to
effectuate the intent and purposes thereof. The validity, construction and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Michigan and applicable
Federal law.
SECTION 3. ELIGIBILITY
Participation will be limited to individuals who are Eligible
Directors, as hereinafter defined. Eligible Director shall mean any Director
of the Company who is not an employee of the Company and who receives a fee for
services as a Director.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustments set forth below, the aggregate number of
shares of Company Common Stock, par value $1.00 per share ("Shares"), which
may be the subject of awards issued under the Plan shall be 500,000.
(b) Any Shares to be delivered under the Plan shall be made available
from newly issued Shares or from Shares reacquired by the Company, including
Shares purchased in the open market.
(c) To the extent a Stock Option award, as hereinafter defined,
terminates without having been exercised, or an award of Restricted Stock, as
hereinafter defined, is forfeited, the Shares subject to such Stock Option or
Restricted Stock award shall again be available for distribution in connection
with future awards under the Plan. Shares equal in number to the Shares
surrendered to the Company in payment of the option price or withholding taxes
(if any) relating to or arising in connection with any Restricted Stock or
Stock Option hereunder shall be added to the number of Shares then available
for future awards under clause (a) above.
(d) In the event of any merger, reorganization, consolidation,
recapitalization, stock split, stock dividend, or other change in corporate
structure affecting the Shares, the aggregate number of Shares which may be
issued under the Plan, the number of Shares subject to Stock Options to be
granted under Section 6(a) hereof and the number of Shares subject to any
outstanding award of Restricted Stock or unexercised Stock Option shall be
adjusted to avoid enhancement or diminution of the benefits intended to be made
available hereunder.
SECTION 5. DIRECTOR STOCK COMPENSATION
(a) The compensation of each Eligible Director for the five year
period beginning January 1, 1997 shall be
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payable in part with an award of Restricted Stock determined as set forth
below, and in part in cash. Compensation for this purpose means annual
retainer fees but does not include supplemental retainer fees for committee
positions or fees for attendance at meetings, which shall be paid in cash.
The portion of compensation payable in Restricted Stock during the five year
period shall be equal to one-half of the annual compensation paid to Eligible
Directors in the year immediately prior to the award multiplied by five, and
the balance of compensation, unless otherwise determined by the Board, shall be
payable in cash. Each award of Restricted Stock shall vest in twenty percent
annual installments (disregarding fractional shares) on January 1 of each of
the five consecutive years following the year in which the award is made.
Subject to the approval of this Plan by the Company's stockholders, each
Eligible Director on February 18, 1997 is awarded as of that date 3,470 Shares
of Restricted Stock, based on the closing price of the Shares as reported on
the New York Stock Exchange Composite Tape ("the NYSE") on February 18, 1997.
Cash shall be paid to an Eligible Director in lieu of a fractional share.
(b) Subject to the approval of this Plan by the Company's
stockholders, each Eligible Director who is first elected or appointed to the
Board on or after the date of the Company's 1997 annual meeting of stockholders
shall receive, as of the date of such election or appointment, an award of
Restricted Stock determined in accordance with Section 5(a) for the five year
period beginning on January 1 of the year in which such election or appointment
occurred; provided, however, that the price of the Shares used in determining
the number of Shares of Restricted Stock which shall be issued to such Eligible
Director shall be the closing price of the Shares as reported on the NYSE on
the date on which such Eligible Director is elected or appointed, and provided,
further, that the amount of Restricted Stock awarded to any Eligible Director
who begins serving as a Director other than at the beginning of a calendar year
shall be prorated to reflect the partial service of the initial year of the
Director's term, such proration to be effected in the initial vesting.
(c) Upon the full vesting of any award of Restricted Stock awarded
pursuant to Section 5(a) or 5(b), each affected Eligible Director shall be
eligible to receive a new award of Restricted Stock, subject to Section 4. The
number of Shares subject to such award shall be determined generally in
accordance with the provisions of Section 5(b); provided, however, that the
Board shall have sole discretion to adjust the amount of compensation then to
be paid in the form of Shares and the terms of any such award of Shares. Except
as the Board may otherwise determine, any increase or decrease in an Eligible
Director's annual compensation during the period when such Director has an
outstanding award of Restricted Stock shall be implemented by increasing or
decreasing the cash portion of such Director's compensation.
(d) Each Eligible Director shall be entitled to vote and receive
dividends on the unvested portion of his or her Restricted Stock, but will not
be able to obtain a stock certificate or sell, encumber or otherwise transfer
such Restricted Stock except in accordance with the terms of the Company's 1991
Long Term Stock Incentive Plan (the "Long Term Plan"). If an Eligible
Director's term is terminated by reason of death or permanent and total
disability, the restrictions on the Restricted Stock will lapse and such
Eligible Director's rights to the Shares will become vested on the date of such
termination. If an Eligible Director's term is terminated for any reason other
than death or permanent and total disability, the Restricted Stock that has not
vested shall be forfeited and transferred back to the Company; provided,
however, that a pro rata portion of the Restricted Stock which would have
vested on January 1 of the year following the year of the Eligible Director's
termination shall vest on the date of termination, based upon the portion of
the year during which the Eligible Director served as a Director of the
Company.
SECTION 6. STOCK OPTION GRANT
(a) Subject to approval of this Plan by the Compan's stockholders,
each Eligible Director on the date of such approval will be granted on such
date a stock option to purchase 4,000 Shares (the "Stock Option").
Thereafter, on the date of each of the Company's subsequent annual stockholders
meetings, each person who is or becomes an Eligible Director on that date and
whose service on the Board will continue after such date shall be granted a
Stock Option, subject to Section 4, effective as of the date of such meeting.
(b) Stock Options granted under this Section 6 shall be non-qualified
stock options and shall have the following terms and conditions.
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1. Option Price. The option price per Share shall be equal to the
closing price of the Shares as reflected on the NYSE on the date of grant (or
if there were no sales on such date, the most recent prior date on which there
were sales).
2. Term of Option. The term of the Stock Option shall be ten years
from the date of grant, subject to earlier termination in the event of
termination of service as an Eligible Director. If an Eligible Director's term
is terminated for any reason other than death at a time when such Director is
entitled to exercise an outstanding Stock Option, then at any time or times
within three months after termination such Stock Option may be exercised as to
all or any of the Shares which the Eligible Director was entitled to purchase
at the date of termination. If an Eligible Director dies at a time when such
Director is entitled to exercise a Stock Option, then at any time or times
within one year after death such Stock Option may be exercised as to all or any
of the Shares which the Eligible Director was entitled to purchase immediately
prior to such Director's death. Except as so exercised, such Stock Options
shall expire at the end of such periods. That portion of the Stock Option not
exercisable at the time of such termination shall be forfeited and transferred
back to the Company on the date of such termination.
3. Exercisability. Subject to clause 2 above, each Stock Option shall
vest and become exercisable with respect to twenty percent of the underlying
Shares on each of the first five anniversaries of the date of grant, provided
that the optionee is an Eligible Director on such date.
4. Method of Exercise. A Stock Option may be exercised in whole or in
part during the period in which such Stock Option is exercisable by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the
purchase price shall be made in cash, by delivery of Shares, or by any
combination of the foregoing.
5. Non-Transferability. Unless otherwise provided by the terms of the
Long Term Plan or the Board, (i) Stock Options shall not be transferable by
the optionee other than by will or by the laws of descent and distribution, and
(ii) during the optionee's lifetime, all Stock Options shall be exercisable
only by the optionee or by his or her guardian or legal representative.
6. Stockholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a stockholder.
SECTION 7. GENERAL
(a) Plan Amendments. The Board may amend, suspend or discontinue the
Plan as it shall deem advisable or to conform to any change in any law or
regulation applicable thereto; provided, that the Board may not, without the
authorization and approval of the stockholders of the Company: (a) modify the
class of persons who constitute Eligible Directors as defined in the Plan; or
(b) increase the total number of Shares available under the Plan. In addition,
without the consent of affected participants, no amendment of the Plan or any
award under the Plan may impair the rights of participants under outstanding
awards.
(b) Listing and Registration. If at any time the Board shall
determine, in its discretion, that the listing, registration or qualification
of the Shares under the Plan upon any securities exchange or under any state or
Federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of any award hereunder, no Shares may be delivered or disposed of unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any condition not acceptable to the Board.
(c) Award Agreements. Each award of Restricted Stock and Stock
Option granted hereunder shall be evidenced by the Eligible Director's written
agreement with the Company which shall contain such terms and conditions not
inconsistent with the provisions of the Plan as shall be determined by the
Board in its discretion.
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EXHIBIT 10.m
MASCOTECH, INC.
1991 LONG TERM STOCK INCENTIVE PLAN
(Amended and Restated April 23, 1997)
SECTION 1. PURPOSES
The purposes of the 1991 Long Term Stock Incentive Plan (the "Plan")
are to encourage selected employees of and consultants to MascoTech, Inc. (the
"Company") and its Affiliates to acquire a proprietary interest in the Company
in order to create an increased incentive to contribute to the Company's future
success and prosperity, and enhance the ability of the Company and its
Affiliates to attract and retain exceptionally qualified individuals upon whom
the sustained progress, growth and profitability of the Company depend, thus
enhancing the value of the Company for the benefit of its stockholders.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Affiliate" shall mean any entity in which the Company's direct or
indirect equity interest is at least twenty percent, and any other entity in
which the Company has a significant direct or indirect equity interest, whether
more or less than twenty percent, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean a committee of the Company's directors
designated by the Board of Directors to administer the Plan and composed of not
less than two directors, each of whom is a "non-employee director" within the
meaning of Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section
6(e) of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Stock Option" shall mean an Option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of
the Code, or any successor provision thereto.
(i) "Non-Qualified Stock Option" shall mean an Option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
(l) "Participant" shall mean an employee of or consultant to the
Company or any Affiliate designated to be granted an Award under the Plan.
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(m) "Performance Award" shall mean any right granted under Section 6(d)
of the Plan.
(n) "Restricted Period" shall mean the period of time during which
Awards of Restricted Stock or Restricted Stock Units are subject to
restrictions.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(p) "Restricted Stock Unit" shall mean any right granted under Section
6(c) of the Plan that is denominated in Shares.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act, or any successor rule or
regulation.
(r) "Section 16" shall mean Section 16 of the Exchange Act, the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder, or any successor provision, rule or regulation.
(s) "Shares" shall mean the Company's common stock, par value $1.00 per
share, and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(c) of the Plan.
(t) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan, and subject to the terms of
the Plan and applicable law, the Committee's authority shall include without
limitation the power to:
(i) designate Participants;
(ii) determine the types of Awards to be granted;
(iii) determine the number of Shares to be covered by Awards
and any payments, rights or other matters to be calculated in
connection therewith;
(iv) determine the terms and conditions of Awards and amend the
terms and conditions of outstanding Awards;
(v) determine how, whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or
suspended;
(vi) determine how, whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the holder thereof
or of the Committee;
(vii) determine the methods or procedures for establishing the
fair market value of any property (including, without limitation, any
Shares or other securities) transferred, exchanged, given or received
with respect to the Plan or any Award;
(viii) prescribe and amend the forms of Award Agreements and
other instruments required under or advisable with respect to the
Plan;
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(ix) designate Options granted to key employees of the Company
or its subsidiaries as Incentive Stock Options;
(x) interpret and administer the Plan, Award Agreements, Awards
and any contract, document, instrument or agreement relating thereto;
(xi) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for
the administration of the Plan;
(xii) decide all questions and settle all controversies and
disputes which may arise in connection with the Plan, Award Agreements
and Awards;
(xiii) delegate to directors of the Company the authority to
designate Participants and grant Awards, and to amend Awards granted to
Participants;
(xiv) make any other determination and take any other action
that the Committee deems necessary or desirable for the interpretation,
application and administration of the Plan, Award Agreements and Awards.
All designations, determinations, interpretations and other decisions
under or with respect to the Plan, Award Agreements or any Award shall be
within the sole discretion of the Committee, may be made at any time and shall
be final, conclusive and binding upon all persons, including the Company,
Affiliates, Participants, beneficiaries of Awards and stockholders of the
Company.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section
4(c):
(i) Initial Authorization. There shall be 6,000,000 Shares
initially available for issuance under the Plan.
(ii) Acquired Shares. In addition to the amount set forth
above, up to 6,000,000 Shares acquired by the Company subsequent to
the 1997 Annual Meeting of Stockholders as full or partial payment for
the exercise price for an Option or any other stock option granted by
the Company, or acquired by the Company, in open market transactions or
otherwise, in connection with the Plan or any Award hereunder or any
other employee stock option or restricted stock issued by the Company
may thereafter be included in the Shares available for Awards. If any
Shares covered by an Award or to which an Award relates are forfeited,
or if an Award expires, terminates or is cancelled, then the Shares
covered by such Award, or to which such Award relates, or the number of
Shares otherwise counted against the aggregate number of Shares
available under the Plan by reason of such Award, to the extent of any
such forfeiture, expiration, termination or cancellation, may
thereafter be available for further granting of Awards and included as
acquired Shares for purposes of the preceding sentence.
(iii) Shares Under Prior Plans. In addition to the amounts set
forth above, shares remaining available for issuance upon any
termination of authority to make further awards under both the
Company's 1984 Restricted Stock Incentive Plan and its 1984 Stock
Option Plan shall thereafter be available for issuance hereunder.
(iv) Accounting for Awards. For purposes of this Section 4,
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(A) if an Award (other than a Dividend Equivalent) is
denominated in Shares, the number of Shares covered by such
Award, or to which such Award relates, shall be counted on the
date of grant of such Award against the aggregate number of
Shares available for granting Awards under the Plan to the
extent determinable on such date and insofar as the number of
Shares is not then determinable under procedures adopted by the
Committee consistent with the purposes of the Plan; and
(B) Dividend Equivalents and Awards not denominated in
Shares shall be counted against the aggregate number of Shares
available for granting Awards under the Plan in such amount and
at such time as the Committee shall determine under procedures
adopted by the Committee consistent with the purposes of the
Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards or restricted stock awards or stock
options granted under any other plan of the Company may be counted or
not counted under procedures adopted by the Committee in order to avoid
double counting. Any Shares that are delivered by the Company or its
Affiliates, and any Awards that are granted by, or become obligations
of, the Company, through the assumption by the Company of, or in
substitution for, outstanding restricted stock awards or stock options
previously granted by an acquired company shall not, except in the case
of Awards granted to Participants who are directors or officers of the
Company for purposes of Section 16, be counted against the Shares
available for Granting Awards under the Plan.
(v) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of
authorized but unissued Shares or of Shares reacquired by the Company,
including but not limited to Shares purchased on the open market.
(b) Individual Stock-Based Awards. Subject to adjustment as provided
in Section 4(c), no Participant may receive Options or Stock Appreciation
Rights under the Plan in any calendar year that relate to more than 1,000,000
Shares in the aggregate; provided, however, that such number may be increased
with respect to any Participant by any Shares available for grant to such
Participant in accordance with this Paragraph 4(b) in any prior years that were
not granted in such prior year beginning on or after January 1, 1997. No
provision of this Paragraph 4(b) shall be construed as limiting the amount of
any other stock-based or cash-based Award which may be granted to any
Participant.
(c) Adjustments. Upon the occurrence of any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), change in the capital or shares of capital stock, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Shares or other securities of the Company or extraordinary transaction or event
which affects the Shares, then the Committee shall have the authority to make
such adjustment, if any, in such manner as it deems appropriate, in (i) the
number and type of Shares (or other securities or property) which thereafter
may be made the subject of Awards, (ii) outstanding Awards including without
limitation the number and type of Shares (or other securities or property)
subject thereto, and (iii) the grant, purchase or exercise price with respect
to outstanding Awards and, if deemed appropriate, make provision for cash
payments to the holders of outstanding Awards; provided, however, that the
number of Shares subject to any Award denominated in Shares shall always be a
whole number.
SECTION 5. ELIGIBILITY
Any employee of or consultant to the Company or any Affiliate,
including any officer of the Company (who may also be a director, any person
who serves only as a director of the Company and any consultant to the Company
or an Affiliate who is also a director of the Company and who is not rendering
services pursuant to a written agreement with the entity in question), as may
be selected from time to time by the Committee or by the directors to whom
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authority may be delegated pursuant to Section 3 hereof in its or their
discretion, is eligible to be designated a Participant.
SECTION 6. AWARDS
(a) Options. The Committee is authorized to grant Options to
Participants.
(i) Committee Determinations. Subject to the terms of the
Plan, the Committee shall determine:
(A) the purchase price per Share under each Option,
provided, however, that such price shall not be less than 100%
of the fair market value of the Shares underlying such Option
on the date of grant;
(B) the term of each Option; and
(C) the time or times at which an Option may be
exercised, in whole or in part, the method or methods by which and
the form or forms (including, without limitation, cash, Shares,
other Awards or other property, or any combination thereof, having
a fair market value on the exercise date equal to the relevant
exercise price) in which payment of the exercise price with respect
thereto may be made or deemed to have been made. The terms of any
Incentive Stock Option granted under the Plan shall comply in all
respects with the provisions of Section 422 of the Code, or any
successor provision thereto, and any regulations promulgated
thereunder.
Subject to the terms of the Plan, the Committee may impose such
conditions or restrictions on any Option as it deems appropriate.
(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant 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 the number of Shares elected for ex-
ercise, such notice to be accompanied by such instruments or
documents as may be required by the Committee, and shall tender the
purchase price of the Shares elected for exercise.
(B) At the time of exercise of an Option payment in full in
cash or in Shares (that have been held by the Participant for at
least six months) or any combination thereof, at the option of the
Participant, shall be made for all Shares then being purchased.
(C) The Company shall not be obligated to issue any Shares
unless and until:
(I) if the class of Shares at the time is listed upon any
stock exchange, the Shares 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 Shares 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 the Company's counsel 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 Shares will be made only in such manner as shall
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be in accordance with law and that the Participant will notify the
Company of any intent to make any disposition of the Shares 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 have been actually issued to the Participant pursuant to the
Plan.
(D) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by
reason of the fact that an entity is no longer an Affiliate) other
than the Participant's death, the Participant may thereafter
exercise the Option as provided below, except that the Committee
may terminate the unexercised portion of the Option concurrently
with or at any time following termination of the employment or
consulting arrangement (including termination of employment upon a
change of status from employee to consultant) if it shall determine
that the Participant has engaged in any activity detrimental to the
interests of the Company or an Affiliate. If such termination is
voluntary on the part of the Participant, the option may be
exercised only within ten days after the date of termination. If
such termination is involuntary on the part of the Participant, if
an employee retires on or after normal retirement date or if the
employment or consulting relationship is terminated by reason of
permanent and total disability, the Option may be exercised within
three months after the date of termination or retirement. For
purposes of this Paragraph (D), 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), (ii) in the case of a transfer of
employment or the consulting arrangement among the Company and
Affiliates, or (iii) by virtue of a change of status from employee
to consultant or from consultant to employee, except as provided
above.
(E) If a Participant dies at a time when entitled to exercise
an Option, then at any time or times within one year after death
such Option may be exercised, as to all or any of the Shares which
the Participant was entitled to purchase immediately prior to
death. 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.
(F) An Option may be exercised only if and to the extent such
Option was exercisable at the date of termination of employment or
the consulting arrangement, and an Option may not be exercised at a
time when the Option would not have been exercisable had the
employment or consulting arrangement continued.
(iii) Restoration Options. The Committee may grant a Participant
the right to receive a restoration Option with respect to an Option or
any other option granted by the Company. Unless the Committee shall
otherwise determine, a restoration Option shall provide that the
underlying option must be exercised while the Participant is an employee
of or consultant to the Company or an Affiliate and the number of Shares
which are subject to a restoration Option shall not exceed the number
of whole Shares exchanged in payment of the original option.
(b) Stock Appreciation Rights. The Committee is authorized to grant
Stock Appreciation Rights to Participants. Subject to the terms of the Plan, a
Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the fair
market value of one Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related to any Incentive
Stock Option, at any time during a specified period before or after the date of
exercise over (ii) the grant price of the right as specified by the Committee.
Subject to the terms of the Plan, the Committee shall determine the grant
price, term, methods of exercise and settlement and any other terms and
conditions of any Stock Appreciation Right and may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it may deem
appropriate.
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(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is authorized to grant to Participants
Awards of Restricted Stock, which shall consist of Shares, and Restricted
Stock Units which shall give the Participant the right to receive cash,
other securities, other Awards or other property, in each case subject to
the termination of the Restricted Period determined by the Committee.
(ii) Restrictions. The Restricted Period may differ among
Participants and may have different expiration dates with respect to
portions of Shares covered by the same Award. Subject to the terms of the
Plan, Awards of Restricted Stock and Restricted Stock Units shall have
such restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the
right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or
times, in installments or otherwise. Unless the Committee shall otherwise
determine, any Shares or other securities distributed with respect to
Restricted Stock or which a Participant is otherwise entitled to receive
by reason of such Shares shall be subject to the restrictions contained
in the applicable Award Agreement. Subject to the aforementioned
restrictions and the provisions of the Plan, Participants shall have all
of the rights of a stockholder with respect to Shares of Restricted
Stock.
(iii) Registration. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate, including,
without limitation, book-entry registration or issuance of stock certifi-
cates.
(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by
reason of the fact that any entity is no longer an Affiliate),
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, all Shares of Restricted Stock theretofore
awarded to the Participant which are still subject to restrictions
shall upon such termination of employment or the consulting
relationship be forfeited and transferred back to the Company.
Notwithstanding the foregoing or Paragraph (C) below, if a
Participant continues to hold an Award of Restricted Stock
following termination of the employment or consulting arrangement
(including retirement and termination of employment upon a change
of status from employee to consultant), the Shares of Restricted
Stock which remain subject to restrictions shall nonetheless be
forfeited and transferred back to the Company if the Committee at
any time thereafter determines that the Participant has engaged in
any activity detrimental to the interests of the Company or an
Affiliate. For purposes of this Paragraph (A), 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), (ii) in the case of
a transfer of employment or the consulting arrangement among the
Company and Affiliates, or (iii) by virtue of a change of status
from employee to consultant or from consultant to employee, except
as provided above.
(B) If a Participant ceases to be employed or retained by the
Company or an Affiliate by reason of death or permanent and total
disability or if following retirement a Participant continues to
have rights under an Award of Restricted Stock and thereafter dies,
the restrictions contained in the Award shall lapse with respect to
such Restricted Stock.
(C) If an employee ceases to be employed by the Company or an
Affiliate by reason of retirement on or after normal retirement
date, the restrictions contained in the Award of Restricted Stock
shall continue to lapse in the same manner as though employment had
not terminated.
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(D) At the expiration of the Restricted Period as to Shares
covered by an Award of Restricted Stock, the Company shall deliver
the Shares as to which the Restricted Period has expired, as
follows:
(1) if an assignment to a trust has been made in
accordance with Section 6(g)(iv)(B)(2)(c), 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.
(d) Performance Awards. The Committee is authorized to grant
Performance Awards to Participants. Subject to the terms of the Plan, a
Performance Award granted under the Plan (i) may be denominated or payable in
cash, Shares (including, without limitation, Restricted Stock), other
securities, other Awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee and payable to, or
exercisable by, the holder of the Performance Award, in whole or in part, upon
the achievement of such performance goals during such performance periods as
the Committee shall establish. Subject to the terms of the Plan, the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted, the amount
of any payment or transfer to be made pursuant to any Performance Award and
other terms and conditions shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to
Participants Awards under which the holders thereof shall be entitled to
receive payments equivalent to dividends or interest with respect to a number
of Shares determined by the Committee, and the Committee may provide that such
amounts (if any) shall be deemed to have been reinvested in additional Shares
or otherwise reinvested. Subject to the terms of the Plan, such Awards may have
such terms and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to
Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to or otherwise based on or related to Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purposes of the Plan,
provided, however, that such grants to persons who are subject to Section 16
must comply with the provisions of Rule 16b-3. Subject to the terms of the
Plan, the Committee shall determine the terms and conditions of such Awards.
Shares or other securities delivered pursuant to a purchase right granted under
this Section 6(f) shall be purchased for such consideration, which may be paid
by such method or methods and in such form or forms, including, without
limitation, cash, Shares, other securities, other Awards or other property or
any combination thereof, as the Committee shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in
the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted under any other plan of the Company or any Affiliate. Awards
granted in addition to or in tandem with other Awards or in addition to
or in tandem with awards granted under another plan of the Company or any
Affiliate, may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
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(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise, or payment
of an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other securities,
other Awards, or other property, or any combination thereof, and may be
made in a single payment or transfer, in installments, or on a deferred
basis, in each case in accordance with rules and procedures established
by the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award
or right under any Award may be sold, encumbered, pledged,
alienated, attached, assigned or transferred in any manner and any
attempt to do any of the foregoing shall be void and unenforceable
against the Company.
(B) Notwithstanding the provisions of Paragraph (A) above:
(1) An Option may be transferred:
(a) to a beneficiary designated by the Participant
in writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant
during the Participant's life, 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 such an Award does not meet the criteria of a
trust to which an assignment is permitted by the terms
hereof, 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 such Options
shall revert to and remain solely in the Participant.
Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under
such an Option may be assigned, for the purpose of
determining compensation arising by reason of the
Option hall continue to be considered an employee or
consultant, as the case may be, of the Company or an
Affiliate, but such trust and the Participant shall be
bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of
and delivered to such trust shall be conclusively
considered issuance and delivery to the Participant.
(2) A Participant may assign or transfer rights under an
Award of Restricted Stock or Restricted Stock Units:
(a) to a beneficiary designated by the
Participant in writing on a form approved by the Committee;
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(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by
the Participant for the sole benefit of the Participant
during the Participant's life, 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 such an Award does not meet the criteria of a
trust to which an assignment is permitted by the terms
hereof, 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 such Awards shall
revert to and remain solely in the Participant.
Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under
such 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 or an
Affiliate, but such trust and the Participant shall be
bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of
and delivered to such trust shall be conclusively
considered issuance and delivery to the Participant.
(3) The Committee shall not permit directors or officers
of the Company for purposes of Section 16 to transfer or
assign Awards except as permitted under Rule 16b-3.
(C) 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, the personal representatives of the Participant's
estate and all persons asserting a claim based on an Award. The
delivery by a Participant of a beneficiary designation, or an
assignment of rights under an Award as permitted hereunder, 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 on 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.
(v) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities
are then listed and any applicable Federal or state securities laws, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(vi) Change in Control. (A) Notwithstanding any of the provisions
of this Plan or instruments evidencing Awards granted hereunder, upon a
Change in Control of the Company (as hereinafter defined) the vesting of
all rights of Participants under outstanding Awards shall be accelerated
and all restrictions thereon shall terminate in order that Participants
may fully realize the benefits thereunder. Such acceleration shall
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include, without limitation, the immediate exercisability in full of all
Options and the termination of restrictions on Restricted Stock and
Restricted Stock Units. Further, in addition to the Committee's authority
set forth in Section 4(c), the Committee, as constituted before such
Change in Control, is authorized, and has sole discretion, as to any
Award, either at the time such Award is made hereunder or any time
thereafter, to take any one or more of the following actions: (i) provide
for the purchase of any such Award, upon the Participant's request, for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Award or realization of the Participant's rights had
such Award been currently exercisable or payable; (ii) make such
adjustment to any such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; and (iii) cause any such
Award then outstanding to be assumed, or new rights substituted
therefore, by the acquiring or surviving after such Change in Control.
(B) With respect to any Award granted hereunder prior to
December 6, 1995, a Change in Control shall occur if:
(1) any "person" or "group of persons" as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act, other than
pursuant to a transaction or agreement previously approved by the
Board of Directors of the Company, 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 percent or more of the
combined voting power of all outstanding voting securities of (A)
the Company or (B) Masco Corporation, a Delaware corporation
("Masco"); or
(2) during any period of twenty-four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's or Masco'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.
(C) Notwithstanding the provisions of subparagraph (B), with
respect to Awards granted hereunder on or after December 6, 1995, a
Change in Control shall occur only if the event described in this
subparagraph (C) shall have occurred. With respect to any other Award
granted prior thereto, a Change in Control shall occur if any of the
events described in subparagraphs (B) or (C) shall have occurred, unless
the holder of any such Award shall have consented to the application of
this subparagraph (C) in lieu of the foregoing subparagraph (B). A
Change in Control for purposes of this subparagraph (C) shall occur 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 (other than Excluded Directors,
as hereinafter defined), 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. For purposes hereof,
"Excluded Directors" are directors whose election by the Board or
approval by the Board for stockholder election occurred within one year
of any "person" or "group of persons", as such terms are used in Sections
13(d) and 14(d) of the Exchange Act, commencing a tender offer for, or
becoming the beneficial owner of, voting securities representing 25
percent or more of the combined voting power of all outstanding voting
securities of the Company, other than pursuant to a tender offer approved
by the Board prior to its commencement or pursuant to stock acquisitions
approved by the Board prior to their representing 25 percent or more of
such combined voting power.
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<PAGE> 12
(D) (1) In the event that subsequent to a Change in Control it
is determined that any payment or distribution by the Company to or for
the benefit of a Participant, whether paid or payable or distributed or
distributable pursuant to the terms of this Plan or otherwise, other than
any payment pursuant to this subparagraph (D) (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then such Participant
shall be entitled to receive from the Company, within 15 days following
the determination described in (2) below, an additional payment ("Excise
Tax Adjustment Payment") in an amount such that after payment by such
Participant of all applicable Federal, state and local taxes (computed at
the maximum marginal rates and including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed
upon the Excise Tax Adjustment Payment, such Participant retains an
amount of the Excise Tax Adjustment Payment equal to the Excise Tax
imposed upon the Payments.
(2) All determinations required to be made under this Section
6(g)(vi)(D), including whether an Excise Tax Adjustment Payment is
required and the amount of such Excise Tax Adjustment Payment, shall be
made by Coopers & Lybrand L.L.P., or such other national accounting firm
as the Company, or, subsequent to a Change in Control, the Company and
the Participant jointly, may designate, for purposes of the Excise Tax,
which shall provide detailed supporting calculations to the Company and
the affected Participant within 15 business days of the date of the
applicable Payment. Except as hereinafter provided, any determination by
Coopers & Lybrand L.L.P., or such other national accounting firm, shall
be binding upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code that may exist
at the time of the initial determination hereunder, it is possible that
(x) certain Excise Tax Adjustment Payments will not have been made by the
Company which should have been made (an "Underpayment"), or (y) certain
Excise Tax Adjustment Payments will have been made which should not have
been made (an "Overpayment"), consistent with the calculations required
to be made hereunder. In the event of an Underpayment, such Underpayment
shall be promptly paid by the Company to or for the benefit of the
affected Participant. In the event that the Participant discovers that
an Overpayment shall have occurred, the amount thereof shall be promptly
repaid to the Company.
(3) This Section 6(g)(vi)(D) shall not apply to any Award (x) that
was granted prior to February 17, 1993 and (y) the holder of which is an
executive officer of the Company, as determined under the Exchange Act.
(vii) Cash Settlement. Notwithstanding any provision of this Plan
or of any Award Agreement to the contrary, any Award outstanding
hereunder may at any time be cancelled in the Committee's sole
discretion upon payment of the value of such Award to the holder thereof
in cash or in another Award hereunder, such value to be determined by the
Committee in its sole discretion.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend the Plan and the Board of Directors or the Committee may amend any out-
standing Award; provided, however, that (i) no Plan amendment shall be
effective until approved by stockholders of the Company insofar as stockholder
approval thereof is required in order for the Plan to continue to satisfy the
conditions of Rule 16b-3, and (ii) without the consent of affected Participants
no amendment of the Plan or of any Award may impair the rights of Participants
under outstanding Awards, and (iii) no Option may be amended to reduce its
initial exercise price other than in connection with an event described in
Section 4(c) hereof.
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<PAGE> 13
(b) Waivers. The Committee may waive any conditions or rights under
any Award theretofore granted, prospectively or retroactively, without the
consent of any Participant.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits to be made
available under the Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to effectuate the Plan.
SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant or other person shall have
any claim to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment of Participants or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards of the same type and
the determination of the Committee to grant a waiver or modification of any
Award and the terms and conditions thereof need not be the same with respect to
each Participant.
(b) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under any
Award or under the Plan the amount (in cash, Shares, other securities, other
Awards or other property) of withholding taxes due in respect of an Award, its
exercise or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, including the grant of
options and other stock-based awards, and such arrangements may be either
generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement or other written agreement with the Participant.
(e) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable Federal law.
(f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be
so construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, person or Award, and the remainder of the
Plan and any such Award shall remain in full force and effect.
13
<PAGE> 14
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other person. To the extent that any person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares, or whether such fractional Shares or any
rights thereto shall be cancelled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the
Company's stockholders.
14
<PAGE> 1
EXHIBIT 10.p
MASCOTECH, INC. 1997 ANNUAL INCENTIVE
COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the MascoTech, Inc. 1997 Annual Incentive Compensation
Plan (the "Plan") is to provide selected executive officers of MascoTech, Inc.
(the "Company") with incentive compensation based upon the achievement of
established annual performance goals.
SECTION 2. ELIGIBILITY
The individuals eligible to participate in the Plan (the
"Participants") are the executive officers of the Company.
SECTION 3. PERFORMANCE PERIODS
Each Performance Period for purposes of the Plan shall have a duration
of one calendar year, commencing January 1 and ending December 31.
SECTION 4. ADMINISTRATION
The Compensation Committee of the Board of Directors of the Company
(the "Committee") shall have the full power and authority to administer and
interpret the Plan and to establish rules for its administration.
SECTION 5. PERFORMANCE GOALS
On or before the 90th day of each Performance Period, the Committee
shall establish in writing one or more performance criteria for the Performance
Period and the weighting of the performance criteria if more than one. The
performance criteria shall consist of one or more of the following: net income,
earnings per share, cash flow, revenues, return on assets or total shareholder
return.
SECTION 6. AWARDS
On or before the 90th day of each Performance Period, the Committee
shall establish in writing a performance incentive award for such Participants
as shall be designated by the Committee and in such amounts as the Committee
shall determine, subject to the limitations of the Plan. No award to any
Participant shall be greater than $2 million. The Committee shall have the
power and authority to reduce or eliminate for any reason the amount of the
award that would otherwise be payable to a Participant based on the performance
criteria.
SECTION 7. CERTIFICATION AND PAYMENT
As soon as practicable after release of the Company's financial results
for the Performance Period, the Committee will certify the Company's attainment
of the criteria established for such Performance Period pursuant to Section 5,
will calculate the possible payment of an award for each Participant and will
certify the amount of the award to each Participant for such Performance
Period. Payments of the awards shall be made in cash. To the extent net
income is used alone or as a component of another performance criteria, it
shall mean net income as reported to stockholders, but before losses resulting
from discontinued operations, extraordinary losses (in accordance with
generally accepted accounting principles, as currently in effect), the
cumulative effect of changes in accounting principles and other unusual,
nonrecurring items of loss that are separately identified and quantified in the
Company's audited financial statements.
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<PAGE> 2
SECTION 8. AMENDMENT
The Committee shall have the right to suspend or terminate this Plan at
any time and may amend or modify the Plan at any time.
SECTION 9. ADOPTION AND DURATION
The Plan was approved by the Committee on February 17, 1997, subject to
the approval of the stockholders of the Company at the 1997 Annual Meeting of
Stockholders. The effective date of the Plan shall be January 1, 1997 and the
Plan shall remain in effect for a period of five years.
2
<PAGE> 1
EXHIBIT 10.q
MASCOTECH, INC.
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to ensure that the non-employee Directors of
MascoTech, Inc. (the "Company") have an equity interest in the Company and
thereby have a direct and long term interest in the growth and prosperity of the
Company by payment of part of their compensation in the form of common stock of
the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
This Plan will be administered by the Company's Board of Directors
(the "Board"). The Board shall be authorized to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's interpretation of the terms and
provisions of this Plan shall be final and conclusive. The Secretary of the
Company shall be authorized to implement the Plan in accordance with its terms
and to take such actions of a ministerial nature as shall be necessary to
effectuate the intent and purposes thereof. The validity, construction and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Michigan and applicable
Federal law.
SECTION 3. ELIGIBILITY
Participation will be limited to individuals who are Eligible
Directors, as hereinafter defined. Eligible Director shall mean any Director
of the Company who is not an employee of the Company and who receives a fee for
service as a Director.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustments set forth below, the aggregate number of
shares of Company Common Stock, par value $1.00 per share ("Shares"), which
may be the subject of awards issued under the Plan shall be 500,000.
(b) Any Shares to be delivered under the Plan shall be made available
from newly issued Shares or from Shares reacquired by the Company, including
Shares purchased in the open market.
(c) To the extent a Stock Option award, as hereinafter defined,
terminates without having been exercised, or an award of Restricted Stock, as
hereinafter defined, is forfeited, the Shares subject to such Stock Option or
Restricted Stock award shall again be available for distribution in connection
with future awards under the Plan. Shares equal in number to the Shares
surrendered to the Company in payment of the option exercise price or
withholding taxes (if any) relating to or arising in connection with any
Restricted Stock or Stock Option hereunder shall be added to the number of
Shares then available for future awards under clause (a) above.
(d) In the event of any merger, reorganization, consolidation,
recapitalization, stock split, stock dividend, or other change in corporate
structure affecting the Shares, the aggregate number of Shares which may be
issued under the Plan, the number of Shares subject to Stock Options to be
granted under Section 6(a) hereof and the number of Shares subject to any
outstanding award of Restricted Stock or unexercised Stock Option shall be
adjusted to avoid enhancement or diminution of the benefits intended to be made
available hereunder.
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<PAGE> 2
SECTION 5. DIRECTOR STOCK COMPENSATION
(a) The compensation of each Eligible Director for the five year
period beginning January 1, 1997 shall be payable in part with an award of
Restricted Stock determined as set forth below, and in part in cash.
Compensation for this purpose means annual retainer fees but does not include
supplemental retainer fees for committee positions or fees for attendance at
meetings, which shall be paid in cash. The portion of compensation payable in
Restricted Stock during the five year period shall be equal to one-half of the
annual compensation paid to Eligible Directors in the year immediately prior to
the award multiplied by five, and the balance of compensation, unless otherwise
determined by the Board, shall be payable in cash. Each award of Restricted
Stock shall vest in twenty percent annual installments (disregarding fractional
shares) on January 1 of each of the five consecutive years following the year
in which the award is made. Subject to the approval of this Plan by the
Company's stockholders, each Eligible Director on February 17, 1997 is awarded
as of that date 5,790 Shares of Restricted Stock, based on the closing price of
the Shares as reported on the New York Stock Exchange Composite Tape (the
"NYSE") on February 14, 1997, the last trading date preceding the grant. Cash
shall be paid to an Eligible Director in lieu of a fractional share.
(b) Subject to the approval of this Plan by the Company's
stockholders, each Eligible Director who is first elected or appointed to the
Board on or after the date of the Company's 1997 annual meeting of stockholders
shall receive, as of the date of such election or appointment, an award of
Restricted Stock determined in accordance with Section 5(a) for the five year
period beginning on January 1 of the year in which such election or appointment
occurred; provided, however, that the price of the Shares used in determining
the number of Shares of Restricted Stock which shall be issued to such Eligible
Director shall be the closing price of the Shares as reported on the NYSE on
the date on which such Eligible Director is elected or appointed, and provided,
further, that the amount of Restricted Stock awarded to any Eligible Director
who begins serving as a Director other than at the beginning of a calendar year
shall be prorated to reflect the partial service of the initial year of such
Director's term, such proration to be effected in the initial vesting.
(c) Upon the full vesting of any award of Restricted Stock awarded
pursuant to Section 5(a) or 5(b), each affected Eligible Director shall be
eligible to receive a new award of Restricted Stock, subject to Section 4. The
number of Shares subject to such award shall be determined generally in
accordance with the provisions of Section 5(b); provided, however, that the
Board shall have sole discretion to adjust the amount of compensation then to
be paid in the form of Shares and the terms of any such award of Shares.
Except as the Board may otherwise determine, any increase or decrease in an
Eligible Director's annual compensation during the period when such Director
has an outstanding award of Restricted Stock shall be implemented by increasing
or decreasing the cash portion of such Director's compensation.
(d) Each Eligible Director shall be entitled to vote and receive
dividends on the unvested portion of his or her Restricted Stock, but will not
be able to obtain a stock certificate or sell, encumber or otherwise transfer
such Restricted Stock except in accordance with the terms of the Company's 1991
Long Term Stock Incentive Plan (the "Long Term Plan"). If an Eligible
Director's term is terminated by reason of death or permanent and total
disability, the restrictions on the Restricted Stock will lapse and such
Eligible Director's rights to the Shares will become vested on the date of such
termination. If an Eligible Director's term is terminated for any reason other
than death or permanent and total disability, the Restricted Stock that has not
vested shall be forfeited and transferred back to the Company; provided,
however, that a pro rata portion of the Restricted Stock which would have
vested on January 1 of the year following the year of the Eligible Director's
termination shall vest on the date of termination, based upon the portion of
the year during which the Eligible Director served as a Director of the
Company.
SECTION 6. STOCK OPTION GRANT
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(a) Subject to approval of this Plan by the Company's stockholders,
each Eligible Director on the date of such approval will be granted on such
date a stock option to purchase 5,000 Shares (the "Stock Option").
Thereafter, on the date of each of the Company's subsequent annual stockholders
meetings, each person who is or becomes an Eligible Director on that date and
whose service on the Board will continue after such date shall be granted a
Stock Option, subject to Section 4, effective as of the date of such meeting.
(b) Stock Options Granted under this Section 6 shall be non-qualified
stock options and shall have the following terms and conditions.
1. Option Price. The option price per Share shall be equal to the
closing price of the Shares as reflected on the NYSE on the date of grant (or
if there were no sales on such date, the most recent prior date on which there
were sales).
2. Term of Option. The term of the Stock Option shall be ten years
from the date of grant, subject to earlier termination in the event of
termination of service as an Eligible Director. If an Eligible Director's term
is terminated for any reason other than death at a time when such Director is
entitled to exercise an outstanding Stock Option, then at any time or times
within three months after termination such Stock Option may be exercised as to
all or any of the Shares which the Eligible Director was entitled to purchase
at the date of termination. If an Eligible Director dies at a time when such
Director is entitled to exercise a Stock Option, then at any time or times
within one year after death such Stock Option may be exercised as to all or any
of the Shares which the Eligible Director was entitled to purchase immediately
prior to such Director's death. Except as so exercised, such Stock Options
shall expire at the end of such periods. That portion of the Stock Option not
exercisable at the time of such termination shall be forfeited and transferred
back to the Company on the date of such termination.
3. Exercisability. Subject to clause 2 above, each Stock Option shall
vest and become exercisable with respect to twenty percent of the underlying
Shares on each of the first five anniversaries of the date of grant, provided
that the optionee is an Eligible Director on such date.
4. Method of Exercise. A Stock Option may be exercised in whole or in
part during the period in which such Stock Option is exercisable by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the
purchase price shall be made in cash, by delivery of Shares, or by any
combination of the foregoing.
5. Non-Transferability. Unless otherwise provided by the terms of the
Long Term Plan or the Board, (i) Stock Options shall not be transferable by
the optionee other than by will or by the laws of descent and distribution, and
(ii) during the optionee's lifetime, all Stock Options shall be exercisable
only by the optionee or by his or her guardian or legal representative.
6. Stockholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a stockholder.
SECTION 7. GENERAL
(a) Plan Amendments. The Board may amend, suspend or discontinue the
Plan as it shall deem advisable or to conform to any change in any law or
regulation applicable thereto; provided, that the Board may not, without the
authorization and approval of the stockholders of the Company: (a) modify the
class of persons who constitute Eligible Directors as defined in the Plan; or
(b) increase the total number of Shares available under the Plan. In addition,
without the consent of affected participants, no amendment of the Plan or any
award under the Plan may impair the rights of participants under outstanding
awards.
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(b) Listing and Registration. If at any time the Board shall
determine, in its discretion, that the listing, registration or qualification
of the Shares under the Plan upon any securities exchange or under any state or
Federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of any award hereunder, no Shares may be delivered or disposed of unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any condition not acceptable to the Board.
(c) Award Agreements. Each award of Restricted Stock and Stock
Option granted hereunder shall be evidenced by the Eligible Director's written
agreement with the Company which shall contain such terms and conditions not
inconsistent with the provisions of the Plan as shall be determined by the
Board in its discretion.
4
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EXHIBIT 10.r
DESCRIPTION OF THE MASCO CORPORATION PROGRAM FOR
ESTATE, FINANCIAL PLANNING AND TAX ASSISTANCE
In order to assure that the Company's senior executives receive the
full benefit of the Company's benefit programs given the complexities of the
tax laws relating thereto, and remain focused on Company matters, the Company
establised a program to provide senior executives with assistance in their
estate, financial planning and tax matters. Under this program, the Company
will pay up to $10,000 for such services each year, with a special
"carry-forward" of the second year's $10,000 allowance during the first year to
cover additional costs that may be associated with developing initial estate
plans. The Company will inform each participant during the course of this
process as to the amount of professional fees allocated to services performed
on such participant's behalf. The value of services received will be taxable as
ordinary income to the participant.
<PAGE> 1
EXHIBIT 10.u
AMENDMENT TO STOCK PURCHASE AGREEMENT
AMENDMENT dated as of May 21, 1997 between Masco Corporation, a
Delaware corporation ("Masco"), and MascoTech, Inc., a Delaware corporation
("MSX").
WHEREAS, Masco and MSX are parties to a Stock Purchase Agreement, dated
as of December 23, 1991 (the "Agreement"), whereby Masco purchased from MSX the
fifty percent equity interest in Masco Capital Corporation, a Delaware
corporation ("Masco Capital"), owned by MSX;
WHEREAS, a portion of the aggregate purchase price payable by Masco to
MSX (the "Additional Payment") under the Agreement is based on Incremental
Value, which, in turn is based on a Valuation;
WHEREAS, pursuant to Section 10 of the Agreement, the Oversight
Committees of the Boards of Directors of Masco and MSX (the "Oversight
Committees") elected to defer payment of the Additional Payment until after a
September 30, 1996 determination of the Valuation and the Incremental Value;
and
WHEREAS, the Boards of Directors of each of Masco and MSX, acting with
the concurrence and based upon the recommendations of their respective
Oversight Committees, have decided to again defer the Additional Payment until
after December 31, 1996 and to continue the authority of the Oversight
Committees in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
1. Capitalized Terms. Unless indicated otherwise, capitalized terms
used in this Amendment shall have the same meanings ascribed to them in the
Agreement.
2. Determinations. The determinations of Valuation and Incremental
Value will be made as of September 30, 1997, or such later date as the
Oversight Committees may from time to time jointly determine.
3. Payment. The Additional Payment owing by Masco to MSX, if any,
shall be paid within thirty (30) days after the Oversight Committees jointly
determine the Valuation and Incremental Value.
4. Effect. This Amendment shall have the effect of modifying the
Agreement, and except as modified, all of the provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
MASCO CORPORATION MASCOTECH, INC.
By /s/Robert B. Rosowski By /s/Timothy Wadhams
--------------------------- ---------------------------
Robert B. Rosowski Timothy Wadhams
Vice President - Controller Vice President - Controller
and Treasurer and Treasurer
<PAGE> 1
EXHIBIT 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EARNINGS BEFORE INCOME TAXES AND FIXED
CHARGES:
Income from continuing operations
before income taxes................ $630,900 $502,700 $351,790 $292,830 $349,190
Deduct/add equity in undistributed
(earnings) loss of
fifty-percent-or-less-owned
companies.......................... (19,470) (12,310) (17,770) 106,200 (13,750)
Add interest on indebtedness, net.... 80,390 74,790 73,400 60,360 62,860
Add amortization of debt expense..... 1,260 1,400 1,930 2,220 2,650
Add estimated interest factor for
rentals............................ 8,150 6,150 4,970 4,220 3,190
-------- -------- -------- -------- --------
Earnings before income taxes and
fixed charges...................... $701,230 $572,730 $414,320 $465,830 $404,140
======== ======== ======== ======== ========
FIXED CHARGES:
Interest on indebtedness............. $ 83,520 $ 77,250 $ 76,460 $ 63,220 $ 63,600
Amortization of debt expense......... 1,260 1,400 1,930 2,220 2,650
Estimated interest factor for
rentals............................ 8,150 6,150 4,970 4,220 3,190
-------- -------- -------- -------- --------
$ 92,930 $ 84,800 $ 83,360 $ 69,660 $ 69,440
======== ======== ======== ======== ========
Ratio of earnings to fixed charges........ 7.5 6.8 5.0 6.7 5.8
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
MASCO CORPORATION EXHIBIT 21
(a Delaware corporation)
Subsidiaries as of March 15, 1998*
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation or Organization
---- -----------------------------
<S> <C>
Alsons Corporation Michigan
American Metal Products Company Delaware
A.M.P. Industrial Mexicana S.A. de C.V. (97%) Mexico
American Shower & Bath Corporation Michigan
Aqua Glass Corporation Tennessee
Aqua Glass West, Inc. Delaware
Tombigbee Transport Corporation Tennessee
Baldwin Hardware Corporation Pennsylvania
Baldwin Decorative Coatings, Inc. Delaware
Baldwin Hardware Service Corp. Delaware
Brass-Craft Manufacturing Company Michigan
Brass-Craft Holding Company Michigan
Brass-Craft Canada Ltd. Canada
Brass-Craft Western Company Texas
Plumbers Quality Tool Mfg. Co., Inc. Michigan
Tempered Products, Inc. Taiwan
Thomas Mfg. Company Inc. of Thomasville North Carolina
Brush Creek Ranch II, Inc. Missouri
Cal-Style Furniture Mfg. Co. California
Cobra Products, Inc. Delaware
Delta Faucet Services International, Inc. Delaware
Delta International Services, Inc. Delaware
Epic Fine Arts Company Delaware
Beacon Hill Fine Art Corporation New York
Morning Star Gallery, Ltd. New Mexico
Fieldstone Cabinetry, Inc. Iowa
Flint & Walling Industries, Inc. Delaware
Franklin Brass Manufacturing Co. Delaware
Gale Industries, Inc. Florida
Gamco Products Company Delaware
KraftMaid Cabinetry, Inc. Ohio
KraftMaid Trucking, Inc. Ohio
KraftMaid Distribution Centers Delaware
Landex, Inc. Michigan
Landex of Wisconsin, Inc. Wisconsin
Liberty Hardware Manufacturing Corporation Florida
</TABLE>
*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 trade names or other assumed names in
the conduct of their business.
<PAGE> 2
<TABLE>
<S> <C>
The Marvel Group, Inc. Delaware
Masco AG Disposition, Inc. Kentucky
Masco B.V. Netherlands
Masco Building Products Corp. Delaware
Computerized Security Systems, Inc. Michigan
Thermador Corporation California
Weiser Lock Corporation California
Winfield Locks, Inc. California
Masco Capital Corporation Delaware
Masco Holdings Limited Delaware
Masco Chile Limited (99%) Chile
Masco Corporation of Indiana Indiana
Damixa A/S Denmark
KS Beheer B.V. Netherlands
Damixa Nederland B.V. Netherlands
N.V. Damixa S.A. Belgium
Damixa Armaturen GmbH Germany
Damixa SARL France
Delta Faucet Company of Tennessee Delaware
Delta Faucet of Oklahoma, Inc. Delaware
Delta Faucet Services (Korea) Korea
Delta Faucet Services (Singapore) Singapore
Delta Faucet Services (Thailand) Thailand
Hydrotech, Inc. Michigan
Masco Canada Limited Ontario
Masco Corporation Limited United Kingdom
Berglen Furniture Limited United Kingdom
Berglen Group Limited United Kingdom
Kiloheat Limited United Kingdom
Moore Group Limited United Kingdom
Moore Furniture Group Limited United Kingdom
NewTeam Export (Jersey) Limited Jersey
NewTeam Ltd. United Kingdom
Chromeco Ltd. United Kingdom
Harplace Ltd. United Kingdom
Masco Europe, Inc. Delaware
Masco GmbH (98%) Germany
Alfred Reinecke GmbH & Co. KG Germany
Alma Kuechen Aloys Meyer GmbH & Co. KG Germany
Duskabin - Wein Austria Austria
E. Missel GmbH & Co. KG Germany
Gebhardt Flaektteknik Aktiebolag Sweden
Gebhardt GmbH & Co. KG Germany
Gebhardt Singapore Singapore
Gebhardt Ventilatoren A/S Denmark
</TABLE>
2
<PAGE> 3
(Subsidiaries of Masco GmbH which is a wholly-owned subsidiary of Masco
Corporation of Indiana cont'd)
<TABLE>
<S> <C>
Gebhardt Ventilatoren GmbH Austria
HTH Haustechnische Handelsgesellschaft Germany
Huppe Belgium N.V./S.A. Belgium
Huppe GmbH Austria
Huppe GmbH & Co. KG Germany
Huppe Sarl France
Huppe Czech Republik Czech Republic
Huppe Netherlands Holland
Huppe Poland Poland
Huppe Switzerland Switzerland
Huppe Italy Italy
Intermart Insaat Malzemeleri Sanayi ve Ticaret AS Turkey
Jung Pumpen GmbH Austria
Jung Pumpen GmbH&Co. KG Germany
Jung Pumpen SARL France
Jung Pumpen United Kingdom United Kingdom
Masco Belgium N.V. Belgium
Vasco N.V. Belgium
Thermic N.V. Belgium
LTV Transport N.V. Belgium
Vasco GmbH Denmark
Vasco BC S.C. France
Vasco Ltd. UK Great Britain
Vasco B.V. Netherlands
Vasco Ges.m.b.H Austria
Vasco sp.z.o.o. Poland
Masco Mobiliario S.L. Spain
Alvic S.A. Spain
Alvinor S.A. Spain
Cockit S.A. Spain
Cockit-Madrid S.L. Spain
Desarollos Modulares (Barcelona) S.A. Spain
Desarollos Modulares S.A. Spain
Madetres S.A. Spain
Ofitres S.A. Spain
Reser Srl Spain
SKS Stakusit-bautechnik GmbH Germany
Bauelemente bertram GmbH Germany
BBD Bauelemente Bertram Duisberg GmbH Germany
elket Kunststoff-Technik GmbH&Co. Germany
SKS Stakusit-Kunststoff Gmbh&Co. Germany
SKS Stakusit-STAHL-Kunststoff Germany
SKS Stakusit POLSKA Sp.2.0.0. Poland
SKS Stakusit GmbH Austria
</TABLE>
3
<PAGE> 4
(Subsidiaries of Masco GmbH which is a wholly-owned subsidiary of Masco
Corporation of Indiana cont'd)
<TABLE>
<S> <C>
N.V. Weiser Europe S.A. Belgium
Rubinetterie Mariani S.P.A. Italy
Studio Technico Sviluppo E. Richerche S.R.L. Italy
Weiser Inc. Canada
Weiser (U.K.) Ltd. United Kingdom
Masco de Puerto Rico, Inc. Puerto Rico
Masco International Sales, Inc. Barbados
Masco International, Inc. Delaware
Masco IRC, Inc. Delaware
Masco Japan Limited Delaware
Masco Philippines Inc. Philippines
Masco of Russia Russia
Masco Services, Inc. Delaware
Masco Training 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
StarMark, Inc. South Dakota
SMI Retail Corp. Delaware
SMI Transportion, Inc. Delaware
StarMark of Virginia, Inc. Virginia
Texwood Industries, Inc. Delaware
Quality Cabinets Inc. Texas
Quality Doors Inc. Texas
Vapor Technologies, Inc. Delaware
Watkins Manufacturing Corporation California
Hot Spring Spas New Zealand (50%) New Zealand
W/C Technology Corporation Delaware
Zenith Products Corporation Delaware
</TABLE>
4
<PAGE> 1
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, 33-53959, 33-53985, 33-60031,
333-27765 and 333- 36477) and Form S-8 (Registration Nos. 2-95969, 33-28142,
33-42229 and 333-30867) of our report dated February 13, 1998, on our audits of
the consolidated financial statements and financial statement schedule of Masco
Corporation and subsidiaries as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997, 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.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 24, 1998
<PAGE> 1
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, 33-53959, 33- 53985, 33-60031,
333-27765 and 333-36477) and Form S-8 (Registration Nos. 2-95969, 33-28142,
33-42229 and 333-30867) of our report dated February 17, 1998, on our audits of
the consolidated financial statements and financial statement schedule of
MascoTech, Inc. and subsidiaries as of December 31,1997 and 1996 and for each
of the three years in the period ended December 31,1997 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.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S DECEMBER 31, 1997 FORM 10-K. THIS INFORMATION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 441,330
<SECURITIES> 0
<RECEIVABLES> 578,850
<ALLOWANCES> 19,800
<INVENTORY> 515,000
<CURRENT-ASSETS> 1,626,720
<PP&E> 1,625,370
<DEPRECIATION> 588,050
<TOTAL-ASSETS> 4,333,760
<CURRENT-LIABILITIES> 620,000
<BONDS> 1,321,470
0
0
<COMMON> 165,570
<OTHER-SE> 2,063,450
<TOTAL-LIABILITY-AND-EQUITY> 4,333,760
<SALES> 3,760,000
<TOTAL-REVENUES> 3,760,000
<CGS> 2,378,250
<TOTAL-COSTS> 2,378,250
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,850
<INCOME-PRETAX> 630,900
<INCOME-TAX> 248,500
<INCOME-CONTINUING> 382,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382,400
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 2.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MASCO CORPORATION'S FORM 10-Q'S FOR THE FIRST, SECOND AND THIRD QUARTERS OF
1997. THIS INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS, EXCEPT FOR PRIMARY (WHICH IS BASIC) AND DILUTED EARNINGS
PER SHARE INFORMATION WHICH HAS BEEN RESTATED TO CONFORM WITH THE DECEMBER 31,
1997 PRESENTATION.
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 JUN-30-1997 MAR-31-1997
<CASH> 379,040 333,170 327,590
<SECURITIES> 0 0 0
<RECEIVABLES> 607,380 556,570 536,980
<ALLOWANCES> 22,930 19,050 18,560
<INVENTORY> 496,920 448,270 424,700
<CURRENT-ASSETS> 1,569,010 1,410,800 1,362,080
<PP&E> 1,588,950 1,503,590 1,483,450
<DEPRECIATION> 584,780 553,940 544,390
<TOTAL-ASSETS> 4,223,620 3,796,290 3,684,130
<CURRENT-LIABILITIES> 641,590 510,320 479,690
<BONDS> 1,321,250 1,228,730 1,216,170
0 0 0
0 0 0
<COMMON> 165,170 161,650 161,240
<OTHER-SE> 1,978,960 1,790,180 1,725,350
<TOTAL-LIABILITY-AND-EQUITY> 4,223,620 3,796,290 3,684,130
<SALES> 2,770,000 1,767,000 854,000
<TOTAL-REVENUES> 2,770,000 1,767,000 854,000
<CGS> 1,751,700 1,117,700 539,500
<TOTAL-COSTS> 1,751,700 1,117,700 539,500
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 58,200 37,400 18,500
<INCOME-PRETAX> 461,500 291,600 139,200
<INCOME-TAX> 184,600 116,500 55,700
<INCOME-CONTINUING> 276,900 175,100 83,500
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 276,900 175,100 83,500
<EPS-PRIMARY> 1.74 1.11 0.53
<EPS-DILUTED> 1.68 1.07 0.51
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S 1996 FORM 10-K AND ITS FORM 10-Q'S FOR THE FIRST,
SECOND AND THIRD QUARTERS OF 1996. THIS INFORMATION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, EXCEPT FOR PRIMARY (WHICH
IS BASIC) AND DILUTED EARNINGS PER SHARE INFORMATION WHICH HAS BEEN RESTATED TO
CONFORM WITH THE DECEMBER 31, 1997 PRESENTATION.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 SEP-30-1996 JUN-30-1996 MAR-31-1996
<CASH> 473,730 196,500 73,030 45,690
<SECURITIES> 0 0 0 0
<RECEIVABLES> 484,800 543,020 508,750 505,370
<ALLOWANCES> 17,900 16,980 16,150 15,630
<INVENTORY> 411,940 417,130 399,360 389,400
<CURRENT-ASSETS> 1,429,770 1,212,230 1,038,040 991,110
<PP&E> 1,474,080 1,435,500 1,398,050 1,367,780
<DEPRECIATION> 533,490 529,050 514,000 502,440
<TOTAL-ASSETS> 3,701,650 3,489,820 3,918,760 3,802,960
<CURRENT-LIABILITIES> 518,440 497,570 476,840 420,940
<BONDS> 1,236,320 1,102,020 1,622,040 1,594,890
0 0 0 0
0 0 0 0
<COMMON> 160,870 160,710 160,540 160,430
<OTHER-SE> 1,678,940 1,616,460 1,552,930 1,523,740
<TOTAL-LIABILITY-AND-EQUITY> 3,701,650 3,489,820 3,918,760 3,802,960
<SALES> 3,237,000 2,394,000 1,551,000 764,000
<TOTAL-REVENUES> 3,237,000 2,394,000 1,551,000 764,000
<CGS> 2,048,070 1,498,900 976,900 480,330
<TOTAL-COSTS> 2,048,070 1,498,900 976,900 480,330
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 74,680 54,900 34,000 17,500
<INCOME-PRETAX> 502,700 353,000 216,700 106,800
<INCOME-TAX> 207,500 141,200 86,700 44,800
<INCOME-CONTINUING> 295,200 211,800 130,000 62,000
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 295,200 211,800 130,000 62,000
<EPS-PRIMARY> 1.87 1.34 0.82 0.39
<EPS-DILUTED> 1.82 1.31 0.80 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S DECEMBER 31, 1995 FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, EXCEPT FOR PRIMARY (WHICH
IS BASIC) AND DILUTED EARNINGS PER SHARE INFORMATION WHICH HAS BEEN RESTATED
TO CONFORM WITH THE DECEMBER 31, 1997 PRESENTATION.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 60,470
<SECURITIES> 0
<RECEIVABLES> 456,200
<ALLOWANCES> 16,300
<INVENTORY> 391,760
<CURRENT-ASSETS> 964,500
<PP&E> 1,342,370
<DEPRECIATION> 485,680
<TOTAL-ASSETS> 3,778,630
<CURRENT-LIABILITIES> 445,850
<BONDS> 1,577,100
0
0
<COMMON> 160,380
<OTHER-SE> 1,495,050
<TOTAL-LIABILITY-AND-EQUITY> 3,778,630
<SALES> 2,927,000
<TOTAL-REVENUES> 2,927,000
<CGS> 1,846,330
<TOTAL-COSTS> 1,846,330
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,800
<INCOME-PRETAX> 351,790
<INCOME-TAX> 151,740
<INCOME-CONTINUING> 200,050
<DISCONTINUED> (641,730)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (441,680)
<EPS-PRIMARY> (2.82)
<EPS-DILUTED> (2.75)
</TABLE>
