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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, 1998 COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: 313-274-7400
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $1.00 Par Value New York Stock Exchange, Inc.
Series A Participating Cumulative
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
</TABLE>
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 15, 1999 (based on the closing sale
price of $25 15/16 of the Registrant's Common Stock, as reported on the New York
Stock Exchange Composite Tape on such date) was approximately $8,540,219,000.
Number of shares outstanding of the Registrant's Common Stock at March 15, 1999:
339,232,000 shares of Common Stock, par value $1.00 per share
Portions of the Registrant's definitive Proxy Statement to be filed for its 1999
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<C> <S> <C>
PART I
1. Business.................................................... 2
2. Properties.................................................. 6
3. Legal Proceedings........................................... 8
4. Submission of Matters to a Vote of Security Holders......... 8
Supplementary Item. Executive Officers of Registrant........ 8
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 9
6. Selected Financial Data..................................... 9
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
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>
1
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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. 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 bath and shower enclosure units,
spas and hot tubs, other shower, bath and plumbing specialties and accessories,
door locks and other builders' hardware, radiators and heat convectors, 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, and recently, through internet
retailers, to consumers and contractors. The Company also supplies and installs
insulation and other building products directly to builders and consumers. The
Company's operations are categorized into three segments: Kitchen and Bath
Products, Environmental Products and Services and Builders' Hardware and Other
Specialty Products.
SEGMENTS
The following table sets forth for the three years ended December 31, 1998,
the contribution of the Company's segments to net sales and operating profit, in
thousands:
<TABLE>
<CAPTION>
NET SALES
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Kitchen and Bath Products.................. $3,294,000 $2,940,000 $2,519,000
Environmental Products and Services........ 485,000 348,000 295,000
Builders' Hardware and Other Specialty
Products................................. 566,000 472,000 423,000
---------- ---------- ----------
Total................................. $4,345,000 $3,760,000 $3,237,000
========== ========== ==========
OPERATING PROFIT(1)
--------------------------------------
1998 1997 1996
---------- ---------- ----------
Kitchen and Bath Products.................. $ 613,000 $ 539,000 $ 462,000
Environmental Products and Services........ 69,000 50,000 41,000
Builders' Hardware and Other Specialty
Products................................. 84,000 80,000 63,000
---------- ---------- ----------
Total................................. $ 766,000 $ 669,000 $ 566,000
========== ========== ==========
</TABLE>
(1) Amounts are before general corporate expense.
Additional financial information concerning the Company's operations by
segments as of and for the three years ended December 31, 1998 is set forth in
the Note to the Company's Consolidated Financial Statements captioned "Segment
Information," included in Item 8 of this Report.
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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 retail accounts and to
distributors who sell the faucets to plumbers, building contractors, remodelers,
smaller retailers and others. PEERLESS faucets, designed for the
"do-it-yourself" market (DIY), 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
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 $884 million in 1998, $815 million
in 1997 and $757 million in 1996. 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, with Moen, Price Pfister, Kohler 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 and 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, England and Spain
with sales to European consumers, wholesalers and builders through distribution
channels that parallel domestic distribution. Sales of kitchen and bath cabinets
were approximately $1,334 million in 1998, $1,083 million in 1997 and $832
million in 1996. Management believes that the Company is the largest
manufacturer of kitchen and bath cabinetry in the United States. Significant
competitors are Aristokraft, Shrock, American Woodmark and Omega.
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 AQUA GLASS(R)
acrylic and gelcoat bath and shower units and whirlpools, which 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 under the brand names AMERICAN SHOWER & BATH(TM)
and TRAYCO(TM) to the home improvement market through hardware stores and home
centers. HUPPE(R) luxury bath and shower enclosures are manufactured and sold by
the Company through wholesale channels primarily in Germany. HERITAGE(TM)
ceramic and acrylic bath fixtures are sold in the United Kingdom directly to
selected retailers. 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.
Direct sales to home center retailers in all of the Company's product lines
have been increasing in recent years, and in 1998 sales to The Home Depot were
$499 million, approximately 11.5 percent of the Company's 1998 sales volume.
Builders, distributors, wholesalers and other retailers represent other channels
of distribution for the Company's products.
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ENVIRONMENTAL PRODUCTS AND SERVICES
The Company manufactures heating, ventilating and air conditioning
accessories under the trademark AMP,(TM) including grilles, registers, diffusers
and Type B Gas Vents, which are sold through wholesale distribution and home
centers. GEBHARDT(TM) commercial ventilating products are manufactured and
distributed by the Company in Europe. The Company manufactures residential
hydronic radiators and heat convectors under the brand names VASCO(R) and
BRUGMAN(TM) and distributes to the European market from operations in Belgium
and Holland. 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.
BUILDERS' HARDWARE AND OTHER SPECIALTY PRODUCTS
Builders' Hardware and 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. JUNG(TM) water pumps are manufactured and distributed by
the Company in Europe. 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. The Company also manufactures electronic lock sets for
use by the banking industry on safes, ATMs, vaults and related cabinetry and
hardware. Key domestic competitors to Baldwin and Weiser in the lock set
business are Kwikset and Schlage. Imported products are also becoming a
significant factor in this market.
The Company has recently begun to utilize 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.
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, although from
time to time various operations may encounter shortages or unusual price
increases.
INTERNATIONAL OPERATIONS
Through its subsidiaries, the Company also has home improvement and
building products manufacturing plants in Austria, Belgium, Canada, Denmark,
England, France, Germany, Holland,
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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 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 international operations
were expanded in 1998 through the acquisition of four manufacturers. Vasco
Corporation, based in Belgium, and The Brugman Group, headquartered in Holland,
are both leading European manufacturers of residential hydronic radiators and
heat convectors. Mirolin Industries Corporation is a leading Canadian
manufacturer of tubs, shower enclosures and whirlpools and Heritage Bathrooms,
PLC is a manufacturer and distributor of residential bath products including
bathtubs, toilets, bidets, sinks, faucets and showers and a full range of bath
accessories, based in England.
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, 1998, 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, 1998, the Company employed approximately 31,700 people.
Satisfactory relations have generally prevailed between the Company and its
employees.
EQUITY INVESTMENTS
The Company has equity investments in certain affiliated companies. One of
these companies, MascoTech, Inc., was formed in July, 1984 when the Company
distributed to its stockholders shares of MascoTech common stock as a special
dividend. The Company's ownership in MascoTech is currently approximately 17
percent. MascoTech is a diversified industrial manufacturing company utilizing
advanced metalworking capabilities to supply metal formed components used in
vehicle engine and drivetrain applications, specialty fasteners, towing systems,
packaging and sealing products and other industrial products. MascoTech's net
sales for 1998 were approximately $1.6 billion.
Further information about the Company's equity investments is set forth in
the Note to the Company's Consolidated Financial Statements captioned "Equity
Investments in Affiliates" included in Item 8 of this Report.
5
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ITEM 2. PROPERTIES.
The following list sets forth the location of the Company's principal
manufacturing facilities and identifies the segments utilizing such facilities.
<TABLE>
<S> <C>
Arizona..................... Tucson (3)
California.................. Carlsbad (1), Corona (1), Costa Mesa (3), Los Angeles (1),
Pico Rivera (1), Rancho Dominguez (1), Torrance (3) and
Vista (1)
Colorado.................... Longmont (1)
Delaware.................... New Castle (1)
Illinois.................... Chicago (3)
Indiana..................... Cumberland (1), Greensburg (1) and Kendallville (3)
Iowa........................ Northwood (1)
Kentucky.................... Henderson (1), Morgantown (1) and Mt. Sterling (1)
Michigan.................... Adrian (1), Hillsdale (1), Lapeer (1) and Troy (3)
Minnesota................... Lakeville (1)
Mississippi................. Olive Branch (2)
Nevada...................... Las Vegas (1)
New Jersey.................. Moorestown (1), Passaic (1) and West Berlin (3)
North Carolina.............. Thomasville (1)
Ohio........................ Jackson (1), Loudonville (1), Middlefield (1) and Orwell (1)
Oklahoma.................... Chickasha (1) and Durant (1)
Oregon...................... Klamath Falls (1)
Pennsylvania................ Reading (1 and 3)
South Dakota................ Rapid City (1) and Sioux Falls (1)
Tennessee................... Adamsville (1), Jackson (1) and McEwen (1)
Texas....................... Cedar Hill (1), Duncanville (1) and Lancaster (1)
Virginia.................... Atkins (1), Culpeper (1), Lynchburg (1) and Mt. Jackson (1)
Austria..................... Furstenfeld (3)
Belgium..................... Brussels (3), Dilsen (2) and St. Niklaas (3)
Canada...................... Cambridge (1), London (1) and St. Thomas (1), Ontario
Denmark..................... Herlev (3) and Odense (1)
England..................... Brighouse (1), Brownhills (1), Corby (1), Warminster (1) and
Wetherby (1)
France...................... Sevres (1)
Germany..................... Ahaus (1), Bad Zwischenahn (1), Bielefeld (3), Duisburg (3),
Dortmund (3), Foehren (3), Iserlohn (1), Kulmbach (3),
Netzschkau (2), Neuwied (1), Rheine (2), Steinhagen (3),
Stuttgart (2) and Waldenburg (2)
Holland..................... Tubbergen (2)
Italy....................... Lacchiarella (1) and Zingonia (1)
Mexico...................... Mexicali (2)
Poland...................... Krakow (2) and Kobierzyce (2)
Spain....................... Alcaudete (1), Barcelona (1) and Vic (1)
Taiwan...................... Tai Chung (1)
Turkey...................... Czerkezkoy (1)
</TABLE>
Segments identified in the preceding table are: (1) Kitchen and Bath Products,
(2) Environmental Products and Services and (3) Builders' Hardware and Other
Specialty Products. Multiple footnotes within the same parentheses indicate that
significant activities relating to more than one segment are conducted at that
location.
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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 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) from which the Company supplies and installs
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.
<TABLE>
<S> <C>
California.................. Commerce
Florida..................... Deerfield Beach and Ocala
Illinois.................... Wheeling and 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,
Newburgh Heights 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.............. Oslavany
England..................... Leicester and Wolverhampton
Germany..................... Neunkirchen, Nurnberg and Zell am Harmersbach
Italy....................... Poggio Rusco and Valmadrera
Mexico...................... Mexico City
Spain....................... Almusaffes
</TABLE>
MascoTech's principal manufacturing facilities range in size from
approximately 10,000 square feet to 310,000 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
production 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 62 1962
Executive Officer
Raymond F. Kennedy..................... President and Chief Operating Officer 56 1989
Dr. Lillian Bauder..................... Vice President -- Corporate Affairs 59 1996
David A. Doran......................... Vice President -- Taxes 57 1984
Daniel R. Foley........................ Vice President -- Human Resources 57 1996
Eugene A. Gargaro, Jr. ................ Vice President and Secretary 56 1993
John R. Leekley........................ Senior Vice President and General 55 1979
Counsel
Richard G. Mosteller................... Senior Vice President -- Finance 66 1962
Robert B. Rosowski..................... Vice President -- Controller and 58 1973
Treasurer
</TABLE>
Executive officers, who are elected by the Board of Directors, serve for a
term of one year or less. Each elected executive officer has been employed in a
managerial capacity with the Company for over five years except for Mr. Foley
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. 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(1)
---------------------------------- DIVIDENDS
QUARTER HIGH LOW DECLARED(1)
- ------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
1998
Fourth................................. $30 7/8 $20 3/4 $.11
Third.................................. 33 22 11/16 .22(2)
Second................................. 30 15/32 26 15/16 --(2)
First.................................. 29 29/32 24 9/16 .10 1/2
----
Total............................... $.43 1/2
====
1997
Fourth................................. $26 29/32 $20 23/32 $.10 1/2
Third.................................. 24 1/8 20 9/32 .10 1/2
Second................................. 21 11/16 17 1/2 .10
First.................................. 18 13/16 16 7/8 .10
----
Total............................... $.41
====
</TABLE>
(1) After giving effect to the Company's 100% stock distribution in July 1998.
(2) The cash dividend ordinarily declared in the second quarter of the fiscal
year was declared early in the third quarter of 1998.
On March 15, 1999, there were 6,258 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 the payment of 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)
1998 1997 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $4,345,000 $3,760,000 $3,237,000
Income from continuing
operations(1)............ $ 476,000 $ 382,400 $ 295,200
Per share of common
stock:(2)
Income from continuing
operations:(1)
Basic............... $1.44 $1.20 $.94
Diluted............. $1.39 $1.15 $.91
Dividends declared....... $ .43 1/2 $ .41 $.39
Dividends paid........... $ .43 $ .40 1/2 $.38 1/2
At December 31:
Total assets............. $5,167,350 $4,333,760 $3,701,650
Long-term debt........... $1,391,420 $1,321,470 $1,236,320
Shareholders' equity..... $2,728,580 $2,229,020 $1,839,810
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995 1994
--------------------- ---------------------
<S> <C> <C> <C> <C>
Net sales.................. $2,927,000 $2,583,000
Income from continuing
operations(1)............ $ 200,050 $ 172,710
Per share of common
stock:(2)
Income from continuing
operations:(1)
Basic............... $.64 $.55
Diluted............. $.62 $.54
Dividends declared....... $.37 $.35
Dividends paid........... $.36 1/2 $.34 1/2
At December 31:
Total assets............. $3,778,630 $4,177,100
Long-term debt........... $1,577,100 $1,587,160
Shareholders' equity..... $1,655,430 $2,118,330
</TABLE>
(1) The year 1994 includes a $79 million after-tax ($.25 per diluted share)
non-cash equity investment charge.
(2) After giving effect to 100 percent stock distribution in July 1998.
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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 changes in general
economic conditions, the timely resolution of the year 2000 issue and other
factors 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 for 1998, aided by acquisitions, both
increased 16 percent to $4,345 million and $681 million, respectively. Net
income and diluted earnings per share for 1998 were $476 million and $1.39,
representing increases of 24 percent and 21 percent, respectively, over 1997.
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 impacted by these expenses.
During 1998, the Company acquired Vasco Corporation and The Brugman Group,
both of which are European manufacturers of residential hydronic radiators and
heat convectors, and Heritage Bathrooms PLC, a European manufacturer and
distributor of residential bath products.
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, 1997, pro forma unaudited
consolidated net sales and net income would have approximated $4,422 million and
$481 million for 1998 and $3,911 million and $394 million for 1997,
respectively, and pro forma unaudited consolidated diluted earnings per share
would have approximated $1.40 and $1.18 for 1998 and 1997, respectively.
10
<PAGE> 12
The Company also acquired several other smaller home improvement and
building products companies in 1998.
The combined purchase price for 1998 acquisitions, net of cash acquired,
aggregated approximately $323 million. The acquisitions were accounted for as
purchase transactions.
In July 1998, the Company completed the sale of its Thermador subsidiary.
Thermador is a U.S. manufacturer of kitchen appliances with annual net sales of
approximately $140 million.
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. 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 and are stated at face value; 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.
PROFIT MARGINS
Operating profit margin, before general corporate expense, decreased to
17.6 percent in 1998 following an increase to 17.8 percent in 1997 from 17.5
percent in 1996 (general corporate expense includes those expenses not
specifically attributable to the Company's business segments). The decrease in
1998 over 1997 is principally due to the influence of product mix and increased
goodwill amortization from recent acquisitions, offset in part by a reduction in
selling, general and administrative expenses as a percentage of sales. The
Company's operating profit margin from faucet sales is somewhat higher than that
from 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 offerings.
General corporate expense in 1998 was $86 million, as compared with $82
million in 1997 and $85 million in 1996. General corporate expense as a
percentage of sales decreased to 2.0 percent in 1998 from 2.2 percent in 1997
and 2.6 percent in 1996. Operating profit margin, after general corporate
expense, was 15.6 percent, 15.6 percent and 14.8 percent in 1998, 1997 and 1996,
respectively.
Net income as a percentage of sales increased to 11.0 percent in 1998 from
10.2 percent and 9.1 percent in 1997 and 1996, respectively. After-tax profit
return on shareholders' equity as measured by net income increased to 21.4
percent in 1998 from 20.8 percent and 17.8 percent in 1997 and 1996,
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.
11
<PAGE> 13
Bank credit lines are maintained to ensure availability of short-term
funds. At December 31, 1998, 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 net
worth. At December 31, 1998, the Company was in compliance with these
limitations and requirements, and the Company's net worth exceeded the most
restrictive of such provisions by approximately $715 million.
In July 1998, the Company effected a two-for-one stock split in the form of
a 100 percent stock distribution to shareholders, which resulted in the issuance
of approximately 170 million shares of common stock and reduced paid-in-capital
by approximately $170 million. Following the issuance of the common shares for
the stock split, the Company declared an increased quarterly cash dividend of
$.11 per common share on its post-split shares, which marks the 40th consecutive
year in which dividends have been increased.
The Company called for redemption its $178 million of 5.25% convertible
subordinated debentures due 2012 in February 1998. Substantially all holders
exercised their right to convert these debentures into Company common stock (at
the pre-stock split conversion price of $42.28 per share), resulting in the
issuance of approximately 4.2 million shares of Company common stock in February
1998 (8.4 million shares after giving effect to the stock split).
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 33 percent at December 31, 1998
from approximately 36 percent at December 31, 1997. The conversion of the
Company's $178 million convertible subordinated debentures contributed to this
improvement. The Company's total debt as a percent of total capitalization ratio
was 37 percent and 38 percent at December 31, 1998 and 1997, respectively. The
Company's working capital ratio was 2.2 to 1 at December 31, 1998 compared with
2.6 to 1 at December 31, 1997; excluding $200 million of 6.625% notes due
September 15, 1999, the Company's working capital ratio was 2.6 to 1 at December
31, 1998.
CASH FLOWS
Significant sources and uses of cash in the past three years are summarized
as follows, in thousands:
<TABLE>
<CAPTION>
CASH SOURCES (USES) 1998 1997 1996
------------------- -------- -------- --------
<S> <C> <C> <C>
Net cash from operating activities.............. $419,090 $405,030 $340,140
Cash proceeds from sale of:
Subsidiary and TriMas investment.............. 137,640 -- --
Discontinued operations....................... -- -- 707,630
MascoTech investments, net.................... -- 45,580 115,000
Acquisition of companies, net of cash
acquired...................................... (322,880) (186,920) (173,110)
Capital expenditures............................ (188,960) (167,400) (138,540)
Purchase of Company common stock for:
Treasury...................................... (43,330) -- --
Long-term incentive award plan................ (46,800) (29,110) (14,030)
Increase (decrease) in debt, net................ 327,680 7,890 (368,160)
Cash dividends paid............................. (145,290) (131,680) (123,530)
Other, net...................................... (36,740) 24,210 67,860
-------- -------- --------
Cash increase (decrease)................... $100,410 $(32,400) $413,260
======== ======== ========
</TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash from operating activities was $419.1 million in 1998 as compared with
$405.0 million in 1997 and $340.1 million in 1996. During 1998, the Company's
accounts receivable and inventories increased
12
<PAGE> 14
by $141.1 million and $44.0 million, respectively, primarily as a 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
benefitting from larger, more cost-effective purchasing.
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
Cash used for investing activities was $410.9 million in 1998 compared with
cash used for investing activities of $284.5 million in 1997 and cash from
investing activities of $578.8 million in 1996.
Cash flows from investing activities for 1998 included $137.6 million of
aggregate proceeds from the sale of the Company's Thermador subsidiary and the
sale of its common stock investment in TriMas Corporation to MascoTech in the
public tender offer. The Company recorded gains aggregating $59.3 million as a
result of these transactions.
Cash flows for investing activities included $322.9 million for the 1998
acquisitions of Vasco Corporation, The Brugman Group, Heritage Bathrooms PLC and
several other smaller home improvement and building products companies.
Capital expenditures totalled $189.0 million in 1998 compared with $167.4
million in 1997 and $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 1999, excluding those of
potential 1999 acquisitions, to exceed $200 million. Depreciation and
amortization expense for 1998 totalled $136.3 million, compared with $116.1
million for 1997 and $99.7 million for 1996; for 1999, depreciation and
amortization expense, excluding 1999 acquisitions, is expected to approximate
$160 million.
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 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. 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. 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.
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 FROM (FOR) FINANCING ACTIVITIES
Cash from financing activities was $92.3 million in 1998 as compared with
cash used for financing activities of $152.9 million in 1997 and $505.7 million
in 1996.
Cash from financing activities for 1998 included $250 million from the
issuance of 6.625% debentures due April 2018, $100 million from the issuance of
5.75% notes due October 2008 and a net increase in other debt of $86.3 million.
After giving effect to the issuance of these debt securities, the
13
<PAGE> 15
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 $409 million of debt and equity securities.
Cash used for financing activities for 1998 included $108.6 million for the
early retirement of certain of the Company's 9% notes and the payment of a
premium associated with this early retirement, $43.3 million for the acquisition
of approximately 1.9 million shares of Company common stock in open-market
transactions and $46.8 million for the acquisition of Company common stock for
the Company's long-term incentive award plan. At December 31, 1998, the Company
had remaining authorization to repurchase up to an additional 12.5 million of
its shares in open-market transactions or otherwise.
During 1996, the Company retired $250 million of 9% notes due in 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.
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 flows from
operations and, to the extent necessary, future financial market activities,
from proceeds from asset sales and from bank borrowings.
CONSOLIDATED RESULTS OF OPERATIONS
Sales and Operations
Net sales for 1998 were $4,345 million, representing an increase of 16
percent over 1997. After adjusting for acquisitions and divestitures, net sales
for 1998 increased 10 percent over 1997. Net sales for 1997 increased 16 percent
to $3,760 million from $3,237 million in 1996; after adjusting for acquisitions,
net sales increased 7 percent in 1997 over 1996.
Cost of sales as a percentage of sales for 1998 increased to 64.3 percent
compared with 63.3 percent for 1997 and 1996. The increase in the cost of sales
percentage for 1998 as compared with 1997 and 1996 was primarily attributable to
product sales mix and acquisitions, which offset the benefits resulting from
increased sales volume and new product introductions.
Excluding amortization of acquired goodwill ($28.5 million, $18.7 million,
and $12.1 million in 1998, 1997 and 1996, respectively), selling, general and
administrative expenses as a percentage of sales were 19.4 percent in 1998
compared with 20.6 percent and 21.5 percent for 1997 and 1996, respectively. The
downward trend in the selling, general and administrative expenses percentage
results from the Company's continuation of cost-containment initiatives and the
leveraging of fixed costs over a higher sales base.
Other Income (Expense), Net
Included in other income (expense), net are equity earnings from MascoTech,
Inc. of $15.4 million for 1998 as compared with equity earnings from MascoTech
of $14.6 million and $13.9 million for 1997 and 1996, respectively.
Included under other income (expense), net in other, net is interest income
for 1998, 1997 and 1996 of $41.5 million, $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 a $151 million note receivable from MascoTech, which was paid
on September 30, 1997.
Included under other income (expense), net in other, net in 1998 were
pre-tax gains aggregating approximately $59 million from sales of the Company's
Thermador subsidiary ($30 million) and the
14
<PAGE> 16
Company's investment in TriMas Corporation ($29 million). Also included in
other, net for 1998 were $7.0 million of dividend income from the Company's
investment in Furnishings International's 13% cumulative preferred stock and an
approximate $12 million pre-tax charge related to the early retirement of
long-term debt.
Included under other income (expense), net in other, net in 1997 were $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 non-operating assets
and charges aggregating approximately $30 million, principally for the
adjustment of the Company's Payless Cashways investment to its estimated fair
value.
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.
Net Income and Earnings Per Share
Net income for 1998 was $476 million compared with $382 million for 1997
and $295 million for 1996. After adjusting for the two-for-one stock split in
July 1998, diluted earnings per share for 1998 were $1.39, compared with $1.15
for 1997 and $.91 for 1996. The Company's effective tax rate decreased to 37.0
percent in 1998 from 39.4 percent in 1997 and 41.3 percent in 1996 due
principally to the increased utilization of foreign tax credits and the
utilization of a portion of the Company's capital loss carryforward benefit. The
Company estimates that its effective tax rate will approximate 37 percent for
1999.
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 1999. 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 actively pursue acquisition candidates that complement or
support the Company's core competencies.
15
<PAGE> 17
NET SALES BY PRODUCT GROUP AND GEOGRAPHIC AREA
The following table sets forth the Company's net sales by product group and
geographic area, in millions.
<TABLE>
<CAPTION>
PERCENT CHANGE
-----------------
NET SALES 1998 1997
------------------------------ VS. VS.
1998 1997 1996 1997 1996
------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Kitchen and Bath Products:
Faucets........................... $ 884 $ 815 $ 757 8% 8%
Cabinets.......................... 1,334 1,083 832 23% 30%
Other............................. 1,076 1,042 930 3% 12%
------ ------ ------
Total Kitchen and Bath
Products..................... 3,294 2,940 2,519 12% 17%
Environmental Products and
Services.......................... 485 348 295 39% 18%
Builders' Hardware and Other
Specialty Products................ 566 472 423 20% 12%
------ ------ ------
Total.......................... $4,345 $3,760 $3,237 16% 16%
====== ====== ======
North America....................... $3,506 $3,072 $2,680 14% 15%
Europe.............................. 839 688 557 22% 24%
------ ------ ------
Total, as above................ $4,345 $3,760 $3,237 16% 16%
====== ====== ======
</TABLE>
BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTS
The following tables set forth net sales and operating profit information
by segment and geographic area.
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Sales increases, year-to-year, excluding acquisitions
and divestitures:
Kitchen and Bath Products.......................... 9% 7%
Environmental Products and Services................ 17% 15%
Builders' Hardware and Other Specialty Products.... 13% 0%
North America...................................... 11% 8%
Europe............................................. 0% (5%)
Operating profit increases, year-to-year*:
Kitchen and Bath Products.......................... 14% 17%
Environmental Products and Services................ 38% 22%
Builders' Hardware and Other Specialty Products.... 5% 27%
North America...................................... 13% 19%
Europe............................................. 24% 14%
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Operating profit margins*:
Kitchen and Bath Products.......................... 18.6% 18.3% 18.3%
Environmental Products and Services................ 14.2% 14.4% 13.9%
Builders' Hardware and Other Specialty Products.... 14.8% 16.9% 14.9%
North America...................................... 18.3% 18.6% 17.9%
Europe............................................. 14.7% 14.4% 15.6%
</TABLE>
*Before general corporate expense.
16
<PAGE> 18
Business Segment Results
After adjusting for acquisitions and divestitures, increases in net sales
for the Company's Kitchen and Bath Products segment 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 results of this business segment for 1998 were favorably influenced by
higher unit sales volume, offset in part by a moderation in gross profit margin
due to the influence of product sales mix, acquisitions and stronger than
anticipated demand for cabinets. For 1997 compared with 1996, higher unit sales
volumes contributed to improved operating results of the Company's U.S. cabinet,
other kitchen and bath and faucet businesses. 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.
After adjusting for acquisitions and divestitures, increases in net sales
for the Company's Environmental Products and Services segment for 1998 and 1997
principally include the influence of higher installation sales of fiberglass
insulation. Operating results of the Company's Environmental Products and
Services segment for 1998 were affected in part by higher fiberglass insulation
costs, which offset the favorable influence of European acquisitions. Operating
results for 1996 were lower due in part to plant reorganization charges.
After adjusting for acquisitions, net sales for the Company's Builders'
Hardware and Other Specialty Products segment increased in 1998 due largely to
increased hardware sales. Operating profit in 1998 was adversely influenced by
lower results of certain of the Company's hardware businesses, which faced
operational challenges and weakness in the domestic hospitality market, and
lower results of European operations. Operating margin for this segment in 1997
benefitted from increased sales of certain higher margin builders' hardware
products and improved results of certain of the Company's other specialty
businesses.
Operating results of the Company's business segments for 1998, 1997 and
1996 benefitted from the leveraging of fixed selling, general and administrative
expenses over higher sales.
Geographic Area Results
Results of North American operations for 1998, 1997 and 1996 benefitted
from acquisitions and increased sales volume of existing businesses, driven in
part by favorable demographic and economic conditions principally in the United
States, including complementary population trends, modest economic growth and
relatively low unemployment and interest rates. These conditions have favorably
influenced the housing market in the United States, including housing starts,
existing home sales and repair and remodeling activities.
European results for 1998 were favorably influenced by acquisitions.
Results of existing European operations have been adversely influenced in recent
years, in part due to softness in the Company's European markets, 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 1998 compared with
1997 as well as 1997 compared with 1996, lowering European net sales by
approximately 2 percent and 12 percent, respectively.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," becomes effective for all
fiscal quarters for all fiscal years beginning after June 15, 1999 (effective
January 1, 2000 for the Company). SFAS No. 133 should not have a material effect
on the Company's financial statements.
The American Institute of Certified Public Accountants' Statement of
Position No. 98-5, "Reporting on the Costs of Start-Up Activities," is effective
for fiscal years beginning after December 15, 1998 and will not have a material
effect on the Company's financial statements.
17
<PAGE> 19
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, 1998. 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, 1998, 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.
YEAR 2000
The year 2000 ("Y2K") 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 systems or equipment that have date-sensitive software using only
two digits may recognize a date using "00" as the year 1900 rather than the year
2000. The resulting system failures or miscalculations may cause disruption of
operations, including, among other things, a temporary inability to process
transactions or send and receive electronic data with third parties or engage in
similar normal business activities.
In 1997, the Company formed an internal review team to address the Y2K
issue. This team, consisting of existing employees of the Company, has developed
a Year 2000 compliance program (the "Y2K Program") which includes: assessing and
monitoring the compliance of all applications, operating systems and hardware on
mainframe, mid-range, personal computer and network platforms; addressing issues
related to non-information technology embedded software and equipment; and
addressing the compliance of key business partners. Executive management
regularly monitors the status of the Company's Y2K Program.
The first component of the Y2K Program is to identify the computer systems
and other equipment with embedded technology that are susceptible to failures or
errors as a result of the Y2K issue. This effort is substantially complete.
The second component involves the actual remediation or replacement of
non-compliant systems and equipment. For its information technology, the Company
generally utilizes mid-range, non-mainframe based computing environments which
are complemented by a series of local-area networks that are connected via a
wide-area network. Substantially all operating systems related to the mid-range
systems and networks have been updated to comply with Y2K requirements. In
addition, upgraded or modified versions of the Company's financial,
manufacturing, human resource, and other packaged software applications which
are Y2K compliant are in the process of being tested and integrated into the
Company's overall system. The Company presently expects that this integration
will be substantially completed by June 1999.
The Company utilizes some microcomputers and software in its various
manufacturing processes throughout the world. The Company is currently assessing
potential Y2K issues in those processes. General findings to date indicate that
problems usually relate to old personal computers or embedded microprocessors
that must be replaced. Although there can be no assurance that the Company will
identify and correct every Y2K issue found in the computer applications used in
its manufacturing processes, the Company believes that it has in place a
comprehensive program to identify and correct any such problems, and expects to
have substantially completed the remediation of all of its manufacturing systems
by June 1999.
The Company is also reviewing its building and utility systems (i.e.,
telephones, security, electrical) to determine any Y2K issues as part of its Y2K
Program. Many of these systems are Y2K
18
<PAGE> 20
compliant. While the Company is working with suppliers of these systems and has
no reason to expect that they will not meet their Y2K compliance targets, there
is no guarantee that they will do so.
The third component of the Y2K Program, which was initiated in late 1997,
involves communication with significant suppliers and customers to determine the
extent to which the Company is vulnerable to such parties' failure to remediate
their own Y2K issues. The Company's efforts with respect to specific issues
identified, including the development of contingency plans, will depend in part
upon its assessment of the risk that such issues could have a material adverse
impact on the Company. Senior management at the Company's operating subsidiaries
have been charged with identifying third party Y2K risks which could materially
disrupt the subsidiaries' business operations. The Company is assisting its
subsidiaries in developing contingency plans where such risks have been
identified. Contingency plans may include securing alternate sources of supply,
increasing inventory levels, stockpiling raw and packaging materials and other
appropriate measures. Once developed, contingency plans will be continually
refined as additional information is updated. The Company has requested that
such contingency plans be completed no later than June 30, 1999. The Company
will continue to monitor and evaluate the progress of its subsidiaries on this
critical matter.
The most reasonably likely worst case Y2K scenario for the Company is a
failure on the part of a significant customer or supplier to remediate their own
Y2K issues which results in a disruption of Company operations. However, because
the Company's customer base is broad enough to minimize the impact of the
failure of any single customer interface, and the contingency plans described
above will mitigate supply problems, the Company currently does not believe that
it has any material exposure to significant business interruption as a result of
Y2K issues. The estimated total cost of the Y2K Program is between $10 million
and $17 million, which includes planned upgrades. This cost, more than half of
which has been incurred and expensed at December 31, 1998, is not expected to be
material to the Company's results of operations or financial position. This cost
and the timing in which the Company plans to complete the Y2K Program, are based
on management's best estimates, at the present time. Accordingly, there can be
no absolute assurance that the Company will timely identify and remediate all
significant Y2K issues, that remedial efforts will not involve significant time
and expense, or that such issues will not have an adverse effect on the
Company's financial position, results of operations or cash flows.
19
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Masco Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a)(1) present fairly, in all material respects, the
financial position of Masco Corporation and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item
14(a)(2)(i) presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
February 17, 1999
20
<PAGE> 22
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash investments................................. $ 541,740,000 $ 441,330,000
Receivables............................................... 700,130,000 559,050,000
Inventories............................................... 558,990,000 515,000,000
Prepaid expenses and other................................ 61,760,000 111,340,000
-------------- --------------
Total current assets................................. 1,862,620,000 1,626,720,000
Equity investment in MascoTech, Inc. ....................... 59,830,000 52,780,000
Equity investments in other affiliates...................... 165,020,000 175,300,000
Securities of Furnishings International Inc................. 434,640,000 393,140,000
Property and equipment...................................... 1,164,250,000 1,037,320,000
Acquired goodwill, net...................................... 1,036,290,000 729,190,000
Other assets................................................ 444,700,000 319,310,000
-------------- --------------
Total assets......................................... $5,167,350,000 $4,333,760,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ 254,010,000 $ 68,460,000
Accounts payable.......................................... 171,250,000 166,310,000
Accrued liabilities....................................... 421,320,000 385,230,000
-------------- --------------
Total current liabilities............................ 846,580,000 620,000,000
Long-term debt.............................................. 1,391,420,000 1,321,470,000
Deferred income taxes and other............................. 200,770,000 163,270,000
-------------- --------------
Total liabilities.................................... 2,438,770,000 2,104,740,000
-------------- --------------
Shareholders' Equity:
Common shares authorized: 900,000,000; issued:
1998-339,330,000; 1997-165,570,000..................... 339,330,000 165,570,000
Preferred shares authorized: 1,000,000.................... -- --
Paid-in capital........................................... 294,060,000 304,560,000
Retained earnings......................................... 2,111,760,000 1,784,370,000
Other comprehensive income (loss)......................... (16,570,000) (25,480,000)
-------------- --------------
Total shareholders' equity........................... 2,728,580,000 2,229,020,000
-------------- --------------
Total liabilities and shareholders' equity........... $5,167,350,000 $4,333,760,000
============== ==============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales...................................... $4,345,000,000 $3,760,000,000 $3,237,000,000
Cost of sales.................................. 2,793,990,000 2,378,250,000 2,048,070,000
-------------- -------------- --------------
Gross profit......................... 1,551,010,000 1,381,750,000 1,188,930,000
Selling, general and administrative expenses... 842,000,000 775,930,000 696,290,000
Amortization of acquired goodwill.............. 28,510,000 18,720,000 12,140,000
-------------- -------------- --------------
Operating profit..................... 680,500,000 587,100,000 480,500,000
-------------- -------------- --------------
Other income (expense), net:
Re: MascoTech, Inc.:
Equity earnings........................... 15,360,000 14,580,000 13,860,000
Gain from change in investment............ -- 29,500,000 --
Gain from sale of investments, net........ -- -- 67,800,000
Equity earnings, other affiliates............ 13,840,000 9,560,000 6,230,000
Other, net................................... 130,560,000 70,010,000 8,990,000
Interest expense............................. (85,260,000) (79,850,000) (74,680,000)
-------------- -------------- --------------
74,500,000 43,800,000 22,200,000
-------------- -------------- --------------
Income before income taxes........... 755,000,000 630,900,000 502,700,000
Income taxes................................... 279,000,000 248,500,000 207,500,000
-------------- -------------- --------------
Net income........................... $ 476,000,000 $ 382,400,000 $ 295,200,000
============== ============== ==============
Earnings per share:
Basic................................ $1.44 $1.20 $.94
============== ============== ==============
Diluted.............................. $1.39 $1.15 $.91
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 24
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From (For):
Operating Activities:
Net income.................................. $ 476,000,000 $ 382,400,000 $ 295,200,000
Depreciation and amortization............... 136,320,000 116,050,000 99,680,000
Unremitted equity earnings of affiliates.... (24,070,000) (19,470,000) (12,310,000)
Interest accrual on pay-in-kind notes
receivable................................ (41,500,000) (36,800,000) (13,970,000)
Deferred income taxes....................... 45,900,000 34,880,000 28,850,000
Gain from:
Sale of subsidiary and TriMas
investment............................. (59,300,000) -- --
Sale of MascoTech investments, net........ -- -- (67,800,000)
Change in MascoTech investment............ -- (29,500,000) --
Increase in receivables..................... (100,820,000) (41,560,000) (7,510,000)
Increase in inventories..................... (39,300,000) (38,770,000) (1,890,000)
Increase in accounts payable and accrued
liabilities, net.......................... 30,240,000 44,960,000 38,410,000
Other, net.................................. (4,380,000) (7,160,000) (18,520,000)
------------- ------------- -------------
Net cash from operating activities... 419,090,000 405,030,000 340,140,000
------------- ------------- -------------
Investing Activities:
Acquisition of companies, net of cash
acquired.................................. (322,880,000) (186,920,000) (173,110,000)
Capital expenditures........................ (188,960,000) (167,400,000) (138,540,000)
Cash proceeds from sale of:
Subsidiary and TriMas investment.......... 137,640,000 -- --
Discontinued operations................... -- -- 707,630,000
MascoTech investments, net................ -- 45,580,000 115,000,000
Other, net.................................. (36,740,000) 24,210,000 67,860,000
------------- ------------- -------------
Net cash from (for) investing
activities........................ (410,940,000) (284,530,000) 578,840,000
------------- ------------- -------------
Financing Activities:
Issuance of 6.625% debentures............... 250,000,000 -- --
Issuance of 5.75% notes..................... 100,000,000 -- --
Increase in other debt...................... 172,310,000 90,550,000 537,380,000
Retirement of 9% notes...................... (108,620,000) -- (250,000,000)
Payment of other debt....................... (86,010,000) (82,660,000) (655,540,000)
Purchase of Company common stock for:
Treasury.................................. (43,330,000) -- --
Long-term incentive award plan............ (46,800,000) (29,110,000) (14,030,000)
Cash dividends paid......................... (145,290,000) (131,680,000) (123,530,000)
------------- ------------- -------------
Net cash from (for) financing
activities........................ 92,260,000 (152,900,000) (505,720,000)
------------- ------------- -------------
Cash and Cash Investments:
Increase (decrease) for the year............... 100,410,000 (32,400,000) 413,260,000
At January 1................................... 441,330,000 473,730,000 60,470,000
------------- ------------- -------------
At December 31................................. $ 541,740,000 $ 441,330,000 $ 473,730,000
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 25
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON OTHER
SHARES RETAINED COMPREHENSIVE
TOTAL ($1 PAR VALUE) PAID-IN CAPITAL EARNINGS INCOME (LOSS)
-------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996.... $1,655,430,000 $160,380,000 $ 128,550,000 $1,366,330,000 $ 170,000
Comprehensive income:
Net income................ 295,200,000 -- -- 295,200,000 --
Cumulative translation
adjustments............. 2,350,000 -- -- -- 2,350,000
--------------
Total comprehensive
income.................... 297,550,000
Shares issued............... 11,950,000 490,000 11,460,000 -- --
Cash dividends declared..... (125,120,000) -- -- (125,120,000) --
-------------- ------------ ------------- -------------- ------------
Balance, December 31,
1996...................... 1,839,810,000 160,870,000 140,010,000 1,536,410,000 2,520,000
Comprehensive income:
Net income................ 382,400,000 -- -- 382,400,000 --
Cumulative translation
adjustments............. (28,000,000) -- -- -- (28,000,000)
--------------
Total comprehensive
income.................... 354,400,000 -- -- -- --
Shares issued............... 169,250,000 4,700,000 164,550,000 -- --
Cash dividends declared..... (134,440,000) -- -- (134,440,000)
-------------- ------------ ------------- -------------- ------------
Balance, December 31,
1997...................... 2,229,020,000 165,570,000 304,560,000 1,784,370,000 (25,480,000)
Comprehensive income:
Net income................ 476,000,000 -- -- 476,000,000 --
Cumulative translation
adjustments............. 8,910,000 -- -- -- 8,910,000
--------------
Total comprehensive
income.................... 484,910,000 -- -- -- --
Shares issued............... 206,590,000 5,670,000 200,920,000 -- --
100 percent stock
distribution.............. -- 169,980,000 (169,980,000) -- --
Shares repurchased.......... (43,330,000) (1,890,000) (41,440,000) -- --
Cash dividends declared..... (148,610,000) -- -- (148,610,000) --
-------------- ------------ ------------- -------------- ------------
Balance, December 31,
1998...................... $2,728,580,000 $339,330,000 $ 294,060,000 $2,111,760,000 $(16,570,000)
============== ============ ============= ============== ============
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 26
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. Per share data and
certain data regarding common shares outstanding for prior periods have been
adjusted for the two-for-one stock split, effected in the form of a 100 percent
stock distribution, in July 1998. Certain amounts for prior years have been
reclassified to conform with 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 any 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 certain 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, 1998 and 1997, accounts and notes receivable are presented net of
allowances for doubtful accounts of $21.5 million and $19.8 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 income. Maintenance and
repair costs are charged to expense as incurred.
Depreciation and Amortization. Depreciation is computed principally using
the straight-line method over the estimated useful lives of the assets. Annual
depreciation rates are as follows: buildings and land improvements, 2 to 10
percent, and machinery and equipment, 5 to 33 percent. Depreciation was $88.5
million, $81.4 million and $71.7 million in 1998, 1997 and 1996, 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, 1998 and 1997 such accumulated amortization totalled $108.0 million
and $82.8 million, respectively. At each balance sheet date, management
evaluates the recoverability of acquired goodwill by comparing 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, 1998 and 1997. 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
$47.8 million, $34.6 million and $28.0 million in 1998, 1997 and 1996,
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 reflects the risk of the underlying investments. The fair value of the
Company's long-term debt instruments was based principally on quoted market
25
<PAGE> 27
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING POLICIES -- (CONCLUDED)
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, 1998 was approximately $650 million and $1,416 million, as compared
with the Company's aggregate carrying value of $639 million and $1,391 million,
respectively, and at December 31, 1997 the aggregate market value 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.
ACQUISITIONS
During 1998, the Company acquired Vasco Corporation and The Brugman Group,
both of which are European manufacturers of residential hydronic radiators and
heat convectors, and Heritage Bathrooms PLC, a European manufacturer and
distributor of residential bath products.
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, 1997, pro forma unaudited
consolidated net sales and net income would have approximated $4,422 million and
$481 million for 1998 and $3,911 million and $394 million for 1997,
respectively, and pro forma unaudited consolidated diluted earnings per share
would have approximated $1.40 and $1.18 for 1998 and 1997, respectively.
The Company also acquired several other smaller home improvement and
building products companies in 1998.
The combined purchase price for 1998 acquisitions, net of cash acquired,
aggregated approximately $323 million. The acquisitions were accounted for as
purchase transactions.
INVENTORIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Raw material............................................ $236,330 $229,040
Finished goods.......................................... 183,910 161,920
Work in process......................................... 138,750 124,040
-------- --------
$558,990 $515,000
======== ========
</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
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
MascoTech, Inc. ......................................... 17% 17% 21%
Emco Limited............................................. 42% 42% --
Hans Grohe, a German partnership......................... 27% 27% 27%
TriMas Corporation....................................... -- 4% 4%
</TABLE>
26
<PAGE> 28
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES -- (CONTINUED)
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 in affiliates at December 31, 1998 (which may differ from the
amounts that could then have been realized upon disposition), based upon quoted
market prices at that date, was $199 million, as compared with the Company's
related aggregate carrying value of $172 million. The Company's carrying value
in common stock of these equity affiliates exceeded its equity in the underlying
net book value by approximately $77 million at December 31, 1998. 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.
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. Under the sale agreement, the Company received approximately $266
million, with $115 million cash 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.
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.
On January 22, 1998, MascoTech announced the completion of its acquisition
of TriMas Corporation. The Company recorded a gain in the first quarter of 1998,
as a result of selling its common stock investment in TriMas to MascoTech in the
public tender offer.
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 at December 31, 1998 and 1997 and for the three years then ended, are
summarized in U.S. dollars as follows, in thousands:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales................................................ $2,732,560 $2,745,570 $2,136,740
========== ========== ==========
Income from continuing operations before income taxes.... $ 203,750 $ 287,380 $ 181,710
========== ========== ==========
Net income attributable to common shareholders........... $ 142,870 $ 172,690 $ 109,500
========== ========== ==========
The Company's net equity in above net income............. $ 29,200 $ 24,140 $ 20,090
========== ========== ==========
Cash dividends received by the Company from affiliates... $ 5,130 $ 4,670 $ 7,780
========== ========== ==========
At December 31:
Current assets......................................... $ 832,350 $ 973,900
Current liabilities.................................... (412,720) (436,250)
---------- ----------
Working capital..................................... 419,630 537,650
Property and equipment................................. 839,080 776,470
Other assets........................................... 968,400 504,810
Long-term liabilities.................................. (1,741,490) (980,990)
---------- ----------
Shareholders' equity................................ $ 485,620 $ 837,940
========== ==========
</TABLE>
Equity in undistributed earnings of affiliates of $57 million at December
31, 1998, $43 million at December 31, 1997 and $32 million at December 31, 1996
are included in consolidated retained earnings.
SECURITIES OF FURNISHINGS INTERNATIONAL INC.
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, including $708 million in cash, $285 million
of junior debt securities and equity securities aggregating $57 million.
Securities of Furnishings International Inc. are summarized as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Junior debt securities (12% pay-in-kind)............. $377,270 $335,770
Preferred stock (13% cumulative).....................
Common stock (15% ownership)......................... 57,370 57,370
Convertible preferred stock..........................
-------- --------
$434,640 $393,140
======== ========
</TABLE>
The junior debt securities mature in 2008 and are stated at face value. 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.
28
<PAGE> 30
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Land and improvements................................. $ 74,440 $ 70,120
Buildings............................................. 507,170 465,920
Machinery and equipment............................... 1,230,100 1,089,330
---------- ----------
1,811,710 1,625,370
Less, accumulated depreciation........................ 647,460 588,050
---------- ----------
$1,164,250 $1,037,320
========== ==========
</TABLE>
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1998 1997
-------- --------
<S> <C> <C>
Salaries, wages and related benefits.................... $105,260 $ 96,160
Advertising and sales promotion......................... 78,250 86,170
Insurance............................................... 55,360 48,930
Income taxes............................................ 45,260 3,240
Dividends payable....................................... 37,330 34,000
Interest................................................ 27,060 26,990
Property, payroll and other taxes....................... 25,840 21,520
Other................................................... 46,960 68,220
-------- --------
$421,320 $385,230
======== ========
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Notes and Debentures:
6.625%, due September 15, 1999...................... $ 200,000 $ 200,000
9%, due October 1, 2001......................... 77,030 175,000
6.125%, due September 15, 2003...................... 200,000 200,000
5.75%, due October 15, 2008........................ 100,000 --
7.125%, due August 15, 2013......................... 200,000 200,000
6.625%, due April 15, 2018.......................... 250,000 --
European bank debt.................................... 505,970 329,300
Convertible subordinated debentures, 5.25%, due
2012................................................ -- 177,920
Other, principally acquisition-related................ 112,430 107,710
---------- ----------
1,645,430 1,389,930
Less, current portion................................. 254,010 68,460
---------- ----------
$1,391,420 $1,321,470
========== ==========
</TABLE>
All of the notes and debentures above are nonredeemable.
29
<PAGE> 31
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT -- (CONCLUDED)
European bank debt relates to borrowings of local currency for European
acquisitions and expansion. At December 31, 1998, approximately $239 million of
European debt related to a term loan facility expiring in 2002. The balance of
$267 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, 1998).
The Company called the 5.25% convertible subordinated debentures due 2012
for redemption in February 1998. Substantially all holders exercised their right
to convert these debentures into Company common stock (at the pre-stock split
conversion price of $42.28 per share), resulting in the issuance of
approximately 4.2 million shares of Company common stock in February 1998 (8.4
million shares after giving effect to the stock split).
Certain debt agreements contain limitations on additional borrowings and
requirements for maintaining a certain level of net worth. At December 31, 1998,
the Company was in compliance with these limitations and requirements, and the
Company's net worth exceeded the most restrictive of such provisions by
approximately $715 million.
At December 31, 1998, the maturities of long-term debt during each of the
next five years, assuming that the bank debt is refinanced, were approximately
as follows: 1999-$254.0 million; 2000-$66.9 million; 2001-$94.3 million;
2002-$10.1 million; and 2003-$206.1 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 at December 31, 1998. Interest is payable on borrowings under this
agreement based upon various floating rate options 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 $409 million of debt and equity securities.
Interest paid was approximately $85 million, $75 million and $102 million
in 1998, 1997 and 1996, respectively. Amounts paid in 1996 include interest
pertaining to discontinued operations.
SHAREHOLDERS' EQUITY
In July 1998, the Company effected a two-for-one stock split in the form of
a 100 percent stock distribution to shareholders, which resulted in the issuance
of approximately 170 million shares of common stock and reduced paid-in-capital
by approximately $170 million.
On the basis of amounts paid (declared) and after giving effect to the
stock split, cash dividends per share were $.43 ($.43 1/2) in 1998, $.40 1/2
($.41) in 1997 and $.38 1/2 ($.39) in 1996.
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.
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
30
<PAGE> 32
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY -- (CONCLUDED)
cumulative translation adjustments in shareholders' equity, included in other
comprehensive income (loss).
During 1998, the Company acquired approximately 1.9 million of its common
shares in open-market transactions at a cost aggregating $43.3 million. At
December 31, 1998, the Company had remaining authorization to repurchase up to
12.5 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, 1998,
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
1,149,000, 1,581,000 and 1,080,000 shares of Company common stock during 1998,
1997 and 1996, 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 1998, 1997 and 1996 was $26, $21 and $15,
respectively. Early vesting of certain of these awards is contingent upon the
market price of Company common stock equalling or exceeding certain price
targets within specific time periods, including a $50 price target by February
2003. Compensation expense for the annual vesting of long-term stock awards was
$17.0 million, $14.0 million and $14.9 million in 1998, 1997 and 1996,
respectively. The unamortized costs of unvested stock awards, aggregating
approximately $127 million at December 31, 1998, 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 at the grant date, equals the market price
of Company common stock on the date of grant. These options generally become
exercisable in installments beginning in the third year and extending through
the eighth year after grant.
During 1997, the Company granted original stock options for 5,680,000
shares of Company common stock with an exercise price of $19 1/2 per share
(equal to the market price on the grant date). During 1998 and 1997, the Company
also granted restoration stock options for 692,000 and 278,000 shares of Company
common stock with grant date exercise prices ranging from $25 to $31 and $17 1/2
to $26, respectively (the market prices on the grant dates), and stock options
for 64,000 and 56,000 shares of Company common stock to non-employee Directors
of the Company with exercise prices of $29 and $19 1/2, respectively.
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 arrangements for the Chief Executive Officer and in
April 1996 granted the Chief Executive Officer a 10-year option, with a $20 1/2
exercise price when the market price was $13 15/16 per share, to purchase two
million shares of Company common stock. This option became exercisable in 1997
when the price of Company common stock exceeded $20 1/2 per share.
31
<PAGE> 33
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONTINUED)
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 through 1998 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 $16 (equal to the market price on
the grant date). Such options were granted for approximately 3,230,000 shares of
Company common stock. In addition, in 1996 when the market price of Company
common stock was $16 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 $25 per share in late 1997.
A summary of the status of the Company's stock options granted for the
three years ended December 31, 1998 is presented below.
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Option shares outstanding, January 1............... 16,200 14,616 10,912
Weighted average exercise price.................. $17 $14 $12
Option shares granted, including restoration
options.......................................... 756 6,014 5,360
Weighted average exercise price.................. $28 $20 $18
Option shares exercised............................ 2,486 4,276 934
Weighted average exercise price.................. $13 $13 $11
Option shares cancelled............................ 74 154 722
Weighted average exercise price.................. $10 $11 $11
Option shares outstanding, December 31............. 14,396 16,200 14,616
Weighted average exercise price.................. $18 $17 $14
Weighted average remaining option term (in
years)........................................ 6.6 7.2 5.5
Option shares exercisable, December 31............. 3,781 4,588 5,614
Weighted average exercise price.................. $17 $16 $12
</TABLE>
Of the 3,781,000 option shares exercisable at December 31, 1998, 946,000
were exercisable at per share prices ranging from $10 to $15, with a weighted
average exercise price of $10; 793,000 were exercisable at per share prices
ranging from $16 to $20, with a weighted average exercise price of $18; and
2,042,000 were exercisable at per share prices ranging from $21 to $30 with a
weighted average exercise price of $21.
At December 31, 1998, a combined total of 12,085,000 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 72,000 shares of Company common stock were granted in 1998 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, 1998, a combined total of 825,000 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 income. Had stock
option compensation expense been determined pursuant to the methodology of
32
<PAGE> 34
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONCLUDED)
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 $.02, $.02 and $.01 in
1998, 1997 and 1996, respectively.
For SFAS No. 123 calculation purposes, the weighted average grant date fair
values of options, including restoration options (which have a vesting period of
approximately one year), granted in 1998, 1997 and 1996 were $6.00, $6.27 and
$5.60, 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 1998, 1997 and 1996, respectively: risk free interest
rate -- 4.9%, 6.7% and 6.7%; dividend yield -- 2.1%, 2.5% and 2.5%; volatility
factor -- 28%, 27% and 25%; and expected option life -- 3 years, 7 years and 7
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 1998, 1997 or 1996. At December 31, 1998, there were 4,695,000
of such shares available for granting future awards under this plan.
Common share and per share data in this note have been adjusted for the
two-for-one stock split, effected in the form of a 100 percent stock
distribution, in July 1998.
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 $32.8 million
in 1998, $23.9 million in 1997 and $24.4 million in 1996.
Net periodic pension cost for the Company's qualified pension plans
includes the following components, in thousands:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Service cost..................................... $ 8,530 $ 7,090 $ 6,220
Interest cost.................................... 11,260 10,170 9,450
Expected return on plan assets................... (11,870) (11,140) (9,590)
Amortization of transition asset................. (620) (620) (620)
Amortization of prior-service cost............... 320 330 300
Amortization of net loss......................... 1,530 770 230
-------- -------- -------
Net periodic pension cost........................ $ 9,150 $ 6,600 $ 5,990
======== ======== =======
</TABLE>
33
<PAGE> 35
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS -- (CONCLUDED)
The following table provides a reconciliation of changes in the projected
benefit obligation, fair value of plan assets and funded status of the Company's
qualified pension plans at December 31, in thousands:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Changes in projected benefit obligation:
Benefit obligation at January 1........................ $152,320 $129,540
Service cost........................................... 8,140 6,680
Interest cost.......................................... 11,260 10,170
Plan amendments........................................ (1,720) (300)
Actuarial loss......................................... 11,780 11,650
Benefit payments....................................... (5,800) (5,420)
-------- --------
Projected Benefit obligation at December 31......... $175,980 $152,320
======== ========
Changes in fair value of plan assets:
Fair value of plan assets at January 1................. $106,520 $102,040
Actual return on plan assets........................... 6,110 6,760
Cash contributions..................................... 6,460 3,590
Benefit payments....................................... (5,800) (5,420)
Expenses/other......................................... (430) (450)
-------- --------
Fair value of plan assets at December 31............ $112,860 $106,520
======== ========
Funded status of qualified pension plans:
Plan assets (less than) projected benefit obligation at
December 31......................................... $(63,120) $(45,800)
Unamortized net asset at transition.................... (2,180) (2,800)
Unamortized prior-service cost......................... 4,150 3,110
Unamortized net loss................................... 52,930 40,340
-------- --------
Net liability recognized............................ $ (8,220) $ (5,150)
======== ========
</TABLE>
The major assumptions used in accounting for the Company's pension plans
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Discount rate for obligations......................... 6.75% 7.0% 7.5%
Expected return on plan assets........................ 11.0 % 11.0% 11.0%
Rate of compensation increase......................... 5.0 % 5.0% 5.0%
</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 $37.0 million and $46.2 million, and $30.8 million and
$39.1 million at December 31, 1998 and 1997, respectively. Net periodic pension
cost for these plans was $7.1 million, $4.7 million and $4.9 million in 1998,
1997 and 1996, 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, 1998,
the aggregate present value of the unfunded accumulated postretirement benefit
obligation approximated $3 million.
34
<PAGE> 36
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION
The Company's operations in the 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; bathtubs and shower tub
enclosures; whirlpools and spas; and bath accessories.
Environmental Products and Services -- grilles, registers, diffusers for
heating/cooling systems; hydronic radiators and heat convectors;
insulation; and venting and ventilation systems.
Builders' Hardware and Other Specialty Products -- builders' hardware,
including mechanical and electronic lock sets; rolling shutters; 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. The Company's country of domicile is the United States.
Corporate assets consist primarily of real property, cash and cash
investments and other investments.
Pursuant to a corporate services agreement to provide MascoTech, Inc. with
certain corporate staff and administrative services, the Company charges a fee
approximating .8 percent of MascoTech net sales. The fees charged to MascoTech
approximated $8 million in 1998, $6 million in 1997 and $7 million in 1996, and
are included as a reduction of general corporate expense. The fees charged to
MascoTech in 1998 include fees related to TriMas Corporation, which was acquired
by MascoTech in January 1998. Fees charged for corporate services provided to
TriMas Corporation for 1997 and 1996 were $4 million and $3 million,
respectively.
The Company's segments are based on similarities in products and services
and represent the aggregation of similar operating units for which financial
information is regularly evaluated by the corporate operating executives in
determining resource allocation and assessing performance and is periodically
reviewed by the Board of Directors. Accounting policies for the segments are the
same as those for the Company. The Company evaluates performance based on
operating profit or loss and, other than general corporate expense, allocates
specific corporate overhead to each segment.
35
<PAGE> 37
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION -- (CONCLUDED)
The following table presents information about the Company by segment and
geographic area:
<TABLE>
<CAPTION>
(IN THOUSANDS)
NET SALES(1)(2)(3) OPERATING PROFIT ASSETS AT DECEMBER 31
------------------------------------ ------------------------------ ------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Company's
operations by
segment were:
Kitchen and Bath
Products...... $3,294,000 $2,940,000 $2,519,000 $613,000 $539,000 $462,000 $2,220,000 $2,023,000 $1,646,000
Environmental
Products and
Services...... 485,000 348,000 295,000 69,000 50,000 41,000 668,000 293,000 260,000
Builders'
Hardware and
Other
Specialty
Products...... 566,000 472,000 423,000 84,000 80,000 63,000 508,000 541,000 372,000
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
Total......... $4,345,000 $3,760,000 $3,237,000 $766,000 $669,000 $566,000 $3,396,000 $2,857,000 $2,278,000
========== ========== ========== ======== ======== ======== ========== ========== ==========
The Company's
operations by
geographic area
were (4):
North America... $3,506,000 $3,072,000 $2,680,000 $643,000 $570,000 $479,000 $2,221,000 $2,146,000 $1,667,000
Europe.......... 839,000 688,000 557,000 123,000 99,000 87,000 1,175,000 711,000 611,000
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
Total, as
above....... $4,345,000 $3,760,000 $3,237,000 766,000 669,000 566,000 3,396,000 2,857,000 2,278,000
========== ========== ==========
General corporate expense, net............................ (86,000) (82,000) (85,000)
-------- -------- --------
Operating profit, after general corporate expense......... 680,000 587,000 481,000
Other income (expense), net............................... 75,000 44,000 22,000
-------- -------- --------
Income before income taxes (5)............................ $755,000 $631,000 $503,000
======== ======== ========
Equity investments in and receivable from affiliates....................................... 225,000 228,000 220,000
Securities of Furnishings International Inc................................................ 435,000 393,000 356,000
Corporate assets........................................................................... 1,111,000 856,000 848,000
---------- ---------- ----------
Total assets......................................................................... $5,167,000 $4,334,000 $3,702,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
PROPERTY ADDITIONS(6)
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
The Company's operations by segment were:
Kitchen and Bath Products.................................................................. $119,000 $149,000 $116,000
Environmental Products and Services........................................................ 77,000 27,000 21,000
Builders' Hardware and Other Specialty Products............................................ 22,000 34,000 21,000
-------- -------- --------
Total.................................................................................. $218,000 $210,000 $158,000
======== ======== ========
<CAPTION>
DEPRECIATION AND
AMORTIZATION
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
The Company's operations by segment were:
Kitchen and Bath Products............................ $ 74,000 $69,000 $58,000
Environmental Products and Services.................. 23,000 13,000 9,000
Builders' Hardware and Other Specialty Products...... 20,000 15,000 12,000
---------- ---------- ----------
Total............................................ $117,000 $97,000 $79,000
========== ========== ==========
</TABLE>
(1) Included in net sales in 1998, 1997 and 1996 are export sales from the U.S.
of $66.8 million, $58.8 million and $46.2 million, respectively.
(2) Intra-company sales among segments and geographic areas represented less
than one percent of consolidated net sales in 1998, 1997 and 1996.
(3) Includes net sales to one customer in 1998 and 1997 of $499 million and $392
million, respectively.
(4) Net sales from the Company's operations in the U.S. were $3,348 million,
$2,907 million and $2,524 million in 1998, 1997 and 1996, respectively.
Long-lived assets of the Company's operations in the U.S. and Europe were
$1,179 million and $813 million, $1,116 million and $467 million and $806
million and $409 million at December 31, 1998, 1997 and 1996, respectively.
(5) Income before income taxes and net income pertaining to non-U.S. operations
were $120 million and $60 million, $93 million and $45 million, and $82
million and $40 million for 1998, 1997 and 1996, respectively.
(6) 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)
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Re: MascoTech, Inc.:
Equity earnings............................... $ 15,360 $ 14,580 $ 13,860
-------- -------- --------
Gain from change in investment................ -- 29,500 --
-------- -------- --------
Gain from sale of investments, net............ -- -- 67,800
-------- -------- --------
Equity earnings, other affiliates............... 13,840 9,560 6,230
-------- -------- --------
Other, net:
Income from cash and cash investments......... 21,540 17,280 6,910
Other interest income......................... 46,340 47,550 20,710
Other items................................... 62,680 5,180 (18,630)
-------- -------- --------
130,560 70,010 8,990
-------- -------- --------
Interest expense................................ (85,260) (79,850) (74,680)
-------- -------- --------
$ 74,500 $ 43,800 $ 22,200
======== ======== ========
</TABLE>
Other interest income for 1998, 1997 and 1996 includes $41.5 million, $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 includes $7.5 million and
$1.7 million, respectively, of interest income from a $151 million note
receivable from MascoTech, which was paid on September 30, 1997.
Other items in 1998 include pre-tax gains aggregating approximately $59
million from sales of the Company's Thermador subsidiary ($30 million) and the
Company's investment in TriMas Corporation ($29 million). Also included in other
items for 1998 were $7.0 million of dividend income from the Company's
investment in Furnishings International's 13% cumulative preferred stock and an
approximate $12 million pre-tax charge related to the early retirement of
long-term debt.
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 non-operating 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.
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.
Interest expense in 1996 is presented net of interest expense pertaining to
discontinued operations of $21.8 million.
37
<PAGE> 39
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Income before income taxes:
U.S......................................... $ 635,320 $ 537,760 $420,560
Foreign..................................... 119,680 93,140 82,140
--------- --------- --------
$ 755,000 $ 630,900 $502,700
========= ========= ========
Provision for income taxes:
Currently payable:
U.S. Federal............................. $ 167,000 $ 146,940 $119,250
State and local.......................... 19,000 25,570 18,280
Foreign.................................. 47,100 41,110 41,120
Deferred:
U.S. Federal............................. 33,490 28,240 27,880
Foreign.................................. 12,410 6,640 970
--------- --------- --------
$ 279,000 $ 248,500 $207,500
========= ========= ========
Deferred tax assets at December 31:
Intangibles................................. $ 18,160 $ 24,110
Inventories................................. 12,210 11,380
Accrued liabilities......................... 46,720 54,650
Capital loss carryforward................... 117,760 149,470
Other, principally equity investments....... 44,600 34,940
--------- ---------
239,450 274,550
Valuation allowance......................... (156,700) (174,960)
--------- ---------
82,750 99,590
--------- ---------
Deferred tax liabilities at December 31:
Property and equipment...................... 166,880 149,220
Other....................................... 25,230 13,830
--------- ---------
192,110 163,050
--------- ---------
Net deferred tax liability at December 31..... $ 109,360 $ 63,460
========= =========
</TABLE>
At December 31, 1998 and 1997, net deferred tax liability consists of net
short-term deferred tax assets of $15.4 million and $19.0 million, respectively,
and net long-term deferred tax liabilities of $124.8 million and $82.5 million,
respectively.
A valuation allowance of approximately $156.7 million and $175.0 million
was recorded at December 31, 1998 and 1997, 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 $117.8 million and $149.5 million after-tax capital loss
carryforward at December 31, 1998 and 1997, respectively, on the disposition of
the Company's home furnishings products segment and a $38.9 million and $25.5
million benefit of a capital nature on the Company's equity and other
investments at December 31, 1998 and 1997, 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:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate................................. 35% 35% 35%
State and local taxes, net of federal tax benefit........... 2 2 2
Higher taxes on foreign earnings............................ 2 3 3
Dividends-received deduction................................ -- (1) --
Amortization in excess of tax............................... 1 1 1
Change in valuation allowance............................... (2) (2) 1
Other, net.................................................. (1) 1 (1)
-- -- --
Effective tax rate........................................ 37% 39% 41%
== == ==
</TABLE>
Income taxes paid were approximately $160 million, $178 million and $201
million in 1998, 1997 and 1996, respectively. Amounts paid in 1996 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, 1998 for U.S. or additional foreign withholding
taxes on approximately $30.8 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
The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per share (after giving effect
to the 100 percent stock distribution in July 1998), in thousands:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Numerator:
Basic (Net income)............................ $476,000 $382,400 $295,200
Add convertible debenture interest, net (1)... 700 5,880 5,880
-------- -------- --------
Diluted (Net income).......................... $476,700 $388,280 $301,080
======== ======== ========
Denominator:
Basic shares (based on weighted average)...... 331,700 319,400 315,000
Add:
Contingently issued shares................. 7,200 6,600 6,200
Stock option dilution...................... 3,800 3,200 1,800
Convertible debentures (1)................. 1,000 8,400 8,400
-------- -------- --------
Diluted shares................................ 343,700 337,600 331,400
======== ======== ========
</TABLE>
(1) 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)
For 1998, the following presents, as one entity with Masco Corporation as
the parent company, the combined unaudited financial statements of the Company
and MascoTech, Inc., and for 1997 and 1996, the combined unaudited financial
statements of the Company, MascoTech and TriMas Corporation. Intercompany
transactions have been eliminated. Amounts, except per share data, are in
thousands. (MascoTech completed its acquisition of TriMas Corporation in early
1998.)
<TABLE>
<CAPTION>
AT DECEMBER 31
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
COMBINED BALANCE SHEETS
Assets
Current assets:
Cash and cash investments........................... $ 571,130 $ 587,820
Marketable securities............................... -- 45,970
Receivables......................................... 923,470 768,030
Prepaid expenses and other.......................... 70,110 85,250
Deferred income taxes............................... 41,950 80,520
Inventories:
Raw material..................................... 298,910 286,120
Finished goods................................... 271,720 237,340
Work in process.................................. 186,710 162,460
---------- ----------
757,340 685,920
---------- ----------
Total current assets........................... 2,364,000 2,253,510
Equity investments in affiliates...................... 258,580 280,970
Securities of Furnishings International Inc........... 434,640 393,140
Property and equipment................................ 1,842,380 1,654,840
Acquired goodwill, net................................ 1,816,950 925,120
Other assets.......................................... 497,950 421,170
---------- ----------
Total assets................................... $7,214,500 $5,928,750
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable....................................... $ 258,830 $ 72,340
Accounts payable.................................... 281,260 264,980
Accrued liabilities................................. 556,550 535,300
---------- ----------
Total current liabilities...................... 1,096,640 872,620
Long-term debt........................................ 2,779,660 1,959,440
Deferred income taxes and other....................... 399,130 365,470
Other interests in combined affiliates................ 210,490 502,200
---------- ----------
Total liabilities.............................. 4,485,920 3,699,730
Equity of shareholders of Masco Corporation........... 2,728,580 2,229,020
---------- ----------
Total liabilities and shareholders' equity..... $7,214,500 $5,928,750
========== ==========
</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
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
COMBINED STATEMENTS OF INCOME
Net sales............................................. $ 5,967,620 $ 5,323,450 $ 5,095,710
Cost of sales......................................... (3,990,040) (3,535,070) (3,476,820)
Selling, general and administrative expenses.......... (1,074,690) (990,850) (933,250)
Gains (charge) on disposition of businesses, net...... (15,580) 4,980 (31,520)
----------- ----------- -----------
Operating profit............................... 887,310 802,510 654,120
----------- ----------- -----------
Other income (expense), net:
Interest expense.................................... (166,760) (114,300) (115,460)
Other, net.......................................... 163,610 153,290 106,810
----------- ----------- -----------
(3,150) 38,990 (8,650)
----------- ----------- -----------
Income before income taxes and other
interests................................... 884,160 841,500 645,470
Income taxes.......................................... (326,830) (347,110) (279,830)
Other interests in combined affiliates................ (81,330) (111,990) (70,440)
----------- ----------- -----------
Net income..................................... $ 476,000 $ 382,400 $ 295,200
=========== =========== ===========
Earnings per share:
Basic............................................... $1.44 $1.20 $.94
=========== =========== ===========
Diluted............................................. $1.39 $1.15 $.91
=========== =========== ===========
</TABLE>
41
<PAGE> 43
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
COMBINED STATEMENTS OF CASH FLOWS
Cash Flows From (For) Operating Activities:
Net income.......................................... $ 476,000 $ 382,400 $ 295,200
Depreciation and amortization....................... 219,960 185,190 167,080
Interest accrual on pay-in-kind notes receivable.... (41,500) (36,800) (13,970)
Unremitted equity earnings of affiliates............ (16,820) (9,060) (12,730)
Deferred income taxes............................... 45,790 57,230 39,590
(Gains) charge on disposition of businesses, net.... (14,720) (4,980) 31,520
Gain from change in investment...................... (7,000) (4,980) --
Other interests in net income of combined
affiliates, net.................................. 81,330 111,990 70,440
(Increase) decrease in receivables.................. (107,520) (40,250) 1,230
(Increase) decrease in inventories.................. (58,940) (41,870) 14,870
Increase in accounts payable and accrued
liabilities, net................................. 24,180 46,200 93,700
Discontinued operations, net........................ -- -- (19,240)
Other, net.......................................... (2,090) (16,360) (26,080)
----------- ----------- -----------
Net cash from operating activities.......... 598,670 628,710 641,610
----------- ----------- -----------
Cash Flows From (For) Investing Activities:
Acquisition of other interests in TriMas
Corporation...................................... (869,680) -- --
Acquisitions, net of cash acquired.................. (377,770) (198,020) (247,800)
Capital expenditures................................ (295,260) (250,740) (207,600)
Cash proceeds from sale of:
Discontinued operations.......................... -- -- 707,630
Subsidiaries..................................... 108,020 76,560 223,720
Proceeds from redemption of debt by affiliates...... 80,500 -- --
Other, net.......................................... (31,680) (37,810) (20,170)
----------- ----------- -----------
Net cash from (for) investing activities.... (1,385,870) (410,010) 455,780
----------- ----------- -----------
Cash Flows From (For) Financing Activities:
Increase in debt.................................... 1,630,340 121,380 570,520
Payment of debt..................................... (550,650) (155,230) (1,063,720)
Purchase of Company common stock for:
Treasury......................................... (106,880) (14,970) (14,040)
Long-term incentive award plan................... (46,800) (29,110) (14,030)
Cash dividends paid................................. (155,500) (151,970) (146,340)
----------- ----------- -----------
Net cash from (for) financing activities.... 770,510 (229,900) (667,610)
----------- ----------- -----------
Cash and Cash Investments:
Increase (decrease) for the year.................... (16,690) (11,200) 429,780
At January 1........................................ 587,820 599,020 169,240
----------- ----------- -----------
At December 31...................................... $ 571,130 $ 587,820 $ 599,020
=========== =========== ===========
</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>
1998:
Net sales............ $4,345,000 $1,099,000 $1,122,000 $1,085,000 $1,039,000
Gross profit......... $1,551,010 $ 372,710 $ 404,900 $ 393,600 $ 379,800
Net income........... $ 476,000 $ 122,500 $ 125,900 $ 117,000 $ 110,600
Earnings per share:
Basic.............. $1.44 $.37 $.38 $.35 $.34
Diluted............ $1.39 $.36 $.37 $.34 $.32
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
Earnings per share:
Basic.............. $1.20 $.33 $.32 $.29 $.26
Diluted............ $1.15 $.31 $.30 $.28 $.26
</TABLE>
43
<PAGE> 45
ITEM 9. CHANGES IN THE 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 1999 Annual
Meeting of Stockholders, to be filed on or before April 30, 1999, 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 1999 Annual Meeting of Stockholders, to be
filed on or before April 30, 1999, 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 1999 Annual Meeting of Stockholders, to be
filed on or before April 30, 1999, 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 1999 Annual Meeting of Stockholders, to be
filed on or before April 30, 1999, 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,
1998 and 1997, and for the years ended December 31, 1998, 1997 and
1996, consist of the following:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
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, 1998, 1997 and
1996, consists of the following:
II. Valuation and Qualifying Accounts
(ii) (A) MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements appended hereto, at December 31, 1998 and 1997,
and for the years ended December 31, 1998, 1997 and 1996,
consist of the following:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Equity
Notes to Consolidated Financial Statements
(B) MascoTech, Inc. and Subsidiaries Financial Statement
Schedule appended hereto, for the years ended December 31,
1998, 1997 and 1996, 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.(7)
3.ii Bylaws of Masco Corporation, as amended.(filed herewith)
4.a.i Indenture dated as of December 1, 1982 between Masco
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee,(5) and Directors' resolutions establishing Masco
Corporation's: (i) 9% Notes Due October 1, 2001(5), (ii)
6 5/8 Notes Due September 15, 1999(6), (iii) 6 1/8 Notes Due
September 15, 2003 (filed herewith), (iv) 7 1/8% Debentures
Due August 15, 2013 (filed herewith), (v) 6.625% Debentures
Due April 15, 2018 (filed herewith) and (vi) 5.75% Notes Due
2008. (filed herewith)
4.a.ii Agreement of Appointment and Acceptance of Successor Trustee
dated as of July 25, 1994 among Masco Corporation, Morgan
Guaranty Trust Company of New York and The First National
Bank of Chicago.(1)
4.a.iii Supplemental Indenture dated as of July 26, 1994 between
Masco Corporation and The First National Bank of Chicago.(1)
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(5) and Amendment No. 1 dated April 30, 1997(6) and
Amendment dated as of March 30, 1998.(7)
</TABLE>
45
<PAGE> 47
<TABLE>
<S> <C> <C>
4.c Rights Agreement dated as of December 6, 1995, between Masco
Corporation and The Bank of New York, as Rights Agent(3) and
Amendment No. 1 to Rights Agreement dated as of September
23, 1998.(8)
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,
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. (all filed herewith)
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.(6)
4.f DM 350,000,000 Multicurrency Revolving Credit Facility dated
September 14, 1998 among Masco GmbH, as Borrower, Masco
Corporation, as Guarantor, Commerzbank Aktiengesellschaft,
as Arranger, and Commerzbank International S.A., as Agent
for the banks party thereto. (filed herewith)
4.g DM 400,000,000 Term Loan Facility dated July 9, 1997 among
Masco GmbH, as Borrower, Masco Corporation, as Guarantor,
Commerzbank Aktiengesellschaft, as Arranger, and Commerzbank
International S.A., as Agent for the banks party thereto,
and Amendment dated as of June 12, 1998 to Credit Agreement.
(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.).(3)
10.b Corporate Services Agreement dated as of January 1, 1987
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(6), Amendment No. 1 dated as of
October 31, 1996(4), and related letter agreement dated
January 22, 1998.(6)
10.c Corporate Opportunities Agreement dated as of May 1, 1984
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(3) and Amendment No. 1 dated as of
October 31, 1996(4).
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, and amendment to Stock Repurchase
Agreement included in Agreement dated as of November 23,
1993. (all filed herewith)
</TABLE>
46
<PAGE> 48
<TABLE>
<S> <C> <C>
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
(Restated July 10, 1998). (filed herewith)
10.f Masco Corporation 1988 Restricted Stock Incentive Plan
(Restated December 6, 1995).(3)
10.g Masco Corporation 1988 Stock Option Plan (Restated December
6, 1995).(3)
10.h Masco Corporation Supplemental Executive Retirement and
Disability Plan.(2)
10.i Masco Corporation 1997 Annual Incentive Compensation
Plan.(6)
10.j Masco Corporation 1997 Non-Employee Directors Stock Plan.
(as amended July 10, 1998). (filed herewith)
10.k MascoTech, Inc. 1991 Long Term Stock Incentive Plan
(Restated July 15, 1998). (filed herewith)
10.l MascoTech, Inc. 1984 Restricted Stock Incentive Plan
(Restated December 6, 1995).(3)
10.m MascoTech, Inc. 1984 Stock Option Plan (Restated December 6,
1995).(3)
10.n MascoTech, Inc. 1997 Annual Incentive Compensation Plan.(6)
10.o MascoTech, Inc. 1997 Non-Employee Directors Stock Plan.(6)
10.p Description of the Masco Corporation Program for Estate,
Financial Planning and Tax Assistance.(6)
10.q 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, Agreement dated as of November 23, 1993
relating thereto, and Amendment No. 1 to the Securities
Purchase Agreement dated as of October 31, 1996. (all filed
herewith)
10.r Registration Agreement dated as of March 31, 1993, between
Masco Corporation and Masco Industries, Inc. (now known as
MascoTech, Inc.). (filed herewith)
10.s Stock Purchase Agreement between Masco Corporation and Masco
Industries, Inc. (now known as MascoTech, Inc.) dated as of
December 23, 1991 (regarding Masco Capital Corporation)(5)
and Amendment thereto dated May 21, 1997.(6)
10.t 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.(5)
10.u Stock Purchase Agreement dated as of October 15, 1996
between Masco Corporation and MascoTech, Inc.(4)
12 Computation of Ratio of Earnings to Fixed Charges. (filed
herewith)
21 List of Subsidiaries. (filed herewith)
23.a Consent of PricewaterhouseCoopers LLP relating to Masco
Corporation's Financial Statements and Financial Statement
Schedule. (filed herewith)
23.b Consent of PricewaterhouseCoopers LLP relating to MascoTech,
Inc.'s Financial Statements and Financial Statement
Schedule. (filed herewith)
</TABLE>
47
<PAGE> 49
<TABLE>
<S> <C> <C>
27 Financial Data Schedule as of and for the year ended
December 31, 1998. (filed herewith)
</TABLE>
- -------------------------
(1) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's
Current Report on Form 8-K dated November 13, 1996.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(8) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
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.
None.
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 26, 1999
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/ THOMAS G. DENOMME Director
- ---------------------------------------------
THOMAS G. DENOMME
/s/ JOSEPH L. HUDSON, JR. Director
- ---------------------------------------------
JOSEPH L. HUDSON, JR.
/s/ VERNE G. ISTOCK Director
- ---------------------------------------------
VERNE G. ISTOCK
/s/ RAYMOND F. KENNEDY President and Chief Operating
- --------------------------------------------- Officer and Director
RAYMOND F. KENNEDY
/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 26, 1999
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, 1998, 1997 and
1996:
<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, 1998, 1997 AND 1996
<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:
1998....................... $19,760,000 $4,130,000 $1,220,000 $(3,590,000) $21,520,000
=========== ========== ========== =========== ===========
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
=========== ========== ========== =========== ===========
</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
of MascoTech, Inc.:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(2)(ii)(A) present fairly, in all material respects,
the financial position of MascoTech, Inc. and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item
14(a)(2)(ii)(B) presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated financial
statements. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
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.
PRICEWATERHOUSECOOPERS, LLP
Detroit, Michigan
February 19, 1999
F-3
<PAGE> 54
MASCOTECH, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash investments................................. $ 29,390,000 $ 41,110,000
Marketable securities..................................... -- 45,970,000
Receivables............................................... 223,340,000 125,930,000
Inventories............................................... 198,350,000 73,860,000
Deferred and refundable income taxes...................... 26,590,000 36,270,000
Prepaid expenses and other assets......................... 23,710,000 13,310,000
-------------- --------------
Total current assets................................. 501,380,000 336,450,000
Equity and other investments in affiliates.................. 93,560,000 263,300,000
Property and equipment, net................................. 678,130,000 417,030,000
Excess of cost over net assets of acquired companies........ 764,220,000 65,610,000
Notes receivable and other assets........................... 53,250,000 62,290,000
-------------- --------------
Total assets......................................... $2,090,540,000 $1,144,680,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 114,830,000 $ 70,120,000
Accrued liabilities....................................... 135,230,000 114,650,000
-------------- --------------
Total current liabilities............................ 250,060,000 184,770,000
Convertible subordinated debentures......................... 310,000,000 310,000,000
Other long-term debt........................................ 1,078,240,000 282,000,000
Deferred income taxes....................................... 88,140,000 114,650,000
Other long-term liabilities................................. 110,220,000 42,600,000
-------------- --------------
Total liabilities.................................... 1,836,660,000 934,020,000
-------------- --------------
Shareholders' equity:
Preferred stock, $1 par:
Authorized: 25 million; Outstanding: None.............. -- --
Common stock, $1 par:
Authorized: 250 million; Outstanding: 45.8 million and
47.3 million......................................... 45,780,000 47,250,000
Paid-in capital........................................... 16,820,000 41,060,000
Retained earnings......................................... 245,860,000 157,790,000
Accumulated other comprehensive loss...................... (7,460,000) (2,560,000)
Less: Restricted stock awards............................. (47,120,000) (32,880,000)
-------------- --------------
Total shareholders' equity........................... 253,880,000 210,660,000
-------------- --------------
Total liabilities and shareholders' equity........... $2,090,540,000 $1,144,680,000
============== ==============
</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, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------------- ------------- ---------------
<S> <C> <C> <C>
Net sales..................................... $ 1,635,500,000 $ 922,130,000 $ 1,281,220,000
Cost of sales................................. (1,208,930,000) (735,470,000) (1,048,110,000)
--------------- ------------- ---------------
Gross profit............................. 426,570,000 186,660,000 233,110,000
Selling, general and administrative
expenses.................................... (204,180,000) (89,930,000) (132,260,000)
Gains (charge) on disposition of businesses,
net......................................... (15,580,000) 4,980,000 (31,520,000)
--------------- ------------- ---------------
Operating profit......................... 206,810,000 101,710,000 69,330,000
--------------- ------------- ---------------
Other income (expense), net:
Interest expense, Masco Corporation......... -- (7,500,000) --
Other interest expense...................... (81,500,000) (29,030,000) (29,970,000)
Equity and other income from affiliates..... 10,150,000 43,360,000 40,460,000
Gain from disposition of an equity
affiliate................................ -- 46,160,000 --
Gains from changes in investments in equity
affiliates............................... -- 18,190,000 --
Deferred gain recognized from disposition of
business................................. 7,000,000 -- --
Other, net.................................. 2,060,000 17,400,000 (2,600,000)
--------------- ------------- ---------------
(62,290,000) 88,580,000 7,890,000
--------------- ------------- ---------------
Income before income taxes and cumulative
effect of accounting change, net....... 144,520,000 190,290,000 77,220,000
Income taxes.................................. 47,050,000 75,050,000 37,300,000
--------------- ------------- ---------------
Income before cumulative effect of
accounting change, net................. 97,470,000 115,240,000 39,920,000
Cumulative effect of accounting change (net of
income taxes)............................... -- -- 11,700,000
--------------- ------------- ---------------
Net income............................... $ 97,470,000 $ 115,240,000 $ 51,620,000
=============== ============= ===============
Preferred stock dividends..................... -- $ 6,240,000 $ 12,960,000
=============== ============= ===============
Earnings attributable to common stock.... $ 97,470,000 $ 109,000,000 $ 38,660,000
=============== ============= ===============
</TABLE>
<TABLE>
<CAPTION>
BASIC DILUTED BASIC DILUTED BASIC DILUTED
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share:
Income before cumulative effect of
accounting change, net................. $2.23 $1.83 $2.70 $2.12 $ .54 $ .50
Cumulative effect of accounting change,
net.................................... -- -- -- -- .23 .22
----- ----- ----- ----- ----- -----
Earnings attributable to common stock.... $2.23 $1.83 $2.70 $2.12 $ .77 $ .72
===== ===== ===== ===== ===== =====
</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, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------ -------------
<S> <C> <C> <C>
CASH FROM (USED FOR):
OPERATING ACTIVITIES:
Net income................................... $ 97,470,000 $115,240,000 $ 51,620,000
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gains) charge on disposition of
businesses, net......................... 15,580,000 (4,980,000) 31,520,000
Gains from disposition or other changes in
investments in equity affiliates........ (7,000,000) (64,350,000) --
Depreciation and amortization.............. 83,640,000 43,460,000 44,470,000
Equity earnings, net of dividends.......... (6,080,000) (27,180,000) (31,650,000)
Deferred income taxes...................... (110,000) 17,520,000 8,640,000
Decrease (increase) in marketable
securities, net......................... 45,970,000 (8,210,000) (24,890,000)
(Increase) decrease in receivables......... (6,700,000) 2,670,000 10,200,000
(Increase) decrease in inventories......... (19,640,000) 1,950,000 19,190,000
Decrease (increase) in prepaid expenses and
other current assets.................... 1,240,000 (1,280,000) 38,650,000
(Decrease) increase in accounts payable and
accrued liabilities..................... (6,060,000) 11,140,000 9,320,000
Other, net................................. 2,290,000 (7,480,000) (28,060,000)
-------------- ------------ -------------
Net cash from operating activities.... 200,600,000 78,500,000 129,010,000
-------------- ------------ -------------
FINANCING ACTIVITIES:
Increase in debt............................. 1,162,670,000 7,080,000 5,220,000
Payment of debt.............................. (410,660,000) (16,590,000) (114,900,000)
Payment of note due to Masco Corporation..... -- (45,580,000) --
Retirement of preferred stock................ -- (8,360,000) --
Retirement of Company Common Stock........... (63,550,000) (6,610,000) (14,040,000)
Repurchase of Company Common Stock and
warrants from Masco Corporation for cash... -- -- (116,000,000)
Payment of dividends......................... (12,240,000) (15,900,000) (22,940,000)
Other, net................................... (13,480,000) (9,070,000) (8,610,000)
-------------- ------------ -------------
Net cash from (used for) financing
activities......................... 662,740,000 (95,030,000) (271,270,000)
-------------- ------------ -------------
INVESTING ACTIVITIES:
Cash received from sale of businesses........ 25,020,000 76,560,000 223,720,000
Acquisition of businesses, net of cash
acquired................................... (879,370,000) (11,100,000) (47,200,000)
Capital expenditures......................... (106,300,000) (54,780,000) (42,390,000)
Receipt of cash from notes receivable........ 4,880,000 17,330,000 9,300,000
Proceeds from redemptions of debt by
affiliates................................. 80,500,000 -- --
Other, net................................... 210,000 10,230,000 1,850,000
-------------- ------------ -------------
Net cash from (used for) investing
activities......................... (875,060,000) 38,240,000 145,280,000
-------------- ------------ -------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year............. (11,720,000) 21,710,000 3,020,000
At January 1................................. 41,110,000 19,400,000 16,380,000
-------------- ------------ -------------
At December 31........................ $ 29,390,000 $ 41,110,000 $ 19,400,000
============== ============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 57
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
(IN THOUSANDS)
OTHER COMPREHENSIVE
INCOME
-----------------------
FOREIGN
CURRENCY MINIMUM RESTRICTED TOTAL
PREFERRED COMMON PAID-IN RETAINED TRANSLATION PENSION STOCK SHAREHOLDERS'
STOCK STOCK CAPITAL EARNINGS AND OTHER LIABILITY AWARDS EQUITY
--------- -------- --------- -------- ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996.... $ 10,800 $55,520 $ 307,910 $ 32,380 $ 8,570 $ -- $(17,050) $ 398,130
Comprehensive income:
Net income............... 51,620 51,620
Foreign currency
translation............ (5,080) (5,080)
Unrealized gain/(loss) on
securities (net of tax,
$3,040)................ 4,560 4,560
---------
Total comprehensive
income................... 51,100
Preferred stock
dividends................ (12,960) (12,960)
Common stock dividends..... (9,980) (9,980)
Retirement of common stock
and warrants..... ....... (18,720) (263,600) (282,320)
Exercise of stock
options.................. 450 3,490 3,940
Restricted stock awards,
net of amortization...... (9,090) (9,090)
-------- -------- --------- -------- ------- -------- -------- ---------
Balances, December 31,
1996....................... 10,800 37,250 47,800 61,060 8,050 -- (26,140) 138,820
Comprehensive income:
Net income............... 115,240 115,240
Foreign currency
translation............ (9,220) (9,220)
Unrealized gain/(loss) on
securities (net of tax
benefit, $(920))....... (1,390) (1,390)
---------
Total comprehensive
income................... 104,630
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 --
Exercise of stock
options.................. 430 4,000 4,430
Restricted stock awards,
net of amortization...... (6,740) (6,740)
-------- -------- --------- -------- ------- -------- -------- ---------
Balances, December 31,
1997....................... -- 47,250 41,060 157,790 (2,560) -- (32,880) 210,660
Comprehensive income:
Net income............... 97,470 97,470
Foreign currency
translation............ 6,410 6,410
Minimum pension liability
(net of tax benefit,
$(6,700)).............. (10,700) (10,700)
Unrealized gain/(loss) on
securities (net of tax
benefit, $(420))....... (610) (610)
---------
Total comprehensive
income................... 92,570
Common stock dividends..... (9,400) (9,400)
Retirement of common
stock.................... (3,640) (60,170) (63,810)
Exercise of stock
options.................. 1,160 14,750 15,910
Restricted stock awards,
net of amortization...... (14,240) (14,240)
Common stock issued for
acquisition of
business................. 1,010 21,180 22,190
-------- -------- --------- -------- ------- -------- -------- ---------
Balances, December 31, 1998.. -- $45,780 $ 16,820 $245,860 $ 3,240 $(10,700) $(47,120) $ 253,880
======== ======== ========= ======== ======= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 58
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 Company has a corporate services agreement with Masco Corporation,
which at December 31, 1998 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 $8.7 million
in 1998, $5.5 million in 1997 and $7.1 million in 1996.
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 and Derivative Financial Instruments. 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. The Company may enter into S&P futures
contracts which 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. The Company may enter into interest rate swap agreements
to limit the effect of increases in the interest rates on any floating rate
debt. For interest rate instruments that effectively hedge interest rate
exposures, the net cash amounts paid or received on the agreements are
recognized as an adjustment to interest expense.
Receivables. Receivables are presented net of allowances for doubtful
accounts of approximately $3.4 million and $1.2 million at December 31, 1998 and
1997, 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-8
<PAGE> 59
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 not held for disposition at December
31, 1998.
At December 31, 1998 and 1997, accumulated amortization of the excess of
cost over net assets of acquired companies and patents was $56.4 million and
$33.2 million, respectively. Amortization expense was $31.8 million, $9.3
million and $8.5 million in 1998, 1997 and 1996, 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
at December 31, 1998 for U.S. or additional foreign withholding taxes on
approximately $90 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. Effective January 1,
1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and displaying comprehensive
income and its components. The Company displays comprehensive income in the
Statement of Shareholders' Equity and has reclassified all prior periods as
required.
Effective December 31, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise." The adoption of SFAS No. 131 did not affect results of operations
or financial position but did affect the disclosure of segment information (see
"Segment Information" note).
Effective December 31, 1998, the Company adopted SFAS No. 132, "Employer's
Disclosure about Pensions and Other Postretirement Benefits." The provisions of
SFAS No. 132 revise employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or recognition
of these plans.
Prior periods have been reclassified to conform to these and other
presentations adopted in calendar year 1998.
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.
On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 is effective for quarters of all fiscal years beginning after June
15, 1999 (January 1, 2000 for the Company). SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in
F-9
<PAGE> 60
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction. The
Company is currently evaluating the impact SFAS No. 133 will have on its
financial statements, if any.
The American Institute of Certified Public Accountants' Statement of
Position No. 98-5, "Reporting on the Costs of Start-up Activities," became
effective on January 1, 1999 and will not have a material impact on the
Company's financial statements.
EARNINGS PER SHARE:
The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per common share:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Weighted average number of shares outstanding............... 43,630 40,300 50,190
======== ======== ========
Income before cumulative effect of accounting change, net... $ 97,470 $115,240 $ 39,920
Less: Preferred stock dividends............................. -- (6,240) (12,960)
-------- -------- --------
Earnings used for basic earnings per share
computation....................................... $ 97,470 $109,000 $ 26,960
======== ======== ========
Basic earnings per share before cumulative effect of
accounting change, net.................................... $2.23 $2.70 $.54
======== ======== ========
Total shares used for basic earnings per share
computation............................................... 43,630 40,300 50,190
Dilutive securities:
Stock options and warrants................................ 1,060 1,250 1,430
Assumed conversion of preferred stock at January 1,
1997................................................... -- 5,210 --
Convertible debentures.................................... 10,000 10,000 --
Contingently issuable shares.............................. 3,830 2,160 2,170
-------- -------- --------
Total shares used for diluted earnings per share
computation....................................... 58,520 58,920 53,790
======== ======== ========
Earnings used for basic earnings per share computation...... $ 97,470 $109,000 $ 26,960
Add back of preferred stock dividends....................... -- 6,240 --
Add back of debenture interest.............................. 9,530 9,530 --
-------- -------- --------
Earnings used for diluted earnings per share
computation....................................... $107,000 $124,770 $ 26,960
======== ======== ========
Diluted earnings per share before cumulative effect of
accounting change, net.................................... $1.83 $2.12 $.50
======== ======== ========
</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.
SUPPLEMENTARY CASH FLOWS INFORMATION:
Significant transactions not affecting cash were: in 1998, the issuance of
$22 million of Company Common Stock in partial exchange for the assets of an
acquired company; the acquisition of TriMas for cash and the assumption of
liabilities of approximately $179 million; in 1997, the conversion of the
Company's outstanding shares of Dividend Enhanced Convertible Preferred Stock
for approximately ten million shares of Company Common Stock (see "Shareholders'
Equity" note); the exchange of
F-10
<PAGE> 61
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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; and in 1996, in addition to cash received, approximately $25
million comprised of both common stock and warrants, 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 ten million shares of the Company's Common Stock (see "Shareholders'
Equity" note).
Income taxes paid (refunded) were $38 million, $44 million and $(12)
million in 1998, 1997 and 1996, respectively. Interest paid was $79 million, $39
million and $30 million in 1998, 1997 and 1996, respectively.
ACQUISITIONS:
In January 1998, the Company completed the acquisition of TriMas
Corporation ("TriMas") by purchasing all the outstanding shares of TriMas not
already owned by the Company for approximately $920 million. The Company
previously owned 37 percent of TriMas.
The results for 1998 reflect TriMas sales and operating results from the
date of acquisition. The acquisition has been accounted for as a purchase and
the excess of the aggregate purchase price over the fair value of net assets
acquired of approximately $680 million is being amortized over 40 years.
The following unaudited pro forma results of operations reflect this
transaction as if it had occurred on January 1, 1997. The unaudited pro forma
data does not purport to be indicative of the results which would actually have
been reported if the transaction had occurred on such date (in thousands except
per share amounts).
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales............................................. $1,671,500 $1,590,040
========== ==========
Net income............................................ $ 97,100 $ 115,260
========== ==========
Diluted earnings per common share..................... $1.83 $2.12
========== ==========
</TABLE>
In transactions accounted for as purchases, the Company acquired additional
businesses in 1998 for an aggregate purchase price of approximately $77 million.
These businesses have annual sales of approximately $60 million and their
results of operations have been included in the consolidated financial
statements from the dates of acquisition.
DISPOSITIONS OF BUSINESSES:
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). 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. In addition, the
Company received approximately $30 million of contingent consideration ($5
million in 1997 and $25 million in 1998) based on the subsequent operating
performance of the businesses sold. This gain, which is non-taxable, is included
in the caption "gains (charge) on disposition of businesses, net" in the
consolidated statement of income.
F-11
<PAGE> 62
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 of
$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 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.
In the second quarter of 1998, the Company recorded a non-cash charge
aggregating approximately $41 million pre-tax (approximately $22 million
after-tax) to reflect the write-down of certain long-lived assets principally
related to the plan to dispose of certain businesses and to accrue exit costs of
approximately $8 million, of which approximately $7 million relates to
severance. The disposition of these businesses is expected to occur in 1999 with
the cash portion of the proceeds applied to reduce the Company's indebtedness
and to provide capital to invest in its remaining businesses. The expected
proceeds from the sale of the businesses to be disposed was estimated by the
Company's management based on a variety of factors including: historical and
projected operating performance, competitive market position, perceived
strategic value to potential acquirors, tangible asset values and other relevant
factors. In addition, management's estimate of the expected proceeds included
input from independent parties familiar with business valuations of this nature.
The dispositions of these businesses do not meet the criteria for
discontinued operations treatment for accounting purposes; accordingly, the
sales and results of operations of these businesses will be included in
continuing operations until disposition. These businesses had annual sales of
$115 million, $130 million and $517 million in 1998, 1997 and 1996,
respectively, and operating profit of $12 million, $16 million and $19 million
in 1998, 1997 and 1996, respectively.
Future periods will include the operating results of the businesses to be
sold and any additional costs to be incurred in connection with the sale of the
remaining businesses which cannot be accrued at December 31, 1998, as well as
the result of differences between estimated and actual proceeds. In addition,
management expects that certain of the businesses to be disposed may be sold for
gains; such gains will be recognized when realized.
INVENTORIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-------------------
1998 1997
-------- -------
<S> <C> <C>
Finished goods............................................ $ 87,810 $22,160
Work in process........................................... 47,960 22,990
Raw material.............................................. 62,580 28,710
-------- -------
$198,350 $73,860
======== =======
</TABLE>
F-12
<PAGE> 63
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EQUITY AND OTHER INVESTMENTS IN AFFILIATES:
Equity and other investments in affiliates consist of the following common
stock interests in publicly traded affiliates:
<TABLE>
<CAPTION>
AT DECEMBER 31
--------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
TriMas Corporation.......................................... -- 37% 41%
Emco Limited................................................ -- -- 43%
Titan International, Inc. .................................. 16% 15% 12%
Delco Remy International, Inc. (voting)..................... 17% 18% 26%
</TABLE>
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. The above companies are accounted for
under the equity method.
The carrying amount of investments in affiliates at December 31, 1998 and
1997 and quoted market values at December 31, 1998 for publicly traded
affiliates (which may differ from the amounts that could have been realized upon
disposition) are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998
QUOTED 1998 1997
MARKET CARRYING CARRYING
VALUE AMOUNT AMOUNT
------- -------- --------
<S> <C> <C> <C>
Common stock:
TriMas Corporation.............................. $ -- $ -- $137,740
Titan International, Inc........................ 31,500 46,900 44,080
Delco Remy International, Inc................... 29,690 10,920 9,320
------- ------- --------
Investments in publicly traded affiliates (common
stock holdings)................................. 61,190 57,820 191,140
MSX International, Inc. debt...................... -- -- 47,500
Other non-public affiliates....................... -- 35,740 24,660
------- ------- --------
Total............................................. $61,190 $93,560 $263,300
======= ======= ========
</TABLE>
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 had an investment in Emco subordinated notes which were
classified as available-for-sale and, as a result, were included in other assets
at fair value at December 31, 1997. The notes were subsequently redeemed in
1998.
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. As a result of the
F-13
<PAGE> 64
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
change in the Company's common equity ownership interest in DRI, the Company
recognized a pre-tax gain of approximately $5 million.
In addition to its equity 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 provider of
technology-based business services and product development services.
Equity in undistributed earnings of affiliates of $6 million at December
31, 1998, $68 million at December 31, 1997 and $57 million at December 31, 1996
are included in consolidated retained earnings.
Approximate combined condensed financial data of the Company's equity
affiliates (including TriMas through the date of acquisition in early 1998 and
Emco through the date of disposition September 30, 1997) accounted for under the
equity method are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-----------------------
1998 1997
--------- ----------
<S> <C> <C>
Current assets......................................... $ 948,370 $1,117,940
Current liabilities.................................... (451,200) (520,900)
--------- ----------
Working capital...................................... 497,170 597,040
Property and equipment, net............................ 473,460 612,060
Excess of cost over net assets of acquired companies... 112,640 371,190
Other assets........................................... 236,420 145,000
Long-term debt......................................... (846,330) (702,390)
Deferred income taxes and other long-term
liabilities.......................................... (52,030) (82,610)
--------- ----------
Shareholders' equity................................. $ 421,330 $ 940,290
========= ==========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $2,764,860 $3,484,540 $2,959,980
========== ========== ==========
Operating profit........................... $ 125,730 $ 264,590 $ 269,440
========== ========== ==========
Earnings attributable to common stock...... $ 32,480 $ 108,230 $ 128,820
========== ========== ==========
</TABLE>
Equity and other income from affiliates consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED
DECEMBER 31
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
The Company's equity in affiliates' earnings
available for common shareholders................ $ 7,340 $31,330 $35,190
Interest and dividend income....................... 2,810 12,030 5,270
------- ------- -------
Equity and other income from affiliates............ $10,150 $43,360 $40,460
======= ======= =======
</TABLE>
F-14
<PAGE> 65
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT, NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1998 1997
---------- --------
<S> <C> <C>
Cost:
Land and land improvements............................ $ 33,160 $ 19,820
Buildings............................................. 179,870 116,270
Machinery and equipment............................... 777,710 545,590
---------- --------
990,740 681,680
Less: Accumulated depreciation.......................... 312,610 264,650
---------- --------
$ 678,130 $417,030
========== ========
</TABLE>
Depreciation expense totalled $52 million, $34 million and $37 million in
1998, 1997 and 1996, respectively.
ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1998 1997
---------- --------
<S> <C> <C>
Salaries, wages and commissions......................... $ 16,550 $ 9,160
Vacation, holiday and bonus............................. 19,420 8,530
Income taxes............................................ 8,790 7,760
Interest................................................ 4,300 1,740
Insurance............................................... 22,470 24,740
Property, payroll and other taxes....................... 5,490 3,340
Pension................................................. 13,600 6,900
Other................................................... 44,610 52,480
---------- --------
$ 135,230 $114,650
========== ========
</TABLE>
LONG-TERM DEBT:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1998 1997
---------- --------
<S> <C> <C>
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......................... 500,000 245,000
Bank term loan.......................................... 475,000 --
Other................................................... 108,060 39,880
---------- --------
1,393,060 594,880
Less: Current portion of long-term debt................. 4,820 2,880
---------- --------
Long-term debt.......................................... $1,388,240 $592,000
========== ========
</TABLE>
In connection with the TriMas acquisition in early 1998 (see "Acquisitions"
note), the Company entered into a new $1.3 billion credit facility. This
facility includes a $500 million term loan with remaining principal payments as
follows: 1999 -- $40 million; 2000 -- $60 million; 2001 -- $75 million;
2002 -- $190 million; and 2003 -- $110 million. The credit facility also
includes an $800 million revolver
F-15
<PAGE> 66
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
which terminates in 2003. The Company has the ability and intent to refinance
amounts due in 1999 on a long-term basis utilizing the revolver.
Other debt at December 31, 1998 principally consists of borrowings
denominated in foreign currencies under the revolving credit agreement by the
Company's subsidiaries. At December 31, 1998, there was $233 million unused
under the revolving credit agreement.
The interest rates applicable to the revolver and term loan are principally
at alternative floating rates which approximated 6.3 percent at December 31,
1998. Interest rate swaps covering a notional amount of $400 million of the
Company's floating rate debt were entered into in 1998 at an aggregate interest
rate of approximately seven percent including the current borrowing spread under
the Company's revolving credit agreement. These swap agreements expire at
various dates between 2000 and 2007.
The 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 taxes and scheduled debt payments. In addition, there
are limitations on dividends, share repurchases and subordinated debt
repurchases. Under the most restrictive of these provisions, approximately $39
million would have been available at December 31, 1998 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 maturities of debt as at December 31, 1998 during the next five years
are as follows (in millions): 1999 -- $45; 2000 -- $67; 2001 -- $79;
2002 -- $194; and 2003 -- $923.
SHAREHOLDERS' EQUITY:
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. 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.
The Company repurchased and retired approximately 3.6 million shares of its
common stock in 1998, 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 1996, pursuant to Board
of Directors' authorized repurchase programs. At December 31, 1998, the Company
may repurchase approximately 4.6 million additional shares of Company Common
Stock pursuant to repurchase authorization.
On the basis of amounts paid (declared), cash dividends per common share
were $.26 ($.20) in 1998, $.22 ($.28) in 1997 and $.18 ($.18) in 1996.
F-16
<PAGE> 67
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 1998,
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
908,000, 565,000 and 480,000 shares of Company Common Stock during 1998, 1997
and 1996, respectively, to key employees of the Company and affiliated
companies. The weighted average fair value per share of long-term stock awards
granted during 1998, 1997 and 1996 on the date of grant was $19, $19 and $14,
respectively. Compensation expense for the vesting of long-term stock awards was
approximately $5.2 million, $4.7 million and $2.3 million in 1998, 1997 and
1996, respectively. The unamortized value of unvested stock awards, aggregating
approximately $47 million at December 31, 1998, are generally amortized over
ten-year vesting periods and are recorded in the financial statements as 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 ten 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 ten years after grant or in
installments beginning in the third year and extending through the eighth year
after grant.
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, 1998 is presented
below.
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Option shares outstanding, January 1........................ 3,770 4,290 3,440
Weighted average exercise price........................... $10 $10 $ 8
Option shares granted....................................... 1,480 80 1,370
Weighted average exercise price........................... $19 $20 $15
Option shares exercised..................................... (1,160) (500) (450)
Weighted average exercise price........................... $10 $ 8 $ 7
Option shares canceled...................................... (140) (100) (70)
Weighted average exercise price........................... $15 $16 $ 5
Option shares outstanding, December 31...................... 3,950 3,770 4,290
Weighted average exercise price........................... $14 $10 $10
Weighted average remaining option term (in years)......... 6.6 4.7 5.3
Option shares exercisable, December 31...................... 750 1,430 1,710
Weighted average exercise price........................... $ 9 $ 9 $ 9
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
NUMBER NUMBER
RANGE OF OUTSTANDING WEIGHTED AVERAGE WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES AT 12/31/98 REMAINING LIFE EXERCISE PRICE AT 12/31/98 EXERCISE PRICE
- ----------------- ----------- ---------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$4.50 -- $14 1,200 2.6 $ 5.46 455 $ 5.33
$14 -- $18 1,226 7.6 $14.54 250 $14.56
$18 -- $25.125 1,524 8.9 $19.20 45 $22.10
----- ---
Total Outstanding 3,950 Total Exercisable 750
===== ===
</TABLE>
F-17
<PAGE> 68
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1998, options have been granted and are outstanding with
exercise prices ranging from $4.50 to $25.125 per share, the fair market values
at the dates of grant.
At December 31, 1998, 1997 and 1996, a combined total of 3,820,000,
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 $6.30, $7.70 and $6.20 in 1998, 1997 and 1996, respectively. Had stock
option compensation expense been determined pursuant to the methodology of SFAS
No. 123, "Accounting for Stock-Based Compensation," the pro forma effects on the
Company's earnings per share would have been a reduction of approximately $.04,
$.02 and $.01 in 1998, 1997 and 1996, respectively.
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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate.................................. 5.5% 6.5% 6.5%
Dividend yield........................................... 1.3% 1.4% 1.1%
Volatility factor........................................ 28.8% 35.0% 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 Board of Directors. Aggregate charges to income
under these plans were $15 million in 1998, $9 million in 1997 and $11 million
in 1996.
Net periodic pension cost for the Company's defined-benefit pension plans
includes the following components for the three years ended December 31, 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Service cost...................................... $ 6,470 $ 3,480 $ 5,230
Interest cost..................................... 11,380 6,650 6,490
Expected return on assets......................... (11,430) (6,600) (5,940)
Amortization of transition asset.................. (170) (120) (120)
Amortization of prior-service cost................ 750 690 640
Amortization of net loss.......................... 670 410 710
-------- ------- -------
Net periodic pension cost......................... $ 7,670 $ 4,510 $ 7,010
======== ======= =======
</TABLE>
Major assumptions used in accounting for the Company's defined-benefit
pension plans are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Discount rate for obligations....................... 6.75% 7.25% 7.50%
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>
F-18
<PAGE> 69
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following provides a reconciliation of the changes in the
defined-benefit pension plans' projected benefit obligations and fair value of
assets for each of the two years ended December 31, 1998, and the funded status
as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997
--------- --------
<S> <C> <C>
CHANGES IN PROJECTED BENEFIT OBLIGATIONS
Benefit obligations at January 1........................ $ (99,150) $(89,620)
Acquisitions.......................................... (63,720) --
Service cost.......................................... (5,900) (3,180)
Interest cost......................................... (11,380) (6,650)
Plan amendments....................................... (650) (2,200)
Actuarial loss........................................ (9,580) (2,140)
Benefit payments...................................... 6,350 4,640
--------- --------
Projected benefit obligations at December 31............ $(184,030) $(99,150)
--------- --------
CHANGES IN PLAN ASSETS
Fair value of plan assets at January 1.................. $ 63,020 $ 59,710
Actual return on plan assets.......................... 1,890 3,100
Acquisitions.......................................... 46,420 --
Contributions......................................... 6,430 5,210
Benefit payments...................................... (6,350) (4,640)
Expenses/Other........................................ (650) (360)
--------- --------
Fair value of plan assets at December 31................ $ 110,760 $ 63,020
========= ========
FUNDED STATUS
Plan assets less than projected benefits at December
31.................................................... $ (73,270) $(36,130)
Unamortized transition asset.......................... (1,100) (800)
Unamortized prior-service cost........................ 7,640 8,210
Unamortized net loss.................................. 36,600 21,340
--------- --------
Net liability recognized at December 31................. $ (30,130) $ (7,380)
========= ========
</TABLE>
The following provides the amounts related to the plans at December 31,
1998 and 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997
-------- --------
<S> <C> <C>
Accrued benefit liability................................ $(51,370) $(24,960)
Intangible asset......................................... 10,540 10,620
Accumulated other comprehensive income................... 10,700 6,960
-------- --------
Net liability recognized............................... $(30,130) $ (7,380)
======== ========
</TABLE>
F-19
<PAGE> 70
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Postretirement Benefits. The Company provides postretirement medical and
life insurance benefits, none of which are funded, for certain of its active and
retired employees. Net periodic postretirement benefit cost includes the
following components for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Service cost.......................................... $ 300 $ 300 $ 400
Interest cost......................................... 1,200 1,400 1,600
Net amortization...................................... (100) 700 800
------ ------ ------
Net periodic postretirement benefit cost.............. $1,400 $2,400 $2,800
====== ====== ======
</TABLE>
The following provides a reconciliation of the changes in the
postretirement benefit plans' benefit obligations for each of the two years
ended December 31, 1998 and the status as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997
-------- --------
<S> <C> <C>
CHANGES IN BENEFIT OBLIGATIONS
Benefit obligations at January 1......................... $(12,400) $(20,000)
Acquisitions........................................... (4,400) --
Service cost........................................... (300) (300)
Interest cost.......................................... (1,200) (1,400)
Employee contributions................................. (100) (100)
Actuarial gain/(loss).................................. (1,900) 8,100
Benefit payments....................................... 1,200 1,300
Curtailment............................................ 200 --
-------- --------
Benefit obligations at December 31....................... $(18,900) $(12,400)
======== ========
STATUS
Benefit obligations at December 31....................... $(18,900) $(12,400)
Unamortized transition obligation...................... 9,300 10,300
Unrecognized prior-service cost........................ 500 500
Unrecognized net gain.................................. (6,200) (9,000)
-------- --------
Net liability at December 31............................. $(15,300) $(10,600)
======== ========
</TABLE>
The discount rate, as of December 31, 1998, used in determining the
accumulated postretirement benefit obligation decreased from 7.25 percent in
1997 to 6.75 percent in 1998. The assumed health care cost trend rate in 1998
was 8.5 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 obligations would increase by $1.2
million and the aggregate of the service and interest cost components of net
periodic postretirement benefit obligations cost would increase by $.1 million.
If the assumed medical cost trend rates were decreased by one percent, the
accumulated postretirement benefit obligations would decrease by $1.1 million
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost would decrease by $.1 million.
F-20
<PAGE> 71
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEGMENT INFORMATION:
The Company has defined a segment as a component, with business activity
resulting in revenue and expense, that has separate financial information
evaluated regularly by the Company's chief operating decision maker in
determining resource allocation and assessing performance. The Company has five
operating segments involving the manufacture and sale of the following:
Specialty Metal Formed Products -- Precision products, principally
engine and drivetrain components and subassemblies, generally produced
using advanced metalworking technologies with significant proprietary
content for the transportation industry.
Towing Systems -- Vehicle hitches, jacks, winches, couplers and related
towing accessories.
Specialty Fasteners -- Cold formed fasteners and related metallurgical
processing.
Specialty Packaging and Sealing Products -- Industrial container
closures, pressurized gas cylinders and metallic and nonmetallic
gaskets.
Specialty Industrial Products -- Specialty drills, cutters and
specialized metal finishing services, and flame-retardant facings and
jacketings and pressure-sensitive tapes.
The Company purchased TriMas in January 1998 and the segment data for 1998
reflects TriMas as though the transaction had occurred on January 1, 1998,
consistent with the Company's internal management reporting.
Included in the Specialty Metal Formed Products segment are sales to one
customer of $184 million, $156 million and $155 million in 1998, 1997 and 1996,
respectively; sales to another customer, attributed mainly to the Specialty
Metal Formed Products segment, of $140 million and $232 million in 1997 and
1996, respectively; sales to a third customer, attributed mainly to the
Specialty Metal Formed Products segment, of $79 million and $146 million in 1997
and 1996, respectively; and sales to a fourth customer, attributed mainly to the
Specialty Metal Formed Products segment, of $62 million and $122 million in 1997
and 1996, respectively. Specialty Metal Formal Products' operating profit for
1997 was reduced by $17 million of nonrecurring charges.
The Company's export sales approximated $142 million, $71 million and $75
million in 1998, 1997 and 1996, respectively.
Intersegment transactions represent principally transactions occurring in
the ordinary course of business.
F-21
<PAGE> 72
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SPECIALTY (IN THOUSANDS)
SPECIALTY PACKAGING SPECIALTY COMPANIES
METAL FORMED TOWING SPECIALTY AND SEALING INDUSTRIAL SOLD OR HELD
PRODUCTS SYSTEMS FASTENERS PRODUCTS PRODUCTS FOR SALE TOTAL
------------ -------- --------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
- -------------------------
Revenue from external
customers.............. $760,000 $238,000 $226,000 $223,000 $110,000 $115,000 $1,672,000
Intersegment revenue..... 5,000 6,000 3,000 -- 1,000 3,000 18,000
Depreciation and
amortization........... 34,000 9,000 10,000 11,000 5,000 6,000 75,000
Segment operating
profit................. 106,000 34,000 38,000 46,000 16,000 12,000 252,000
Segment net assets....... 494,000 281,000 328,000 423,000 140,000 102,000 1,768,000
Capital expenditures..... 63,000 8,000 14,000 16,000 4,000 3,000 108,000
1997
- -------------------------
Revenue from external
customers.............. 711,000 -- 44,000 -- 37,000 130,000 922,000
Intersegment revenue..... 9,000 -- 1,000 -- -- 2,000 12,000
Depreciation and
amortization........... 29,000 -- 1,000 -- 2,000 6,000 38,000
Segment operating
profit................. 88,000 -- 8,000 -- 7,000 16,000 119,000
Segment net assets....... 444,000 -- 17,000 -- 18,000 109,000 588,000
Capital expenditures..... 46,000 -- 1,000 -- 2,000 5,000 54,000
1996
- -------------------------
Revenue from external
customers.............. 668,000 -- 43,000 -- 53,000 517,000 1,281,000
Intersegment revenue..... 9,000 -- 3,000 -- -- -- 12,000
Depreciation and
amortization........... 26,000 -- 1,000 -- 2,000 15,000 44,000
Segment operating
profit................. 93,000 -- 8,000 -- 3,000 19,000 123,000
Segment net assets....... 429,000 -- 17,000 -- 12,000 215,000 673,000
Capital expenditures..... 24,000 -- 3,000 -- 1,000 13,000 41,000
</TABLE>
The following table presents the Company's revenues for each of the years ended
December 31 and net assets at each year ended December 31 by geographic area,
attributed to each subsidiary's continent of domicile. Revenue and net assets
from no single foreign country was material to the consolidated revenues and net
assets of the Company.
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
---------------------- ---------------------- ----------------------
SALES NET ASSETS SALES NET ASSETS SALES NET ASSETS
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Europe................................. $149,000 $171,000 $100,000 $111,000 $170,000 $129,000
Australia.............................. 18,000 10,000 -- -- -- --
Other North America.................... 16,000 12,000 -- -- -- --
-------- -------- -------- -------- -------- --------
Total foreign........................ $183,000 $193,000 $100,000 $111,000 $170,000 $129,000
======== ======== ======== ======== ======== ========
</TABLE>
F-22
<PAGE> 73
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of reportable segment revenue from
external customers, segment operating profit and segment net assets to the
Company's consolidated totals:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
---------- -------- ----------
<S> <C> <C> <C>
REVENUE FROM EXTERNAL CUSTOMERS
Revenue from external customers for reportable segments.... $1,672,000 $922,000 $1,281,000
TriMas sales prior to acquisition.......................... (36,000) -- --
---------- -------- ----------
Total net sales..................................... $1,636,000 $922,000 $1,281,000
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
---------- -------- ----------
<S> <C> <C> <C>
OPERATING PROFIT
Total operating profit for reportable segments............. $ 252,000 $119,000 $ 123,000
General corporate expense.................................. (24,000) (22,000) (22,000)
Loss on disposition of businesses.......................... (41,000) -- (32,000)
MSTI earnout............................................... 25,000 5,000 --
TriMas operating profit prior to acquisition............... (5,000) -- --
---------- -------- ----------
Total operating profit.............................. $ 207,000 $102,000 $ 69,000
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
---------- -------- ----------
<S> <C> <C> <C>
NET ASSETS AT DECEMBER 31
Total net operating assets for reportable segments......... $1,768,000 $588,000 $ 673,000
Corporate net assets....................................... 72,000 372,000 371,000
---------- -------- ----------
Total net assets.................................... $1,840,000 $960,000 $1,044,000
========== ======== ==========
</TABLE>
The information that the chief operating decision maker utilizes includes
total net assets as presented in the table above. Total net assets is defined by
the Company as total assets less current liabilities.
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
---------- -------- ----------
<S> <C> <C> <C>
DEPRECIATION AND AMORTIZATION
Segment totals............................................. $ 75,000 $ 38,000 $ 44,000
Adjustments................................................ 9,000 5,000 1,000
---------- -------- ----------
Consolidated totals................................. $ 84,000 $ 43,000 $ 45,000
========== ======== ==========
</TABLE>
The above adjustments to depreciation and amortization are principally the
result of compensation expense related to stock award amortization and prepaid
debenture expense amortization.
F-23
<PAGE> 74
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Other, net:
Net realized and unrealized gains (losses) from
marketable securities.............................. $ 3,330 $ 13,130 $ (160)
Interest income....................................... 4,180 3,440 1,160
Other, net............................................ (5,450) 830 (3,600)
-------- -------- -------
$ 2,060 $ 17,400 $(2,600)
======== ======== =======
</TABLE>
INCOME TAXES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Income before income taxes and cumulative effect of
accounting change, net:
Domestic.............................................. $115,630 $173,410 $59,870
Foreign............................................... 28,890 16,880 17,350
-------- -------- -------
$144,520 $190,290 $77,220
======== ======== =======
Provision for income taxes:
Currently payable:
Federal............................................ $ 28,210 $ 40,290 $16,170
State and local.................................... 3,950 6,810 4,650
Foreign............................................ 15,000 10,430 7,840
Deferred:
Principally federal................................ 590 18,840 8,300
Foreign............................................ (700) (1,320) 340
-------- -------- -------
Income taxes on income before cumulative effect of
accounting change, net........................... $ 47,050 $ 75,050 $37,300
======== ======== =======
</TABLE>
The components of deferred taxes at December 31, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventories......................................... $ 2,990 $ 2,440
Accrued liabilities and other long-term
liabilities....................................... 51,910 35,660
Expected capital loss benefit from disposition of
businesses........................................ 7,910 --
-------- --------
62,810 38,100
-------- --------
Deferred tax liabilities:
Property and equipment.............................. 101,640 64,630
Other, principally equity investments in
affiliates........................................ 26,170 62,240
-------- --------
127,810 126,870
-------- --------
Net deferred tax liability............................. $ 65,000 $ 88,770
======== ========
</TABLE>
F-24
<PAGE> 75
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)
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
U.S. federal statutory rate........................ 35% 35% 35%
------- ------- -------
Tax at U.S. federal statutory rate................. $50,580 $66,600 $27,020
State and local taxes, net of federal tax
benefit.......................................... 2,570 4,430 3,020
Higher effective foreign tax rate.................. 4,210 3,200 2,100
Non-taxable additional consideration from
previously sold business......................... (8,190) (1,710) --
Disposition of businesses.......................... (2,400) -- 5,780
Amortization in excess of tax, net................. 1,390 (760) (140)
Other, net......................................... (1,110) 3,290 (480)
------- ------- -------
Income taxes before cumulative effect of
accounting change, net........................ $47,050 $75,050 $37,300
======= ======= =======
</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 and interest rate swap agreements, are
intended to reduce the market risk associated with the Company's marketable
equity securities portfolio and floating rate debt.
The Company's investment in S&P 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
F-25
<PAGE> 76
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
contract cost. The average monthly notional amount of S&P futures contracts in
1997 was approximately $17 million. 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. There were no contracts
outstanding at December 31, 1998 or 1997.
Interest rate swap agreements covering a notional amount of $400 million of
the Company's floating rate debt were entered into in 1998 at an aggregate
interest rate of approximately seven percent including the current borrowing
spread under the Company's revolving credit agreement. The fair value of the
swap agreements was not recognized in the consolidated financial statements
since they are accounted for as hedges of the floating rate exposure. These swap
agreements expire at various dates in 2000 to 2007.
The estimated fair value of the interest rate swap agreements, based on
current market rates, approximated a net payable of $11 million at December 31,
1998. Exposure to credit loss could occur when the fair value of the agreements
is a net receivable.
The interest rate swaps are with major banks of high credit quality;
therefore, the risk of non-performance by the counterparties is considered to be
negligible.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1998 1997
------------------------ --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash investments........................ $ 29,390 $ 29,390 $ 41,110 $ 41,110
Marketable securities, notes receivable and other
assets......................................... $ 5,290 $ 4,480 $ 80,760 $ 81,590
Long-term debt:
Bank debt...................................... $1,051,260 $1,051,260 $267,000 $267,000
4 1/2% Convertible Subordinated Debentures..... $ 310,000 $ 251,100 $310,000 $269,700
Other long-term debt........................... $ 26,980 $ 25,580 $ 15,000 $ 14,500
</TABLE>
F-26
<PAGE> 77
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>
1998:
- -----------------------------------------
Net sales................................ $401,760 $399,500 $433,480 $400,760
Gross profit............................. $104,960 $100,150 $117,070 $104,390
Net income:
Income................................. $18,120 $ 16,790 $ 29,820 $ 32,740
Income attributable to common stock.... $18,120 $ 16,790 $ 29,820 $ 32,740
Per common share:
Basic.......................... $.43 $.38 $.68 $.74
Diluted........................ $.36 $.33 $.54 $.60
Market price per common share:
High................................... $18 3/4 $24 1/8 $26 7/16 $23 1/4
Low.................................... $15 1/4 $16 1/4 $22 5/16 $17 11/16
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
</TABLE>
In January 1998, the Company completed the acquisition of TriMas
Corporation ("TriMas") by purchasing all the outstanding shares of TriMas not
already owned by the Company for approximately $920 million. The results for
1998 reflect TriMas sales and operating results from the date of acquisition.
Results for first quarter 1998 benefitted from pre-tax gains aggregating
approximately $12 million which resulted from partial recognition of a deferred
gain related to the 1997 divestiture of a business and gains from the Company's
marketable securities portfolio.
Second quarter results for 1998 were impacted by the charge (approximately
$41 million pre-tax) principally related to the disposition of certain
businesses. This charge more than offset the gain (approximately $25 million
pre-tax) related to additional consideration received by the Company in the
second quarter of 1998 resulting from the disposition of MascoTech Stamping
Technologies, Inc. ("MSTI") in 1996.
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.
F-27
<PAGE> 78
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 MSTI, which was sold
in the second quarter 1996.
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.
The 1998 and 1997 income (loss) per common share amounts for the quarters
may not total to the full year amounts due to the purchase and retirement of
shares throughout the year.
F-28
<PAGE> 79
MASCOTECH, INC.
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1998
Schedules, as required for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
II. Valuation and Qualifying Accounts....................... F-30
</TABLE>
F-29
<PAGE> 80
MASCOTECH, INC.
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<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:
1998........................... $1,180,000 $750,000 $2,590,000 $1,110,000 $3,410,000
========== ======== ========== ========== ==========
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
========== ======== ========== ========== ==========
</TABLE>
NOTES:
(A) Allowance of companies acquired, and other adjustments, net in 1998 and
1997. Allowance of companies reclassified for businesses held for
disposition, and other adjustments, net in 1996.
(B) Deductions, representing uncollectible accounts written off, less recoveries
of accounts written off in prior years.
F-30
<PAGE> 81
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.i
Restated Certificate of Incorporation of Masco Corporation
and amendments thereto.(7)
3.ii
Bylaws of Masco Corporation, as amended.(filed herewith)
4.a.i
Indenture dated as of December 1, 1982 between Masco
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee,(5) and Directors' resolutions establishing Masco
Corporation's: (i) 9% Notes Due October 1, 2001(5), (ii)
6 5/8 Notes Due September 15, 1999(6), (iii) 6 1/8 Notes Due
September 15, 2003 (filed herewith), (iv) 7 1/8% Debentures
Due August 15, 2013 (filed herewith), (v) 6.625% Debentures
Due April 15, 2018 (filed herewith) and (vi) 5.75% Notes Due
2008. (filed herewith)
4.a.ii
Agreement of Appointment and Acceptance of Successor Trustee
dated as of July 25, 1994 among Masco Corporation, Morgan
Guaranty Trust Company of New York and The First National
Bank of Chicago.(1)
4.a.iii
Supplemental Indenture dated as of July 26, 1994 between
Masco Corporation and The First National Bank of Chicago.(1)
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(5) and Amendment No. 1 dated April 30, 1997(6) and
Amendment dated as of March 30, 1998.(7)
4.c
Rights Agreement dated as of December 6, 1995, between Masco
Corporation and The Bank of New York, as Rights Agent(3) and
Amendment No. 1 to Rights Agreement dated as of September
23, 1998.(8)
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,
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. (all filed herewith)
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.(6)
4.f
DM 350,000,000 Multicurrency Revolving Credit Facility dated
September 14, 1998 among Masco GmbH, as Borrower, Masco
Corporation, as Guarantor, Commerzbank Aktiengesellschaft,
as Arranger, and Commerzbank International S.A., as Agent
for the banks party thereto. (filed herewith)
4.g
DM 400,000,000 Term Loan Facility dated July 9, 1997 among
Masco GmbH, as Borrower, Masco Corporation, as Guarantor,
Commerzbank Aktiengesellschaft, as Arranger, and Commerzbank
International S.A., as Agent for the banks party thereto,
and Amendment dated as of June 12, 1998 to Credit Agreement.
(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.).(3)
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.b
Corporate Services Agreement dated as of January 1, 1987
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(6), Amendment No. 1 dated as of
October 31, 1996(4), and related letter agreement dated
January 22, 1998.(6)
10.c
Corporate Opportunities Agreement dated as of May 1, 1984
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(3) and Amendment No. 1 dated as of
October 31, 1996(4).
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, and amendment to Stock Repurchase
Agreement included in Agreement dated as of November 23,
1993. (all filed herewith)
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
(Restated July 10, 1998). (filed herewith)
10.f
Masco Corporation 1988 Restricted Stock Incentive Plan
(Restated December 6, 1995).(3)
10.g
Masco Corporation 1988 Stock Option Plan (Restated December
6, 1995).(3)
10.h
Masco Corporation Supplemental Executive Retirement and
Disability Plan.(2)
10.i
Masco Corporation 1997 Annual Incentive Compensation
Plan.(6)
10.j
Masco Corporation 1997 Non-Employee Directors Stock Plan.
(as amended July 10, 1998). (filed herewith)
10.k
MascoTech, Inc. 1991 Long Term Stock Incentive Plan
(Restated July 15, 1998). (filed herewith)
10.l
MascoTech, Inc. 1984 Restricted Stock Incentive Plan
(Restated December 6, 1995).(3)
10.m
MascoTech, Inc. 1984 Stock Option Plan (Restated December 6,
1995).(3)
10.n
MascoTech, Inc. 1997 Annual Incentive Compensation Plan.(6)
10.o
MascoTech, Inc. 1997 Non-Employee Directors Stock Plan.(6)
10.p
Description of the Masco Corporation Program for Estate,
Financial Planning and Tax Assistance.(6)
10.q
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, Agreement dated as of November 23, 1993
relating thereto, and Amendment No. 1 to the Securities
Purchase Agreement dated as of October 31, 1996. (all filed
herewith)
10.r
Registration Agreement dated as of March 31, 1993, between
Masco Corporation and Masco Industries, Inc. (now known as
MascoTech, Inc.). (filed herewith)
10.s
Stock Purchase Agreement between Masco Corporation and Masco
Industries, Inc. (now known as MascoTech, Inc.) dated as of
December 23, 1991 (regarding Masco Capital Corporation)(5)
and Amendment thereto dated May 21, 1997.(6)
10.t
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.(5)
10.u
Stock Purchase Agreement dated as of October 15, 1996
between Masco Corporation and MascoTech, Inc.(4)
12
Computation of Ratio of Earnings to Fixed Charges. (filed
herewith)
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
21
List of Subsidiaries. (filed herewith)
23.a
Consent of PricewaterhouseCoopers LLP relating to Masco
Corporation's Financial Statements and Financial Statement
Schedule. (filed herewith)
23.b
Consent of PricewaterhouseCoopers LLP relating to MascoTech,
Inc.'s Financial Statements and Financial Statement
Schedule. (filed herewith)
27
Financial Data Schedule as of and for the year ended
December 31, 1998. (filed herewith)
</TABLE>
- -------------------------
(1) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's
Current Report on Form 8-K dated November 13, 1996.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(8) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
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.
None.
<PAGE> 1
EXHIBIT 3.ii
BYLAWS
OF
MASCO CORPORATION
(a Delaware corporation)
(As Amended May 19, 1993)
ARTICLE I
Meetings of Stockholders
Section 1.01. Annual Meetings. The annual meeting of stockholders for the
election of Directors and for the trans action of such other proper business,
notice of which was given in the notice of the meeting, shall be held on a date
(other than a legal holiday) in May or June of each year which shall be
designated by the Board of Directors, or on such other date to which a meeting
may be adjourned or re-scheduled, at such time and place within or without the
State of Delaware as shall be designated in the notice of such meeting.
Section 1.02. Special Meetings. 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.
Special meetings shall be held at such place within or without the State of
Delaware and at such hour as may be designated in the notice of such meeting and
the business transacted shall be confined to the object stated in the notice of
the meeting.
Section 1.03. Re-scheduling and Adjournment of Meetings. Notwithstanding
Sections 1.01 and 1.02 of this Article, the Board of Directors may postpone and
re-schedule any previously scheduled annual or special meeting of stockholders.
The person presiding at any meeting is empowered to adjourn the meeting at any
time after it has been convened.
Section 1.04. Notice of Stockholders' Meetings. The notice of all meetings
of stockholders shall be in writing and shall state the place, date and hour of
the meeting. The notice of an annual meeting shall state that the meeting is
called for the election of the Directors to be elected at such meeting and for
the transaction of such other business as is stated in the notice of the
meeting.
<PAGE> 2
The notice of a special meeting shall state the purpose or purposes for which
the meeting is called and shall also indicate that it is being issued by or at
the direction of the person or persons calling the meeting. If, at any meeting,
action is proposed to be taken which would, if taken, entitle stockholders
fulfilling the requirements of the General Corporation Law to receive payment
for their shares, the notice of such meeting shall include a statement to that
effect.
A copy of the notice of each meeting of stockholders shall be given,
personally or by mail, not less than ten days nor more than sixty days before
the date of the meeting, to each stockholder entitled to vote at such meeting at
his record address or at such other address as he may have furnished by request
in writing to the Secretary of the Corporation. If a meeting is adjourned to
another time or place, and, if any announcement of the adjourned time or place
is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the adjournment is for more than thirty days or the
Directors, after adjournment, fix a new record date for the adjourned meeting.
Notice of a meeting need not be given to any stockholder who submits a
signed waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of a stockholder at a meeting, in person or by proxy,
without protesting prior to the meeting the lack of notice of such meeting shall
constitute a waiver of notice of the meeting.
Section 1.05. Business to be Considered. Only those matters stated to be
considered in the notice of the meeting, or of which written notice has been
given to the Corporation either by personal delivery to the Chairman of the
Board or the Secretary or by U.S. mail, postage prepaid, of a stockholder's
intent to bring the matter before the meeting, may be considered at the Annual
Meeting of Stockholders. Such notice shall be received no later than 120 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.
Only that business brought before a special meeting pursuant to the notice
of the meeting may be conducted or considered at such meeting.
-2-
<PAGE> 3
Only such business brought before an annual or special meeting of
stockholders pursuant to these bylaws shall be eligible to be conducted or
considered at such meetings.
Section 1.06. Quorum. Except as otherwise required by law, by the
Certificate of Incorporation or by these bylaws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the Corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
Directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the holders of shares entitled to vote in the election. Whenever
any corporate action, other than the election of Directors, is to be taken by
vote of the stockholders, except as otherwise required by the General
Corporation Law, the Certificate of Incorporation or these bylaws, it shall be
authorized by a majority of the votes cast on the proposal by the holders of
shares entitled to vote thereon at a meeting of stockholders.
Section 1.07. Inspectors at Stockholders' Meetings. The Board of Directors,
in advance of any stockholders' meeting, shall appoint one or more inspectors to
act at the meeting or any adjournment thereof and to make a written report
thereof. In case any inspector or alternate appointed is unable to act, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares out standing and the
voting power of each, and shares represented at the meeting, the existence of a
quorum, the validity and effect of
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<PAGE> 4
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote the fairness to all stockholders.
On request of the person presiding at the meeting or any stockholder entitled to
vote thereat, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated and of the vote as certified by them.
Section 1.08. Presiding Officer at Stockholders' Meetings. The Chairman, or
the President, shall preside at Stockholders' Meetings as more particularly
provided in Article III hereof. In the event that both the Chairman and the
President shall be absent or otherwise unable to preside, then a majority of the
Directors present at the meeting shall appoint one of the Directors or some
other appropriate person to preside.
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<PAGE> 5
ARTICLE II
Directors
Section 2.01. Qualifications and Number; Term; Vacancies. A Director need
not be a stockholder, a citizen of the United States, or a resident of the State
of Delaware. The number of Directors constituting the entire Board shall be not
less than five nor more than twelve, 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. Directors shall be
nominated and serve for such terms, and vacancies shall be filled, as provided
in the Certificate of Incorporation.
Directors may be removed only for cause.
Section 2.02. Place and Time of Meetings of the Board. Regular and special
meetings of the Board shall be held at such places (within or without the State
of Delaware) and at such times as may be fixed by the Board or upon call of the
Chairman of the Board or of the executive committee or of any two Directors,
provided that the Board of Directors shall hold at least four meetings a year.
Section 2.03. Quorum and Manner of Acting. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business, but if
there shall be less than a quorum at any meeting of the Board, a majority of
those present (or if only one be present, then that one) may adjourn the meeting
from time to time and the meeting may be held as adjourned without further
notice. Except as provided to the contrary by the General Corporation Law, by
the Certificate of Incorporation or by these bylaws, at all meetings of
Directors, a quorum being present, all matters shall be decided by the vote of a
majority of the Directors present at the time of the vote.
Section 2.04. Remuneration of Directors. In addition to reimbursement for
his reasonable expenses incurred in attending meetings or otherwise in
connection with his attention to the affairs of the Corporation, each Director
as such, and as a member of any committee of the Board, shall be entitled to
receive such remuneration as may be fixed from time to time by the Board.
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<PAGE> 6
Section 2.05. Notice of Meetings of the Board. Regular meetings of the
Board may be held without notice if the time and place of such meetings are
fixed by the Board. All regular meetings of the Board, the time and place of
which have not been fixed by the Board, and all special meetings of the Board
shall be held upon twenty-four hours' notice to the Directors given by letter or
telegraph. No notice need specify the purpose of the meeting. Any requirement of
notice shall be effectively waived by any Director who signs a waiver of notice
before or after the meeting or who attends the meeting without protesting (prior
thereto or at its commencement) the lack of notice to him; provided, however,
that a regular meeting of the Board may be held without notice immediately
following the annual meeting of the stockholders at the same place as such
meeting was held, for the purpose of electing officers and a Chairman of the
Board for the ensuing year.
Section 2.06. Executive Committee and Other Committees. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an Executive Committee and other committees to
serve at the pleasure of the Board. Each Committee shall consist of such number
of Directors as shall be specified by the Board in the resolution designating
the Committee. Except as set forth below, the Executive Committee shall have all
of the authority of the Board of Directors. Each other committee shall be
empowered to perform such functions, as may, by resolution, be delegated to it
by the Board.
The Board of Directors may designate one or more Directors as alternate
members of any such committee, who may replace any absent member or members at
any meetings of such committee. Vacancies in any committee, whether caused by
resignation or by increase in the number of members constituting said committee,
shall be filled by a majority of the entire Board of Directors. The Executive
Committee may fix its own quorum and elect its own Chairman. In the absence or
disqualification of any member of any such committee, the member or members
thereof present at any meeting and not disqualified from voting whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member.
Section 2.07. Action Without Meeting. Any action required
or permitted to be taken at any meeting of the Board of
Directors, or
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<PAGE> 7
of any committee thereof, may be taken without a meeting, if prior to such
action a written consent thereto is signed by all members of the Board, or of
such committee as the case may be, and such written consent if filed with the
minutes of proceedings of the Board or committee.
ARTICLE III
Officers
Section 3.01. Officers. The Board of Directors, at its first meeting held
after the annual meeting of stockholders in each year shall elect a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer
and a Controller, and may, in its discretion, also appoint from time to time,
such other officers or agents as it may deem proper. The Chairman shall be
elected from among the members of the Board of Directors.
Any two or more offices may be held by the same person.
Unless otherwise provided in the resolution of election or appointment,
each officer shall hold office until the meeting of the Board of Directors
following the next annual meeting of stockholders and until his successor has
been elected and qualified; provided, however, that the Board of Directors may
remove any officer for cause or without cause at any time.
Section 3.02. Chairman of the Board. The Chairman shall preside, unless he
designates another to act in his stead, at all meetings of the Stockholders, the
Board of Directors, and the Executive Committee and shall be a member ex officio
of all committees appointed by the Board of Directors, except that the Board
may, at his request, excuse him from membership on a committee. The Chairman
shall be the chief executive officer of the Corporation and shall have the power
on behalf of the Corporation to enter into, execute and deliver all contracts,
instruments, conveyances or documents and to affix the corporate seal thereto.
The Chairman shall do and perform all acts and duties herein specified or which
may be assigned to him from time to time by the Board of Directors.
Section 3.03. Chairman Emeritus. If the Board shall elect a Chairman
Emeritus, he or she shall, at the request of the Chairman of the Board or
in his absence or inability to act if the Board shall not designate another
member, preside at the meetings of the
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<PAGE> 8
Board. The Chairman Emeritus shall also perform such duties which may be
assigned to him by the Chairman of the Board.
Section 3.04. President. At the request of the Chairman of the Board or in
his absence or inability to act, the President shall preside at meetings of the
Stockholders. The President shall be the chief operating officer of the
Corporation and as such, subject to the direction of the Chairman of the Board,
be responsible for the operations of the Corporation and shall also perform such
other duties as may be prescribed by the Board of Directors or the Executive
Committee or the Chairman of the Board. The President shall have the power on
behalf of the Corporation to enter into, execute, or deliver all contracts,
instruments, conveyances or documents and to affix the corporate seal thereto.
Section 3.05. Secretary. The Secretary shall keep minutes of the
proceedings taken and the resolutions adopted at all meetings of the
stockholders, the Board of Directors and the Executive Committee, and shall give
due notice of the meetings of the stockholders, the Board of Directors and the
Executive Committee. He shall have charge of the seal and all books and papers
of the corporation, and shall perform all duties incident to his office. In case
of the absence or disability of the Secretary, his duties and powers may be
exercised by such person as may be appointed by the Board of Directors or the
Executive Committee.
Section 3.06. Treasurer. The Treasurer shall receive all the monies
belonging to the Corporation, and shall forthwith deposit the same to the credit
of the Corporation in such financial institution as may be selected by the Board
of Directors or the Executive Committee. He shall keep books of account and
vouchers for all monies disbursed. He shall also perform such other duties as
may be prescribed by the Board of Directors or Executive Committee or the
President and in case of the absence or disability of the Treasurer, his duties
and powers may be exercised by such person as may be appointed by the Board of
Directors or Executive Committee.
Section 3.07. Controller. The Controller shall have custody of the
financial records of the Corporation and shall keep full and accurate books and
records of the financial transactions of the Corporation. He shall determine the
methods of accounting and reporting for all entities comprising the Corporation
and shall be responsible for assuring adequate systems of internal control.
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<PAGE> 9
The Controller shall render to the Chairman of the Board of Directors, the
President, and the Board of Directors, whenever they may request it, a report on
the financial condition of the Corporation and on the results of its operations.
ARTICLE IV
Capital Stock
Section 4.01. Share Certificates. Each certificate representing shares of
the Corporation shall be in such form as may be approved by the Board of
Directors, and, when issued, shall contain upon the face or back thereof the
statements prescribed by the General Corporation Law and by any other applicable
provision of law. Each such certificate shall be signed by the Chairman of the
Board or the President or a Vice President and by the Secretary or Treasurer or
an Assistant Secretary or Assistant Treasurer. The signatures of said officers
upon a certificate may be facsimile if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation itself or
its employee. In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of issue.
Section 4.02. Lost, Destroyed or Stolen Certificates. No certificate
representing shares shall be issued in place of any certificate alleged to have
been lost, destroyed or stolen, except on production of evidence of such loss,
destruction or theft and on delivery to the Corporation, if the Board of
Directors shall so require, of a bond of indemnity in such amount, upon such
terms and secured by such surety as the Board of Directors may in its discretion
require.
Section 4.03. Transfer of Shares. The shares of stock of the Corporation
shall be transferable or assignable on the books of the Corporation only by the
person to whom they have been issued or his legal representative, in person or
by attorney, and only upon surrender of the certificate or certificates
representing such shares properly assigned. The person in whose name shares of
stock shall stand on the record of stockholders of the Corporation shall be
deemed the owner thereof for all purposes as regards the Corporation.
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<PAGE> 10
Section 4.04. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other action, the Board may fix, in advance, a date as the record date of any
such determination of stockholders. Such date shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action.
ARTICLE V
Miscellaneous
Section 5.01. Signing of Instruments. All checks, drafts, notes,
acceptances, bills of exchange, and orders for the payment of money shall be
signed in such manner as may be provided and by such person or persons as may be
authorized from time to time by resolution of the Board of Directors or the
Executive Committee or these bylaws.
Section 5.02. Corporate Seal. The seal of the Corporation shall consist
of a metal disc having engraved thereon the words "Masco Corporation,
Delaware."
Section 5.03. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of January of each year and shall end on the thirty-first day
of December following.
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<PAGE> 11
ARTICLE VI
Amendments of Bylaws
Section 6.01. Amendments. Except as provided to the contrary by the General
Corporation Law, by the Certificate of Incorporation or by these bylaws, these
bylaws may be amended or repealed at a meeting, (1) by vote of a majority of the
whole Board of Directors, provided that notices of the proposed amendments shall
have been sent to all the Directors not less than three days before the meeting
at which they are to be acted upon, or at any regular meeting of the Directors
by the unanimous vote of all the Directors present, or (2) by the affirmative
vote of the holders of at least 80% of the stock of the Corporation generally
entitled to vote, voting together as a single class.
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<PAGE> 1
EXHIBIT 4.a.i
RESOLUTIONS
OF THE PRICING COMMITTEE
OF THE BOARD OF DIRECTORS
OF MASCO CORPORATION
September 8, 1993
WHEREAS, the Company has filed a Registration Statement (No. 33-53330) 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 ("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, IT IS 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 "6-1/8% Notes Due
September 15, 2003".
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,
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, 2003.
4. The Securities of such series shall bear interest from September 15,
1993, at the rate of 6-1/8% per annum, payable semi-annually on March
15 and September 15 of each year commencing on March 15, 1994, until
the principal thereof is paid or made available 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
<PAGE> 2
the "record date" for the determination of holders to whom interest is
payable.
5. The principal of and interest on the Securities of such series shall be
payable at the office or agency of the 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 of such series shall be issuable at a price such that
the Company shall receive $198,700,000 after an underwriting discount
of $1,300,000.
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 is authorized to execute, on the Company's behalf and in its
name, and the Secretary or an Assistant Secretary 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. 33-53330), but with such changes and
insertions therein as are appropriate to conform such Securities to the terms
set forth herein or otherwise as the respective officers executing such
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 the Company as
provided in the Indenture;
<PAGE> 3
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 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 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 the 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 the Company in respect of such Securities and the
Indenture may be served;
FURTHER RESOLVED, that Morgan Guaranty Trust Company of New York is
appointed Paying Agent of the Company for the payment of interest on and
principal of the Securities of such series, and the corporate trust office of
Morgan Guaranty Trust Company of New York, is designated, pursuant to the
Indenture, as the office or agency of the Company where such Securities may be
presented for payment; and
FURTHER RESOLVED, that each Company officer 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
<PAGE> 4
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 such Securities for authentication and of requests or
orders for the authentication and delivery of such Securities).
<PAGE> 5
Permanent Global Registered Fixed Rate Security
THIS NOTE IS A GLOBAL SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO A
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS NOTE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC TO MASCO CORPORATION OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
MASCO CORPORATION
6 1/8% Note Due September 15, 2003
REGISTERED CUSIP No. 574599AP1
No. R-1
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 CEDE & CO. 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 TWO HUNDRED MILLION DOLLARS ($200,000,000) on September 15,
2003, 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
1
<PAGE> 6
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.
2
<PAGE> 7
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.
Dated: September 10, 1993
Masco Corporation
By /s/ Richard A. Manoogian
------------------------
Chairman of the Board
Attest
By /s/ Gerald Bright
--------------------
Assistant Secretary
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED THEREIN REFERRED TO IN
THE WITHIN-MENTIONED INDENTURE.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS TRUSTEE
BY
--------------------
AUTHORIZED OFFICER
3
<PAGE> 8
REVERSE OF NOTES
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 1/8% Notes Due September 15, 2003 of the Company,
limited in aggregate principal amount to $200,000,000.
In case an Event of Default with respect to the 6- 1/8% Notes Due September
15, 2003 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 of 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,
4
<PAGE> 9
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.
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 hereon.
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
5
<PAGE> 10
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.
6
<PAGE> 11
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:
TEN COM - as tenants in common
TEN-ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT-..............Custodian..............
(Cust) (Minor)
under Uniform Gifts to Minors Act........................
(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.
7
<PAGE> 12
RESOLUTIONS
OF THE PRICING COMMITTEE
OF THE BOARD OF DIRECTORS
OF MASCO CORPORATION
August 17, 1993
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 two Registration Statements (Nos.
33-40067 and 33-53330) on Form S-3 with the Securities and Exchange Commission,
which are 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, IT IS 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 "7 1/8%
Debentures Due August 15, 2013".
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 August 15, 2013.
<PAGE> 13
4. The Securities of such series shall bear interest from August 15,
1993, at the rate of 7 1/8% per annum, payable semi-annually on
February 15 and August 15 of each year commencing on February 15,
1994, until the principal thereof is paid or made available for
payment. The February 1 or August 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 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 $197,000,000 (plus accrued interest from August 15,
1993 to the date of delivery) after an underwriting discount of
$1,750,000.
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 of any
Vice President is authorized to execute, on the Company's behalf and in its
name, and the Secretary or an Assistant Secretary 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 debenture filed as an exhibit to the
Company's Registration Statements on Form S-3 (No. 33-40067 and 33-53330), but
with such changes and insertions therein as are appropriate to conform the
Debentures 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
<PAGE> 14
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 the 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 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 and Smith Barney Shearson
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 and 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
Morgan Guaranty Trust Company of New York, is designated, pursuant to the
Indenture, as the office or agency of the Company where Securities may be
presented for payment; and
<PAGE> 15
FURTHER RESOLVED, that each Company officer 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).
<PAGE> 16
Permanent Global Registered Fixed Rate Security
THIS DEBENTURE IS A GLOBAL SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR DEBENTURES IN CERTIFICATED FORM, THIS DEBENTURE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC") TO A NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS DEBENTURE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO MASCO CORPORATION OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEBENTURE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
MASCO CORPORATION
7 1/8% Debenture Due August 15, 2013
REGISTERED CUSIP No. 574599AN6
No. R-1
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 CEDE & CO. 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 TWO HUNDRED MILLION DOLLARS ($200,000,000) on August 15, 2013,
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 February 15 and August 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 Debenture, from the February 15 or
August 15, as the case may be, next preceding the date of this Debenture 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 Debenture, or unless no interest has been paid or duly provided
for on the Debentures since the original issue date (as defined in the Indenture
referred to on the reverse hereof) of this Debenture, in which case from the
February 15 or August 15 next preceding such original issue date or if the
original issue date is a February 15 or August 15 then from such original issue
date, until
1
<PAGE> 17
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after February 1 or August
1, as the case may be, and before the following February 15 or August 15, this
Debenture shall bear interest from such February 15 or August 15; provided,
however, that if the Company shall default in the payment of interest on such
February 15 or August 15, then this Debenture shall bear interest from the next
preceding February 15 or August 15 to which interest has been paid or duly
provided for, or, if no interest has been paid or duly provided for on the
Debentures since the original issue date (as defined in such Indenture) of this
Debenture, from the February 15 or August 15 next preceding such original issue
date unless the original issue date is a February 15 or August 15, in which case
from the original issue date hereof. The interest so payable on any February 15
or August 15 will, subject to certain exceptions provided in such Indenture, be
paid to the person in whose name this Debenture is registered at the close of
business on the February 1 or August 1, as the case may be, next preceding such
February 15 or August 15, whether or not such February 1 or August 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 Debenture 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 Debenture 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.
2
<PAGE> 18
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.
Dated: August 18, 1993
Masco Corporation
By /s/Richard A. Manoogian
-----------------------
Chairman of the Board
Attest
By /s/ Gerald Bright
-----------------------
Assistant Secretary
CERTIFICATE OF AUTHENTICATION
THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED THEREIN REFERRED TO IN
THE WITHIN-MENTIONED INDENTURE.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS TRUSTEE
BY
---------------------------------
AUTHORIZED OFFICER
3
<PAGE> 19
REVERSE OF DEBENTURES
This Debenture 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 Debenture is
one of a series designated as the 7 1/8% Debentures Due August 15, 2013 of the
Company, limited in aggregate principal amount to $200,000,000.
In case an Event of Default with respect to the 7 1/8% Noes Due August
15, 2013 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 of 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,
4
<PAGE> 20
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 Debenture (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Debenture and any Debentures 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 Debenture
or such other Debentures.
No reference herein to the Indenture and no provision of this Debenture
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
Debenture at the place, at the respective times, at the rate and in the coin or
currency herein prescribed.
The Debentures 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 Debenture 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 Debenture or Debentures 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.
The Debentures 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 Debenture
(whether or not this Debenture 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 hereon.
No recourse for the payment of the principal of, or premium, if any, or
interest on this Debenture, 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 Debenture, 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
5
<PAGE> 21
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 Debenture which are defined in the Indenture
shall have the respective meanings ascribed to them therein.
This Debenture 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.
6
<PAGE> 22
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:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT- Custodian
-------------- --------------------------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
--------------------
(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 Debenture of MASCO CORPORATION and hereby
does irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------
to transfer the said Debenture 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.
7
<PAGE> 23
RESOLUTIONS
OF THE
PRICING COMMITTEE
OF THE
BOARD OF DIRECTORS
OF MASCO CORPORATION
April 16, 1998
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. 33-56043) 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 (as amended to the date hereof, the "Indenture"), with
The First National Bank of Chicago, as successor trustee to Morgan Guaranty
Trust Company of New York (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 "6.625%
Debentures Due April 15, 2018".
2. The aggregate principal amount of Securities of such series which
may be authenticated and delivered under the Indenture is limited to Two
Hundred Fifty Million Dollars ($250,000,000), expect 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 April 15, 2018.
4. The Securities of such series shall bear interest from April 21,
1998, at the rate of 6.625% per annum, payable semi-annually on April 15
and October 15 of each year commencing on October 15, 1998, until the
principal thereof is paid or made available for payment. The April 1 or
October 1 (whether or not a business day), as the case may be, next
<PAGE> 24
preceding each such interest payment date shall be the "record date" for
the determination of holders to whom interest is payable.
5. The Securities shall be issued initially in the form of one or more
global securities registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"), and will be held by the Trustee as
custodian for DTC. The Securities shall be subject to the procedures of DTC
described in the Company's prospectus supplement dated April 16, 1998
relating to the Securities and, except as described in such prospectus
supplement, will not be issued in definitive registered form.
6. The principal of and 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 if Securities in definitive registered form are
issued, then 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.
7. The Securities of such series shall not be redeemable prior to
maturity.
8. The Securities of such series shall be issuable in denominations of
One Thousand Dollars ($1,000) and any integral multiples thereof.
9. The Securities shall be issuable at a price such that this Company
shall receive $247,460,000 after an underwriting discount of $2,187,500.
10. The Securities shall be subject to defeasance and discharge and to
defeasance of certain obligations as set forth in the Indenture.
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), $250,000,000 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
2
<PAGE> 25
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. 33-56043), but with such
changes and insertions therein as are appropriate to conform the Securities 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 the time
the respective Securities shall be authenticated and delivered of disposed of,
the individual so signing shall have ceased to hold such office;
FURTHER RESOLVED, that Salomon Brothers Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated 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 The First National Bank of Chicago, 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 The First National Bank of Chicago 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;
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<PAGE> 26
FURTHER RESOLVED, that The First National Bank of Chicago 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 The First National
Bank of Chicago, is designated, pursuant to the 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).
<PAGE> 27
Permanent Global Registered Fixed Rate Security
THIS DEBENTURE IS A GLOBAL SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR NOTES IN CERTIFICATED FORM, THIS DEBENTURE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC") TO A NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS DEBENTURE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO MASCO CORPORATION OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEBENTURE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
MASCO CORPORATION
6.625% Debenture Due April 15, 2018
REGISTERED CUSIP No. 574599 AR7
No. R-1
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 CEDE & CO. 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 TWO HUNDRED MILLION DOLLARS ($200,000,000) on April 15, 2018,
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 April 15 and October 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 Debenture, from the April 15 or October
15, as the case may be, next preceding the date of this Debenture 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 Debenture, or unless no Interest has been paid or duly provided for on
the Debentures since the original issue date (as defined in the Indenture
referred to on the reverse hereof) of this Debenture, in which case from the
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 April 1
or October 1, as the case may be, and before the following April 15 or October
15, this Debenture shall bear interest from such April 15 or October 15;
provided, however,
1
<PAGE> 28
that if the Company shall default in the payment of interest on such April 15 or
October 15, then this Debenture shall bear interest from the next preceding
April 15 or October 15 to which interest has been paid or duly provided for, or,
if no interest has been paid or duly provided for on the Debentures since the
original issue date (as defined in such Indenture) of this Debenture, from the
original issue date hereof. The interest so payable on any April 15 or October
15 will, subject to certain exceptions provided in such Indenture, be paid to
the person in whose name this Debenture is registered at the close of business
on the April 1 or October 1, as the case may be, next preceding such April 15 or
October 15, whether or not such April 1 or October 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 Debenture 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 Debenture 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.
****[end of page 2]***
2
<PAGE> 29
IN WITNESS WHEREOF, Masco Corporation has caused this instrument to be executed
in its corporate name by the manual or facsimile signature of its Chairman of
the Board or its President and imprinted with a manual or facsimile of its
corporate seal, attested by the manual or facsimile signature of its Secretary
or an Assistant Secretary.
Dated: April 21, 1997
Masco Corporation
By /s/Richard A. Manoogian
Chairman of the Board
Attest
By /s/John R. Leekley
Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the securities of the series designated therein referred to in
the within-mentioned indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
BY________________________
AUTHORIZED OFFICER
3
<PAGE> 30
REVERSE OF NOTES
This Debenture 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 The First
National Bank of Chicago (as successor trustee 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 Debenture is one of a series
designated as the 6.625% Debentures Due April 15, 2018 of the Company, limited
in aggregate principal amount to $250,000,000.
In case an Event of Default with respect to the 6.625% Debentures Due April
15, 2018 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 of 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
4
<PAGE> 31
(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 Debenture (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Debenture and any Debentures 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 Debenture
or such other Debentures.
No reference herein to the Indenture and no provision of this Debenture 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
Debenture at the place, at the respective times, at the rate and in the coin or
currency herein prescribed.
The Debentures 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 Debenture 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 Debenture or Debentures 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.
The Debentures may not be redeemed prior to maturity.
The Debentures will be subject to defeasance and discharge and to
defeasance of certain obligations as set forth in the Indenture.
The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the holder hereof as the absolute hereof (whether or not this
Debenture 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 hereon.
No recourse for the payment of the principal of, or premium, if any, or
interest on this Debenture, 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 Debenture, or because of the creation of any indebtedness represented
thereby, shall
5
<PAGE> 32
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 Debenture which are defined in the Indenture shall
have the respective meanings ascribed to them therein.
This Debenture 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.
***[end of page 6]***
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:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common UNIF
GIFT MIN ACT-..............Custodian..............
(Cust) (Minor)
under Uniform Gifts to Minors Act........................
(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 Debenture of MASCO CORPORATION and hereby does irrevocably
constitute and appoint
Attorney
to transfer the said Debenture 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.
6
<PAGE> 33
Permanent Global Registered Fixed Rate Security
THIS DEBENTURE IS A GLOBAL SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR NOTES IN CERTIFICATED FORM, THIS DEBENTURE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC") TO A NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS DEBENTURE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO MASCO CORPORATION OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEBENTURE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
MASCO CORPORATION
6.625% Debenture Due April 15, 2018
REGISTERED CUSIP No. 574599 AR7
No. R-2
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 CEDE & CO. 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 FIFTY MILLION DOLLARS ($50,000,000) on April 15, 2018, 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 April 15 and October 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 Debenture, from the April 15 or October
15, as the case may be, next preceding the date of this Debenture 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 Debenture, or unless no Interest has been paid or duly provided for on
the Debentures since the original issue date (as defined in the Indenture
referred to on the reverse hereof) of this Debenture, in which case from the
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 April 1
or October 1, as the case may be, and before the following April 15 or October
15, this Debenture shall bear interest from such April 15 or October 15;
provided, however,
1
<PAGE> 34
that if the Company shall default in the payment of interest on such April 15 or
October 15, then this Debenture shall bear interest from the next preceding
April 15 or October 15 to which interest has been paid or duly provided for, or,
if no interest has been paid or duly provided for on the Debentures since the
original issue date (as defined in such Indenture) of this Debenture, from the
original issue date hereof. The interest so payable on any April 15 or October
15 will, subject to certain exceptions provided in such Indenture, be paid to
the person in whose name this Debenture is registered at the close of business
on the April 1 or October 1, as the case may be, next preceding such April 15 or
October 15, whether or not such April 1 or October 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 Debenture 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 Debenture 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.
****[end of page 2]***
2
<PAGE> 35
IN WITNESS WHEREOF, Masco Corporation has caused this instrument to be executed
in its corporate name by the manual or facsimile signature of its Chairman of
the Board or its President and imprinted with a manual or facsimile of its
corporate seal, attested by the manual or facsimile signature of its Secretary
or an Assistant Secretary.
Dated: April 21, 1997
Masco Corporation
By/s/Richard A. Manoogian
Chairman of the Board
Attest
By/s/John R. Leekley
Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the securities of the series designated therein referred to in
the within-mentioned indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
BY________________________
AUTHORIZED OFFICER
3
<PAGE> 36
REVERSE OF NOTES
This Debenture is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (hereinafter called the
ASecurities@) 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 The First
National Bank of Chicago (as successor trustee 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 Debenture is one of a series
designated as the 6.625% Debentures Due April 15, 2018 of the Company, limited
in aggregate principal amount to $250,000,000.
In case an Event of Default with respect to the 6.625% Debentures Due April
15, 2018 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 of 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
4
<PAGE> 37
(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 Debenture (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Debenture and any Debentures 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 Debenture
or such other Debentures.
No reference herein to the Indenture and no provision of this Debenture 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
Debenture at the place, at the respective times, at the rate and in the coin or
currency herein prescribed.
The Debentures 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 Debenture 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 Debenture or Debentures 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.
The Debentures may not be redeemed prior to maturity.
The Debentures will be subject to defeasance and discharge and to
defeasance of certain obligations as set forth in the Indenture.
The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the holder hereof as the absolute hereof (whether or not this
Debenture 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 hereon.
No recourse for the payment of the principal of, or premium, if any, or
interest on this Debenture, 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 Debenture, or because of the creation of any indebtedness represented
thereby, shall
5
<PAGE> 38
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 Debenture which are defined in the Indenture shall
have the respective meanings ascribed to them therein.
This Debenture 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.
***[end of page 6]***
6
<PAGE> 39
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:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT-..............Custodian..............
(Cust) (Minor)
under Uniform Gifts to Minors Act............................
(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 Debenture of MASCO CORPORATION and hereby does irrevocably
constitute and appoint
Attorney
to transfer the said Debenture 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.
7
<PAGE> 40
RESOLUTIONS
OF THE
PRICING COMMITTEE
OF THE
BOARD OF DIRECTORS
OF MASCO CORPORATION
October 6, 1998
WHEREAS, Masco Corporation, a Delaware corporation (the "Company") the
Company has filed a Registration Statement (No. 33-56043) 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 (as amended to the date hereof,
the "Indenture"), with The First National Bank of Chicago, as successor trustee
to Morgan Guaranty Trust Company of New York (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 "5.75%
Notes Due 2008".
2. The aggregate principal amount of Securities of such series which
may be authenticated and delivered under the Indenture is limited to One
Hundred Million Dollars ($100,000,000), 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 October 15, 2008.
4. The Securities of such series shall bear interest from October 9,
1998, at the rate of 5.75% per annum, payable semi-annually on April 15 and
October 15 of each year commencing on April 15, 1999, until the principal
thereof is paid or made available for payment. The April 1 or October 1
(whether or not a business day), as the case may be, next preceding
<PAGE> 41
each such interest payment date shall be the "record date" for the
determination of holders to whom interest is payable.
5. The Securities shall be issued initially in the form of one or more
global securities registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"), and will be held by the Trustee as
custodian for DTC. The Securities shall be subject to the procedures of DTC
described in the Company's prospectus supplement dated October 6, 1998
relating to the Securities and, except as described in such prospectus
supplement, will not be issued in definitive registered form.
6. The principal of and 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 if Securities in definitive registered form are
issued, then 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.
7. The Securities of such series shall not be redeemable prior to
maturity.
8. The Securities of such series shall be issuable in denominations of
One Thousand Dollars ($1,000) and any integral multiples thereof.
9. The Securities shall be issuable at a price such that this Company
shall receive $99,350,000 after an underwriting discount of $650,000.
10. The Securities shall be subject to defeasance and discharge and to
defeasance of certain obligations as set forth in the Indenture.
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), $100,000,000 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,
2
<PAGE> 42
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. 33-56043), but with such changes and
insertions therein as are appropriate to conform the Securities 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 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 Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Salomon Smith Barney 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 The First National Bank of Chicago, 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 The First National Bank of Chicago 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 The First National Bank of Chicago 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 The First National
3
<PAGE> 43
Bank of Chicago, is designated, pursuant to the 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).
4
<PAGE> 44
Permanent Global Registered Fixed Rate Security
THIS NOTE IS A GLOBAL SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO A
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS NOTE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC TO MASCO CORPORATION OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
MASCO CORPORATION
5.75% Note Due 2008
REGISTERED CUSIP No. 574599AS5
No. R-1
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 CEDE & CO. 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 ONE HUNDRED MILLION DOLLARS ($100,000,000) on October 15, 2008,
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 April 15 and October 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 April 15 or October 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 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 April 1 or October 1,
as the case may be, and
1
<PAGE> 45
before the following April 15 or October 15, this Note shall bear interest from
such April 15 or October 15; provided, however, that if the Company shall
default in the payment of interest on such April 15 or October 15, then this
Notes shall bear interest from the next preceding April 15 or October 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 original issue date hereof. The
interest so payable on any April 15 or October 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 April 1 or October 1, as the
case may be, next preceding such April 15 or October 15, whether or not such
April 1 or October 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.
2
<PAGE> 46
IN WITNESS WHEREOF, Masco Corporation has caused this instrument to be executed
in its corporate name by the manual or facsimile signature of its Chairman of
the Board or its President and imprinted with a manual or facsimile of its
corporate seal, attested by the manual or facsimile signature of its Secretary
or an Assistant Secretary.
Dated: October 9, 1998
Masco Corporation
By /s/Richard A. Manoogian
-----------------------
Chairman of the Board
Attest
By /s/Richard G. Mosteller
-----------------------
Assistant Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the securities of the series designated therein referred to in
the within-mentioned indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
BY
---------------------
AUTHORIZED OFFICER
3
<PAGE> 47
REVERSE OF NOTES
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 The First
National Bank of Chicago (as successor trustee 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 5.75% Notes Due 2008 of the Company, limited in aggregate
principal amount to $100,000,000.
In case an Event of Default with respect to the 5.75% Notes Due 2008 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 of 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
4
<PAGE> 48
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.
The Notes may not be redeemed prior to maturity.
The Notes will be subject to defeasance and discharge and to defeasance of
certain obligations as set forth in the Indenture.
The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the holder hereof as the absolute hereof (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 hereon.
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
5
<PAGE> 49
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.
6
<PAGE> 50
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:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT-..............Custodian..............
(Cust) (Minor)
under Uniform Gifts to Minors Act.........................
(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.
7
<PAGE> 1
EXHIBIT 4.d
[CONFORMED COPY]
MASCO INDUSTRIES, INC.
AND
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
TRUSTEE
-------------------
INDENTURE
Dated as of November 1, 1986
--------------------
<PAGE> 2
TIE-SHEET*
of provisions of Trust Indenture Act of 1939 with Indenture dated as of
November 1, 1986 between Masco Industries, Inc. and Morgan Guaranty Trust
Company of New York, Trustee:
Section of Act Section of Indenture
310(a)(1) and (2) 8.09
310(a)(3) and (4) Not applicable
310(b) 8.08 and 8.10 (a)(b)
and (d)
310(c) Not applicable
311(a) and (b) 8.13
311(c) Not applicable
312(a) 6.01 and 6.02(a)
312(b) and (c) 6.02(b) and (c)
313(a) 6.04(a)
313(b)(1) Not applicable
313(b)(2) 6.04(b)
313(c) 6.04(c)
313(d) 6.04(d)
314(a) 6.03
314(b) Not applicable
314(c)(1) and (2) 15.05
314(c)(3) Not applicable
314(d) Not applicable
314(e) 15.05
314(f) Not applicable
315(a)(c) and (d) 8.01
315(b) 7.08
315(e) 7.09
316(a)(1) 7.01 and 7.07
316(a)(2) Omitted
316(a) last sentence 9.04
316(b) 7.04
317(a) 7.02
317(b) 5.04(a)
318(a) 15.07
- -------------------
*This tie-sheet is not part of the Indenture as executed.
<PAGE> 3
TABLE OF CONTENTS*
----------------
Page
Parties 1
Recitals 1
Authorization of Indenture 1
Compliance with Legal Requirements 1
ARTICLE ONE.
Definitions.
SECTION 1.01. Definitions 1
Authenticating Agent 2
Board of Directors 2
Common Stock 2
Company 2
Consolidated Net Earnings 2
Convertible Security or
Convertible Securities 3
Event of Default 3
Indenture 3
Officers' Certificate 3
Opinion of Counsel 4
Original Issue Date 4
Person 4
Principal Office of the Trustee 4
Responsible Officer 4
Security or Securities; Outstanding 4
Securityholder 5
Senior Indebtedness 5
Subsidiary 6
Trustee 7
Trust Indenture Act of 1939 7
- -----------------
*This table of contents shall not, for any purpose, be deemed to be part
of the Indenture.
<PAGE> 4
ii
ARTICLE TWO.
SECURITIES.
Page
SECTION 2.01. Forms Generally 7
SECTION 2.02. Form of Trustee's Certificate
of Authentication 7
SECTION 2.03. Amount Unlimited; Issuable in Series 8
SECTION 2.04. Authentication and Delivery 9
SECTION 2.05. Date and Denomination of Securities 11
SECTION 2.06. Execution of Securities 12
SECTION 2.07. Exchange and Registration of Transfer
of Securities 12
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen
Securities 13
SECTION 2.09. Temporary Securities 15
SECTION 2.10. Cancellation of Securities Paid, etc. 15
ARTICLE THREE.
CONVERSION OF SECURITIES.
SECTION 3.01. Conversion Privilege 16
SECTION 3.02. Manner of Exercise of Conversion Privilege 16
SECTION 3.03. Fractional Shares 17
SECTION 3.04. Conversion Price 18
SECTION 3.05. Adjustment of Conversion Price 18
SECTION 3.06. Merger, Consolidation, etc. 22
SECTION 3.07. Notices 22
SECTION 3.08. Taxes on Conversions 23
SECTION 3.09. Company to Provide Stock 24
SECTION 3.10. Disclaimer of Responsibility for Certain
Matters 24
SECTION 3.11. Return of Funds Deposited for Redemption of
Converted Securities 25
SECTION 3.12. Disposition of Converted Securities 25
ARTICLE FOUR.
SUBORDINATION OF SECURITIES.
SECTION 4.01. Agreement to Subordinate 25
SECTION 4.02. No Payment on Securities if Senior
Indebtedness in Default 26
SECTION 4.03. Priority of Senior Indebtedness 26
SECTION 4.04. Company to Give Notice of Certain Events;
Reliance by Trustee 28
<PAGE> 5
iii
Page
SECTION 4.05. Subrogation of Securities 29
SECTION 4.06. Company Obligation to Pay Unconditional 29
SECTION 4.07. Authorization of Holders of Securities to
Trustee to Effect Subordination 30
SECTION 4.08. Notice to Trustee of Facts Prohibiting
Payments 30
SECTION 4.09. Trustee May Hold Senior Indebtedness 30
SECTION 4.10. All Indenture Provisions Subject to this
Article 30
ARTICLE FIVE.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest 31
SECTION 5.02. Offices for Notices and Payments, etc. 31
SECTION 5.03. Appointments to Fill Vacancies in Trustee's
Office 32
SECTION 5.04. Provision as to Paying Agent 32
SECTION 5.05. Certificate to Trustee 33
ARTICLE SIX.
SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND
THE TRUSTEE.
SECTION 6.01. Securityholders' Lists 33
SECTION 6.02. Preservation and Disclosure of Lists 34
SECTION 6.03. Reports by Company 35
SECTION 6.04. Reports by Trustee 36
ARTICLE SEVEN.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT.
SECTION 7.01. Events of Default 38
SECTION 7.02. Payment of Securities on Default;
Suit Therefor 41
SECTION 7.03. Application of Moneys Collected by Trustee 43
SECTION 7.04. Proceedings by Securityholders 44
SECTION 7.05. Proceedings by Trustee 45
SECTION 7.06. Remedies Cumulative and Continuing 45
SECTION 7.07. Direction of Proceedings and Waiver of
Defaults by Majority of Securityholders 46
SECTION 7.08. Notice of Defaults 47
SECTION 7.09. Undertaking to Pay Costs 47
<PAGE> 6
iv
ARTICLE EIGHT.
CONCERNING THE TRUSTEE.
Page
SECTION 8.01. Duties and Responsibilities of Trustee 48
SECTION 8.02. Reliance on Documents, Opinions, etc. 49
SECTION 8.03. No Responsibility for Recitals, etc. 50
SECTION 8.04. Trustee, Authenticating Agent, Paying Agents,
Transfer Agents, Conversion Agents or
Registrar May Own Securities 51
SECTION 8.05. Moneys to Be Held in Trust 51
SECTION 8.06. Compensation and Expenses of Trustee 51
SECTION 8.07. Officers' Certificate as Evidence 52
SECTION 8.08. Conflicting Interest of Trustee 52
SECTION 8.09. Eligibility of Trustee 59
SECTION 8.10. Resignation or Removal of Trustee 59
SECTION 8.11. Acceptance by Successor Trustee 61
SECTION 8.12. Succession by Merger, etc. 62
SECTION 8.13. Limitation on Rights of Trustee as a Creditor 63
SECTION 8.14. Authenticating Agents 67
ARTICLE NINE.
CONCERNING THE SECURITYHOLDERS.
SECTION 9.01. Action by Securityholders 70
SECTION 9.02. Proof of Execution by Securityholders 70
SECTION 9.03. Who Are Deemed Absolute Owners 70
SECTION 9.04. Securities Owned by Company Deemed
Not Outstanding 71
SECTION 9.05 Revocation of Consents; Future Holders Bound 71
ARTICLE TEN.
SECURITYHOLDERS' MEETING.
SECTION 10.01. Purposes of Meetings 72
SECTION 10.02. Call of Meetings by Trustee 72
SECTION 10.03. Call of Meetings by Company or
Securityholders 73
SECTION 10.04. Qualifications for Voting 73
SECTION 10.05. Regulations 73
SECTION 10.06. Voting 74
<PAGE> 7
v
ARTICLE ELEVEN.
SUPPLEMENTAL INDENTURE.
Page
SECTION 11.01. Supplemental Indentures without Consent of
Securityholders 75
SECTION 11.02. Supplemental Indentures with Consent of
Securityholders 77
SECTION 11.03. Compliance with Trust Indenture Act; Effect
of Supplemental Indentures 78
SECTION 11.04. Notation on Securities 78
SECTION 11.05. Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee 79
SECTION 11.06. Effect on Senior Indebtedness 79
ARTICLE TWELVE.
CONSOLIDATION, MERGER AND SALE BY THE COMPANY.
SECTION 12.01. Consolidation, Merger or Sale of Assets
Permitted 79
SECTION 12.02. Successor Corporation to be Substituted
for Company 80
SECTION 12.03. Evidence to be Furnished Trustee 80
ARTICLE THIRTEEN.
SATISFACTION AND DISCHARGE OF INDENTURE.
SECTION 13.01. Discharge of Indenture 81
SECTION 13.02. Deposited Moneys to Be Held in Trust
by Trustee 82
SECTION 13.03. Paying Agent to Repay Moneys Held 83
SECTION 13.04. Return of Unclaimed Moneys 83
ARTICLE FOURTEEN.
IMMUNITY OF INCORPORATION, STOCKHOLDERS,
OFFICERS AND DIRECTORS.
SECTION 14.01. Indenture and Securities Solely Corporate
Obligations 83
ARTICLE FIFTEEN.
MISCELLANEOUS PROVISIONS.
SECTION 15.01. Successor 84
SECTION 15.02. Official Acts by Successor Corporation 84
SECTION 15.03. Addresses for Notices, Inc. 84
<PAGE> 8
vi
Page
SECTION 15.04. New York Contract 84
SECTION 15.05. Evidence of Compliance with Conditions
Precedent 85
SECTION 15.06 Legal Holidays 85
SECTION 15.07. Trust Indenture Act to Control 85
SECTION 15.08. Table of Contents, Headings, etc. 85
SECTION 15.09. Execution in Counterparts 86
SECTION 15.10. No Security Interest Created 86
ARTICLE SIXTEEN.
REDEMPTION OF SECURITIES - MANDATORY AND
OPTIONAL SINKING FUND.
SECTION 16.01. Applicability of Article 86
SECTION 16.02. Notice of Redemption; Selection of Securities 86
SECTION 16.03. Payment of Securities Called for Redemption 87
SECTION 16.04. Mandatory and Optional Sinking Fund 88
TESTIMONIUM 91
SIGNATURES 91
ACKNOWLEDGEMENTS 92
<PAGE> 9
THIS INDENTURE, dated as of November 1, 1986, between MASCO INDUSTRIES,
INC., a Delaware corporation (hereinafter sometimes called the "Company"), and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, trustee (hereinafter sometimes called
the "Trustee").
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue from time to time of its convertible and non-convertible
subordinated debentures, notes or other evidence of indebtedness to be issued in
one or more series (the "Securities") up to such principal amount or amounts as
may from time to time be authorized in accordance with the terms of this
Indenture and, to provide the terms and conditions upon which the Securities are
to be authenticated, issued and delivered, the Company has duly authorized the
execution of this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid
agreement according to its terms, have been done and performed;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
In consideration of the premises, and the purchase of the Securities by
the holders thereof, the Company covenants and agrees with the Trustee for the
equal and proportionate benefit of the respective holders from time to time of
the Securities or of a series thereof, as follows:
ARTICLE ONE.
DEFINITIONS.
SECTION 1.01 Definitions. The terms defined in this Section 1.01 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective means specified in this Section 1.01. all others terms
used in this Indenture which are defined in the Trust Indenture Act of 1939, as
amended, or which are by reference therein defined in the Securities Act of
1933, as amended, shall (except as herein otherwise expressly provided or unless
the context otherwise requires) have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of this
Indenture as originally executed. All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with generally accepted accounting principles and the term "generally accepted
accounting principles" means such accounting principles as are generally
accepted at the time of any computation. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision.
<PAGE> 10
2
Authenticating Agent:
The term "Authenticating Agent" shall mean any agent or agents of the
Trustee which at the time shall be appointed and acting pursuant to Section
8.14.
Board of Directors:
The term "Board of Directors" shall mean the Board of Directors of the
Company or any committee of such Board duly authorized to act for it hereunder.
Common Stock:
The term "Common Stock" shall mean the Common Stock of the Company, $1 par
value, at the date of this Indenture, as such Common Stock may be changed or
reclassified from time to time.
Company:
The term "Company" shall mean Masco Industries, Inc., a Delaware
corporation, and, subject to the provisions of Article Twelve, shall include its
successors and assigns.
Consolidated Net Earnings:
The term "Consolidate Net Earnings" shall mean the consolidate net
earnings (or loss) of the Company and its consolidated Subsidiaries determined
on a consolidated basis in accordance with generally accepted accounting
principles, after deduction of all charges, including, without limitation,
operating expenses, interest amortization of deferred charges, depreciation and
taxes (including income and other profits taxes).
Convertible Security or Convertible Securities:
The terms "Convertible Security" or "Convertible Securities" shall mean
any series of Securities designated convertible by the resolutions or
supplemental indentures referred to in Section 2.03.
Event of Default:
The term "Event of Default" shall mean any event specified in Section
7.01, continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.
Indenture:
The term "Indenture" shall mean this instrument as originally executed
or,if amended or supplemented as herein provided, as so amended or supplemented,
or both, and shall include the form and
<PAGE> 11
3
terms of particular series of Securities established as contemplated hereunder;
provided, however, that if at any time more than one Person is acting as Trustee
under this instrument, "Indenture" shall mean with respect to any one or more
series of Securities for which such Person is Trustee, this instrument as
originally executed or as it may from time to time be supplemented or amended by
one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof and shall include the terms of particular series of
Securities for which such Person is Trustee established as contemplated by
Section 2.03, exclusive, however, of any provisions or terms which relate solely
to other series of Securities for which such Person is not Trustee, regardless
of when such terms or provisions were adopted, and exclusive any provisions or
terms adopted by means of one or more indentures supplemental hereto executed
and delivered after such Person had become such Trustee but to which such
Person, as such Trustee, was not a party.
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board, the President or any Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary of an Assistant Secretary of
the Company and delivered to the Trustee. Each such certificate shall include
the statements provided for in Section 15.05 if and to the extent required by
the provisions of such Section.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing signed by
legal counsel, who may be an employee of or counsel to the Company, or may be
other counsel acceptable to the Trustee. Each such opinion shall include the
statements provided for in Section 15.05 if an to the extent required by the
provisions of such Section.
Original Issue Date:
The term "Original Issue Date" or "original issue date" of any Security
(or any portion thereof) shall mean the earlier of (a) the date of such Security
or (b) the date of any Security (or portion thereof) for which such Security was
issued (directly or indirectly) on registration of transfer, exchange or
substitution.
Person:
The term "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
<PAGE> 12
4
Principal Office of the Trustee:
The term "principal office of the Trustee", or other similar term, shall
mean the principal office of the Trustee at which at any particular time its
corporate trust business shall principally be administered, which office may be
in more than one location within the same city.
Responsible Officer:
The term "Responsible Officer", when used with respect to the Trustee,
means any officer of the Trustee authorized to administer its corporate trust
matters.
Security or Securities; Outstanding:
The terms "Security" or "Securities" shall have the meaning stated in the
first recital of this Indenture and more particularly means any security or
securities, as the case may be, authenticated and delivered under this
Indenture, whether reconvertible or non-convertible into shares of Common Stock;
provided, however, that if at any time there is more than one Person acting as
Trustee under this instrument, "Security" or "Securities" with respect to the
Indenture as to which such Person is Trustee shall have the meaning stated in
the first recital of this instrument and shall more particularly mean any
securities, as the case may be, authenticated and delivered under this
instrument, whether convertible or non-convertible into shares of Common Stock,
exclusive, however, of securities of any series as to which such Person is not
Trustee.
The term "outstanding" (except as otherwise provided in Section 8.08),
when used with reference to Securities, shall, subject to the provisions of
Section 9.04, mean, as of any particular time, all Securities authenticated and
delivered by the Trustee or the authenticating Agent under this Indenture,
except
(a) Securities theretofore cancelled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or redemption of
which moneys is in the necessary amount shall have been deposited in trust with
the Trustee or with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the Company (if the Company shall act as
its own paying agent); provided that, if such Securities, or portions thereof,
are to be redeemed prior to maturity thereof, notice of such redemption shall
have been given as in Article Sixteen provided or provisions satisfactory to the
Trustee shall have been made for giving such notice; and
<PAGE> 13
5
(c) Securities paid or in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to the terms of
Section 2.08 unless proof satisfactory to the Company and the Trustee is
presented that any such Securities are held by bona fide holders in due course.
Securityholder:
The terms "Securityholder", "holder of Securities" or "Holder", or other
similar terms, shall mean any person in whose name at the time a particular
Security is registered on the register kept by the Company or the Trustee for
that purpose in accordance with the terms hereof.
Senior Indebtedness:
The term "Senior Indebtedness" shall mean (a) all indebtedness of the
Company for money borrowed (including without limitation obligations of the
Company in respect of overdrafts, foreign exchange contracts, letters of credit,
bankers' acceptance, or any loan or advance from a bank whether or not evidenced
by promissory notes or other instruments) or incurred in connection with the
acquisition of property, whether outstanding on the date of execution of this
Indenture or thereafter created, assumed or incurred, except such indebtedness
as is by its terms expressly stated to be not superior in right of payment to
the Securities or to rank pari passu with the Securities and (b) any deferrals,
renewals or extensions of any such Senior Indebtedness, or debentures, notes or
other evidences of indebtedness issued in exchange for such Senior Indebtedness.
The term "indebtedness of the Company for money borrowed" as used in the
foregoing sentence shall mean any obligation of the Company (and any guaranty,
endorsement or other contingent obligation of the Company in respect of, or to
purchase or otherwise acquire, any obligation of another) for borrowed money
evidenced by notes or other written obligations, and any indebtedness of the
Company evidenced by bonds, notes or debentures or other similar instruments.
The term "indebtedness of the Company incurred in connection with the
acquisition of property" as used in the first sentence of this definition shall
mean any purchase money obligation (whether or not secured by any lien or other
security interest) created or assumed as all or part of the consideration for
the acquisition of property whether by purchase, merger, consolidation or
otherwise (but not including any account payable or any other obligation created
or assumed by the Company in the ordinary course of business in connection with
the obtaining materials or services).
<PAGE> 14
6
Subsidiary:
The term "Subsidiary" shall mean any corporation of which at least a
majority of the outstanding stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(excluding in the computation of such percentage stock of any class or classes
of such corporation which has or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Company, or by one or more Subsidiaries, or by the Company and
one or more Subsidiaries.
Trustee:
The term "Trustee" shall mean the Person identified as "Trustee" in the
first paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder;
provided, however, that if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean only
the Trustee with respect to Securities of that series.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture of
Act of 1939 as in force at the date of execution of this Indenture, except as
provided in Sections 2.03 and 11.03.
ARTICLE TWO.
SECURITIES.
SECTION 2.01. Forms Generally. The Securities of each series shall be in
substantially the form as shall be established by or pursuant to a resolution of
the Board of Directors or in one or more indentures supplemental hereto, in each
case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with any law or with
any rules made pursuant thereto or with any rules of any securities exchange or
all as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
<PAGE> 15
7
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
SECTION 2.02 Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication on all Securities shall be in
substantially the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Trustee
By
Authorized Officer
SECTION 2.03. Amount Unlimited; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities shall rank equally and pari passu and may be issued in one
or more series. There shall be established in or pursuant to a resolution of the
Board of Directors or established in one or more indentures supplemental hereto,
prior to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to Section
2.07, 2.08, 2.09, 11.04 or 16.03);
(3) the date or dates on which the principal of an premium, if any, on the
Securities of the series is payable;
(4) the rate or rates at which the Securities of the series shall bear
interest, or the method by which such interest may be determined, the date or
dates from which such interest shall accrue, the interest payment dates on which
such interest shall be payable and the record dates for the determination of
holders to whom interest is payable;
<PAGE> 16
8
(5) the place or places where the principal of, and premium, if any, and
interest on Securities of the series shall be payable;
(6) the price or prices at which, the period or periods within which and
the terms and conditions upon which Securities of the series may be redeemed, in
whole or in part, at the option of the Company, pursuant to any Sinking Fund or
otherwise;
(7) the obligation, if any, of the Company to redeem, purchase or repay
Securities of the series pursuant to any sinking fund or analogous provisions or
at the option of a Securityholder thereof and the price or prices at which and
the period or periods within which and the terms and conditions upon which
Securities of the series shall be redeemed, purchased or repaid, in whole or in
part, pursuant to such obligation;
(8) the right, if any, of the Company to discharge the Indenture as to the
Securities of the series pursuant to Section 13.01(c) or to limit the Indenture
as to the Securities of the series pursuant to the last sentence of Section
13.01 (and if any sinking fund is applicable to such series, the obligations of
such sinking fund shall survive and be provided for upon the discharge of the
Indenture pursuant to Section 13.01(c) or the limitation of the Indenture
pursuant to the last sentence of Section 13.01);
(9) if other than denominations of $1,000 and any multiple thereof, the
denominations in which Securities of the series shall be issuable;
(10) any Events of Default with respect to the Securities of a particular
series, in addition to or in lieu of those set forth herein;
(11) any trustees, authenticating or paying agents, warrant agents,
transfer agents, conversion agents (if such Securities are Convertible
Securities) or registrar with respect to the Securities of such series;
(12) the applicable initial conversion price if such Securities are
Convertible Securities, the dates on or subsequent to which such Securities are
convertible and the date such Securities cease to be convertible; and
(13) any other terms of the series (which terms shall conform to the
requirements of the Trust Indenture Act of 1939 as then in effect, shall not
adversely affect the rights of the Securityholders of any other Securities then
outstanding and shall not be inconsistent with the provisions of this
Indenture).
All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be
<PAGE> 17
9
provided in or pursuant to such resolution of the Board of Directors or in any
such indenture supplemental hereto.
SECTION 2.04. Authentication and Delivery. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Securities to or upon the written order of the Company, signed by its Chairman
of the Board of Directors, President, any Vice President, its Treasurer or
Assistant Treasurer or its Secretary or an Assistant Secretary without any
further action by the Company hereunder. In authenticating such Securities, the
Trustee shall be entitled to receive, and (subject to Sections 8.01 and 8.02)
shall be fully protected in relying upon:
(1) a copy of any resolution or resolutions of the Board of Directors
relating thereto and, if applicable, an appropriate record of any action taken
pursuant to such resolution, in each case certified by the Secretary or an
Assistant Secretary of the Company;
(2) an executed supplemental indenture, if any;
(3) an Officers' Certificate prepared in accordance with Section 15.05
setting forth the form and terms of the Securities as required pursuant to
Sections 2.01 and 2.03, respectively; and
(4) an Opinion of Counsel prepared in accordance with Section 15.05 which
shall also state
(a) that the form of such Securities has been established by or
pursuant to a resolution of the Board of Directors or by a
supplemental indenture as permitted by Section 2.01 in conformity
with the provisions of this Indenture;
(b) that the terms of such Securities have been established by or
pursuant to a resolution of the Board of Directors or by a
supplemental indenture as permitted by Section 2.03 in conformity
with the provisions of this Indenture;
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute
valid and legally binding obligations of the Company;
<PAGE> 18
10
(d) that all laws and requirements in respect of the execution and
delivery by the Company of the Securities have been complied with
and that authentication and delivery of the Securities by the
Trustee will not violate the terms of this Indenture; and
(e) such other matters as the Trustee may reasonably request.
The Trustee shall have the right to decline to authenticate and deliver
any Securities under this Section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees and/or vice presidents shall determine that
such action would expose the Trustee to personal liability to existing holders.
SECTION 2.05. Date and Denomination of Securities. The Securities shall be
issuable as registered Securities without coupons and in such denominations as
shall be specified as contemplated by Section 2.03. In the absence of any such
specification with respect to the Securities of any series, the Securities of
such series shall be issuable in the denominations of $1,000 and any multiple
thereof. The Securities shall be numbered, lettered, or otherwise distinguished
in such manner or in accordance with such plans as the officers of the Company
executing the same may determine with the approval of the Trustee as evidenced
by the execution and authentication thereof.
Every Security shall be dated the date of its authentication, shall bear
interest from such date and shall be payable on such dates, in each case, as
contemplated by Section 2.03.
The person in whose name any Security of any series is registered at the
close of business on any record date (as hereinafter defined) with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of such Security
upon any transfer, exchange or conversion subsequent to the record date and
prior to such interest payment date; provided, however, that if and to the
extent the Company shall default in the payment of the interest due on such
interest payment date, such defaulted interest shall be paid to the persons in
whose names outstanding Securities are registered on a subsequent record date
established by notice given by mail by or on behalf of the Company to the
holders of Securities and the Trustee not less than 15 days preceding such
subsequent record date, such subsequent record date to be not less than ten days
preceding the date of payment of such defaulted interest. The term "record date"
as used in this Section with respect to any interest payment date shall mean if
such interest payment date is the first day of a calendar month, the fifteenth
day of the next preceding calendar month and shall mean, if such interest
payment date is the fifteenth
<PAGE> 19
11
day of a calendar month, the first day of such calendar month, whether or not
such record date is a business day.
SECTION 2.06. Execution of Securities. The Securities shall be signed in
the name and on behalf of the Company by the facsimile signature of its Chairman
of the Board or its President and imprinted with a facsimile of its corporate
seal, and attested by the facsimile signature of its Secretary or an Assistant
Secretary. Each such signature upon the Securities may be in the form of a
facsimile signature of any such officer and may be imprinted or otherwise
reproduced on the Securities and for that purpose the Company may adopt and use
the facsimile signature of any person who has been or is such officer, and in
case any such officer of the Company signing any of the Securities shall cease
to be such officer before the Securities so signed shall have been authenticated
and delivered by the Trustee, or disposed of by the Company, such securities
nevertheless may be authenticated and delivered or disposed of as though such
person had not ceased to be such officer of the Company. Only such Securities as
shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee or the Authenticating Agent, shall
be entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate by the Trustee or the Authenticating Agent upon any
Security executed by the Company shall be conclusive evidence that the Security
so authenticated has been duly authenticated and delivered hereunder and that
the holder is entitled to the benefits of this Indenture.
SECTION 2.07. Exchange and Registration of Transfer of Securities.
Securities of any series may be exchanged for a like aggregate principal amount
of Securities of the same series of other authorized denominations. Securities
to be exchanged may be surrendered at the principal office of the Trustee or at
any office or agency to be maintained by the Company for such purpose as
provided in Section 5.02, and the Company or the Trustee shall execute and
register and the Trustee or the Authenticating Agent shall authenticate and
deliver in exchange therefor the Security or Securities which the Securityholder
making the exchange shall be entitled to receive. Upon due presentment for
registration of transfer of any Security of any series at the principal office
of the Trustee or at any office or agency of the Company maintained for such
purpose as provided in Section 5.02, the Company or the Trustee shall execute
and register and the Trustee or the Authenticating Agent shall authenticate and
deliver in the name of the transferee or transferees a new Security or
Securities of the same series for a like aggregate principal amount.
Registration or registration of transfer of any Security by the Trustee or by
any agent of the Company appointed pursuant to Section 5.02, and delivery of
such Security, shall be deemed to complete the registration or registration of
transfer of such Security.
<PAGE> 20
12
The Company or the Trustee shall keep, at the principal office of the
Trustee, a register for each series of Securities issued hereunder in which,
subject to such reasonable regulations as it may prescribe, the Company or the
Trustee shall register all Securities and shall register the transfer of all
Securities as in this Article Two provided. Such register shall be in written
form or in any other form capable of being converted into written form within a
reasonable time.
All Securities presented for registration of transfer or for exchange or
payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee or the Authenticating Agent duly executed by, the holder or his
attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Securities, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith.
The Company or the Trustee shall not be required to exchange or register a
transfer of (a) any Security of a series for a period of 15 days next preceding
the date of selection of Securities of such series for redemption, or (b) any
Securities of any series selected, called or being called for redemption in
whole or in part, except, in the case of any Securities of any series to be
redeemed in part, the portion thereof not so to be redeemed.
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Securities. In case any
temporary or definitive Security shall become mutilated or be destroyed, lost or
stolen, the Company in the case of a mutilated Security shall, and in the case
of a lost, stolen or destroyed Security may in its discretion, execute, and upon
its request the Trustee shall authenticate and deliver, a new Security of the
same series bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Security, or in lieu of and in substitution for
the Security so destroyed, lost or stolen. In every case the applicant for a
substituted Security shall furnish to the Company and the Trustee such security
or indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of such Security and of the ownership thereof.
The Trustee may authenticate any such substituted Security and deliver the
same upon the written request or authorization of any officer of the Company.
Upon the issuance of any substituted Security, the Company may require the
payment of a sum sufficient
<PAGE> 21
13
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith an in additional further sum
not exceeding two dollars for each Security so issued in substitution. In case
any Security which has matured or is about to mature or has been called for
redemption in full shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Security, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Security) if the applicant for such payment shall furnish to the Company and the
Trustee such security or indemnity as may be required by them to save each of
them harmless and, in case of destruction, loss or theft, evidence satisfactory
to the Company and to the Trustee of the destruction, loss or theft of such
Security and of the ownership thereof.
Every substituted Security of any series issued pursuant to the provisions
of this Section 2.08 by virtue of the fact that any such Security is destroyed,
lost or stolen shall constitute an additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Security shall be found at
any time, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities of the same series duly
issued hereunder. All Securities shall be held and owned upon the express
condition that, to the extent permitted by applicable law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities and shall preclude any and all
other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.09. Temporary Securities. Pending the preparation of definitive
Securities of any series the Company may execute and the Trustee shall
authenticate and deliver temporary Securities (printed or lithographed).
Temporary Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Securities but with such omissions,
insertions and variations as may be appropriate for temporary Securities, all as
may be determined by the Company. Every such temporary Security shall be
executed by the Company and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Securities. Without unreasonable delay the Company will execute
and deliver to the Trustee or the Authenticating Agent definitive Securities and
thereupon any or all temporary Securities of such series may be surrendered in
exchange therefor, at the principal office of the Trustee or at any office or
agency maintained by the Company for such purpose as provided in Section 5.02,
and the Trustee or the Authenticating Agent shall authenticate and deliver in
exchange for such temporary Securities a like aggregate principal amount of such
definitive Securities. Such exchange shall be made by the Company
<PAGE> 22
14
at its own expense and without any charge therefor except that in case of any
such exchange involving a registration of transfer the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto. Until so exchanged, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series authenticated and
delivered hereunder.
Section 2.10. Cancellation of Securities Paid, etc. All Securities
surrendered for the purpose of payment, redemption, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent, be
surrendered to the Trustee and promptly cancelled by it, or, if surrendered to
the Trustee or any Authenticating Agent, shall be promptly cancelled by it, and
no Securities shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Indenture. All Securities cancelled by any
Authenticating Agent shall be delivered to the Trustee. The Trustee shall
destroy cancelled Securities and shall deliver a certificate of such destruction
to the Company. If the Company shall acquire any of the Securities, however,
such acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation.
ARTICLE THREE.
Conversion of Securities.
SECTION 3.01. Conversion Privilege. Subject to and upon compliance with
the provisions of this Article Three, the holder of any Convertible Security
shall have the right, at his option, at any date on or subsequent to which such
Convertible Security is convertible up to the date on which such Convertible
Security ceases to be convertible (or if such Convertible Security is called for
redemption prior to such date such Convertible Security ceases to be convertible
then, in respect of such Convertible Security, to and including but not after
the close of business on the last business day preceding the date fixed for such
redemption, unless the Company shall default in the payment due upon redemption
thereof) as set forth in the resolutions or supplemental indenture relating to
such series of Convertible Securities referred to in Section 2.03 to convert the
principal amount of such Convertible Security into the whole number of fully
paid and non-assessable shares of Common Stock obtained by dividing the
principal amount of the Convertible Security to be converted by the Conversion
Price for such series.
SECTION 3.02. Manner of Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the holder of any Convertible Security to be
converted shall surrender such Convertible Security at the office or agency to
be maintained by
<PAGE> 23
15
the Company pursuant to Section 5.02 for the conversion of Convertible
Securities, and shall give written notice to the Company in the form provided on
the Security at such office or agency that the holder elects to convert such
Convertible Security and, if so required by the Company, accompanied by
instruments of transfer, in form satisfactory to the Company and to the Trustee,
duly executed by the Holder or his duly authorized attorney in writing.
Convertible Securities, of any series, surrendered for conversion during the
period from the close of business on any record date (as defined in Section
2.05) for the payment of interest on such series of Convertible Securities to
the opening of business on the interest payment date (as defined in Section
2.05) of such series for such interest shall (except in the case of Convertible
Securities which have been called for redemption on a redemption date within
such period) be accompanied by payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to the interest payable on
such interest payment date on the principal amount of Convertible Securities
being surrendered for conversion. Said notice shall state the name or names
(with addresses) in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued. As promptly as
practicable after the surrender of such Convertible Security and the receipt of
such notice, as aforesaid, the Company shall, subject to the provisions of
Section 3.08, issue and deliver at such office or agency to such holder, or on
his written order, a certificate or certificates for the number of full shares
of Common Stock issuable on such conversion of Convertible Securities in
accordance with the provisions of this Article and cash, as provided in Section
3.03, in respect of any fraction of a share of Common Stock otherwise issuable
upon such conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the date (herein called the "Date
of Conversion") on which such notice shall have been received by the Company and
such Convertible Security shall have been surrendered as aforesaid, and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on the Date of Conversion the holder or holders of record of the
shares represented thereby; provided, however, that any such surrender on any
date when the stock transfer books of the Company shall be closed shall
constitute the person or persons in whose name or names the certificate or
certificates for such shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open but such conversion shall
nevertheless be at the conversion price in effect at the close of business on
the date when such Convertible Security shall have been so surrendered with the
conversion notice, and such Convertible Security shall cease to bear interest on
such date. Subject to the foregoing and to the last paragraph of Section 2.05,
no payment or adjustment shall be made upon conversion on account of any
interest accrued on any
<PAGE> 24
16
Convertible Security converted or for dividends or distributions on any shares
of Common Stock issued upon conversion of any Convertible Security.
SECTION 3.03. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversions of Convertible Securities. If more than one
Convertible Security shall be surrendered for conversion at one time by the same
holder, the number of full shares which shall be issuable upon conversion shall
be computed on the basis of the aggregate principal amount of the Convertible
Securities so surrendered. Instead of any fractional interest in a share of
Common Stock which would otherwise be issuable upon conversion of any
Convertible Security or Convertible Securities, the Company shall pay a cash
adjustment in respect of such fractional interest to the nearest one-hundredth
of a share in an amount equal to the market value of such fractional interest on
the Date of Conversion. In such event, the market value of a share of Common
Stock shall be (i) if the Common Stock is listed or admitted to trading on a
national securities exchange, the closing price on the NYSE-Consolidated Tape
(or any successor composite tape reporting transactions on national securities
exchanges) or, if such a composite tape shall not be in use or shall not report
transactions in the Common Stock, the last reported sales price regular way on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading (which shall be the national securities exchange on which
the greatest number of shares of the Common Stock has been traded during the
preceding 30 consecutive trading days), or, if there is no transaction on any
such day in any such situation, the mean of the bid and asked prices on such day
or (ii), if the Common Stock is not listed or admitted to trading on any such
exchange, the last reported sale price, if reported, or, if no sale occurs on
such date or the last reported sale price is not available, the average of the
closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System (NASDAQ) or a similar source
selected from time to time by the Company for the purpose.
SECTION 3.04. Conversion Price. The Conversion Price for such series of
Convertible Securities shall be as specified in the resolution or supplemental
indenture or indentures pursuant to which such series is created referred to in
Section 2.03, subject to adjustment as provided in this Article Three.
SECTION 3.05. Adjustment of Conversion Price. The Conversion Price for
each series shall be adjusted from time to time as follows:
(a) In case the Company shall, while any of the Convertible
Securities are outstanding, (i) pay a dividend or make a distribution with
respect to its Common Stock in shares of its capital stock (whether shares
of Common Stock or of capital stock of any other class), (ii) subdivide
its
<PAGE> 25
17
outstanding shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock
of the Company, the conversion privilege and the Conversion Price for each
series of Convertible Securities in effect immediately prior to such
action shall be adjusted so that the holder of any Convertible Security
thereafter surrendered for conversion shall be entitled to receive the
number of shares of capital stock of the Company which he would have owned
immediately following such action had such Convertible Security been
converted immediately prior thereto. An adjustment made pursuant to this
subsection (a) shall become effective immediately after the record date in
the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection (a), the holder of any Convertible Security thereafter
surrendered for conversion shall become entitled to receive shares of two
or more classes of capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a
resolution filed with the Trustee) shall determine the allocation of the
adjusted Conversion Price for each series of Convertible Securities
between or among shares of such classes of capital stock.
(b) In case the Company shall, while any of the Convertible
Securities are outstanding, issue rights or warrants to all holders of its
Common Stock entitling them (for a period expiring within forty-five days
after the record date mentioned below) to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price
per share (as determined pursuant to subsection (d) below) on the record
date mentioned below, the Conversion Price for each series of Convertible
Securities of the Common Stock shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price for such
series in effect immediately prior to the date of issuance of such rights
or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of shares which the aggregate offering price
of the total number of shares so offered would purchase at such current
market price, and of which the denominator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants.
<PAGE> 26
18
(c) In case the Company shall, while any of the Convertible
Securities are outstanding, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (excluding any cash dividends) or
rights to subscribe or warrants (excluding those referred to in subsection
(b) above), then in each such case the Conversion Price for each series of
Convertible Securities of the Common Stock shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
for such series in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in subsection (d) below) of
the Common Stock on he record date mentioned below less the then fair
market value (as determined by the Board of Directors of the Company,
whose determination shall be conclusive, and described in a resolution
filed with the Trustee) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or warrants
applicable to one share of Common Stock, and the denominator shall be such
current market price per share of the Common Stock. Such adjustment shall
become effective immediately after the record date for the determination
of stockholders entitled to receive such distribution.
(d) For the purpose of any computation under Subdivisions (b) and
(c) above, the current market price per share of Common Stock at any date
shall be deemed to be the average of the daily closing prices for the
thirty consecutive trading days commencing forty-five trading days before
the date in question. The closing price for each day shall be (i) if the
Common Stock is listed or admitted to trading on a national securities
exchange, the closing price on the NYSE-Consolidated Tape (or any
successor composite tape reporting transactions on national securities
exchanges) or, if such a composite tape shall not be in use or shall not
report transactions in the Common Stock, the last reported sales price
regular way on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (which shall be the national
securities exchange on which the greatest number of shares of the Common
Stock has been traded during such 30 consecutive trading days), or, if
there is no transaction on any such day in any such situation, the mean of
the bid and asked prices on such day or (ii) if the Common Stock is not
listed or admitted to trading on any such exchange, the last reported sale
price, if reported, or, if no sale occurs on such date or the last
reported sale price is not available, the average of the closing bid and
asked prices as reported by the National Association of Securities Dealers
Automated Quotation System (NASDAQ) or a similar source selected from time
to time by the Company for the purpose.
<PAGE> 27
19
(e) In any case in which this Section 3.05 shall require that an
adjustment be made immediately following a record date, the Company may
elect to defer (but only until five business days following the filing by
the Company with the Trustee of the Officer's Certificate described in
subsection (g) below) issuing to the holder of any Convertible Security
converted after such record date the shares of Common Stock and other
capital stock of the Company issuable upon such conversion over and above
the shares of Common Stock and other capital stock of the Company issuable
upon such conversion only on the basis of the Conversion Price for the
series of Convertible Securities which such Convertible Security is a part
prior to such adjustment; and, in lieu of the shares the issuance of which
is so deferred, the Company shall issue or cause its transfer agents to
issue due bills or other appropriate evidence of the right to receive such
shares.
(f) No adjustment in the Conversion Price for any series of
Convertible Securities shall be required unless such adjustment would
require in increase or decrease of at least 1% in such price; provided,
however, that any adjustments which be reason of this subsection (f) are
not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 3.05 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
(g) Whenever the Conversion Price for any series of Convertible
Securities is adjusted as herein provided, the Company shall promptly file
with the Trustee and each conversion agent an Officers' Certificate
setting forth the Conversion Price for such series after such adjustment
and setting forth a brief statement of the facts and calculation requiring
such adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment and cause a notice stating that such
adjustment has been effected and the adjusted Conversion Price to be
mailed to the holders of Convertible Securities of such series at their
last addresses as they shall appear on the Securities register.
(h) The Company may make such reductions in the Conversion Price, in
addition to those required by this Section 3.05, as it considers to be
advisable in order to avoid or diminish any income tax to any holder of
its Common Stock resulting from any dividend distribution of stock or
issuance or rights or warrants to purchase or subscribe for stock or from
any event treated as such for income tax purposes or for any other
reasons.
(i) In the event that at any time as a result of an adjustment made
pursuant to subsection (a) above, the holder of any Convertible Security
thereafter surrendered
<PAGE> 28
20
for conversion shall become entitled to receive any shares of capital
stock of the Company other than shares of its Common Stock, thereafter the
Conversion Price for such series of such other shares so receivable upon
conversion of any convertible Securities shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in
subsections (a) through (h) above, and the provisions of Sections 3.01
through 3.04 and of Sections 3.06 through 3.10 with respect to the Common
Stock shall apply on like terms to any such other shares.
SECTION 3.06. Merger, Consolidation, etc. If either of the following shall
occur, namely: (a) any consolidation or merger to which the Company is a party,
other than a consolidation or a merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in par value or from par value to no par value or from no
par value to par value, or as a result of a subdivision or combination) in,
outstanding shares of the Common Stock, or (b) any sale or conveyance to another
corporation of the assets of the Company as an entirety or substantially as an
entirety, then the Company, or such successor or purchasing corporation, as the
case may be, shall execute and deliver to the Trustee a supplemental indenture
providing that the holder of each Convertible Security then outstanding shall
have the right to convert such Convertible Security into the kind and amount of
shares of stock and other securities and property (including cash) receivable
upon such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock issuable upon conversion of
such Convertible Security immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Such supplemental indenture shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The provisions of
this Section 3.06 shall similarly apply to successive consolidations, mergers,
sales or conveyances.
SECTION 3.07. Notices. In case, at any time while any of the
Convertible Securities are outstanding,
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock, excluding any cash dividends; or
(b) the Company shall authorize the issuance to all holders of its
Common Stock of rights or warrants to subscribe for or purchase shares of
its Common Stock or of any other subscription rights or warrants; or
(c) of any reclassification of Common Stock of the Company (other
than a subdivision or combination thereof) or
<PAGE> 29
21
of any consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company is required (except for
a merger of the Company into one of its Subsidiaries solely for the
purpose of changing the corporate domicile of the Company to another state
of the United States and in connection with which there is no substantive
change in the rights or privileges of any securities of the Company other
than changes resulting from differences in the corporate statutes of the
then existing and the new state of domicile), or of the sale or transfer
of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Convertible Securities pursuant to Section
5.02, and shall cause to be mailed to the holders of Convertible Securities at
their last addresses as they shall appear on the Securities register, at least
10 days before the date hereinafter specified (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified), a
notice stating (i) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, rights or warrants are to be determined, or (ii)
the date on which any such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property (including cash), if any, deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
The failure to give or receive the notice required by this Section 3.07 or any
defect therein shall not affect the legality or validity of any such dividend,
distribution, right or warrant or other action.
SECTION 3.08. Taxes on Conversions. The Company will pay any and all
documentary, stamp or similar taxes payable to the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
the issue or delivery of shares of Common Stock on conversion of Convertible
Securities pursuant hereto; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the holder of the Convertible Securities to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Company the amount of any such tax or has established,
to the satisfaction of the Company, that such tax has been paid.
<PAGE> 30
22
SECTION 3.09. Company to Provide Stock. The Company covenants that there
shall be reserved, free from pre-emptive rights, out of authorized but unissued
shares of Common Stock, sufficient shares to provide for the conversion of the
Convertible Securities from time to time as such Convertible Securities are
presented for conversion.
If any shares of Common Stock to be reserved for the purpose of conversion
of Convertible Securities hereunder require registration with or approval of any
governmental authority under any Federal or state law before such shares may be
validly issued or delivered upon conversion, then the Company covenants that it
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
Before any action which would cause an adjustment reducing the Conversion
Price for any series of Convertible Securities below the then par value, if any,
of the Common Stock, the Company covenants that there will be taken all
corporate action which may, in the opinion of its counsel, be necessary in order
that there may be validly and legally issued fully paid and non-assessable
shares of such Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Convertible Securities will upon issue be validly issued,
fully paid and non-assessable and free from all liens and charges with respect
to the issue or delivery thereof.
SECTION 3.10. Disclaimer of Responsibility for Certain Matters. Neither
the Trustee nor any conversion agent shall at any time be under any duty or
responsibility to any holder of Convertible Securities to determine whether any
facts exist which may require any adjustment of the Conversion Price for any
series of Convertible Securities, or with respect to the Officer's Certificate
referred to in Section 3.05(g), or with respect to the nature or extent of any
such adjustment when made, or with respect to the method employed, or herein or
in any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any conversion agent shall be accountable with respect
to the registration, validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at any time be issued
or delivered upon the conversion of any Convertible Security; and neither the
Trustee nor any conversion agent makes any representation with respect thereto.
Neither the Trustee nor any conversion agent shall be responsible for any
failure of the Company to issue or deliver any shares of Common Stock or stock
certificates or other securities, cash or property upon the surrender of any
Convertible Security for the purpose of conversion, or, subject to Section 8.01,
to comply with any of the covenants of the Company contained in this Article
Three.
<PAGE> 31
23
SECTION 3.11. Return of Funds Deposited for Redemption of Converted
Securities. Any funds which at any time shall have been deposited by the Company
or on its behalf with the Trustee or any other paying agent for the purpose of
paying the principal of, premium, if any, and interest on any of the Convertible
Securities and which shall not be required for such purposes because of the
conversion of such Convertible Securities, as provided in this Article Three,
shall forthwith after such conversion be repaid to the Company by the Trustee or
such other paying agent.
SECTION 3.12. Disposition of Converted Securities. All Convertible
Securities delivered to the Company or any conversion agent upon conversion
pursuant to this Article Three shall be delivered to the Trustee for
cancellation.
ARTICLE FOUR.
Subordination of Securities.
SECTION 4.01. Agreement to Subordinate. The Company covenants and agrees,
and each holder of Securities issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Securities issued hereunder shall be
issued subject to the provisions of this Article; and each person holding any
Security, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions. The provisions of this
Article are made for the benefit of the holders of Senior Indebtedness, and such
holders shall, at any time, be entitled to enforce such provisions against the
Company or any Securityholders.
All Securities issued hereafter shall, to the extent and in the manner
hereinafter in this Article set forth, be subordinate and junior in the right of
payment to the prior payment in full of all Senior Indebtedness.
SECTION 4.02. No Payment on Securities if Senior Indebtedness in Default.
No payment on account of principal, premium, if any, sinking funds or interest
on the Securities shall be made unless full payment of amounts then due for
principal, premium, if any, sinking funds and interest on all Senior
Indebtedness has been made or duly provided for. No payment (including the
making of any deposit in trust with the Trustee in accordance with Section
13.01) on account of principal, premium, if any, sinking funds or interest on
the Securities shall be made if, at the time of such payment or immediately
after giving effect thereto, (i) there shall exist a default in the payment of
principal, premium, if any, sinking funds or interest with respect to any Senior
Indebtedness, or (ii) there shall have occurred an event of default (other than
a default in the payment of principal, premium, if any, sinking funds or
interest) with respect to any Senior Indebtedness, as defined therein or in the
instrument under which the same is outstanding, permitting the holders thereof
to accelerate the maturity thereof,
<PAGE> 32
24
and such event of default shall not have been cured or waived or shall not have
ceased to exist. The foregoing provision shall not prevent the Trustee from
making payments on the Securities from monies or securities deposited with the
Trustee pursuant to the terms of Section 13.01 if at the time such deposit was
made or immediately after giving effect thereto the conditions in (i) or (ii) of
this Section did not exist.
SECTION 4.03. Priority of Senior Indebtedness. In the event of any
insolvency or bankruptcy proceedings, and any receivership, liquidation,
reorganization under the Federal Bankruptcy Code or any other similar applicable
Federal or state law, or other similar proceedings in connection therewith,
relative to the Company or to its creditors, as such, or to its property, and in
the event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company or assignment for the benefit of creditors or any
other marshalling of assets of the Company, whether or not involving insolvency
or bankruptcy, then the holders of Senior Indebtedness shall be entitled to
receive payment in full of all principal of and premium, if any, and interest on
all Senior Indebtedness including interest on such Senior Indebtedness after the
date of filing of a petition or other action commencing such proceeding before
the holders of the Securities are entitled to receive any payment on account of
the principal of or premium, if any, or interest on the Securities (except that
holders of Securities shall be entitled to receive such payments from monies or
securities deposited with the Trustee pursuant to the terms of Section 13.01 if
at the time such deposit was made or immediately after giving effect thereto the
conditions in (i) or (ii) of Section 4.02 did not exist), and any payment or
distribution of any kind or character which may be payable or deliverable in any
such proceedings in respect of the Securities, except securities which are
subordinate and junior in right of payment to the payment of all Senior
Indebtedness then outstanding, shall be paid by the person making such payment
or distribution directly to the holders of Senior Indebtedness to the extent
necessary to make payment in full of all Senior Indebtedness, after giving
effect to any concurrent payment or distribution to the holders of Senior
Indebtedness. In the event that any payment or distribution of cash, property or
securities shall be received by the Trustee or the holders of the Securities in
contravention of this Section before all Senior Indebtedness is paid in full, or
provision made for the payment thereof, such payment or distribution shall be
held in trust for the benefit of and shall be paid over to the holders of such
Senior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture under which any instrument evidencing
any of such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay in full all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
<PAGE> 33
25
In the event that any Security is declared due and payable before its
expressed maturity because of the occurrence of an Event of Default (under
circumstances when the provisions of the first paragraph of this Section shall
not be applicable), the holders of the Senior Indebtedness outstanding at the
time the Securities of such series so become due and payable because of such
occurrence of such an Event of Default shall be entitled to receive payment in
full of all principal of and premium, if any, interest on all Senior
Indebtedness before the holders of the Securities of such series are entitled to
receive any payment on account of the principal of or premium, if any, or
interest on the Securities of such series except that holders of Securities of
such series shall be entitled to receive payments from monies or securities
deposited with the Trustee pursuant to the terms of Section 13.01, if at the
time of such deposit no Security of such series had been declared due and
payable before its expressed maturity because of the occurrence of an Event of
Default.
Nothing in this Section shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.06.
SECTION 4.04. Company to Give Notice of Certain Events; Reliance by
Trustee. The Company shall give prompt written notice to the Trustee of any
insolvency or bankruptcy proceedings, any receivership, liquidation,
reorganization under the Federal Bankruptcy Code or any other similar applicable
Federal or state law, or similar proceedings and any proceedings for voluntary
liquidation, dissolution or winding up of the Company within the meaning of this
Article. The Trustee shall be entitled to assume that no such event has occurred
unless the Company or any one or more holders of Senior Indebtedness or any
trustee therefor has given such notice together with proof satisfactory to the
Trustee of such holding of Senior Indebtedness or the authority of such Trustee.
Upon any payment or distribution of assets of the Company referred to in this
Article, the Trustee, in the absence of its negligence or bad faith and any
holder of a Security shall be entitled to rely upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the holders
of Securities, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article. In the event that the Trustee determines, in good
faith, that further evidence is required with respect to the right of any person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such person, as to the extent to which such person
is entitled to participate in such payment or distribution and as to
<PAGE> 34
26
other facts pertinent to the rights of such person under this Article, and if
such evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such covenants and obligations as are specifically
set forth in this Indenture and no implied covenants or obligations with respect
to holders of Senior Indebtedness shall be read into this Indenture against the
Trustee.
Nothing in this Section shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.06.
SECTION 4.05. Subrogation of Securities. Subject to the payment in full of
all Senior Indebtedness, the holders of the Securities shall be subrogate to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company made on the Senior Indebtedness until the
principal of and premium, if any, and interest on the Securities shall be paid
in full; and, for the purposes of such subrogation, no payments or distributions
to the holders of Senior Indebtedness of any cash, property or securities to
which the holders of the Securities or the Trustee would be entitled except for
the provisions of this Article, an no payment over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by holders of the Securities
or by the Trustee, shall, as between the Company, its creditors other than the
holders of Senior Indebtedness, and the holders of Securities, be deemed to be a
payment by the Company to or on account of Senior Indebtedness, and no payments
or distributions to the Trustee or the holders of the Securities of cash,
property or securities payable or distributable to the holders of the Senior
Indebtedness to which the Trustee or the holders of the Securities shall become
entitled pursuant to the provisions of this Section, shall, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Securities, be deemed to be a payment by the Company to the
holders of or on account of the Securities.
SECTION 4.06. Company Obligation to Pay Unconditional. The provisions of
this Article are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the holders of the
Securities on the other hand, and nothing herein shall impair, as between the
Company and the holders of the Securities, the obligation of the Company, which
is unconditional and absolute, to pay to the holders thereof the principal
thereof and premium, if any, and interest thereon in accordance with the terms
of the Securities and this Indenture nor shall anything herein prevent the
holders of the Securities or the Trustee from exercising all remedies otherwise
permitted by applicable law or under the Securities and this Indenture upon
default under the Securities and this Indenture, subject to the
<PAGE> 35
27
rights of holders of Senior Indebtedness under the provisions of this Article to
receive cash, property or securities otherwise payable or deliverable to the
holders of the Securities.
SECTION 4.07. Authorization of Holders of Securities to Trustee to Effect
Subordination. Each holder of Securities by his acceptance thereof authorizes
the Trustee in his behalf to take such action as may be necessary to appropriate
to effectuate the subordination as provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes.
SECTION 4.08. Notice to Trustee of Facts Prohibiting Payments.
Notwithstanding any of the provisions of this Article or any other provision of
this Indenture, the Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
moneys to or by the Trustee, unless and until the Principal Corporate Trust
Office of the Trustee shall have received written notice thereof from the
Company or from one or more holders of Senior Indebtedness or from any trustee
therefor, together with proof satisfactory to the Trustee of such holding of
Senior Indebtedness or the authority of such Trustee, and, prior to the receipt
of any such written notice, the Trustee, subject to the provisions of Section
8.01, shall be entitled in all respects to assume that no such facts exist;
provided, that, if prior to the second business day preceding the date upon
which by the terms hereof any such moneys may become payable for any purpose
(including, without limitation, the payment of the principal of or premium, if
an, or interest on any Security), the Trustee shall have not received with
respect to such moneys the notice provided for in this Section, then, anything
herein contained to the contrary notwithstanding, the Trustee and any paying
agent shall have full power and authority to receive such moneys and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary which may be received by it on or after such day,
and provided, further, that nothing contained herein shall prevent conversions
of the Securities in accordance with the provisions of this Indenture.
SECTION 4.09. Trustee May Hold Senior Indebtedness. The Trustee, shall be
entitled to all the rights set forth in this Article with respect to any Senior
Indebtedness at the time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
SECTION 4.10. All Indenture Provisions Subject to this Article.
Notwithstanding anything herein contained to the contrary, all the provisions of
this Indenture shall be subject to the provisions of this Article, so far as the
same may be applicable thereto.
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ARTICLE FIVE.
PARTICULAR COVENANTS OF THE COMPANY.
SECTION 5.01. Payment of Principal, Premium and Interest. The Company
covenants and agrees for the benefit of each series of Securities that it will
duly and punctually pay or cause to be paid the principal of an premium, if any,
and interest on each of the Securities of that series at the place, at the
respective times and in the manner provided in such Securities. Each installment
of interest on the Securities of any series may be paid by mailing checks for
such interest payable to the order of the holders of Securities entitled thereto
as they appear on the registry books of the Company.
SECTION 5.02. Offices for Notices and Payments, etc. So long as any of the
Securities remains outstanding, the Company will maintain in the Borough of
Manhattan, The City of New York, an office or agency where the Securities of
each series may be presented for payment, an office or agency where the
Securities of that series may be presented for registration of transfer and for
exchange as in this Indenture provided, an office or agency where the Securities
of that series, if convertible, may be presented for conversion and an office or
agency where notices and demands to or upon the Company in respect of the
Securities of that series or of this Indenture may be served. The Company will
give to the Trustee written notice of the location of any such office or agency
and of any change of location thereof. The Company hereby initially appoints the
corporate trust office of MORGAN GUARANTY TRUST COMPANY OF NEW YORK in the
Borough of Manhattan, The City of New York as the Company's conversion agent.
Until otherwise designated from time to time by the Company in a notice to the
Trustee, or specified as contemplated by Section 2.03, such office or agency for
all of the above purposes shall be the principal office of the Trustee. In case
the Company shall fail to maintain any such office or agency in the Borough of
Manhattan, The City of New York, or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notices may be served at the principal office of the Trustee.
In addition to such office or agency, the Company may from time to time
designate one or more offices or agencies outside the Borough of Manhattan, The
City of New York, where the Securities may be presented for registration of
transfer and for exchange in manner provided in this Indenture, and the Company
may from time to time rescind such designation, as the Company may deem
desirable or expedient; provided, however, that no such designation rescission
shall in any manner relieve the Company of its obligation to maintain such
office or agency in the Borough of Manhattan, The City of New York, for the
purposes above mentioned. The Company will give to the Trustee prompt written
notice of any such designation or rescission thereof.
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SECTION 5.03. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
SECTION 5.04. Provision as to Paying Agent. (a) If the Company shall
appoint a paying agent or conversion agent other than the Trustee with respect
to the Securities of any series, it will cause such paying agent or conversion
agent to execute and deliver to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 5.04:
(1) that it will hold all sums held by it as such agent for the payment of
the principal of and premium, if any, or interest on the Securities of such
series (whether such sums have been paid to it by the Company or by any other
obligor on the Securities of such series) in trust for the benefit of the
holders of the Securities of such series;
(2) that it will give the Trustee notice of any failure by the Company (or
by any other obligor on the Securities of such series) to make any payment of
the principal of and premium, if any, or interest on the Securities of such
series when the same shall be due and payable; and
(b) If the Company shall act as its own paying agent, it will, on or not
more than seven days before each due date of the principal of and premium, if
any, or interest on the Securities of any series, set aside, segregate and hold
in trust for the benefit of the holders of the Securities of such series a sum
sufficient to pay such principal, premium or interest so becoming due and will
notify the Trustee of any failure to take such action and of any failure by the
Company (or by any other obligor under the Securities of such series) to make
any payment of the principal of and premium, if any, or interest on the
Securities of such series when the same shall become due and payable.
(c) Anything in this Section 5.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining satisfaction and
discharge with respect to one or more or all series of Securities hereunder, or
for any other reason, pay or cause to be paid to the Trustee all sums held in
trust for any such series by the Trustee or any paying agent hereunder, as
required by this Section 5.04, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 5.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.04 is subject to
Sections 13.03 and 13.04.
<PAGE> 38
30
SECTION 5.05. Certificate to Trustee. The Company will deliver to the
Trustee on or before April 1 in each year (beginning with April 1, 1987), so
long as Securities of any series are outstanding hereunder, an Officers'
Certificate stating that in the course of the performance by the signers of
their duties as officers of the Company they would normally have knowledge of
any default by the Company in the performance of any covenants contained in
Article Three and Section 12.01, stating whether or not they have knowledge of
any such default and, if so, specifying each such default of which the signers
have knowledge and the nature thereof.
ARTICLE SIX.
SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE.
SECTION 6.01. Securityholders' Lists. The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after each record date for each
series of Securities, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Securityholders of such series of
Securities as of such record date; and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company, of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, except that no such lists need be furnished so long as the Trustee
is in possession thereof by reason of its acting as Securities registrar for
such series.
SECTION 6.02. Preservation and Disclosure of Lists. (a) The Trustee shall
preserve, in as current as form as is reasonably practicable, all information as
to the names and addresses of the holders of each series of Securities (1)
contained in the most recent list furnished to it as provided in Section 6.01 or
(2) received by it in the capacity of Securities registrar (if so acting)
hereunder. The Trustee may destroy any list furnished to it as provided in
Section 6.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Securities of any series (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Security of such
series for a period of at least six months preceding the date of such
application, and such
<PAGE> 39
31
application states that the applicants desire to communicate with other holders
of Securities of such series or with holders of all Securities with respect to
their rights under this Indenture or under such Securities and is accompanied by
a copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall within five business days after the receipt
of such application, at its election, either:
(1) afford such applicants access to the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, or
(2) inform such applicants as to the approximate number of holders of such
series or all Securities, as the case may be, whose names and addresses appear
in the information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 6.02, and as to the approximate
cost of mailing to such Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder of such series or all Securities, as the case may
be, whose name and address appear in the information preserved at the time by
the Trustee in accordance with the provisions of subsection (a) of this Section
6.02 a copy of the form of proxy or other communication which is specified in
such request with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses of mailing, unless within five days after such tender, the
Trustee shall mail to such applicants and file with the Securities and Exchange
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the holders of Securities of such series or
all Securities, as the case may be, or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion. If said
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, said Commission shall find, after notice and opportunity for
hearing, that all the objections so sustained have been met and shall enter an
order so declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
<PAGE> 40
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(c) Each and every holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Securities in accordance with the provisions of subsection (b) of this
Section 6.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
SECTION 6.03. Reports by Company. (a) The Company covenants and agrees to
file with the Trustee, within 15 days after the Company is required to file the
same with the Securities and Exchange Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as said Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with said
Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934; or, if the Company is not required to file information, documents
or reports pursuant to either of such sections, then to file with the Trustee
and said Commission, in accordance with rules and regulations prescribed from
time to time by said Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Securities Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed from time to
time in such rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the
Securities and Exchange Commission, in accordance with the rules and regulations
prescribed from time to time by said Commission, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Indenture as may be required from
time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail to all holders of
Securities, as the names and addresses of such holders appear upon the
Securities register, within 30 days after the filing thereof with the Trustee,
such summaries of any information, documents and reports required to be filed by
the Company pursuant to subsections (a) and (b) of this Section 6.03 as may be
required by rules and regulations prescribed from time to time by the Securities
and Exchange Commission.
SECTION 6.04. Reports by the Trustee. (a) On or before June 15, 1987, and
on or before June 15 in every year thereafter, so long as any Securities are
outstanding for which the Trustee is appointed hereunder, the Trustee shall
transmit to the
<PAGE> 41
33
Securityholders of each series of Securities for which such Trustee is appointed
as hereinafter in this Section 6.04 provided, a brief report dated as of April
15 of the appropriate year with respect to:
(1) its eligibility under Section 8.09, and its qualification under
Section 8.08, or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified under such Sections, a written
statement to such effect;
(2) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Securities, on any property or funds hold or
collected by it as Trustee, except that the Trustee shall not be required
(but may elect) to state such advances if such advances so remaining
unpaid aggregate not more than 1/2 of 1% of the principal amount of the
Securities for any series outstanding on the date of such report.
(3) the amount, interest rate, and maturity date of all other
indebtedness owing by the Company (or by any other obligator on the
Securities) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except any indebtedness based upon a creditor
relationship arising in any manner described in paragraph (2), (3), (4) or
(6) of subsection (b) of Section 8.13;
(4) the property and funds, if any, physically in the possession of
the Trustee, as such, on the date of such report;
(5) any additional issue of Securities which the Trustee has not
previously reported; and
(6) any action taken by the Trustee in the performance of its duties
under this Indenture which it has not previously reported and which in its
opinion materially affects the Securities, except action in respect of a
default, notice of which has been or is to be withheld by it in accordance
with the provisions of Section 7.08.
(b) The Trustee shall transmit to the Securityholders for each series, as
hereinafter provided, a brief report with respect to the character and amount of
any advances (and if the Trustee elects so to state, the circumstances
surrounding the making thereof) made by the Trustee (as such), since the date of
the last report transmitted pursuant to the provisions of subsection (a) of this
<PAGE> 42
34
Section 6.04 (or, if no such report has yet been so transmitted, since the date
of execution of this Indenture), for the reimbursement of which it claims or may
claim a lien or charge prior to that of the Securities of such series on
property or funds held or collected by it as Trustee, and which it has not
previously reported pursuant to this subsection, except that the Trustee shall
not be required (but may elect) to report such advances if such advances
remaining unpaid at any time aggregate 10% or less of the principal amount of
Securities for such series outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) Reports pursuant to this Section 6.04 shall be transmitted by mail to
all holders of Securities as the names and addresses of such holders appear upon
the Securities register.
(d) A copy of each such report shall, at the time of such transmission to
Securityholders, be filed by the Trustee with each stock exchange upon which the
Securities of any applicable series are listed and also with the Securities and
Exchange Commission. The Company will notify the Trustee when and as the
Securities of any series become listed on or delisted by any stock exchange.
ARTICLE SEVEN.
Remedies of the Trustee and Securityholders
on Event of Default.
SECTION 7.01. Events of Default. "Event of Default", wherever used herein
with respect to Securities of any series, means any one of the following events
and such other events as may be established with respect to the Securities of
that series as contemplated by Section 2.03 hereof:
(a) default in the payment of interest upon any Securities of that
series when it becomes due and payable, and continuance of such default
for a period of 30 days; or
(b) default in the payment of all or any part of the principal or
(or premium, if any, on) any Securities of that series as and when the
same shall become due and payable either at maturity, upon redemption
(including redemption for the sinking fund), by declaration or otherwise;
or
(c) default in the performance, or breach, of any covenant of the
Company in this Indenture (other than a covenant a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with and other than those set forth exclusively in terms of any
particular series of Securities established as contemplated in this
Indenture), and continuance of such default or breach for a period of 90
days after there has been given, by registered or
<PAGE> 43
35
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in principal amount of the
outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(d) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or
for any substantial part of its property, or ordering the winding-up or
liquidation of its affairs and such decree or order shall remain unstayed
and in effect for a period of 90 consecutive days; or
(e) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due.
If an Event of Default described in clause (a) or (b) or established
pursuant to Section 2.03 occurs and is continuing, then, and in each and every
such case, unless the principal of all of the Securities of such series shall
have already become due and payable, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Securities of such series
then outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by Securityholders), may declare the entire principal of all
the Securities of such series and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default described in clause (c), (d)
or (e) occurs and is continuing, then and in each and every such case, unless
the principal of all the Securities shall have already become due and payable,
either the Trustee of the holders of not less than 25% in aggregate principal
amount of all the Securities then outstanding hereunder (treated as one class),
by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal of all the Securities then
outstanding and interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable.
<PAGE> 44
36
The foregoing provisions, however, are subject to the condition that if,
at any time after the principal of the Securities of any series (or of all the
Securities, as the case may be) shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all the Securities of any series (or all the Securities, as the
case may be) and the principal of and premium, if any, on any and all Securities
of such series (or of all the Securities, as the case may be) which shall have
become due otherwise than by acceleration (with interest upon such principal and
premium, if any, and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest at the same rate as
the rate of interest specified in the Securities of such series, or at the
respective rates of interest of the Securities, as the case may be, to the date
of such payment or deposit) and such amount as shall be sufficient to cover
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, as provided in Section 8.06, and if
any and all Events of Default under this Indenture, other than the non-payment
of the principal of or premium, if any, on Securities which shall have become
due by acceleration, shall have been cured, waived or otherwise remedied as
provided herein--then and in every such case the holders of a majority in
aggregate principal amount of the Securities of such series (or of all the
Securities, as the case may be) then outstanding, by written notice to the
Company and to the Trustee, may waive all defaults with respect to that series
(or with respect to all Securities, as the case may be, in such case, treated as
a single class), and rescind and annul such declaration and its consequences,
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company,
the Trustee and the holders of the Securities shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the Trustee and the holders of the Securities shall
continue as though no such proceeding had been taken.
SECTION 7.02. Payment of Securities on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Securities of any series as and when the
same shall become due and payable, and such default shall have continued for a
period of 30 days, or (b) in case default shall be made in the payment of the
<PAGE> 45
37
principal of or premium, if any, on any of the Securities of any series as and
when the same shall have become due and payable, whether at maturity of the
Securities of that series or upon redemption or by declaration or otherwise--
then, upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the holders of the Securities of that series, the whole amount that
then shall have become due and payable on all such Securities of that series for
principal and premium, if any, or interest, or both, as the case may be, with
interest upon the overdue principal and premium, if any, and (to the extent that
payment of such interest is enforceable under applicable law) upon the overdue
installments of interest at the rate of interest borne by the Securities of that
series; and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including a reasonable compensation
to the Trustee, its agents, attorneys and counsel, as provided in Section 8.06.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name as trustee of an express trust, shall be
entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on such
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on such Securities wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Securities of any
series under Title 11, United States Code, or any other applicable law, or in
case a receiver or trustee (or similar official) shall have been appointed for
the property of the Company or such other obligor, or in the case of any other
similar judicial proceedings relative to the Company or other obligor upon the
Securities of any series, or to the creditors or property of the Company or such
other obligor, the Trustee, irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 7.02, shall be
entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal and interest
owing and unpaid in respect of the Securities of such series and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel, as
provide in Section 8.06) and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Securities of
any series, or to the creditors
<PAGE> 46
38
or property of the Company or such other obligor, unless prohibited by
applicable law and regulations, to vote on behalf of the holders of the
Securities of any series in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
proceedings or person performing similar functions in comparable proceedings,
and to collect and receive any moneys or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
charges and expenses; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the Securityholders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of such payments directly to the Securityholders, to pay to the Trustee
such amounts as shall be sufficient to cover reasonable compensation to the
Trustee, each predecessor Trustee and their respective agents, attorneys and
counsel, as provided in Section 8.06.
Nothing herein contained shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities of any series or the rights of any holder thereof or to authorize the
Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of all
the Securities in respect of which such action was taken.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities of the series affected thereby and it shall not be necessary
to make any such holders of the Securities parties to any such proceedings.
<PAGE> 47
39
Section 7.03 Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee shall be applied in the order following, at the date or
dates fixed by the Trustee for the distribution of such moneys, upon
presentation of the several Securities of any series in respect of which moneys
have been collected, and stamping thereon the payment, if only partially paid,
and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection
applicable to each such series and reasonable compensation to the Trustee,
its agents, attorneys and counsel, as provided in Section 8.06;
SECOND: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall not have become due and
be unpaid, to the payment of interest on the Securities of each such
series in the order of the maturity of the installments of such interest,
with interest (to the extent that such interest has been collected by the
Trustee) upon the overdue installments of interest at the respective rates
borne by the Securities of each such series, such payments to be made
ratably to the persons entitled thereto;
THIRD: In case the principal of the outstanding Securities in
respect of which moneys have been collected shall have become due, by
declaration or otherwise, to the payment of the whole amount then owing
and unpaid upon the Securities of each such series for principal and
premium, if any, and interest, with interest on the overdue principal and
premium, if any, and (to the extent that such interest has been collected
by the Trustee) upon overdue installments of interest at the respective
rates specified in the Securities of each such series: and in case such
moneys shall be insufficient to pay in full the whole amount so due and
unpaid upon the Securities of each such series, then to the payment of
such principal and premium, if any, and interest without preference or
priority of principal and premium, if any, over interest, or of interest
over principal and premium, if any, or of any installment of interest over
any other installment of interest, or of any Security of each such series
over any other Security of each such series, ratably to the aggregate of
such principal and premium, if any, and accrued and unpaid interest.
Any surplus then remaining shall be paid to the Company or to such other
person as shall be entitled to receive it.
Section 7.04. Proceedings by Securityholders. No holder of any Security
of any series shall have any right by virtue of or by availing of any provision
of this Indenture to institute any suit,
<PAGE> 48
40
action or proceeding in equity or at law upon or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of default and of the continuance thereof, as hereinbefore provided, and
unless also the holders of not less than 25% in aggregate principal amount of
the Securities of that series then outstanding, or, in the case of any Event of
Default described in clause (c), (d) or (e) of Section 7.01, 25% in aggregate
principal amount of all Securities then outstanding, shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonably
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity shall have failed to institute any
such action, suite or proceeding, it being understood and intended, and being
expressly covenanted by the taker and holder of every Security with every other
taker and holder and the Trustee, that no one or more holders of Securities of
any series shall have any right in any manner whatever by virtue of or by
availing of any provision of this Indenture to affect, disturb or prejudice the
rights of any other holder of Securities, or to obtain or seek to obtain
priority over or preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all holders of Securities of the applicable
series.
Notwithstanding any other provisions in this Indenture, however, the right
of any holder of any Security to receive payment of the principal of, premium,
if any, and interest on such Security, on or after the same shall have become
due and payable, or to institute suit for the enforcement of any such payment,
shall not be impaired or affected without the consent of such holder.
SECTION 7.05. Proceedings by Trustee. In case of an Event of Default
hereunder the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suite in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 7.06. Remedies Cumulative and Continuing. All powers and remedies
given by this Article Seven to the Trustee or to the Securityholders shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any
thereof or of any other powers and remedies available to the Trustee or the
holders of the
<PAGE> 49
41
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no
delay or omission of the Trustee or of any holder of any of the Securities to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article Seven
or by law to the trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
SECTION 7.07. Direction of Proceedings and Waiver of Defaults by Majority
of Securityholders. The holders of a majority in aggregate principal amount of
the Securities of any or all series at the time outstanding shall have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee; provided, however, that (subject to the provisions of Section 8.01)
the Trustee shall have the right to decline to follow any such direction if the
Trustee shall determine that the action so directed would be unjustly
prejudicial to the holders not taking part in such direction or if the Trustee
being advised by counsel determines that the action or proceeding so directed
may not lawfully be taken or if the Trustee in good faith by its board of
directors or trustees, executive committee, or a trust committee of directors or
trustees and/or Responsible Officers shall determine that the action or
proceedings so directed would involve the Trustee in personal liability. Subject
to Sections 7.01 and 7.02, the holders of a majority in aggregate principal
amount of the Securities of that series at the time outstanding may on behalf of
the holders of all the Securities of such series waive any past default or Event
of Default including any default or Event of Default established pursuant to
Section 2.03 (or, in the case of an event specified in clause (c), (d) or (e) of
Section 7.01, the holders of a majority in aggregate principal amount of all the
Securities then outstanding (voting as one class)) may waive such default or
Event of Default, and its consequences except a default (a) in the payment of
principal of, premium, if any, or interest on any of the Securities or (b) in
respect of covenants or provisions hereof which cannot be modified or amended
without the consent of the holder of each Security affected. Upon any such
waiver the Company, the Trustee and the holders of the Securities of that series
(or of all Securities, as the case may be) shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon. Whenever any default or Event of Default hereunder shall
have been waived as permitted by this Section 7.07, said default or Event of
Default shall for all purposes of the Securities of that series (or of all
Securities, as the case may
<PAGE> 50
42
be) and this Indenture be deemed to have been cured and to be not continuing.
Section 7.08. Notice of Defaults. The Trustee shall, within 90 days after
the occurrence of a default with respect to any of the Securities of any series
mail to all Securityholders of that series, as the names and addresses of such
holders appear upon the Securities register, notice of all defaults with respect
to that series known to the Trustee, unless such defaults shall have been cured
before the giving of such notice (the term "defaults" for the purpose of this
Section 7.08 being hereby defined to be the events specified in clauses (a),
(b), (c), (d) and (e) of Section 7.01, not including periods of grace, if any,
provided for therein, and irrespective of the giving of written notice specified
in clause (c) of Section 7.01); and provided that, except in the case of default
in the payment of the principal of, premium, if any, or interest on any of the
Securities of such series, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interests of the
Securityholders of such series; and provided further, that in the case of any
default of the character specified in Section 7.01(c) no such notice to
Securityholders shall be given until at least 90 days after the occurrence
thereof but shall be given within 120 days after such occurrence.
Section 7.09. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 7.09 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders of any series, holding in the
aggregate more than 10% in principal amount of the Securities of that series (or
in the case of any suit relating to or arising under clause (c), (d) or (e) of
Section 7.01, 10% in aggregate principal amount of all Securities) outstanding,
or to any suit instituted by any Securityholder for the enforcement of the
payment of the principal of or premium, if any, or interest on any Security
against the Company on or after the same shall have become due and payable.
<PAGE> 51
43
ARTICLE EIGHT
Concerning the Trustee
Section 8.01. Duties and Responsibilities of Trustee. With respect to any
series of Securities issued hereunder, the Trustee, prior to the occurrence of
an Event of Default with respect to Securities of that series and after the
curing or waiving of all Events of Default which may have occurred with respect
to Securities of that series, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture with respect to such
series. In case an Event of Default with respect to the Securities of a series
has occurred (which has not been cured or waived) the Trustee shall exercise
such of the rights and powers vested in it by this Indenture with respect to
such series, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default with respect to
the Securities of a series and after the curing or waiving of all Events
of Default with respect to that series which may have occurred
(1) the duties and obligations of the Trustee with respect to
the Securities of a series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations with
respect to such series as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the trust of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless
it shall be proved that the
<PAGE> 52
44
Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the
direction of the Securityholders pursuant to Section 7.07, relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it.
Section 8.02. Reliance on Documents, Opinions, etc. Except as otherwise
provided in Section 8.01
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, debenture or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee
by a copy thereof certified by the Secretary or an Assistant Secretary of
the Company;
(c) the Trustee may consult with counsel and any advice or Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken or omitted by it hereunder in good faith and
in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of
this Indenture, unless such Securityholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be
<PAGE> 53
45
authorized or within the discretion or rights or powers conferred upon it
by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall
not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond, debenture, coupon or
other paper or document, unless requested in writing to do so by the
holders of not less than a majority in principal amount of the Securities
of all series affected then outstanding; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expense or
liability as a condition to so proceeding; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents
(including any Authenticating Agent) or attorneys, and the Trustee shall
not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed by it with due care.
SECTION 8.03. No Responsibility for Recitals, etc. The recitals contained
herein and in the Securities (except in the certificate of authentication of the
Trustee or the Authenticating Agent) shall be taken as the statements of the
Company, and the Trustee and the Authenticating Agent assume no responsibility
for the correctness of the same. The Trustee and the Authenticating Agent make
no representations as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee and the Authenticating Agent shall not be accountable
for the use or application by the Company of any Securities or the proceeds of
any Securities authenticated an delivered by the Trustee or the Authenticating
Agent in conformity with the provisions of this Indenture.
SECTION 8.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents, Conversion Agents or Registrar May Own Securities. The Trustee or any
Authenticating Agent or any paying agent or any transfer agent or any conversion
agent or any Securities registrar, in its individual or any other capacity, may
become the owner or pledgee of Securities with the same rights it would have if
it were not Trustee, Authenticating Agent, paying agent, transfer agent,
conversion agent or Securities registrar.
<PAGE> 54
46
SECTION 8.05. Moneys to Be Held in Trust. Subject to the provisions of
Section 13.04, all moneys received by the trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purpose for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee and any paying agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company. So long as no Event of Default shall have occurred and
be continuing, all interest allowed, if any, on any such moneys shall be paid
from time to time upon the written order of the Company, signed by the Chairman
of the Board of Directors, the President, any Vice President, the Treasurer or
any Assistant Treasurer of the Company.
SECTION 8.06. Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ and any amounts paid by the
Trustee to any Authenticating Agent pursuant to Section 8.14) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
If any property other than cash shall at any time be subject to the lien of this
Indenture, the Trustee, if and to the extent authorized by a receivership or
bankruptcy court of competent jurisdiction or by the supplemental instrument
subjecting such property to such lien, shall be entitled to make advances for
the purpose of preserving such property or of discharging tax liens or other
prior liens or encumbrances thereon. The Company also covenants to indemnify
each of the Trustee, and any predecessor Trustee for, and to hold each of them
harmless against, any loss, liability or expense arising out of or in connection
with the acceptance or administration of this trust and the performance of its
duties hereunder including the costs and expenses of defending itself against
any claim of liability in the premises, except to the extent such loss,
liability or expense results from its own negligence or bad faith. The
obligations of the Company under this Section 8.06 to compensate the Trustee and
to pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a claim prior to that of the Securities upon all property and
funds held or collected by the Trustee as such, except funds held in trust for
the benefit of the holders of particular Securities.
SECTION 8.07 Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.01 and 8.02, whenever in the
<PAGE> 55
47
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
Certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.
SECTION 8.08. Conflicting Interest of Trustee. (a) If the Trustee has or
shall acquire any conflicting interest, as defined in this Section 8.08 with
respect to the Securities of any series, it shall, within 90 days after
ascertaining that it has such conflicting interest, either eliminate such
conflicting interest or resign with respect to the Securities of that series in
the manner and with the effect specified in Section 8.10.
(b) In the event that the Trustee shall fail to comply with the provisions
of subsection (a) of this Section 8.08 with respect to the Securities of any
series, the Trustee shall, within 10 days after the expiration of such 90-day
period, transmit notice of such failure to all holders of Securities of that
series, as the names and addresses of such holders appear upon the Securities
register.
(c) For the purposes of this Section 8.08 the Trustee shall be deemed to
have a conflicting interest with respect to Securities of any series if
(1) the Trustee is trustee under this Indenture with respect to the
Securities of any other series or under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the Company or other
obligor on the Securities of such series (each of which is hereafter
in this Section called a "Security party") are outstanding, unless
such other indenture is a collateral trust indenture under which the
only collateral consists of Securities issued under this Indenture;
provided that there shall be excluded from the operation of this
paragraph this Indenture with respect to the Securities of any other
series and any other indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of a Security party (as defined in Section 8.13), are
outstanding if (i) this Indenture is and, if applicable, this
Indenture and such other indenture or indentures are wholly
unsecured and such other indenture or indentures are hereafter
qualified under the Trust Indenture Act of 1939, unless the
Securities and Exchange Commission shall have found
<PAGE> 56
48
and declared by order pursuant to subsection (b) of Section 305 or
subsection (c) of Section 307 of the Trust Indenture Act of 1939
that differences exist between the provisions of this Indenture with
respect to Securities of such series and one or more other series
or, if applicable, this Indenture and the provisions of such other
indenture or indentures which are so likely to involve a material
conflict of interest as to make it necessary in the public interest
or for the protection of investors to disqualify the Trustee from
acting as such under this Indenture and such other indenture or
indentures, or (ii) the Company shall have sustained the burden of
proving, on application to the Securities and Exchange Commission
and after opportunity for hearing thereon, that trusteeship under
this Indenture with respect to Securities of such series and one or
more other series or, if applicable, this Indenture and such other
indenture or indentures is not so likely to involve a material
conflict of interest as to make it necessary in the public interest
or for the protection of investors to disqualify the Trustee from
acting as such under this Indenture with respect to Securities of
such series and one or more other series or, if applicable, this
Indenture and one of such indentures;
(2) the Trustee or any of its directors or executive officers
is an obligor upon the Securities of any series issued under this
Indenture or an underwriter for a Security party;
(3) the Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common
Control with a Security party or an underwriter for a Security
party;
(4) the Trustee or any of its directors or executive officers
is a director, officer, partner, employee, appointee, or
representative of a Security party, or of an underwriter (other than
the Trustee itself) for a Security party who is currently engaged in
the business of underwriting, except that (A) one individual may be
a director and/or an executive officer of the Trustee and a director
and/or an executive officer of a Security party, but may not be at
the same time an executive officer of both the Trustee and a
Security party; (B) if and so long as the number of directors of the
Trustee in office is more than nine, one additional individual may
be a director and/or an executive officer of the Trustee and a
director of a Security party; and (C) the Trustee may be designated
by a Security party or by an underwriter for a Security party to act
in the capacity of transfer agent, registrar, custodian, paying
<PAGE> 57
49
agent, fiscal agent, escrow agent, or depositary, or in any other
similar capacity, or, subject to the provisions of paragraph (1) of
this subsection (c), to act as trustee whether under an indenture or
otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by a Security party or by any director,
partner, or executive officer thereof, or 20% or more of such voting
securities is beneficially owned, collectively, by any two or more
of such persons; or 10% or more of the voting securities of the
Trustee is beneficially owned either by an underwriter for a
Security party or by any director, partner, or executive officer
thereof, or is beneficially owned, collectively, by any two or more
such persons;
(6) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, (A) 5% or
more of the voting securities, or 10% or more of any other class of
security, of a Security party, not including the Securities issued
under this Indenture and securities issued under any other indenture
under which the Trustee is also trustee, or (B) 10% or more of any
class of security of an underwriter for a Security party;
(7) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 5% or
more of the voting securities of any person who, to the knowledge of
the Trustee, owns 10% or more of the voting securities of, or
controls directly or indirectly or is under direct or indirect
common control with, a Security party;
(8) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 10% or
more of any class of security of any person who, to the knowledge of
the Trustee, owns 50% or more of the voting securities of a Security
party; or
(9) the Trustee owns on May 15 in any calendar year, in the
capacity of executor, administrator, testamentary or inter vivos
trustee, guardian, committee or conservator, or in any other similar
capacity, an aggregate of 25% or more of the voting securities, or
of any class of security, of any person, the beneficial ownership of
a specified percentage of which would have constituted a conflicting
interest under paragraph (6), (7) or (8) of this subsection (c). As
to any such securities of which the Trustee acquired ownership
through becoming executor, administrator or testamentary trustee of
an estate which included them, the provisions of the preceding
sentence
<PAGE> 58
50
shall not apply, for a period of two years from the date of such
acquisition, to the extent that such securities included in such
estate do not exceed 25% of such voting securities or 25% of any
such class of security. Promptly after May 15, in each calendar
year, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such May
15. If the Company fails to make payment in full of principal of or
interest on any of the Securities when and as the same become due
and payable, and such failure continues for 30 days thereafter, the
Trustee shall make a prompt check of its holdings of such securities
in any of the above-mentioned capacities as of the date of the
expiration of such 30-day period and, after such date,
notwithstanding the foregoing provisions of this paragraph (9), all
such securities so held by the Trustee, with sole or joint control
over such securities vested in it, shall, but only so long as such
failure shall continue, be considered as though beneficially owned
by the Trustee for the purposes of paragraphs (6), (7), and (8) of
this subsection (c).
The specifications of percentages in paragraphs (5) to (9), inclusive, of
this subsection (c) shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this subsection (c).
For the purposes of paragraphs (6), (7), and (9) of this subsection (c)
only, (A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (B) an obligation shall be deemed to be in default
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (C) the Trustee shall not be deemed to be the
owner or holder of (i) any security which it holds as collateral security (as
trustee or otherwise) for any obligation which is not in default as defined in
clause (B) above, or (ii) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (iii) any
security which it holds as agent for collection, or as custodian, escrow agent,
or depositary, or in any similar representative capacity.
Except as provided in the next preceding paragraph hereof, the work
"security" or "securities" as used in this Indenture shall mean any note, stock,
treasury stock, bond, debenture, evidence of indebtedness, certificate of
interest or participation in any
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51
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas or other mineral rights, or, in general, any
interest or instrument commonly known as a "security" or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase any of the
foregoing.
(d) For the purposes of this Section 8.08:
(1) The term "underwriter" when used with reference to a
Security party shall mean every person who, within three years prior
to the time as of which the determination is made, has purchased
from such Security party with a view to, or has offered or sold for
such Security party in connection with, the distribution of any
security of such Security party outstanding at such time, or has
participated or has had a direct or indirect participation in any
such undertaking, or has participated or has had a participation in
the direct or indirect underwriting of any such undertaking, but
such term shall not include a person whose interest was limited to a
commission from an underwriter or dealer not in excess of the usual
and customary distributors' or sellers' commission.
(2) The term "director" shall mean any director of a
corporation or any individual performing similar functions with
respect to any organization whether incorporated or unincorporated.
(3) The term "person" shall mean an individual, a corporation,
a partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political
subdivision thereof. As used in this paragraph, the term "trust"
shall include only a trust where the interest or interests of the
beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" shall mean any security
presently entitling the owner or holder thereof to vote in the
direction or management of the affairs of a person, or any security
issued under or pursuant to any trust, agreement or arrangement
whereby a trustee or trustees or agent or agents for the owner or
holder of such security are presently entitled to vote in the
direction or management of the affairs of a person.
(5) The term "executive officer" shall mean the president,
every vice president, every trust officer, the
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cashier, the secretary, and the treasurer of a corporation, and any
individual customarily performing similar functions with respect to
any organization whether incorporated or unincorporated, but shall
not include the chairman of the board of directors.
The percentages of voting securities and other securities specified in
this Section 8.08 shall be calculated in accordance with the following
provisions:
(A) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section 8.08
(each of whom is referred to as a "person" in this paragraph) means
such amount of the outstanding voting securities of such person as
entitles the holder or holders to cast such specified percentage of
the aggregate votes which the holders of all the outstanding voting
securities of such person are entitled to cast in the direction or
management of the affairs of such person.
(B) A specified percentage of a class of securities of a person
means such percentage of the aggregate amount of securities of the
class outstanding.
(C) The term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the
number of shares if relating to capital shares, and the number of
units if relating to any other kind of security.
(D) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating
to another class of securities of the issuer, if the
obligations evidenced by such other class of securities is not
in default as to principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security for
an obligation of the issuer not in default as to principal or
interest or otherwise;
(iv) securities held in escrow if placed in escrow by the
issuer thereof; provided, however, that any
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voting securities of an issuer shall be deemed outstanding if
any person other than the issuer is entitled to exercise the
voting rights thereof.
(E) A security shall be deemed to be of the same class as another
security if both securities confer upon the holders or holders
thereof substantially the same rights and privileges; provided,
however, that, in the case of secured evidences of indebtedness, all
of which are issued under a single indenture, differences in the
interest rates or maturity dates of various series thereof shall not
be deemed sufficient to constitute such series different classes,
and provided, further, that, in the case of unsecured evidences of
indebtedness, differences in the interest rates or maturity dates
thereof shall not be deemed sufficient to constitute them securities
of different classes, whether or not they are issued under a single
indenture.
SECTION 8.09. Eligibility of Trustee. The Trustee hereunder shall at all
times be a corporation organized and doing business under the laws of the United
States or any State or Territory thereof or of the District of Columbia
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $5,000,000, subject to supervision or
examination by Federal, State, Territorial, or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 8.09 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 8.09, the Trustee shall resign immediately
in the manner and with the effect specified in Section 8.10.
SECTION 8.10. Resignation or Removal of Trustee. (a) The Trustee, or any
trustee or trustees hereafter appointed, may at any time resign with respect to
one or more or all series of Securities by giving written notice of such
resignation to the Company and by mailing notice thereof to the holders of the
applicable series of Securities at their addresses as they shall appear on the
Securities register. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee or trustees with respect to the
applicable series by written instrument, in duplicate, executed by order of its
Board of Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy the successor trustee. If no successor trustee
shall have been so appointed with respect to any series of Securities and have
accepted appointment within 60 days after the mailing of such
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54
notice of resignation to the affected Securityholders, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona fide holder of a Security or
Securities of the applicable series for at least six months may, subject to the
provisions of Section 7.09, on behalf of himself and all other similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur--
(1) the Trustee shall fail to comply with the provisions of
subjection (a) of Section 8.08 after written request therefor by the
Company or by any Securityholder who has been a bona fide holder of
a Security or Securities for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.09 and shall fail to resign after written
request therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee with respect to all
Securities and appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor trustee,
or, subject to the provisions of Section 7.09, any Securityholder who has been a
bona fide holder of a Security or Securities of the applicable series for at
least six months may, on behalf of himself and all other similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee with
respect to all Securities and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities of one or more series (each series voting as a class) or all series
(voting as one class) at the time outstanding may at any time remove the Trustee
with respect to the applicable series of Securities or all series, as the case
may be, and nominate a successor trustee with respect to the applicable series
of Securities or all series, as the case may be, which shall be
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deemed appointed as successor trustee with respect to the applicable series
unless within ten days after such nomination the Company objects thereto, in
which case the Trustee so removed or any Securityholder of the applicable
series, upon the terms and conditions and otherwise as in subdivision (a) of
this Section 8.10 provided, may petition any court of competent jurisdiction for
an appointment of a successor trustee with respect to such series.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
SECTION 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to all or any applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations with respect to such series of its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to the provisions
of Section 8.06, execute and deliver an instrument transferring to such
successor trustee all the rights and powers of the trustee so ceasing to act.
Upon request of any such successor trustee, the Company shall execute any and
all instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers. Any trustee
ceasing to act shall, nevertheless, retain a claim upon all property or funds
held or collected by such trustee to secure any amounts then due it pursuant to
the provisions of Section 8.06.
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If a successor trustee is appointed with respect to the Securities of one
or more (but not all) series, the Company, the predecessor Trustee and each
successor trustee with respect to the Securities of any applicable series shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Securities of any series as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trust hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts hereunder separate and
apart from any trust or trusts hereunder administered by any other such trustee.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company shall mail notice of the succession of such trustee
hereunder to the holders of Securities of any applicable series at their
addresses as they shall appear on the Securities register. If the Company fails
to mail such notice within ten days after the acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Company.
SECTION 8.12. Succession by Merger, etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor of
the Trustee hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor trustee, and deliver
such Securities so authenticated; and in case at that time any of the Securities
of any series shall not have been authenticated, any successor to the Trustee
may authenticate such Securities either in the name of any predecessorhereunder
or in the name of the successor trustee; and in all such cases such
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certificates shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or authenticate Securities of any
series in the name of any predecessor Trustee shall apply only to its successor
or successors by merger, conversion or consolidation.
SECTION 8.13. Limitation on Rights of Trustee as a Creditor. (a) Subject
to the provisions of subsection (b) of this Section 8.13, if the Trustee shall
be or shall become a creditor, directly or indirectly, secured or unsecured, of
the Company or of any other obligor on the Securities (each of which is
hereafter in this Section 8.13 called a "Security party") within four months
prior to a default, as defined in paragraph (1) of subsection (c) of this
Section 8.13, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the holders of the
Securities, and the holders of other indenture securities (as defined in
paragraph (2) of subsection (c) of this Section 8.13):
(1) an amount equal to any and all reductions in the amount due and
owning upon any claim as such creditor in respect of principal or
interest, effected after the beginning of such four-month period and valid
as against such Security party and its other creditors, except any such
reduction resulting from the receipt or disposition of any property
described in paragraph (2) of this subsection, or from the exercise of any
right of set-off which the Trustee could have exercised if a petition in
bankruptcy had been filed by or against such Security party upon the date
of such default; and
(2) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such four-month
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of such Security
party and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of
any such claim by any person (other than such Security party) who is
liable thereon, and (ii) the proceeds of the bona fide sale of any such
claim by the Trustee to a third person, and (iii) distributions made in
case, securities, or other property in respect of claims filed
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58
against such Security party in bankruptcy or receivership or in
proceedings for reorganization pursuant to Title 11, United States Code or
applicable state law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such four-month period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such
four-month period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default, as defined in
subsection (c) of this Section 8.13, would occur within four months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim
as provided in such paragraph (B) or (C), as the case may be, to the
extent of the fair value of such property.
For the purposes of paragraphs (B), (C), and (D), property substituted
after the beginning of such four-month period for property held as security at
the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of the Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property held
in such special account and the proceeds thereof shall be apportioned between
the Trustee, the Securityholders and the holders of other indenture securities
in such manner that the Trustee, the Securityholders and the holders of other
indenture securities realize, as a result of payments from such special account
and payments of dividends on claims filed against such Security party in
bankruptcy or receivership or in proceedings for reorganization pursuant to
Title 11, United States Code, or applicable state law, the same percentage of
their respective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from such Security party of the funds
and property in such special account and before crediting to the respective
claims of the Trustee, the Securityholders, and the holders of other indenture
securities dividends on claims filed against such Security party in bankruptcy
or receivership or in proceedings for reorganization pursuant to
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Title 11, United States Code or applicable state law, but after crediting
thereon receipts on account of the indebtedness represented by their respective
claims from all sources other than from such dividends and from the funds and
property so held in such special account. As used in this paragraph, with
respect to any claim, the term "dividends" shall include any distribution with
respect to such claim, in bankruptcy or receivership or in proceedings for
reorganization pursuant to Title 11, United States Code, or applicable state
law, whether such distribution is made in cash, securities, or other property,
but shall not include any such distribution with respect to the secured portion,
if any, of such claim. The court in which such bankruptcy, receivership, or
proceeding for reorganization is pending shall have jurisdiction (i) to
apportion among the Trustee, the Securityholders, and the holders of other
indenture securities, in accordance with the provisions of this paragraph, the
funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give the provisions
of this paragraph due consideration in determining the fairness of the
distributions to be made to the Trustee, the Securityholders and the holders of
other indenture securities with respect to their respective claims, in which
event it shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as security for any
such claim, or to make a specific allocation of such distributions as between
the secured and unsecured portions of such claims, or otherwise to apply the
provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such
four-month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such four-month period, it shall be
subject to the provisions of this subsection (a) if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had continued as
trustee, occurred after the beginning of such four-month period; and
(ii) such receipt of property or reduction of claim occurred within
four months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of this
Section 8.13 a creditor relationship arising from
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
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(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien of
this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advance and of the circumstances
surrounding the making thereof is given to the Securityholders at the time
and in the manner provided in Section 6.04 with respect to reports
pursuant to the subsections (a) and (b) thereof, respectively;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c) of this
Section 8.13;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of a Security
party; or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within
the classification of self-liquidating paper as defined in subsection (c)
of this Section 8.13.
(c) As used in this Section 8.13:
(1) The term "default" shall mean any failure to make payment in
full of the principal of or interest upon any of the Securities or upon
the other indenture securities when and as such principal or interest
becomes due and payable;
(2) The term "other indenture securities" shall mean securities upon
which a Security party is an obligor (as defined in the Trust Indenture
Act of 1939) outstanding under any other indenture (A) under which the
Trustee is also trustee, (B) which contains provisions substantially
similar to the provisions of subsection (a) of this Section 8.13, and (C)
under which a default exists at the time of the apportionment of the funds
and property held in said special account;
(3) The term "cash transaction" shall mean any transaction in which
full payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
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(4) The term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by a Security party for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security; provided that the
security is received by the Trustee simultaneously with the creation of
the creditor relationship with such Security party arising from the
making, drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
SECTION 8.14. Authenticating Agents. There may be one or more
Authenticating Agents appointed by the Trustee upon the request of the Company
with power to act on the Trustee's behalf and subject to its direction in the
authentication and delivery of Securities of any series issued upon exchange or
transfer thereof as fully to all intents and purposes as though any such
Authenticating Agent had been expressly authorized to authenticate and deliver
Securities of such series; provided, that the Trustee shall have no liability to
the Company for any acts or omissions of the Authenticating Agent with respect
to the authentication and delivery of Securities of any series. Any such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States or of any State or Territory
thereof or of the District of Columbia authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of at least
$5,000,000 and being subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually pursuant to law or the requirements of
such authority, then for the purposes of this Section 8.14 the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 8.14, without the execution or filing of any paper or any further act on
the part of the parties hereto or such Authenticating Agent.
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Any Authenticating Agent may at any time resign with respect to one or
more or all series of Securities by giving written notice of resignation to the
Trustee and to the Company. The Trustee may at any time terminate the agency of
any Authenticating Agent with respect to one or more or all series of Securities
by giving written notice of termination to such Authenticating Agent and to the
Company. Upon receiving such a notice of resignation or upon such a termination,
or in case at any time any Authenticating Agent shall cease to be eligible under
this Section 8.14, the Trustee may, and upon the request of the Company shall,
promptly appoint a successor Authenticating Agent with respect to the applicable
series eligible under this Section 8.14, shall give written notice of such
appointment to the Company and shall mail notice of such appointment to all
holders of the applicable series of Securities as the names and addresses of
such holders appear on the Securities register. Any successor Authenticating
Agent with respect to all or any series upon acceptance of its appointment
hereunder shall become vested with all rights, powers, duties and
responsibilities with respect to such series of its predecessor hereunder, with
like effect as if originally named as Authenticating Agent herein.
The Trustee agrees to pay to any Authenticating Agent from time to time
reasonable compensation for its services, and the Trustee shall be entitled to
be reimbursed for such payments, subject to Section 8.06. Any Authenticating
Agent shall have no responsibility or liability for any action taken by it as
such in accordance with the directions of the Trustee.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form.
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
as Trustee
By
as Authenticating Agent
for the Trustee
By
Authorized Officer
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ARTICLE NINE
Concerning the Securityholders
SECTION 9.01. Action by Securityholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Securities of any or all series may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action) the fact that at the time of taking any such
action the holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by such Securityholders in person or by agent or proxy appointed in
writing, or (b) by the record of such holders of Securities voting in favor
thereof at any meeting of such Securityholders duly called and held in
accordance with the provisions of Article Ten, or (c) by a combination of such
instrument or instruments and any such record of such a meeting of such
Securityholders.
SECTION 9.02. Proof of Execution by Securityholders. Subject to the
provisions of Sections 8.01, 8.02 and 10.05, proof of the execution of any
instrument by a Securityholder or his agent or proxy shall be sufficient if made
in accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
ownership of Securities shall be proved by the Securities register or by a
certificate of the Securities registrar.
The record of any Securityholders' meeting shall be proved in the manner
provided in Section 10.06.
SECTION 9.03. Who Are Deemed Absolute Owners. The Company, the Trustee,
any Authenticating Agent, any paying agent, any transfer agent, any conversion
agent and any Securities registrar may deem the person in whose name such
Security shall be registered upon the Securities register to be, and may treat
him as, the absolute owner of such Security (whether or not such Security shall
be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purposes of conversion and of receiving payment of or on
account of the principal of, premium, if any, and interest on such Security and
for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
conversion agent nor any Securities registrar shall be affected by any notice to
the contrary. All such payments so made to any holder for the time being or upon
his order shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Security.
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SECTION 9.04. Securities Owned by Company Deemed Not Outstanding. In
determining whether the holders of the requisite aggregate principal amount of
Securities have concurred in any direction, consent or waiver under this
Indenture, Securities which are owned by the Company or any other obligor on the
Securities or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Securities shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; provided that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, consent
or waiver, only Securities which a Responsible Officer knows are so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as outstanding for the purposes of this Section 9.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Securities and that the pledgee is not the Company or any such other
obligor or person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor.
Upon request of the Trustee, the Company shall furnish to the Trustee promptly
an Officers' Certificate listing and identifying all Securities, if any, known
by the Company to be owned or held by or for the account of any of the
above-described person; and, subject to the provisions of Section 8.01, the
Trustee shall be entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Securities not
listed therein are outstanding for the purpose of any such determination.
SECTION 9.05. Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.01, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Securities specified in this Indenture in connection
with such action, any holder of a Security (or any Security issued in whole or
in part in exchange or substitution therefor) who consented to such action may,
by filing written notice with the Trustee at its principal office and upon proof
of holding as provided in Section 9.02, revoke such action so far as concerns
such Security (or so far as concerns the principal amount represented by any
exchanged or substituted Security). Except as aforesaid any such action taken by
the holder of any Security shall be conclusive and binding upon such holder and
upon all future holders and owners of such Security, and of any Security issued
in exchange or substitution therefor, irrespective of whether or not any
notation in regard thereto is made upon such Security or any Security issued in
exchange or substitution therefor. Any action taken by the holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action shall be conclusively binding upon the
Company, the Trustee and the holders of such Securities.
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ARTICLE TEN
Securityholders' Meetings
SECTION 10.01. Purposes of Meetings. A meeting of Securityholders of any
or all series may be called at any time and from time to time pursuant to the
provisions of this Article Ten for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Securityholders pursuant to any of the provisions of Article
Seven;
(b) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article Eight;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.02; or
(d) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of such
Securities under any other provisions of this Indenture or under
applicable law.
SECTION 10.02. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Securityholders of any or all series to take any action
specified in Section 10.01, to be held at such time and at such place in the
Borough of Manhattan, The City of New York, as the Trustee shall determine.
Notice of every meeting of the Securityholders of any or all series, setting
forth the record date, time and place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be mailed to holders of
Securities of each series affected at their addresses as they shall appear on
the Securities register of each series affected. Such notice shall be mailed not
less than 20 nor more than 90 days prior to the date fixed for the meeting.
SECTION 10.03. Call of Meetings by Company or Securityholders. In case at
any time the Company pursuant to a resolution of the Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Securities of any
or all series, as the case may be, then outstanding, shall have requested the
Trustee to call a meeting of Securityholders of any or all series, as the case
may be, by written request setting forth in reasonable detail action proposed to
be taken at the meeting, and the Trustee shall not have mailed the notice of
such meeting within 20 days after receipt of such request, then the Company or
such
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Securityholders may determine the time and the place in said Borough of
Manhattan for such meeting and may call such meeting to take any action
authorized in Section 10.01, by mailing notice thereof as provided in Section
10.02.
SECTION 10.04. Qualifications for Voting. To be entitled to vote at any
meeting of Securityholders a person shall (a) be a holder of one or more
Securities with respect to which the meeting is being held or (b) a person
appointed by an instrument in writing as proxy by such a holder of one or more
such Securities. The only persons who shall be entitled to be present or to
speak at any meeting of Securityholders shall be the persons entitled to vote at
such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 10.05. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, in regard to proof of the holding
of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 10.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 9.04, at any meeting each holder of
Securities with respect to which such meeting is being held or proxy therefor
shall be entitled to one vote for each $1,000 principal amount of Securities
held or represented by him; provided, however, that no vote shall be cast or
counted at any meeting in respect of any Security challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Securities held
by him or instruments in writing as aforesaid duly designating him as the person
to vote on behalf of other Securityholders. At any meeting of Securityholders,
the presence of persons holding or representing Securities in an aggregate
principal amount sufficient to take action on the business for the transaction
of which such meeting was called shall constitute a quorum, but, if less than a
quorum is present, the persons holding or representing a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
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vote may adjourn such meeting with the same effect, for all intents and
purposes, as though a quorum had been present. Any meeting of Securityholders
duly called pursuant to the provisions of Section 10.02 or 10.03 may be
adjourned from time to time by a majority of those present, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
SECTION 10.06. Voting. The vote upon any resolution submitted to any
meeting of holders of Securities with respect to which such meeting is being
held shall be by written ballots on which shall be subscribed the signatures of
such holders or of their representatives by proxy and the serial number or
numbers of the Securities held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 10.02. The record
shall show the serial numbers of the Securities voting in favor of or against
any resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
ARTICLE ELEVEN.
Supplemental Indentures.
SECTION 11.01. Supplemental Indentures without Consent of Securityholders.
The Company, when authorized by a resolution of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to evidence the succession of another corporation to the
Company, or successive succession, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Twelve hereof;
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(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of all or any
series of Securities (and if such covenants are to be for the benefit of
less than all series of Securities stating that such covenants are
expressly being included for the benefit of such series) as the Board of
Directors and the Trustee shall consider to be for the protection of the
holders of such Securities, and to make the occurrence, or the occurrence
and continuance, of a default in any of such additional covenants,
restrictions or conditions a default or an Event of Default permitting the
enforcement of all or any of the several remedies provided in this
Indenture as herein set forth; provided, however, that in respect of any
such additional covenant, restriction or condition such supplemental
indenture may provide for a particular period of grace after default
(which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such
default or may limit the remedies available to the Trustee upon such
default;
(c) to provide for the issuance under this Indenture of Securities
in coupon form (including Securities registrable as to principal only) and
to provide for exchangeability of such Securities with the Securities
issued hereunder in fully registered form and to make all appropriate
changes for such purpose;
(d) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 and 2.03;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one trustee, pursuant
to the requirements of Section 8.11;
(f) to make provision with respect to the conversion rights of
holders of Convertible Securities pursuant to the requirements of Section
3.06; and
(g) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective
or inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture; provided that any such
action shall not materially adversely affect the interests of the holders
of the Securities.
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The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.01 may be executed by the Company and the Trustee without the consent of the
holders of any of the Securities at the time outstanding, notwithstanding any of
the provisions of Section 11.02.
SECTION 11.02. Supplemental Indentures with Consent of Securityholders.
With the consent (evidenced as provided in Section 9.01) of the holders of not
less than 66 2/3% in aggregate principal amount of the Securities at the time
outstanding of all series affected by such supplemental indenture (voting as a
class), the Company, when authorized by a resolution of the Board of Directors,
and the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of any supplemental indenture or of modifying in any manner the rights of the
holders of the Securities of each series so affected; 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 provided in the
Securities, or impair the right to convert Convertible Securities into Common
Stock on the terms set forth herein, or impair or affect the right of any
Securityholder to institute suit for payment thereof or the right of repayment,
if any, at the option of the holder, or modify any of the provisions of this
Indenture relating to the subordination of the Securities in a manner adverse to
the holders thereof without the consent of the holder of each Security so
affected, or (ii) reduce the aforesaid percentage of Securities the holders of
which are required to act pursuant to Section 7.07 or to consent to any such
supplemental indenture, without the consent of the holders of each Security then
affected.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of Securityholders of such series with respect to such covenant or
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provision, shall be deemed not to affect the rights under this Indenture of the
Securityholders of any other series.
Upon the request of the Company accompanied by a copy of a resolution of
the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 11.03. Compliance with Trust Indenture Act; Effect of Supplemental
Indentures. Any supplemental indenture executed pursuant to the provisions of
this Article Eleven shall comply with the Trust Indenture Act of 1939, as then
in effect. Upon the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Securities of each series
affected thereby shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications an amendments and all
the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
SECTION 11.04. Notation on Securities. Securities of any series
authenticated and delivered after the execution of any supplemental indenture
affecting such series pursuant to the provisions of this Article Eleven may bear
a notation in the form approved by the trustee as to any matter provided for in
such supplemental indenture. If the Company or the Trustee shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee or the Authenticating Agent and delivered
in exchange for the Securities of any series then outstanding.
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SECTION 11.05. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.01 and
8.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Eleven.
SECTION 11.06. Effect on Senior Indebtedness. No supplemental indenture
shall adversely affect the rights of any holder of Senior Indebtedness under
Article Four without the consent of such holder.
ARTICLE TWELVE.
Consolidation, Merger and Sale by the Company.
SECTION 12.01. Consolidation, Merger and Sale of Assets Permitted. The
Company covenants and agrees that it will not consolidate with, merge into, or
sell or otherwise dispose of all or substantially all its property as an
entirety to, any person other than a corporation organized under the laws of the
United States of America or any State or Territory thereof or of the District of
Columbia, lawfully entitled to acquire the same. The Company will not so
consolidate or merge, or make any such sale or other disposition, unless, and
the Company covenants and agrees that any such consolidation, merger, sale or
other disposition shall be on the condition that, (1) the provisions of Section
3.06 are complied with and (2) such corporation shall expressly assume the due
and punctual payment of the principal of and premium, if any, and interest on
all the Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company, by supplemental indenture satisfactory
to the Trustee, executed and delivered to the Trustee by such corporation. The
Company covenants and agrees that it will not so consolidate or merge or make
any such sale or other disposition, or permit any corporation to merge into the
Company, if immediately thereafter the Company or such successor corporation, as
the case may be, shall be in default in the performance or observance of any of
the covenants or conditions of this Indenture.
SECTION 12.02. Successor Corporation to Be Substituted for Company. In
case of any such merger, consolidation, sale or conveyance and upon any such
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part, and, in case of such a sale or
conveyance other than a lease, the Company thereupon shall be relieved of any
further obligation or liability hereunder or upon the Securities, and may
thereupon or at any time thereafter
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be dissolved, wound up or liquidated. Such successor corporation thereupon may
cause to be signed, and may issue either in its own name or in the name of Masco
Industries, Inc. any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee or the Authenticating Agent; and, upon the order of such successor
corporation (instead of the Company) and subject to all the terms, conditions
and limitations in this Indenture prescribed, the Trustee or the Authenticating
Agent shall authenticate and deliver any Securities which previously shall have
been signed and delivered by the officers of the Company to the Trustee or the
Authenticating Agent for authentication, and any Securities which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee or
the Authenticating Agent for that purpose. All the Securities so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale or conveyance, such
changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
SECTION 12.03. Evidence to Be Furnished Trustee. The Trustee, subject to
the provisions of Sections 8.01 and 8.02, may receive and rely upon an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any
consolidation, merger, sale or conveyance, and any such assumption complies with
the provisions of this Article Twelve.
ARTICLE THIRTEEN.
Satisfaction and Discharge of Indenture.
SECTION 13.01. Discharge of Indenture. When (a) the Company shall have
paid or caused to be paid the principal of and interest on all Securities of any
series outstanding hereunder, as and when the same shall have become due and
payable, (b) the Company shall deliver to the Trustee for cancellation all
Securities of any series theretofore authenticated (other than any Securities of
such series which shall have been destroyed, lost or stolen and which shall have
been replaced or paid as provided in Section 2.08 or converted) and not
theretofore cancelled, or (c) with respect to any series of Securities which,
under the terms specified in the resolution or supplemental indenture or
indentures referred to in Section 2.03, pursuant to which such series is
created, can be discharged prior to maturity, the Company shall deposit with the
Trustee, in trust, cash and/or a principal amount of obligations of or directly
guaranteed by the United States of America maturing or redeemable at the option
of the holder thereof not later than the
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date fixed for payment or redemption of all outstanding Securities of such
series which, together with the income to be earned on such obligations prior to
such date, equals the principal amount of (and any applicable premium on), all
such Securities of such series not theretofore cancelled or delivered to the
Trustee for cancellation, with interest to the date of their maturity or
redemption, as the case may be, but excluding, however, the amount of any moneys
for the payment of principal of, or premium, if any, or interest on the
Securities of such series (1) theretofore repaid to the Company in accordance
with the provisions of Section 13.04, or (2) paid to any State or to the
District of Columbia pursuant to its unclaimed property or similar laws, and if
in any such case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then (except in the case of (c) above as to
(i) rights of registration of transfer and exchange and any right of the Company
of optional redemption and to deliver Securities of such series to the Trustee
for cancellation, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities, (iii) any remaining rights of conversion of Convertible
Securities, (iv) the rights, obligations and immunities of the Trustee hereunder
and (v) the rights of the Securityholders as beneficiaries hereof with respect
to the property so deposited with the Trustee, all of which shall continue in
full force and effect) all of the Company's liability with respect to principal,
premium, if any, and interest on the Securities of such series shall be
discharged, this Indenture shall cease to be of further effect as to such
series, and the Trustee, on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture as to such series, the Company, however, hereby
agreeing to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred by the Trustee in connection with this
Indenture or the Securities; provided, however, that the rights of
Securityholders to receive amounts in respect of principal of and interest on
the Securities held by them shall not be delayed longer than required by
then-applicable mandatory rules or policies of any securities exchange if the
Securities of such series continue to be listed. Notwithstanding the foregoing,
if the Company makes a deposit of cash and/or obligations described in clause
(c) above with respect to any series of Securities which, under the terms
specified in the resolution or supplemental indenture or indentures referred to
in Section 2.03, pursuant to which such series is created, is subject to the
provisions of this sentence (whether or not such resolution or supplemental
indenture provides that such series can be discharged prior to maturity under
clause (c) above), and, concurrently with such deposit, notifies the Trustee
that such series shall no longer have the benefit of all or any portion of the
provisions of Article Seven of this Indenture and such other provisions of this
Indenture or the resolution or supplemental indenture, pursuant to which such
series is created, as are specifically permitted in such resolution or
supplemental indenture
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to be made inapplicable under this sentence with respect to such series, this
Indenture and such supplemental indenture or resolution shall thereupon be
deemed amended with respect to such series solely by the deletion in their
entirety of such provisions and this Indenture and such supplemental indenture
or resolution shall in all other respects be unaffected thereby.
SECTION 13.02. Deposited Moneys to Be Held in Trust by Trustee. Subject to
the provisions of Section 13.04, all moneys and obligations deposited with the
Trustee pursuant to Section 13.01 shall be held in trust and applied by it to
the payment, either directly or through any paying agent (including the Company
if acting as its own paying agent), to the holders of the particular Securities
for the payment of which such moneys and obligations have been deposited with
the Trustee, of all sums due and to become due thereon for principal, premium,
if any, and interest; provided, however, that the Company shall be entitled from
time to time to withdraw cash and/or obligations deposited under clause (c) or
the last sentence of Section 13.01 provided that the cash and obligations
thereafter on deposit and after giving effect to such withdrawal would, if then
deposited under such clause, satisfy in all respects the requirements of such
clause or the last sentence of Section 13.01. At the time of any such
withdrawal, the Company shall deliver to the Trustee an Officers' Certificate
demonstrating compliance with the provisions of such clause or sentence.
SECTION 13.03. Paying Agent to Repay Moneys Held. Upon the satisfaction
and discharge of this Indenture all moneys then held by any paying agent of the
Securities (other than the Trustee) shall, upon demand of the Company, be repaid
to it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such moneys.
SECTION 13.04. Return of Unclaimed Moneys. Except as may be required under
applicable law, any moneys deposited with or paid to the Trustee or any paying
agent for payment of the principal of, and premium, if any, or interest on
Securities and not applied but remaining unclaimed by the holders of Securities
for three years after the date upon which the principal of, and premium, if any,
or interest on such Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such paying agent on
written demand; and the holder of any of the Securities shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
and all liability of the Trustee or such paying agent with respect to such
moneys shall thereupon cease.
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ARTICLE FOURTEEN.
Immunity of Incorporators, Stockholders, Officers and Directors.
SECTION 14.01. Indenture and Securities Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Security, or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture or in any supplemental indenture, or in any Security,
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 of the
Company, either directly or through the Company or any successor corporation of
the Company, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Securities.
ARTICLE FIFTEEN.
Miscellaneous Provisions.
SECTION 15.01. Successors. All the covenants, stipulations, promises and
agreements in this Indenture contained by the Company shall bind its successors
and assigns whether so expressed or not.
SECTION 15.02. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 15.03. Addresses for Notices, etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Securities on the Company may be given of
served by being deposited postage prepaid by registered or certified mail in a
post office letter box addressed (until another address is filed by the Company
with the Trustee for the purpose) to Masco Industries Inc., 21001 Van Born Road,
Taylor, Michigan 48180, Attention: President. Any notice, direction, request or
demand by any Securityholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
office of the Trustee, 30 West Broadway, New York, New York 10015, Attention:
Corporate Trust Administration.
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SECTION 15.04. New York Contract. This Indenture and each Security shall
be deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be governed by and construed in accordance with the laws of
said State.
SECTION 15.05. Evidence of Compliance with Conditions Precedent. Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that in the opinion of the signers all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture (other than the Officers' Certificate called for by
Section 5.05) shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 15.06. Legal Holidays. In any case where the date of payment of
interest on or principal of or premium, if any, on the Securities will be in The
City of New York, New York a legal holiday or a day on which banking
institutions are authorized by law to close, the payment of such interest on or
principal of or premium, if any, on the Securities need not be made on such date
but may be made on the next succeeding day not in such City a legal holiday or a
day on which banking institutions are authorized by law to close, with the same
force and effect as if made on the date of payment and no interest shall accrue
for the period from and after such date.
SECTION 15.07. Trust Indenture Act to Control. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act
of 1939, such required provision shall control.
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SECTION 15.08. Table of Contents, Headings, etc. The table of contents and
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall no way modify or restrict any of the terms of provisions
hereof.
SECTION 15.09. Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 15.10. No Security Interest Created. Nothing in this Indenture or
in the Securities, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction where property of
the Company or its Subsidiaries is located.
ARTICLE SIXTEEN.
Redemption of Securities--Mandatory and
Optional Sinking Fund.
SECTION 16.01. Applicability of Article. The provisions of this Article
shall be applicable to the Securities of any series which are redeemable at the
option of the Company before their maturity or to any sinking fund for the
retirement of Securities of a series except as otherwise specified as
contemplated by Section 2.03 for Securities of such series.
SECTION 16.02. Notice of Redemption; Selection of Securities. In case the
Company shall desire to exercise the right to redeem all, or, as the case may
be, any part of the Securities of any series in accordance with their terms, it
shall fix a date for redemption and shall mail a notice of such redemption at
lease 30 and not more than 60 days prior to the date fixed for redemption to the
holders of Securities of such series so to be redeemed as a whole or in part at
their last address as the same appear on the Securities register. Such mailing
shall be by first class mail. The notice if mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
holder receives such notice. In any case, failure to give such notice by mail or
any defect in the notice to the holder of any Security of a series designated
for redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security of such series.
Each such notice of redemption shall specify the date fixed for
redemption, the redemption price at which Securities of such series are to be
redeemed, the place or places of payment, that
<PAGE> 86
78
payment will be made upon presentation and surrender of such Securities, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, and that on and after said date interest thereon or on the portions
thereof to be redeemed will cease to accrue. If less than all the Securities of
such series are to be redeemed the notice of redemption shall specify the
numbers of the Securities of that series to be redeemed. In case any Security of
a series is to be redeemed in part only, the notice of redemption shall state
the portion of the principal amount thereof to be redeemed and shall state that
on and after the date fixed for redemption, upon surrender of such Security, a
new Security or Securities of that series in principal amount equal to the
unredeemed portion thereof will be issued.
Not more than seven days prior to the redemption date specified in the
notice of redemption given as provided in this Section, the Company will deposit
with the Trustee or with one or more paying agents an amount of money sufficient
to redeem on the redemption date all the Securities so called for redemption at
the appropriate redemption price, together with accrued interest to the date
fixed for redemption.
If less than all the Securities of a series are to be redeemed the Company
will give the Trustee notice not less than 60 days prior to the redemption date
as to the aggregate principal amount of Securities of that series to be redeemed
and the Trustee shall select, in such manner as in its sole discretion it shall
deem appropriate and fair, the Securities of that series or portions thereof (in
integral multiples of $1,000, except as otherwise set forth in the applicable
form of Security) to be redeemed.
SECTION 16.03. Payment of Securities Called for Redemption. If notice of
redemption has been given as provided in Section 16.02 or Section 16.04, the
Securities or portions of Securities of the series with respect to which such
notice has been given shall become due and payable on the date and at the place
or places stated in such notice at the applicable redemption price, together
with interest accrued to the date fixed for redemption, and on and after said
date (unless the Company shall default in the payment of such Securities at the
redemption price, together with interest accrued to said date) interest on the
Securities or portions of Securities of any series so called for redemption
shall cease to accrue. On presentation and surrender of such Securities at a
place of payment specified in said notice, the said Securities or the specified
portions thereof shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to the date fixed for
redemption.
Upon presentation of any Security of any series redeemed in part only, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder thereof, at the expense of
<PAGE> 87
79
the Company, a new Security or Securities of such series of authorized
denominations, in principal amount equal to the unredeemed portion or the
Security so presented.
SECTION 16.04. Mandatory and Optional Sinking Fund. The minimum amount of
any sinking fund payment provided for by the terms of Securities of any series
determined pursuant to Section 2.03 is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount provided
for by the terms of Securities of any series is herein referred to as an
"optional sinking fund payment". The last date on which any such payment may be
made is herein referred to as a "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any Securities of a series in cash, the Company may at its
option (a) deliver to the Trustee Securities of that series (other than any
previously called for redemption) theretofore purchased or otherwise acquired by
the Company and (b) may apply as a credit Securities of that series which have
been previously delivered to the Trustee by the Company or Securities of that
series which have been converted or redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
optional sinking fund payments pursuant to the next succeeding paragraph, in
each case in satisfaction of all or any part of any mandatory sinking fund
payment, provided that such Securities have not been previously so credited.
Each such Security so delivered or applied as a credit shall be credited at the
sinking fund redemption price for such Securities and the amount of any
mandatory sinking fund shall be reduced accordingly. If the Company intends so
to deliver or credit such Securities with respect to any mandatory sinking fund
payment it shall deliver to the Trustee at least 60 days prior to the next
succeeding sinking fund payment date for such series (a) a certificate signed by
the Treasurer or an Assistant Treasurer of the Company specifying the portion of
such sinking fund payment, if any, to be satisfied by payment of cash and the
portion of such sinking fund payment, if any, which is to be satisfied by
delivering and crediting such Securities and (b) any Securities to be so
delivered, if not previously delivered. All Securities so delivered to the
Trustee shall be cancelled by the Trustee and no Securities shall be
authenticated in lieu thereof. If the Company fails to deliver such certificate
and Securities at or before the time provided above, the Company shall not be
permitted to satisfy any portion of such mandatory sinking fund payment by
delivery or credit of Securities.
At its option the Company may pay into the sinking fund for the retirement
of Securities of any particular series, on or not more than seven days before
each sinking fund payment date for such series, any additional sum in cash as
specified by the terms of such series of Securities. If the Company intends to
exercise its
<PAGE> 88
80
right to make any such optional sinking fund payment, it shall deliver to the
Trustee at least 60 days prior to the next succeeding sinking fund payment date
for such Series a certificate signed by the Treasurer or an Assistant Treasurer
of the Company stating that the Company intends to exercise such optional right
and specifying the amount which the Company intends to pay on such sinking fund
payment date. If the Company fails to deliver such certificate at or before the
time provided above, the Company shall not be permitted to make any optional
sinking fund payment with respect to such sinking fund payment date. To the
extent that such right is not exercised in any year it shall not be cumulative
or carried forward to any subsequent year.
If the sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made in cash
shall exceed $50,000 (or a lesser sum if the Company shall so request) with
respect to the Securities of any particular series, it shall be applied by the
Trustee or one or more paying agents on the next succeeding sinking fund payment
date to the redemption of Securities of such series at the sinking fund
redemption price together with accrued interest to the date fixed for
redemption. The Trustee shall select, in the manner provided in Section 16.02,
for redemption on such sinking fund payment date a sufficient principal amount
of Securities of such series to absorb said cash, as nearly as may be, and the
Trustee shall, at the expense and in the name of the Company, thereupon cause
notice of redemption of Securities of such series to be given in substantially
the manner and with the effect provided in Sections 16.02 and 16.03 for the
redemption of Securities of that series in part at the option of the Company,
except that the notice of redemption shall also state that the Securities of
such series are being redeemed for the sinking fund. Any sinking fund moneys not
so applied or allocated by the Trustee or any paying agent to the redemption of
Securities of that series shall be added to the next cash sinking fund payment
received by the Trustee or such paying agent and, together with such payment,
shall be applied in accordance with the provisions of this Section 16.04. Any
and all sinking fund moneys held by the Trustee or any paying agent on the
maturity date of the securities of any particular series, and not held for the
payment or redemption of particular Securities of such series, shall be applied
by the trustee or such paying agent, together with other moneys, if necessary,
to be deposited sufficient for the purpose, to the payment of the principal of
Securities at maturity.
On or not more than seven days before each sinking fund payment date, the
Company shall pay to the Trustee or to one or more paying agents in cash sum
equal to all interest accrued to the date fixed for redemption on Securities to
be redeemed on the next following sinking fund payment date pursuant to this
Section.
<PAGE> 89
81
Neither the Trustee nor any paying agent shall redeem any Securities of a
series with sinking fund moneys, and the Trustee shall not mail any notice of
redemption of Securities of such series by operation of the sinking fund, during
the continuance of a default in payment of interest on such Securities or of any
Event of Default (other than an Event of Default occurring as a consequence of
this paragraph) with respect to such Securities, except that if the notice of
redemption of any Securities shall theretofore have been mailed in accordance
with the provisions hereof, the Trustee or any paying agent shall redeem such
Securities if cash sufficient for that purpose shall be deposited with the
Trustee or such paying agent for that purpose in accordance with the terms of
this Article Sixteen. Except as aforesaid, any moneys in the sinking fund for
such series at the time when any such default or Event of Default shall occur
and any moneys thereafter paid into the sinking fund shall, during the
continuance of such default or Event of Default, be held as security for the
payment of all Securities of such series; provided, however, that in case such
Event of Default or default shall have been cured or waived as provided herein,
such moneys shall thereafter be applied on the next succeeding sinking fund
payment date on which such moneys may be applied pursuant to the provisions of
this Section 16.04
MORGAN GUARANTY TRUST COMPANY OF NEW YORK hereby accepts the trusts in
this Indenture declared and provided, upon the terms and conditions hereinabove
set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto duly affixed and attested, all as of
the day and year first above written.
MASCO INDUSTRIES, INC.
Company
By /s/JAMES J. SIGOUIN
Vice President
[CORPORATE SEAL]
Attest:
/s/TIMOTHY WADHAMS
Assistant Secretary
<PAGE> 90
82
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
Trustee
By /s/J. N. CREAN
Trust Officer
[CORPORATE SEAL]
Attest:
/s/G. J. CASTELLANO
Assistant Trust Officer
<PAGE> 91
83
State of Michigan)
) ss.:
County of Wayne )
On the 2nd of February, 1987, before me personally came JAMES J. SIGOUIN,
to me known, who, being by me duly sworn, did depose and say that he resides at
570 Oxford, Grosse Pointe Woods, MI; that he is Vice President of MASCO
INDUSTRIES, INC., the corporation described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the seal
affixed to the said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation; and that he signed his
name thereto by like authority.
/s/DIANE G. KIRKENDALL
Notary Public
DIANE G. KIRKENDALL
Notary Public, Wayne County, MI
My Commission Expires 7-15-90
[NOTARIAL SEAL]
State of New York)
) ss.:
County of Kings )
On the 4th day of February, 1987, before me personally came J. N. CREAN,
to me known, who, being by me duly sworn, did depose and say that he resides at
Allendale, N. J. 07401; that he is Trust Officer of MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, one of the corporations described in and which executed the
above instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
/s/WILLIAM P. MIFSUD, JR.
Notary Public
WILLIAM P. MIFSUD, JR.
Notary Public, State of New York
No. 4785483
Qualified in Kings County
Commission Expires Mar. 30, 1987
[NOTARIAL SEAL]
<PAGE> 92
RESOLUTIONS
OF THE
PRICING COMMITTEE
OF THE
BOARD OF DIRECTORS
OF MASCOTECH, INC.
January 13, 1994
WHEREAS, the Company has filed a Registration Statement on Form S-3 (file
no. 33-59222) with the Securities and Exchange Commission, which currently
remains in effect.
WHEREAS, the Company desires to create and make provision for a series of
securities under the Indenture dated as of November 1, 1986 (the "Indenture")
with Morgan Guaranty Trust Company of New York, as trustee (the "Trustee"),
which was filed as an exhibit to the Registration Statement, providing for the
issuance from time to time of convertible or non-convertible unsecured
subordinated debentures, notes or other evidences of indebtedness of the 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;
NOW, THEREFORE, BE IT RESOLVED, that there hereby is approved and
established a series of Securities under the Indenture whose terms shall be as
follows:
1. The Securities of such series shall be known and designated as the
"4 1/2% Convertible Subordinated Debentures Due 2003" of the Company.
2. The aggregate principal amount of Securities of such series which
may be authenticated and delivered under the Indenture is limited to Three
Hundred Forty-Five Million Dollars ($345,000,000), 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, 11.04 or 16.03 of the Indenture.
3. The date on which the principal of the Securities of such series
shall be payable is December 15, 2003.
<PAGE> 93
4. The Securities of such series shall bear interest from January 21,
1994, at the annual rate of 4? percent, payable semi-annually on June 15
and December 15 of each year commencing on June 15, 1994 (calculated on a
standard 360 day year of 12 thirty-day months) until the principal thereof
is paid or made available for payment. The June 1 or December 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 premium, if any, and interest on the
Securities of such series shall be payable at the office or agency of the
Company maintained for such purpose under Section 5.02 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 registry books of the
Company.
6. The Securities of such series shall be subject to redemption at any
time on or after December 22, 1996, in whole or in part, at the option of
the Company, at a redemption price equal to the percentage of the
principal amount set forth below if redeemed during the twelve-month
period beginning December 15 in each of the following years, in each case
together with interest accrued to the date fixed for redemption (subject
to the right, if any, of the registered holder on the record date for an
interest payment to receive such interest):
Year Percentage
1996. . . . . . . 103.00%
1997. . . . . . . 102.50%
1998. . . . . . . 102.00%
1999 . . . . . . . 101.50%
2000 . . . . . . . 101.00%
2001 . . . . . . . 100.50%
2002 . . . . . . . 100.00%
7. The Company shall have the right to discharge or limit the
Indenture as to the Securities of such series prior to maturity pursuant
to the provisions of Section 13.01 of the Indenture.
8. The Securities of such series shall be convertible at any time on
or after March 22, 1994 and prior to maturity, unless previously redeemed,
into an aggregate maximum amount
- 2 -
<PAGE> 94
of 11,129,032 fully paid and non-assessable shares of Company Common
Stock, par value $1.00 per share, at a conversion price of $31.00 per
share, such number of shares of Common Stock and conversion price being
subject to adjustment as provided in the Indenture.
9. The Securities of such series shall be subordinated in right of
payment to the prior payment in full of Senior Indebtedness (as defined in
the Indenture) and so long as the Securities of such series are
outstanding, the Company shall not create or incur "indebtedness of the
Company for money borrowed" or "indebtedness of the Company incurred in
connection with the acquisition of property" that is subordinate and
junior in right of payment to the prior payment of Senior Indebtedness,
except such indebtedness that ranks pari passu with, or is subordinate and
junior in right of payment to, the Securities of such series.
10. The Securities of such series shall be issuable in denominations
of One Thousand Dollars ($1,000) and any integral multiple thereof.
11. The Company shall receive 97.75 percent of the price of such
Securities sold to the public after discount of 2.25 percent.
FURTHER RESOLVED, that the Securities of such series are declared to be
issued under the Indenture and subject to the provisions thereof;
FURTHER RESOLVED, that the Chairman of the Board, the President or any
Vice President and the Secretary or any Assistant Secretary is authorized in the
name and on behalf of the Company and under its corporate seal (which may be in
the form of a facsimile of the seal of the Company) to execute $345,000,000
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, substantially in the form of the
subordinated debenture filed as an exhibit to the Company's Registration
Statement, with such changes and insertions therein as are appropriate to
conform such debentures to the terms set forth herein or otherwise as the
respective officers executing such 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 delivery in accordance with the
terms of the Indenture, and the Trustee is authorized and directed thereupon to
authenticate and deliver the same to or upon the written order of the Company as
provided in the Indenture;
- 3 -
<PAGE> 95
FURTHER RESOLVED, that the signatures of the officers of the Company so
authorized to execute the Securities of such series may be the manual or
facsimile signatures of the present or any future such authorized officers and
may be imprinted or otherwise reproduced thereon, the Company for such purpose
hereby adopting each such facsimile signature as binding upon it notwithstanding
the fact that at the time the respective Securities shall be authenticated and
delivered or disposed of, the officer so signing shall have ceased to be such
officer;
FURTHER RESOLVED, that Smith Barney Shearson Inc., PaineWebber
Incorporated, Prudential Securities Incorporated and Salomon Brothers Inc are
appointed as 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 name and on behalf of the Company, to execute
and deliver an Underwriting Agreement, substantially in the form heretofore
approved by the Board of Directors of the Company, with such underwriters and
with such changes and insertions therein as are appropriate to conform such
Underwriting Agreement to the terms set forth herein or otherwise as the
respective officers 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 such 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 the Company for the purpose of effecting the registration,
transfer, exchange and conversion 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, exchange and
conversion and where notices and demands to or upon the Company in respect of
the Securities of such series and of the Indenture may be served;
FURTHER RESOLVED, that Morgan Guaranty Trust Company of New York, is
appointed Paying Agent of the Company for the payment of principal of and
premium, if any, and interest on the Securities of such series, and the
corporate trust office of Morgan Guaranty Trust Company of New York, is
designated, pursuant to the Indenture, as the office or agency of the Company
where such Securities may be presented for payment; and
FURTHER RESOLVED, that each of the officers of the Company is authorized
and directed in the name and on behalf of the Company to do or cause to be done
all such acts and things as they or he may deem necessary or advisable, to
effect the sale and delivery of the Securities of such series pursuant to the
Underwriting Agreement
- 4 -
<PAGE> 96
and otherwise to carry out the obligations of the Company under the Underwriting
Agreement, and to do or cause to be done all such acts and things and to execute
and deliver all such documents as they or he deem necessary or advisable in
connection with the execution and delivery of the Underwriting Agreement, the
execution, authentication and delivery of such Securities (including, without
limiting the generality of the foregoing, delivery to the Trustee of such
Securities for authentication and of requests or orders for the authentication
and delivery of Securities) and the listing of the Securities on The New York
Stock Exchange.
- 5 -
<PAGE> 97
AGREEMENT OF APPOINTMENT
AND
ACCEPTANCE OF SUCCESSOR TRUSTEE
THIS AGREEMENT dated as of August 4, 1994 (the "Agreement"), is among
MascoTech, Inc. (the "Company"), Morgan Guaranty Trust Company of New York
("Morgan") and The First National Bank of Chicago ("First Chicago").
WHEREAS, Section 8.10 of the Indenture dated as of November 1, 1986
between the Company and Morgan (the "Indenture") provides that the Trustee
thereunder may resign at any time by giving written notice of such resignation
to the Company;
WHEREAS, Morgan gave such written notice, dated July 11, 1994, to the
Company;
WHEREAS, Section 8.10 of the Indenture provides that in case the Trustee
shall resign, the Company shall promptly appoint a successor Trustee thereunder;
WHEREAS, the Company's Board of Directors authorized the appointment of
First Chicago as successor Trustee under the Indenture; and
WHEREAS, Section 8.11 of the Indenture provides that any successor Trustee
appointed thereunder shall execute, acknowledge and deliver to the Company and
the resigning Trustee thereunder an instrument accepting such appointment, and
thereupon the resignation of such resigning Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts, immunities, duties and
obligations of the resigning Trustee thereunder, with like effect as if
originally named as Trustee therein.
NOW THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for and in
consideration of the premises and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, Morgan
and First Chicago hereby covenant and agree as follows:
1. The Company hereby accepts the resignation of Morgan as Trustee under
the Indenture, such resignation to become effective at the close of business on
the date hereof. From the close of business on the date hereof and except as
otherwise provided for herein, Morgan shall have no further responsibility for
the exercise of the rights and powers or for the performance of the trusts and
duties vested in the Trustee under the Indenture.
<PAGE> 98
2. Pursuant to Section 8.10 of the Indenture, and in accordance with the
resolutions duly adopted by the Company's Board of Directors, the Company hereby
confirms its appointment of First Chicago as successor Trustee under the
Indenture, effective as of the close of business on the date hereof, and hereby
vests in First Chicago all the rights, powers, trusts, immunities, duties and
obligations which Morgan now holds under and by virtue of the Indenture with
like effect as if originally named as Trustee in the Indenture.
3. First Chicago hereby represents that it is qualified and eligible under
Article Eight of the Indenture and under the Trust Indenture Act of 1939, as
amended, to accept appointment as successor Trustee under the Indenture.
4. First Chicago hereby accepts, as of the close of business on the date
hereof, its appointment as successor Trustee under the Indenture and assumes the
rights, powers, trusts, immunities, duties and obligations which Morgan now
holds under and by virtue of the Indenture, upon the terms and conditions set
forth therein.
5. In accordance with Section 8.11 of the Indenture, Morgan hereby
confirms, assigns, transfers and sets over to First Chicago, as successor
Trustee under the Indenture, all rights, powers, trusts, immunities, duties and
obligations which Morgan now holds under and by virtue of the Indenture, and
does hereby assign, transfer and deliver to First Chicago, as such Trustee, all
property and money held by Morgan as Trustee under the Indenture.
6. In accordance with Section 8.11 of the Indenture, the Company and
Morgan, for the purpose of more fully and certainly vesting in and confirming to
First Chicago, as successor Trustee under the Indenture, the rights, powers,
trusts, immunities, duties and obligations of such Trustee with like effect as
if originally named as Trustee in the Indenture, agree upon reasonable request
of First Chicago to execute, acknowledge and deliver such further instruments of
conveyance and further assurance and to do such other things as may be
reasonably required for more fully and certainly vesting and confirming in First
Chicago all rights, powers, trusts, immunities, duties and obligations which
Morgan now holds under and by virtue of the Indenture.
7. Promptly after the execution hereof, Morgan shall mail the notice of
the resignation of Morgan and the succession of First Chicago as successor
Trustee in accordance with Sections 8.10 and 8.11 of the Indenture. Such notice
shall be in the form attached hereto as Exhibit A.
2
<PAGE> 99
8. This Agreement may be executed in any number of counterparts all of
which taken together shall constitute one and the same Agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
9. This Agreement shall be governed by the laws of the State of New York,
both in interpretation and performance.
10. Unless otherwise defined, all terms used herein with initial capital
letters shall have the meaning given them in the Indenture.
11. Morgan hereby represents and warrants to First Chicago that: (a) no
covenant or condition contained in the Indenture has been waived by Morgan or,
to the best of the knowledge of the officers assigned to Morgan's Corporate
Trust Department, by the Holders of the percentage in aggregate principal amount
of the Securities required by the Indenture to effect any such waiver; (b) there
is no action, suit or proceeding pending or, to the best of the knowledge of the
officers assigned to Morgan's Corporate Trust Department, threatened against
Morgan before any court or any governmental authority arising out of any action
or omission by Morgan as Trustee under the Indenture; (c) to the best of the
knowledge of the officers assigned to Morgan's Corporate Trust Department, no
Event of Default, or event which, with the giving of notice or passage of time
or both, would become an Event of Default, has occurred and is continuing; and
(d) Morgan has furnished, or as promptly as practicable will furnish, to First
Chicago originals of all documents relating to the trust created by the
Indenture and all material information in its possession relating to the
administration and status thereof and will furnish to First Chicago any of such
documents or information First Chicago may reasonably request, provided that
First Chicago will make available to Morgan as promptly as practicable following
the request of Morgan any such original documents which Morgan may need to
defend against any action, suit or proceeding against Morgan as Trustee or which
Morgan may need for any other proper purpose.
12. The Company hereby represents and warrants to First Chicago and Morgan
that no Event of Default, or event which, with the giving of notice or passage
of time or both, would become an Event of Default, has occurred and is
continuing.
13. Except as hereinabove expressly set forth, all other terms and
provisions set forth in the Indenture shall remain in full force and effect and
without any change whatsoever being made hereby.
3
<PAGE> 100
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and acknowledged as of the date first written above.
MASCOTECH, INC.
By:/s/ Timothy Wadhams
Name: Timothy Wadhams
Title: Vice President
[Seal]
Attest:
/s/ Eugene A. Gargaro, Jr.
Secretary
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as resigning
Trustee
By:/s/ Michael Culhane
Name: Michael Culhane
Title: Vice President
[Seal]
Attest:
/s/ M. E. McNulty
Assistant Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, as successor Trustee
By:/s/ R. D. Manella
Name: R. D. Manella
Title: Vice President
[Seal]
Attest:
/s/ T. Marshall
Trust Officer
4
<PAGE> 101
State of Michigan)
) ss
County of Wayne)
On the 2nd day of August, 1994, before me personally came Timothy Wadhams,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of MascoTech, Inc., the corporation described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
/s/ Nancy S. Steinrock
Notary Public
Wayne County, Michigan
My Comm. Exp.: Nov. 9, 1994
[NOTARIAL SEAL]
State of New York)
) ss
County of New York)
On the 2nd day of August, 1994, before me personally came Michael Culhane,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of Morgan Guaranty Trust Company of New York, the corporation
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to the said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/ Thomas J. Courtney
Notary Public
State of New York
No. 24-4996233
Qualified in Kings County
My Comm. Exp.: May 11, 1996
[NOTARIAL SEAL]
5
<PAGE> 102
State of Illinois)
) ss
County of Cook )
On the 3rd day of August, 1994, before me personally came R. D. Manella,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of First Chicago, the corporation described in and which executed the
above instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
/s/ Nancy Lopez
Notary Public
State of Illinois
My Comm. Exp.: May 21, 1997
[NOTARIAL SEAL]
6
<PAGE> 103
EXHIBIT A
NOTICE OF RESIGNATION OF TRUSTEE
AND
APPOINTMENT OF SUCCESSOR TRUSTEE
To the Holders of the MascoTech, Inc. 4 1/2% Convertible Subordinated Debentures
Due 2003:
NOTICE IS HEREBY GIVEN THAT, pursuant to Sections 8.10 and 8.11 of the
Indenture (the "Indenture") dated as of November 1, 1986 between MascoTech, Inc.
(formerly Masco Industries, Inc.) (the "Company") and Morgan Guaranty Trust
Company of New York ("Morgan Guaranty"), under which the above-referenced
Securities were issued:
1. Morgan Guaranty has resigned as Trustee under the Indenture.
2. The Company has appointed The First National Bank of Chicago ("First
Chicago") as successor Trustee under the Indenture, and First Chicago has
accepted such appointment.
3. The following is the office or agency of the Company where securities
issued under the Indenture may be presented for payment, or presented for
registration of transfer and for exchange as provided in the Indenture and
where notices and demands to or upon the Company in respect of any of the
Securities issued under the Indenture or the Indenture may be served:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
14 Wall Street, 8th Floor
New York, New York 10005
Attention: Corporate Trust Administration
Dated: August 5, 1994
MASCOTECH, INC.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
<PAGE> 104
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE, dated as of August 5, 1994, between MascoTech,
Inc., a Delaware corporation (the "Company"), and The First National Bank of
Chicago, as trustee (the "Trustee").
WHEREAS, the Company entered into an Indenture dated as of November 1, 1986
with Morgan Guaranty Trust Company (the "Indenture");
WHEREAS, the Trustee is the successor trustee under the Indenture; and
WHEREAS, Section 11.01(g) the Indenture provides for supplemental
indentures to make changes, provided such action does not adversely affect the
interests of the holders of the Securities.
NOW, THEREFORE, the parties agree as follows:
1. Section 8.10 of the Indenture shall be amended by inserting the
following as a new subparagraph (e):
"(e) Notwithstanding the provisions of Section 8.12, in connection
with any sale or proposed sale of all or any portion of the corporate trust
business of any Trustee hereunder or any other transaction that would
result in a change of control of such corporate trust business, and
provided that no Event of Default exists, the Company may remove the
Trustee and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee. Any removal of the Trustee and appointment of a
successor trustee pursuant to the foregoing shall become effective upon
acceptance of appointment by the successor trustee as provided in Section
8.11."
2. Except as hereinabove expressly set forth, all other terms and
provisions set forth in the Indenture shall remain in full force and effect and
without any change whatsoever being made hereby.
<PAGE> 105
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to
be executed and acknowledged as of the date first written above.
MASCOTECH, INC.
By:/s/ Timothy Wadhams
---------------------
Timothy Wadhams
Vice President
[Seal]
Attest:
/s/ Eugene A. Gargaro, Jr.
- --------------------------
Secretary
THE FIRST NATIONAL BANK OF CHICAGO
By:/s/ R. D. Manella
-------------------
R. D. Manella
Vice President
[Seal]
Attest:
/s/ T. Marshall
- ---------------------
State of Michigan)
) ss
County of Wayne)
On the 2nd day of August, 1994, before me personally came Timothy Wadhams,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of MascoTech, Inc., the corporation described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to the said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
/s/ Nancy S. Steinrock
- --------------------------
Notary Public
Wayne County, Michigan
My Comm. Exp.: Nov. 9,1994
[NOTARIAL SEAL]
- 2 -
<PAGE> 106
State of Illinois)
) ss
County of Cook )
On the 3rd day of August, 1994, before me personally came R. D. Manella, to
me known, who, being by me duly sworn, did depose and say that he is a Vice
President of The First National Bank of Chicago, the corporation described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ Nancy Lopez
- ----------------------------
Notary Public
State of Illinois
My Comm. Exp.: May 21, 1997
[NOTARIAL SEAL]
-3-
<PAGE> 1
EXHIBIT 4.f
Dated 14 September 1998
MASCO GMBH
as Borrower
and
MASCO CORPORATION
as Guarantor
and
COMMERZBANK AKTIENGESELLSCHAFT
as Arranger
and
COMMERZBANK INTERNATIONAL S.A.
as Agent
and
OTHERS
---------------------------------------------
DM 350,000,000 MULTICURRENCY REVOLVING CREDIT FACILITY
----------------------------------------------
HENGELER MUELLER WEITZEL WIRTZ
Frankfurt am Main
<PAGE> 2
-2-
CONTENTS
- --------
Page
SECTION 1 Interpretation 3
SECTION 2 The Facility 3
SECTION 3 The Lenders 3
SECTION 4 Cancellation 4
SECTION 5 Fees and Expenses 4
SECTION 6 Advance of Funds 5
SECTION 7 Currency Option 7
SECTION 8 Interest 8
SECTION 9 Repayment of Advances 9
SECTION 10 Prepayment of Advances 9
SECTION 11 Guarantee 9
SECTION 12 Changes of Circumstances 11
SECTION 13 Payments 15
SECTION 14 Late Payment 17
SECTION 15 Sharing among Lenders 17
SECTION 16 Representations and Warranties 19
SECTION 17 Delivery of Information 23
SECTION 18 General Covenants 26
SECTION 19 Early Termination 30
SECTION 20 The Agent and the Arranger 33
SECTION 21 Evidence and Certificates 37
SECTION 22 Notices 37
SECTION 23 Transfers and Substitution 38
SECTION 24 Waivers and Amendments 40
SECTION 25 Miscellaneous 41
SECTION 26 Law and Jurisdiction 42
SECTION 27 Confidentiality 42
Annex: Definitions, References and Construction 46
SCHEDULES
- ---------
Schedule 1: Lenders and Commitments; Address Details 57
Schedule 2: Conditions Precedent 60
Schedule 3: Form of Substitution Certificate 61
Schedule 4: Form of Borrowing Notice 63
Schedule 5: Form of Tax Confirmation 65
<PAGE> 3
-3-
CREDIT AGREEMENT dated 14 September 1998 between:
(1) MASCO GMBH, as borrower (the "Borrower"),
(2) MASCO CORPORATION, as guarantor (the "Guarantor"),
(3) COMMERZBANK AKTIENGESELLSCHAFT, as arranger (the "Arranger"),
(4) COMMERZBANK INTERNATIONAL S.A., as agent, and
(5) THE FINANCIAL INSTITUTIONS listed in Schedule 1, as lenders.
THE PARTIES agree as follows:
SECTION 1 INTERPRETATION
The defined expressions used in this Agreement are set out in the Annex.
SECTION 2 THE FACILITY
(1) Amount and Nature. The Facility is a five-year DM 350,000,000 multicurrency
revolving credit facility.
(2) Purpose. The Borrower agrees to use the proceeds of the Facility to
refinance debt of the Borrower outstanding at the date of this Agreement or for
general corporate funding purposes, but no Syndicate Party needs to concern
itself with the application of amounts taken up by the Borrower under the
Facility.
(3) Availability. The Borrower may borrow under the Facility after the Agent has
received all the items listed in Schedule 2 in a form satisfactory to the Agent.
(4) Expiry of Availability. The Borrower may not borrow under the Facility after
the Commitment Expiry Date.
SECTION 3 THE LENDERS
(1) Rights and Obligations. The rights and obligations of each Lender under this
Agreement are separate and independent from the rights and obligations of each
other Lender. A Lender may take proceedings against any Obligor on its own
without involving any other Lender in those proceedings.
(2) Failure to Perform. If a Lender fails to perform its obligations the
Borrower will have rights solely against that Lender. The obligations of any
Obligor
<PAGE> 4
-4-
to the Agent, the Arranger and the other Lenders will not be affected by this
failure.
SECTION 4 CANCELLATION
(1) Voluntary Cancellation. The Borrower may cancel the whole or any part of the
Available Facility by giving notice in writing to the Agent. This notice will
take effect thirty days after it is received by the Agent unless a later date is
specified in the notice. In that case the notice will take effect on the
specified date. The Borrower may only cancel a part of the Available Facility
which is a minimum amount of DM 10,000,000 or any higher integral multiple of DM
5,000,000.
(2) Effect of Cancellation. The Borrower may not borrow any part of the
Available Facility which has been cancelled or which is the subject of a notice
of voluntary cancellation. The Available Commitments of the Lenders will be
reduced by an aggregate amount equal to the reduction of the Available Facility.
Each Lender's Available Commitment will be reduced proportionately. No amount of
the Available Facility cancelled under this Agreement may subsequently be
reinstated. The Available Facility shall be cancelled automatically on the Final
Maturity Date.
SECTION 5 FEES AND EXPENSES
(1) Management Fee. The Borrower will pay to the Agent for the account of the
Arranger a management fee. The amount of this fee and the timing of payment are
described in a letter from the Arranger to the Borrower dated the same date as
this Agreement.
(2) Agency Fee. The Borrower agrees to pay to the Agent an agency fee. The
amount of this fee and the timing of payment are described in a letter from the
Agent to the Borrower dated the same date as this Agreement.
(3) Reimbursement of Initial Expenses. The Borrower agrees to reimburse the
Arranger for all reasonable out-of-pocket expenses incurred in connection with
the negotiation, preparation and signing (including, but not limited to, legal
expenses, travelling expenses and communication charges) of this Agreement and
the syndication of the Facility. In addition, the Borrower agrees to bear and
pay all expenses related to the publication of any advertisements in connection
with the Facility made with the approval of the Borrower.
(4) Commitment Fee. A commitment fee will accrue on the undrawn and uncancelled
amount of the Commitment of each Lender. This fee will accrue from the date of
this Agreement until the Final Maturity Date. The rate of the fee will be 50 per
cent. of the Margin as most recently determined according to the Definition of
Margin. The Borrower agrees to pay the fee to the Agent for the
<PAGE> 5
-5-
benefit of each Lender in arrear at quarterly intervals and on the Final
Maturity Date.
(5) Protection of Rights. A Syndicate Party may incur expenses in protecting,
preserving or enforcing its rights under this Agreement. The Borrower agrees to
reimburse that Syndicate Party for the amount of expenses reasonably incurred.
(6) Documentary Taxes. The Borrower agrees to bear and pay any duty, fee or
other similar charge required to be paid on this Agreement, any document
referred to in or contemplated by this Agreement or any judgment obtained in
connection with this Agreement or payable in order for this Agreement or any of
these documents to be valid, binding and enforceable or for any of them to be
admitted as evidence in court. Alternatively, a Syndicate Party may make the
payment; if it does so, the Borrower agrees to reimburse that Syndicate Party
for the amount paid.
SECTION 6 ADVANCE OF FUNDS
(1) Notice to the Agent. When the Borrower wishes to borrow under the Facility,
it will deliver a notice to the Agent substantially in the form attached hereto
as Schedule 4. The notice shall specify the amount of the Advance, the currency
of the Advance, the length of the Term of the Advance and the proposed Advance
Date. The Advance Date must be no sooner than three (or, in the case of Optional
Currency other than USD, four) Business Days after the date the Agent receives
the notice. For this purpose, if the Agent receives the notice on a day which is
not a Business Day or after 2.00 p.m. on a Business Day, it will be treated as
having received the notice on the following Business Day.
(2) Limitations on Advances.The following limitations apply to Advances:
(a) No Advance may exceed the Available Facility. This limitation will be
applied as at the Advance Date. For this purpose:
(i) any part of the Facility which is subject to a notice of voluntary
cancellation will be treated as cancelled;
(ii) any amount due to be repaid on the Advance Date will be
treated as having been repaid; and
(iii) Advances in Optional Currencies will be taken at their Original DM
Amount.
(b) An Advance must be a minimum of DM 10,000,000 or any higher integral
multiple of DM 5,000,000 or be the Available Facility (or in each case the
equivalent in Optional Currency).
<PAGE> 6
-6-
(c) If the Advance is not to be in DM, SECTION 7 applies.
(d) The Term of the Advance must be a period of 1, 2, 3 or 6 months (or any
longer period agreed by all Lenders).
(e) The Advance Date must be a Business Day on or prior to the Commitment Expiry
Date and at least three (or, in the case of Optional Currency other than
USD, four) Business Days after the Facility has become available under
SECTION 2(3).
(f) No more than six Advances may be outstanding at any time.
(g) The Term of the Advance must expire on or before the Final Maturity Date.
(3) Amount of the Lenders' Participation in the Advance. The amount of a
Lender's participation in an Advance shall be that proportion of the Advance
which its Commitment bears to the Total Commitments on the date of receipt by
the Agent of the relevant notice of borrowing. For this purpose any amount due
to be repaid on the Advance Date will be treated as having been repaid. The
Agent may round participations upwards or downwards to the nearest unit of
currency not exceeding each Lender's Commitment.
(4) Notice to the Lenders. The Agent agrees to provide details of the notice of
borrowing to each Lender not later than close of business on the third Business
Day preceding the Advance Date. These details will also include the amount of
each Lender's participation in the Advance, and in case of a borrowing under
SECTION 7, the Exchange Rate and the Original DM Amount.
(5) Conditions to Borrowing. The Lenders will only be obliged to make an Advance
to the Borrower if:
(a) the Facility is available in accordance with SECTION 2 and SECTION 4;
(b) a properly completed and signed notice of borrowing has been received by the
Agent;
(c) the representations and warranties in SECTION 16(1) and SECTION 16(2) except
the representations set forth in SECTION 16(2)(d)(iii), (e), (f) (other than
clause (i) thereof), (g) and (j) are true on the date of delivery of the
notice of borrowing and on the Advance Date; and
(d) on the date of delivery of the borrowing notice and on the Advance Date, no
Termination Event or Potential Termination Event exists.
<PAGE> 7
-7-
(6) Obligation to make an Advance. If the requirements of this SECITON 6 are
satisfied, each Lender agrees to make the amount of its participation in the
Advance available to the Agent for the Borrower on the Advance Date. The Advance
will be made available to the Borrower in the case of DM by 11.00 a.m. on the
Advance Date, in the case of USD by 11.00 a.m. New York time on the Advance Date
and in the case of an Optional Currency other than USD by such other time on the
Advance Date as is customary for the relevant Optional Currency.
(7) Consequences of an Advance not being made. If a notice of borrowing is
delivered but no Advance is made due to any of the Conditions in SECTION 6(5)
not being satisfied, the Borrower agrees to reimburse each Lender for the losses
and expenses incurred by such Lender as a result of liquidating or otherwise
utilizing amounts taken up by it to fund its participation in the Advance or
terminating commitments relating to the funding or hedging open positions
resulting from the Advance not being made.
(8) Adjustment of the Term. The Term will end on the last day of a calendar
month if it is for a number of complete months and either:
(a) it commenced on the last Business Day of a calendar month; or
(b) it commenced on a day for which there is no corresponding day in the month
in which it is due to end.
SECTION 7 CURRENCY OPTION
(1) Request for Optional Currency. If a notice of borrowing specifies a currency
other than DM, the Advance requested will be made in the currency specified if
all the following are true:
(a) The currency specified is an Optional Currency.
(b) The conditions to borrowing pursuant to SECTION 6 are satisfied.
(c) If the Advance is made the Loan will not be outstanding in more than five
different currencies.
(2) Non-availability of Optional Currency. A Lender (an "Affected Lender") may
notify the Agent that it is unable to make its participation in an Advance
available in the specified Optional Currency for the requested Term. Each of the
following applies if this notice is received by the Agent by 9.30 a.m. on the
Rate Fixing Day:
(a) The Affected Lender will not be obliged to make its participation in the
Advance available in the specified Optional Currency. Instead the Affected
Lender agrees to make the participation available in DM.
<PAGE> 8
-8-
(b) The amount the Affected Lender is required to advance will be the Original
DM Amount of the participation it would otherwise have been required to make
available in the Optional Currency.
(c) The Agent agrees to notify the Borrower and the other Lenders of the receipt
of the notice from the Affected Lender. This notification will be made
before 11.00 a.m. on the Rate Fixing Day.
(d) The time at which LIBOR (or, in the case of GBP, PIBOR) is determined will
be postponed to 1 p.m. London (or, in the case of PIBOR, Paris) time on the
Rate Fixing Day.
(3) Impracticality of Drawing in Optional Currency. An Advance which was to have
been made in an Optional Currency will not be required to be made if all the
following are true:
(a) An event described in SECTION 7(4) occurs.
(b) The Agent notifies the Borrower of this event and states that as a result
the Advance cannot be made in the Optional Currency.
(c) The notice from the Agent is received by the Borrower by 9.00 a.m. on the
Advance Date.
The Agent agrees to deliver a notice under this sub-paragraph if it is
instructed by an Instructing Group to do so.
(4) Events Making Drawing in Optional Currency Impractical. An event referred to
in SECTION 7(3) occurs if both:
(a) there is a change in national or international financial, political or
economic conditions or in currency exchange rates or exchange controls; and
(b) this change would mean that the Advance cannot reasonably be denominated in
the Optional Currency in question.
(5) DM-Advance in the Event of Impracticality. If an event referred to in
SECTION 7(3) has occurred the Advance will, if so elected in the notice of
borrowing, be made in the Original DM Amount of the Optional Currency, provided
that
(a) the Rate Fixing Day of the Advance will be postponed to the day on which the
Agent has given notice pursuant to SECTION 7(3)(b); and
(b) the Advance Date will be the second Business Day following the Rate Fixing
Day.
<PAGE> 9
-9-
SECTION 8 INTEREST
(1) Accrual of Interest. Interest will accrue on each Advance during its Term.
(2) Rate of Interest. The rate of interest applicable during the Term of an
Advance will be a rate per annum equal to LIBOR (or, in the case of GBP, PIBOR)
for the currency of that Advance for that Term plus the Margin. The rate of
interest will be fixed on the Rate Fixing Day.
(3) Accrual and Payments. Interest on each Advance shall:
(a) accrue from day to day and be calculated for the actual number of days
elapsed and on the basis of a year of 360 days (or 365 days if this is
market practice for the relevant Optional Currency) and
(b) be payable in arrear on the last day of the Term, and in the case of a Term
in excess of six months, also on the day falling six months after the
Advance was made, and thereafter at six months' intervals.
SECTION 9 REPAYMENT OF ADVANCES
The Borrower agrees to repay each Advance made to the Borrower on the last day
of its Term together with interest and all other amounts due in respect of such
Advance. Amounts repaid may be redrawn.
SECTION 10 PREPAYMENT OF ADVANCES
The Borrower may repay an Advance early. In this case the Borrower shall
reimburse each Lender for the costs and expenses incurred as a result of the
prepayment. These costs and expenses will be calculated in accordance with
SECTION 12(5).
SECTION 11 GUARANTEE
(1) Guarantee. The Guarantor unconditionally and irrevocably guarantees to each
Syndicate Party the performance of any and all obligations of the Borrower under
this Agreement and the payment of each amount expressed herein to be payable by
the Borrower as and when such amount becomes due and in the same currency as the
amount due. Payment shall be made forthwith upon the written demand of the Agent
or any Lender through the Agent.
(2) Nature of Guarantee Obligation. This Guarantee constitutes a "Garantie" and
not a "Burgschaft". Accordingly the obligations of the Guarantor under this
Guarantee (i) are separate and independent from the obligations of the Borrower
under this Agreement, (ii) exist irrespective of the legality, validity, binding
effect or enforceability of the obligations of the Borrower under this
Agreement,
<PAGE> 10
-10-
and (iii) are not affected by any event, condition or circumstance of whatever
nature, whether factual or legal, save the full, definitive and irrevocable
satisfaction of any and all payment obligations expressed herein to be payable
by the Borrower.
(3) Preservation of Rights. Any obligations of the Guarantor under this
Guarantee will not be affected by:
(a) Any change, waiver or release of the Borrower's obligations.
(b) Any concession or time being given to the Borrower.
(c) The winding-up or re-organisation of the Borrower.
(d) Any change in the condition, nature or status of the Borrower.
(e) Any of the above events occurring in relation to another guarantor or
provider of security of its obligations.
(f) Any failure of any Syndicate Party to take, retain or enforce any other
guarantee or security.
(g) Any circumstances affecting or preventing recovery of amounts due by the
Borrower.
(h) Any other matter which might discharge the Guarantor (other than full and
unconditional payment under the Guarantee).
(4) Covenants of the Guarantor. The Guarantor agrees as follows:
(a) Security. The Guarantor will not have the benefit of any Security provided
by the Borrower in respect of this Guarantee.
(b) Exercise of Rights. The Guarantor will not:
(i) take the benefit of any rights against the Borrower or any other person
in respect of amounts paid under this Guarantee; or
(ii) claim or exercise against the Borrower any right to any payment
(whether or not in connection with this Agreement).
(c) Competing Claim. An Instructing Group may request the Guarantor to submit a
claim in insolvency proceedings for amounts due to it by the Borrower or any
other guarantor. The Guarantor agrees to submit such claim promptly in
accordance with this request. The Guarantor hereby assigns to the Agent (for
the benefit of the Syndicate Parties) for security purposes all its rights
in respect of that claim.
<PAGE> 11
-11-
The obligations in this SECTION 11(4) will cease to have effect when the
Facility has ceased to be available and there are no amounts outstanding
under the Facility. Paragraph (b) only applies for so long as there is a
current Termination Event.
(5) Discharge Conditional. Any settlement with, or discharge of, the Guarantor
will be subject to the condition that the settlement or discharge will be set
aside if any prior payment, or any other guarantee or security relating to any
amount due under this Agreement, is set aside, invalidated or reduced. In this
event the Guarantor agrees to reimburse each Syndicate Party for the value of
the payment, guarantee or security which is set aside, invalidated or reduced.
(6) Additional Security. This Guarantee is in addition to and is not in any
way prejudiced by any other security now or hereafter held by any Syndicate
Party.
SECTION 12 CHANGES OF CIRCUMSTANCES
(1) Illegality.
(a) Notice of Illegality. Each Lender may notify the Borrower if it determines
that it is or will be acting illegally (rechtswidrig) in relation to the
Facility. The illegality may relate to the performance of the Lender's
obligations, the maintenance of the Facility or the Lender's funding
arrangements.
(b) Cancellation and Prepayment. If a Lender delivers a notice of illegality
any outstanding Commitment of that Lender will be cancelled on the date of
that notice. The Borrower agrees to prepay the participation of that
Lender in the Loan on the last day of the Term during which the notice is
received, unless the Lender certifies that, because of a legal requirement
(law, regulation or any action by a court or administrative authority)
applicable to the Lender, it must be repaid earlier. In this event the
Borrower agrees to prepay the participation on the date specified by the
Lender. SECTION 12(5) applies to any cancellation or prepayment under this
paragraph.
(2) Increased Costs.
(a) Notice of Increased Costs. A Lender may give notice of increased costs to
the Borrower if:
(i) either:
(aa) there is a change in a legal or other requirement applicable to the
Lender (or its holding company) (including any change relating to
taxation or reserve asset, special deposit, cash ratio, liquidity or
capital adequacy requirements or any other form of banking or
<PAGE> 12
-12-
monetary control) or a change in its interpretation or application; or
(bb) the Lender (or its holding company) complies with a direction or
request (whether or not having the force of law) of any central bank
or other fiscal, monetary or other authority; and
(ii) as a result, any of the following occurs:
(aa) the Lender (or its holding company) incurs an expense;
(bb) the Lender's (or its holding company's) effective return from the
Facility or on its overall capital is reduced;
(cc) any amount payable to the Lender (or its holding company) is reduced;
or
(dd) the Lender (or its holding company) does not recover an amount which
would otherwise have been paid to it.
No account will be taken of tax on the overall net income of a Lender in
the country in which it has its principal office or the office through
which it is acting for the purposes of this Agreement; and the losses,
(iii) reductions and expenses arising as a result are wholly or partly
attributable to the Facility or the arrangements made by a Lender in
connection with the Facility.
(b) Payment of Additional Amounts. The Borrower agrees to reimburse each
Lender for the losses, reductions and expenses described in paragraph
(a)(ii) which are attributable to the Facility (as certified by the
Lender, which certification shall include a calculation of the amount to
be reimbursed). No reimbursement will be made for losses, reductions or
expenses attributable to the period which is more than 30 days prior to
the receipt of the notice described in paragraph (a).
(c) Prepayment. If a Lender delivers a notice of increased costs the Borrower
may, on giving not less than 5 Business Days prior notice to that Lender,
prepay the participation of that Lender in the Loan, together with
compensation for such increased costs on the last day of the Term during
which the notice is received and all other amounts then due to such Lender
under the Facility, and any outstanding Commitment of the Lender will be
cancelled on the date of that notice.
(3) Market Disruption.
(a) Notice of Market Disruption. The Agent agrees to give notice of market
disruption if:
<PAGE> 13
-13-
(i) the Agent determines, upon consultation with the Reference Banks, that
there are no reasonable means to ascertain LIBOR (or, in the case of GPB,
PIBOR) because of circumstances affecting the London or, as the case may
be, Paris, Interbank Market generally;
(ii) Lenders with Commitments exceeding in aggregate 35% of the Total
Commitments, or with participations exceeding in aggregate 35% of the
Loan, notify the Agent that they determine that LIBOR (or, in the case of
GBP, PIBOR) would not reflect fairly the cost to them of funding an amount
outstanding under this Agreement;
(iii) LIBOR (or, in the case of GBP, PIBOR) cannot be determined because less
than two Reference Banks provide quotations; or
(iv) Lenders with Commitments exceeding in aggregate 35% of the Total
Commitments, or with participations exceeding in aggregate 35% of the
Loan, notify the Agent that funds necessary to fund their participation in
the Loan are not readily available in the London or, as the case may be,
Paris, Interbank Market.
(b) Alternative Interest Rate Arrangements. If the Agent gives a notice of
market disruption, the following applies:
(i) The Advance will be made and shall have a term of one month.
(ii) The means of determining the rates of interest applicable under this
Agreement will be suspended. Instead the Borrower agrees to pay interest
to the Lenders in the manner requested by the Agent. A request by the
Agent must specify the rate of interest to apply for a period of one
month. This rate will be the rate determined by the Agent to reflect the
cost to each Lender of funding for the period plus the applicable Margin.
In order to assist the Agent in this determination each Lender agrees to
provide to the Agent any information which the Agent may reasonably
request. If this information is received by the Agent within any time
period specified by the Agent it will be taken into account by the Agent
in making its determination.
(iii) The Borrower and the Agent will negotiate the terms of an alternative
arrangement for determining a rate of interest. The negotiations will be
carried on in good faith. Neither party is bound to continue the
negotiations after the date 30 days after the Borrower receives the
Agent's notice. If agreement is reached and if it is approved by an
Instructing Group, the rate of interest will be determined in accordance
with such agreement. Sub-paragraph (ii) will not apply to the extent that
it is expressly excluded by such agreement.
<PAGE> 14
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(iv) If the circumstances described in paragraph (a) cease to apply, the Agent
will notify the Borrower and the Lenders. The Borrower agrees to pay
interest to the Lenders in the manner described in sub-paragraph (ii) or
(iii) for the remainder of the period for which an alternative interest
rate arrangement has been made in respect of each affected Advance unless
a different arrangement is agreed by the Agent and the Borrower and
approved by an Instructing Group. In this case the Borrower agrees to pay
interest to the Lenders in the manner agreed.
(4) Withholdings.
(a) Notice of Withholding. The Borrower agrees to give notice of withholding
or deduction on account of any taxes, duties or charges ("taxes") to the
Agent if it is required by law to make a payment under this Agreement net
of a withholding or deduction on account of taxes.
(b) Grossing Up. If the Borrower is so required, the Borrower agrees to
increase the amount of any payment which is subject to a withholding or
deduction on account of taxes. As a result of this increase the person
entitled to the payment will be entitled to receive the same amount it
would have received if there had been no withholding or deduction on
account of taxes.
(c) Payment of Tax. The Borrower will pay to the appropriate authority all
amounts withheld or deducted. If a receipt or other evidence of payment
can be issued, the Borrower agrees to deliver this to the Agent as soon as
practicable.
(d) Refund of Tax Credits. If the Borrower makes a payment under this SECTION
12(4) (a "Tax Payment"), the relevant Lender agrees to notify the Borrower
if it has obtained a refund of tax or obtained and used a credit against
tax on its overall net income (a "Tax Credit") which that Lender is able
to identify as directly attributable to that Tax Payment. To the extent
that it can in its opinion do so without prejudicing its ability to retain
such Tax Credit, the Lender shall reimburse the Borrower such amount as
that Lender shall have determined to be the proportion of that Tax Credit
as will leave the Lender (after that reimbursement) in no better or worse
position in respect of its worldwide tax liabilities than it would have
been in had no Tax Payment been required. Nothing in this paragraph
affects the right of any Syndicate Party to arrange its tax affairs as it
thinks fit or gives the Borrower or the Guarantor the right to inquire
into those tax affairs.
(e) SECTION 12(4) applies, mutatis mutandis, to payments to be made by the
Guarantor in respect of the Guarantee.
<PAGE> 15
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(5) Prepayment. If the Borrower is obliged to prepay the Loan or any part of it
under this SECTION 12 or SECTION 19(2), the Borrower agrees to pay on the date
on which payment is due interest accrued on the Loan (or the amount to be
repaid) up to that date. If the date on which repayment is due is not the last
day of a Term, the Borrower will reimburse each affected Lender for the losses
and expenses which that Lender has incurred, or will incur, in liquidating or
otherwise utilizing amounts taken up by the Lender to fund the Loan or in
hedging open positions resulting from the payment (excluding loss of margin for
the period after any such repayment).
SECTION 13 PAYMENTS
(1) Method, Timing and Currency of Payments. All payments under the Facility
must be made in immediately available and freely transferable funds. Each
payment must be received by 10 a.m. (time at the place of payment) on the due
date.
(2) Currency of Payment. Each Advance is to be repaid in the currency in which
it is denominated. Interest on an Advance is to be paid in the same currency as
the Advance. Payments under SECTION 5(1) to (4) are to be made in DM; losses and
expenses are to be compensated in the currency in which such losses and expenses
were incurred.
(3) Payments through the Agent
(a) Normal Arrangements. All payments under this Agreement will be made through
the Agent. Each payment, if in Deutsche Mark, will be made to the account of
the Agent, as notified by the Agent to the Borrower, if in other currency to
such account as the Agent may designate. The Agent will pay on to the
Lenders an amount received as soon as the Agent has ascertained that it has
been received.
(b) Alternative Arrangements. If the Agent determines that it is, or will be,
illegal or impossible for it to pay on to a Lender in accordance with
paragraph (a), it agrees to notify the Borrower and that Lender. In this
case the Borrower and that Lender may agree on alternative arrangements for
payments to be made to that Lender. Paragraph (a) will not apply to the
extent excluded by those alternative arrangements. The Lender agrees to
provide notice of the arrangements to the Agent and will notify the Agent of
payments in accordance with SECTION 15(1).
(4) Payments to the Borrower. Each payment by the Agent to the Borrower will be
made to the account of the Borrower specified by it in the request for
borrowing.
(5) Payments to Lenders. Each payment by the Agent to a Lender will be made to
the account of that Lender notified to the Agent for this purpose.
<PAGE> 16
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(6) Change of Account. The Borrower or a Lender may change its receiving account
by not less than five Business Days' notice to the Agent. The Agent may change
its receiving account by not less than five Business Days' notice to each
Obligor and the Lenders.
(7) Refunding of Payments by the Agent. If the Agent makes a payment out in the
mistaken belief that it has received or will receive an incoming payment on a
particular day, the person which received the payment from the Agent agrees to
return it. It will also reimburse the Agent for all losses and expenses incurred
by the Agent as a result of the payment. This SECTION 13(7) does not affect the
rights of the person which received the payment against the person which failed
to make the payment to the Agent.
(8) Non-Business Days. If a payment would be due on a non-Business Day the
payment obligation will be deferred until the next Business Day.
Interest will be adjusted accordingly.
(9) Payment in Full. All payments by any Obligor will be made in full and
without set-off, counterclaim, or retention. No payment by any Obligor will be
made net of a withholding or deduction, unless this is required by law. In this
event SECTION 12(4) applies.
(10)Set-off. After a Termination Event or Potential Termination Event has
occurred, any Syndicate Party may set off any obligation which it owes to any
Obligor against any obligation which that Obligor owes to that Syndicate Party
under this Agreement. The obligation of the Syndicate Party may be in a
different currency, arise on a separate transaction, provide for a different
place of payment, or involve another branch. If its obligation is in a different
currency, the Syndicate Party may convert the amount owed into the same currency
as the obligation of that Obligor using the then current exchange rate. If a
Lender sets off an obligation, that Lender agrees to notify the Agent thereof.
The notice will provide details of the amount set off.
(11) Application of Partial Payments. If the Agent receives a payment
insufficient to discharge all the amounts then due and payable by the Borrower
under this Agreement, the Agent shall apply that payment towards the obligations
of the Borrower under this Agreement in the following order:
(a) first, in or towards payment pro rata of any unpaid costs or expenses due to
the Agent in its capacity as such under or in connection with this
Agreement;
(b) secondly, in or towards payment pro rata of any agency fee due but unpaid
under SECTION 5;
<PAGE> 17
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(c) thirdly, in or towards payment pro rata of any other accrued fees due but
unpaid under SECTION 5;
(d) fourthly, in or towards payment pro rata of any accrued interest due but
unpaid under this Agreement;
(e) fifthly, in or towards payment pro rata of any principal due but unpaid
under this Agreement;
(f) sixthly, in or towards payment pro rata of any other sums due but unpaid
under this Agreement.
The Agent will vary the order set out in paragraphs (d) to (f) inclusive above
if requested by all the Lenders. The provisions of this SECTION 13(11) will
override any appropriation made by the Borrower.
(12)Currency Indemnity. Where a payment due by any Obligor under or in
connection with this Agreement is made in a currency other than the currency
owed, to the extent that the amount received, when converted into the currency
owed, is less than the amount due that Obligor agrees to reimburse the person
entitled to the payment for the difference. For the purposes of the computation
of this amount that person will apply to the amount received a rate of exchange
prevailing on an established currency market on the date of receipt. If,
however, that person is unable to use the amount received to buy the currency
owed on the date of receipt, the rate of exchange prevailing on the first date
on which that person could buy the currency owed will be used instead. The obli-
gation in this SECTION 13(12) is a separate and independent obligation.
SECTION 14 LATE PAYMENT
(1) Default Interest. If any Obligor fails to make a payment other than interest
on its due date, that Obligor agrees to pay interest on the amount unpaid from
its due date for payment. This interest will be computed by reference to
successive periods not exceeding six months selected by the Agent. The first of
these periods will start on the due date for payment of the unpaid amount. The
rate of interest applicable during each of these periods will be a rate per
annum equal to 1% plus LIBOR (or, in the case of GBP, PIBOR) for that period
plus the applicable Margin. This interest will be paid in arrear on the last day
of each of these periods and on the date of payment of the unpaid amount.
(2) Indemnity. If the Borrower fails to make a payment other than interest on
the due date the Borrower agrees to reimburse the person entitled to the payment
for the losses and expenses (including loss of profit) that person incurs, or
will incur, as a result. The computation of these losses and expenses will take
into account any amount received under SECTION 14(1).
<PAGE> 18
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(3) Late Interest Payment. If the Borrower fails to pay an amount of interest on
the due date the Borrower agrees to pay to the Agent by way of indemnification
and in addition to such amount, a lump sum computed on that amount due from the
due date up to the date of payment by reference to the sum of (i) 1.6 per cent.
per annum and (ii) LIBOR (or, in the case of GBP, PIBOR) for the period selected
by the Agent if SECTION 14(1) were to apply.
SECTION 15 SHARING AMONG LENDERS
(1) Notice. If an amount due to a Lender (the "Recipient") under this Agreement
is discharged other than by payment through the Agent the Lender agrees to
notify the Agent. This may occur because of the exercise of a right of set-off,
by virtue of a combination of accounts, because of a voluntary or involuntary
payment by the Borrower direct to the Lender or otherwise. The notification will
provide details of the amount discharged and will be delivered no later than ten
Business Days after the discharge.
(2) Determination by the Agent. Where a Lender has issued a notice under SECTION
15(1) the Agent will determine what payments, if any, are due under SECTION
15(4). This determination will be made on the basis of the information contained
in all the notices delivered to the Agent under SECTION 15(1). The determination
will be notified to the Borrower and the Lenders.
(3) Litigation. In determining the amount due under SECTION 15(4) no account
will be taken of an amount due to a Lender which has declined to participate
in legal proceedings which resulted in the payment described in SECTION 15(1).
This only applies if that Lender could have joined in the proceedings or could
have instituted its own proceedings, but failed to do so.
(4) Payment to the Agent. The Recipient agrees to pay to the Agent an amount
equal to the amount discharged, less the amount which would have been received
by the Recipient if the discharge had been made by payment to the Agent. This
amount will be paid no later than five Business Days after receipt of a notice
from the Agent under SECTION 15(2).
(5) Obligations of the Borrower. Any amount due to the Recipient which would
otherwise have been discharged as described in SECTION 15(1) will be treated as
not having been discharged to the extent of an amount which is or will be
payable under SECTION 15(4) as a result. Accordingly the Borrower agrees to pay
this amount to the Recipient as if it had not been discharged. This payment is
required to be made by the Borrower whether or not the Agent has issued a
determination under SECTION 15(2).
(6) Distribution. The Agent agrees to distribute to the Lenders (other than the
Recipient) the amount received by it under SECTION 15(4) as if that amount had
been received from the Borrower in discharge of amounts due under the Agreement.
<PAGE> 19
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(7) Recovery. If an amount discharged as described in SECTION 15(1) is recovered
by the Borrower or is required to be repaid to the Borrower by the Recipient,
each Lender which received the benefit of a payment made under SECTION 15(6)
from the Agent agrees to repay to the Recipient the amount it received. Each of
these Lenders will also reimburse the Recipient for any interest or other losses
or expenses which the Recipient has incurred in connection with the discharged
amount or its recovery or repayment. The rights and obligations of the parties
shall be restored to the position before any payment became due under SECTION
15(4).
SECTION 16 REPRESENTATIONS AND WARRANTIES
(1) By the Borrower. The Borrower represents and warrants that:
(a) Corporate Existence and Power. The Borrower is a corporation duly
incorporated and validly existing, and the Borrower and its Subsidiaries
have the power and all material governmental licenses, authorizations,
consents and approvals required to own their assets and conduct their
businesses, considered as a whole, substantially as now being conducted.
(b) Binding Obligations. This Agreement has been duly authorized, signed and
delivered by the Borrower and the obligations of the Borrower under this
Agreement are valid and binding obligations of the Borrower in accordance
with their terms.
(c) Legality and Contraventions. Its signing and delivery of this Agreement
and its exercise of rights and performance of obligations under this
Agreement:
(i) do not require any approval, filing, registration or exemption (except for
filings under the Securities Exchange Act of 1934);
(ii) do not contravene any provision of its Articles of Association or any law,
regulation or order;
(iii) are not prohibited by, and do not constitute a default under, and do not
result in an obligation to create Security under, any document or
arrangement to which it is a party.
(d) No Termination Event. No Termination Event or Potential Termination Event
has occurred and is continuing and none will occur as a result of the
exercise of the Borrower's rights or the performance of its obligations
under this Agreement.
<PAGE> 20
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(e) Accuracy of Information. All information supplied, and to be supplied, on
behalf of the Borrower to any Syndicate Party is, and will be, accurate and
not misleading in any material respect.
(f) No Breach. Neither the Borrower nor any of its Subsidiaries is in breach of
any agreement to which it is a party or which is binding on it or any of its
assets which breach has a material adverse effect on the ability of the
Borrower to perform any of its obligations under this Agreement.
(g) Financial Statements. Its audited financial statements for the year ended
November 30, 1997 and the partial year (Rumpfgeschaftsjahr) ended December
31, 1997 give a true and fair view of the results of its operations and
financial position as of the date or period to which they relate. They were
prepared in accordance with German law and generally accepted accounting
principles consistently applied except to the extent otherwise described in
the accompanying notes.
(2) By the Guarantor. The Guarantor represents and warrants that:
(a) Corporate Existence and Power. The Guarantor and its United States
Subsidiaries are corporations duly incorporated, validly existing and in
good standing under the laws of their respective states of incorporation,
and have all corporate powers and all material governmental licences,
authorizations, consents and approvals required to carry on their
businesses, considered as a whole, substantially as now conducted.
(b) Corporate and Governmental Authorization; No Contravention. The execution,
delivery and performance by the Guarantor of this Agreement are within the
Guarantor's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official (except filings under the Securities
Exchange Act of 1934) and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of the Guarantor or of any agreement, judgement,
injunction, order, decree or other instrument binding upon the Guarantor or
result in the creation or imposition of any Lien on any asset of the
Guarantor or any of its Subsidiaries.
(c) Binding Effect. This Agreement constitutes a valid and binding agreement of
the Guarantor.
(d) Financial statements.
(i) The consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of December 31, 1997 and the related consolidated statements
of income and cash flows for the fiscal year then ended, reported on by
Coopers & Lybrand L.L.P. and set forth in the Guarantor's
<PAGE> 21
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1997 Form 10-K, a copy of which has been delivered to each of the Lenders,
fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Guarantor and its
Consolidated Subsidiaries as of such date and the consolidated results of
their operations and their cash flows for such fiscal year.
(ii) The unaudited condensed consolidated balance sheet of the Guarantor and
its Consolidated Subsidiaries as of March 31, 1998 and the re lated
unaudited condensed statements of consolidated income and consolidated
cash flows for the three months then ended, set forth in the Guarantor's
quarterly report for the Fiscal Quarter ended March 31, 1998 as filed with
the Securities and Exchange Commission on Form 10-Q, a copy of which has
been delivered to each of the Lenders, fairly present, on a basis
consistent with the financial statements referred to in sub-paragraph
(2)(d)(i) of this Clause, the consolidated financial position of the
Guarantor and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such three-months
period (subject to normal year-end adjustments).
(iii) There has been no material adverse change since December 31, 1997 in the
business or financial position of the Guarantor and its Consolidated
Subsidiaries, considered as a whole, as reflected in the financial
statements referred to in sub-paragraph (2)(d)(i) of this Clause.
(e) Litigation. There is no action, suit or proceeding pending against, or to
the knowledge of the Borrower threatened against or affecting, the
Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which, in the reasonable opinion of
the Guarantor, is likely to have a material adverse effect on the business
or financial position of the Guarantor and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question the
validity of this Agreement.
(f) Compliance with ERISA. Each member of the ERISA Group (i) has fulfilled
its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and (ii) is in compliance
in all material respects with the presently applicable provisions of ERISA
and the Internal Revenue Code with respect to each Plan. No member of the
ERISA Group has (x) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue 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 Internal Revenue Code, in each case securing an amount
greater than US $ 10,000,000 or (z) incurred any liability under Title IV
of ERISA other than a liability to the
<PAGE> 22
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PBGC for premiums under Section 4007 of ERISA which could materially
adversely affect the business, consolidated financial position or
consolidated results of operations of the Guarantor and its Consolidated
Subsidiaries.
(g) Environmental Matters. In the ordinary course of its business, the Guarantor
conducts appropriate reviews of the effect of Environmental Laws on the
business, operations and properties of the Guarantor 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, the Guarantor 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 the Guarantor and
its Consolidated Subsidiaries, considered as a whole.
(h) Taxes. United States Federal income tax returns of the Guarantor and its
Subsidiaries have been examined and closed through the Fiscal Year ended
December 31, 1993. The Guarantor and its Subsidiaries have filed all United
States Federal income tax returns and all other material tax returns which
are required to be filed by them and have paid all taxes shown as due
pursuant to such returns or pursuant to any assessment received by the
Guarantor or any Subsidiary, except such taxes, if any, as are being
contested in good faith and as to which, in the opinion of the Guarantor,
adequate reserves have been provided. The charges, accruals and reserves on
the books of the Guarantor and its Subsidiaries in respect of taxes or
related governmental charges are in the opinion of the Guarantor adequate.
(i) Not an Investment Company. The Guarantor is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended,
(j) Compliance with Laws. The Guarantor 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 (i) the necessity of compliance
therewith is contested in good faith by appropriate proceedings, (ii) no
officer of the Guarantor is aware that the Guarantor or the relevant
Subsidiary has failed to comply therewith or (iii) the Guarantor has
reasonably concluded that failure to comply is not likely to have a material
adverse effect on the business, financial position or results of
<PAGE> 23
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operations of the Guarantor and its Consolidated Subsidiaries, taken as a
whole.
(3) Repetition. The representations in SECTION 16(1 and SECTION 16(2)(except the
representations set forth in SECTION 16(2)(d)(iii), (e), (f) (other than
clause (i) thereof), (g) and (j)) will be deemed repeated by the Borrower
and the Guarantor, respectively, at the time of delivery of a notice of
borrowing and on the first day of each Term. This repetition will be by
reference to the facts on that day. If on that day audited accounts for a
period subsequent to December 31, 1997 have been finalised SECTION 16(1)(g)
and SECTION 16(2)(d)(i) will be treated as referring to the audited profit
and loss accounts and audited balance sheets contained in the then latest
audited financial statements of the Borrower or the Guarantor, respectively.
If on that day unaudited, condensed quarterly accounts of the Guarantor for
a period subsequent to March 31, 1998 have been finalised, SECTION
16(2)(d)(ii) will be treated as referring to the then latest quarterly
accounts of the Guarantor.
(4) Survival of representations. Each of the representations made under this
Agreement shall survive the making of the Advances.
SECTION 17 DELIVERY OF INFORMATION
(1) By the Borrower.
(a) Periodic Reports. The Borrower agrees to deliver each of the following to
the Agent as soon as they become available and, in any event, by the latest
date indicated:
Document/Information Latest date
- -------------------- -----------
Consolidated audited annual 90 days after the end of the
financial statements of the Borrower's financial year
Borrower
Half-year consolidated 60 days after the end of the
financial statements of the first half of the Borrower's
Borrower financial year (except for
the first half of 1998 for which the
consolidated financial statements shall be
delivered within 90 days after the end of such
half year)
(b) Other information. The Borrower agrees to deliver to the Agent such
additional information regarding the financial position or business of the
Borrower as the Agent may reasonably request from time to time.
<PAGE> 24
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(c) Termination Events. The Borrower agrees to deliver to the Agent within 15
days after any officer of the Borrower becomes aware of the existence of any
Termination Event or Potential Termination Event (unless such Termination
Event or Potential Termination Event shall have been cured before the end of
such 15 day period) a certificate signed by the chief financial officer or
the chief accounting officer of the Borrower setting forth the details of
such Termination Event or Potential Termination Event and the action which
the Borrower is taking or proposes to take with respect thereto;
(2) By the Guarantor.
(a) Reports, Documents and Certificates. The Guarantor agrees to
deliver to the Agent:
(i) as soon as available and in any event within 90 days after the end of
each fiscal year, a consolidated balance sheet of the Guarantor and
its Consolidated Subsidiaries as of the end of such fiscal year and
the related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the previous fiscal year, all reported on by
Coopers & Lybrand L.L.P. or other independent public accountants of
nationally recognized standing, whose report shall be without material
qualification;
(ii) as soon as available and in any event within 45 days after the end of
each of the first three quarters of each fiscal year, a condensed
consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of the end of such quarter, the related condensed
consolidated statement of income for such quarter and the related
condensed consolidated statements of income and cash flows for the
portion of such fiscal year ended at the end of such quarter, setting
forth in each case in comparative form the corresponding figures for
the corresponding periods of the previous fiscal year, all in
reasonable detail and certified, to the best of its knowledge (subject
to normal year-end adjustments), as to fairness of presentation, and
consistency with generally accepted accounting principles (except for
changes concurred in by the Guarantor's independent public
accountants) by the chief financial officer or the chief accounting
officer of the Guarantor.
(iii) simultaneously with the delivery of each set of financial statements
referred to in sub-paragraphs (i) and (ii), a certificate of the chief
financial officer or the chief accounting officer of the Guarantor (x)
setting forth in reasonable detail the calculations required to
establish whether the Guarantor was in compliance with the re-
<PAGE> 25
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quirements of SECTION 18(2)(a) to (c), inclusive, on the date of such
financial statements, (y) stating, to the best of its knowledge,
whether any Termination Event or Potential Termination Event exists on
the date of such certificate and (z) if any Termination Event or
Potential Termination Event then exists, setting forth the details
thereof and the action which the Guarantor is taking or proposes to
take with respect thereto;
(iv) within 15 days after any officer of the Guarantor becomes aware of the
existence of any Termination Event or Potential Termination Event
(unless such Termination Event or Potential Termination Event shall
have been cured before the end of such 15 day period) a certificate of
the chief financial officer or the chief accounting officer of the
Guarantor setting forth the details of such Termination Event or
Potential Termination Event and the action which the Guarantor is
taking or proposes to take with respect thereto;
(v) promptly upon the mailing thereof to the shareholders of the Guarantor
generally, copies of all financial statements, reports and proxy
statements so mailed;
(vi) promptly upon the filing thereof, copies of all reports on Forms 10-K,
10-Q and 8-K and similar regular and periodic reports which the
Guarantor shall have filed with the Securities and Exchange
Commission;
(vii) if and when any member of the ERISA Group (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 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 Internal
Revenue 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
<PAGE> 26
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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 the Guarantor setting forth details
as to such occurrence and action, if any, which the Guarantor or
applicable member of the ERISA Group is required or proposes to take;
provided that no such certificate shall be required unless the
aggregate unpaid actual or potential liability of members of the ERISA
Group involved in all events referred to in (i) through (vii) above of
which officers of the Guarantor have obtained knowledge and have not
previously reported under this sub-paragraph (vii) exceeds US $
25,000,000;
(viii)immediately after any officer of the Guarantor obtains knowledge of a
change or a proposed change in the rating of the Guarantor's
outstanding senior unsecured long-term debt securities by Moody's
Investor Service, Inc. or Standard & Poor's Rating Group, a
certificate of the chief financial officer or chief accounting officer
of the Guarantor setting forth the details thereof; and
(b) Other Information. The Guarantor agrees to deliver to the Agent from time to
time such additional information regarding the financial position or
business of the Guarantor as the Agent may reasonably request.
SECTION 18 GENERAL COVENANTS
(1) By the Borrower. The Borrower agrees as follows:
(a) Disposal of Assets. The Borrower and its Subsidiaries, considered as a
whole, will not, without the prior approval of an Instructing Group, dispose
of the whole or the substantial part of their assets. This does not apply to
disposals on commercial terms for full market value and on an arms-length
basis.
(b) Maintenance of Representations. It will take all steps necessary to ensure
that the representations and warranties in Section 16(1) remain true and
correct.
(c) Insurance. The Borrower and its Subsidiaries, considered as a whole, will
maintain insurances on and in relation to their businesses, assets and
operations with reputable insurance companies which are, in the reasonable
opinion of the Borrower, appropriate to insure the Borrower and its
Subsidiaries against risks involved in carrying on their businesses,
including, in particular, product liability and environmental liability.
<PAGE> 27
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(2) By the Guarantor. The Guarantor agrees as follows:
(a) Minimum Consolidated Net Worth. At no time will Consolidated Net Worth be
less than Minimum Consolidated Net Worth. "Minimum Consolidated Net Worth"
means US $ 1,700,000,000; provided that such amount shall be adjusted at the
end of each Fiscal Quarter ending after March 31, 1998 as follows:
(i) increased by 50% of Consolidated Net Income for such Fiscal Quarter;
provided that, if Consolidated Net Income for such Fiscal Quarter is a
negative number (a "Consolidated Net Loss"), an amount up to 50% of
such Consolidated Net Loss shall be applied first to reduce Minimum
Consolidated Net Worth to the extent of offsetting prior increases (if
any) in Minimum Consolidated Net Worth made pursuant to this sub-
paragraph (i) during the same fiscal year and second to reduce (but
not below zero) any future increase in Minimum Consolidated Net Worth
that would otherwise be made pursuant to this sub-paragraph (i) during
the same fiscal year; and
(ii) increased by an amount equal to 50% of all increases in Consolidated
Net Worth during such Fiscal Quarter attributable to sales or
issuances of the Guarantor's Equity Securities; provided that an
amount up to 50% of all decreases in Consolidated Net Worth during
such Fiscal Quarter attributable to purchases or other retirements of
the Guarantor's Equity Securities shall be applied first to offset any
increase in Minimum Consolidated Net Worth that would otherwise be
made pursuant to this sub-paragraph (ii) at the end of such Fiscal
Quarter, second to reduce Minimum Consolidated Net Worth to the extent
of offsetting prior increases (if any) in Minimum Consolidated Net
Worth made pursuant to this sub-paragraph (ii) and third to reduce
(but not below zero) any future increase in Minimum Consolidated Net
Worth that would otherwise be made pursuant to this sub-paragraph
(ii).
(b) Limitations on Debt.
(i) It will not at any time, and will not suffer or permit any
Consolidated Subsidiary at any time to, create, incur, issue,
guarantee or assume any Debt if, immediately after giving effect
thereto, the ratio of (y) Consolidated Debt to (z) the sum of
Consolidated Debt and Consolidated Adjusted Net Worth would exceed
53%.
(ii) It will not at any time suffer or permit any Consolidated Subsidiary
to create, incur, issue, guarantee or assume any Debt if, immediately
after giving effect thereto, the aggregate outstanding amount
(determined at that time) of Debt of all Consolidated Subsidiaries
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(other than Debt owed to the Borrower or one or more other
Consolidated Subsidiaries) would exceed 30% of Consolidated Net Worth.
(iii) Sub-paragraphs (i) and (ii) shall not prevent (i) the Guarantor from
creating, incurring, issuing, guaranteeing or assuming Debt for the
purpose of extending, renewing or Refunding (as such term is defined
in this subsection) an equal or greater principal amount of Debt then
outstanding of the Guarantor or of Debt then outstanding of a
Consolidated Subsidiary or (ii) a Consolidated Subsidiary from
creating, incurring, issuing, guaranteeing or assuming Debt for the
purpose of extending, renewing or Refunding an equal or greater
principal amount of Debt then outstanding of such Consolidated
Subsidiary, or (iii) the creation, incurrence, issuance, guarantee or
assumption of Debt owed to or owned by the Guarantor or a Consolidated
Subsidiary. For purposes of this sub-paragraph (iii), Debt is deemed
to be for the purpose of "Refunding" other Debt if and to the extent
that (x) no later than 5 Domestic Business Days after the refunding
Debt is incurred, the Guarantor delivers to the Agent written notice
stating that the purpose of such Debt is to refund outstanding Debt
and specifying the Debt to be refunded, (y) the proceeds of such
refunding Debt are held in the form of cash or High Quality
Investments (free of any Lien except a Lien securing the specified
Debt to be refunded) until such specified Debt is repaid and (z) such
specified Debt to be refunded is repaid within 45 days after the
refunding Debt is incurred.
(iv) For purposes of the limitations provided in, and computations under,
this SECTION 18(2)(b), (x) when a corporation becomes a Consolidated
Subsidiary it shall be deemed to create at such time all the Debt it
has outstanding immediately after such time (provided that, if after
giving effect to this clause (x), the aggregate outstanding amount of
Debt of all Consolidated Subsidiaries (other than Debt owed to the
Guarantor or one or more other Consolidated Subsidiaries) would be
greater than 30% but less than 60% of Consolidated Net Worth, this
clause (x) shall not apply at the time such corporation becomes a
Consolidated Subsidiary, but such corporation shall be deemed to
create on the 15th day after it becomes a Consolidated Subsidiary all
the Debt it has outstanding on such 15th day), (y) the disposition
(other than to a Consolidated Subsidiary or the Guarantor) by the
Guarantor or a Subsidiary of capital stock of any Consolidated
Subsidiary which holds Debt of the Guarantor or any other Consolidated
Subsidiary so that the Consolidated Subsidiary ceases to be a
Consolidated Subsidiary after such disposition) shall be deemed the
creation of such Debt, and (z) the disposition (other than to a
<PAGE> 29
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Consolidated Subsidiary or the Guarantor) of Debt of the Guarantor or
any Consolidated Subsidiary by any Consolidated Subsidiary or the
Guarantor shall be deemed the creation of such Debt.
(c) Negative Pledge. Neither the Guarantor nor any Consolidated Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(i) Liens existing on March 31, 1998 securing Debt outstanding on March
31, 1998 in an aggregate principal amount not exceeding
US $30,000,000;
(ii) 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;
(iii) any Lien on any asset securing Debt incurred or assumed solely 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;
(iv) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Guarantor or a
Consolidated Subsidiary and not created in contemplation of such
event;
(v) any Lien existing on any asset prior to the acquisition thereof by
the Guarantor or a Consolidated Subsidiary and not created in
contemplation of such acquisition;
(vi) 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;
(vii) any Lien in favour of the holder of Debt (or any person or entity
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;
(viii) Liens incidental to the normal conduct of its business or the
ownership of its assets which (x) do not secure Debt, (y) do not
secure
<PAGE> 30
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any obligation in an amount exceeding US $ 100,000,000 and (z) do not
in the aggregate materially detract from the value of the assets of
the Guarantor and its Consolidated Subsidiaries taken as a whole or in
the aggregate materially impair the use thereof in the operation of
the business of the Guarantor and its Consolidated Subsidiaries taken
as a whole; and
(ix) Liens securing Debt which are not otherwise permitted by the foregoing
clauses of this subparagraph (c); provided that (y) the aggregate
outstanding principal amount of Debt secured by all such Liens on
current assets shall not at any time exceed 20% of Consolidated
Current Assets and (z) the aggregate outstanding principal amount of
Debt secured by all such Liens (including Liens referred to in clause
(y) of this proviso) shall not at any time exceed the sum of (A) 20%
of Consolidated Current Assets plus (B) 3% of Consolidated Net Worth.
(d) Consolidations, Mergers and Sale of Assets.
(i) The Guarantor will not directly or indirectly sell, lease, transfer or
otherwise dispose of all or substantially all of its assets, or merge
or consolidate with any other Person, or acquire any other Person
through purchase of assets or capital stock, unless either (y) the
Guarantor shall be the continuing or surviving corporation or (z) the
successor or acquiring corporation (if other than the Guarantor) shall
be a corporation organized under the laws of one of the States of the
United States of America and shall assume, by a writing satisfactory
in form and substance to the Instructing Group, all of the obligations
of the Guarantor under this Agreement, including all covenants herein
and therein contained, in which case such successor or acquiring
corporation shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a party hereto.
(ii) No disposition of assets, merger, consolidation or acquisition
referred to in sub-paragraph (i) shall be permitted if, immediately
after giving effect thereto, the Guarantor would be in default under
any of the terms or provisions of this Agreement.
(e) Compliance with Laws. The Guarantor 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 (x) the necessity of compliance
therewith is contested in good faith by appropriate proceedings, (y) no
officer of the Guarantor is aware that the Guarantor or the relevant
Subsidiary has failed to comply therewith or (z) the Guarantor
<PAGE> 31
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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 the Guarantor and its Consolidated Subsidiaries, taken as a
whole.
(3) Duration of covenants. The obligations of the Borrower and the Guarantor
under this SECTION 18 and SECTION 17 will cease to have effect when the Facility
has ceased to be available and there are no amounts outstanding under the
Facility.
SECTION 19 EARLY TERMINATION
(1) Termination Events. Each of the following is a Termination Event:
(a) Non-payment. The Borrower fails to pay when due any principal, or fails to
pay within five days of the due date thereof, any other sum payable under
this Agreement.
(b) Certain Covenants. The Borrower fails to observe or perform any covenant
contained in SECTION 18(1)(a) to (c) or the Guarantor fails to observe or
perform any covenant contained in SECTION 18(2)(a) to (d).
(c) Other Covenants. Any of the Obligors fails to observe or perform any other
covenant or agreement contained in this Agreement for 30 days after written
notice thereof has been given to the Borrower and the Guarantor by the
Agent;
(d) Incorrect Statements. Any statement made by any of the Obligors in SECTION
16 or in any document delivered pursuant to this Agreement is incorrect in
any material respect when made or deemed to have been repeated; provided
that, if any statement deemed to have been made by the Obligor pursuant to
SECTION 16(3) shall have been incorrect solely by reason of the existence of
a Termination Event or Potential Termination Event of which the Obligor was
not aware when such statement was deemed to have been made and which was
cured before or promptly after the Obligor became aware thereof, then such
statement shall be deemed not to have been incorrect in any material
respect.
(e) Cross Default. The Guarantor or any Subsidiary fails to make one or more
payments in respect of Material Debt (other than Acquired Debt in an
aggregate outstanding principal amount not exceeding US $ 50,000,000) when
due or within any applicable grace period, and such failure has not been
waived.
(f) Default on Other Obligations. The Guarantor or any Consolidated Subsidiary
fails to observe or perform any term, covenant or agreement contained in any
instrument or agreement (other than this Agreement) by
<PAGE> 32
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which it is bound relating to Material Debt (other than Acquired Debt in an
aggregate outstanding principal amount not exceeding US $ 50,000,000), or
any other event or condition referred to therein shall occur, and the effect
of all such failures, events and conditions (each a "default") is to cause
the maturity of Material Debt to be accelerated or to permit (any applicable
period of grace having expired) the holder or holders of Material Debt (or
any Person acting on their behalf) to accelerate the maturity thereof.
(g) Voluntary Insolvency. The Borrower, the Guarantor or any Significant
Subsidiary commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property under any such law,
or consents to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it under any such law, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they
become due, or a resolution shall be adopted by either the shareholders or
the board of directors of such corporation to authorize any of the
foregoing.
(h) Involuntary Insolvency. An involuntary case or other proceeding is commenced
against the Borrower, the Guarantor or any Significant Subsidiary in any
court of competent jurisdiction seeking in each case liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property under any such law, and in each case
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Guarantor or any Significant Subsidiary as debtors under the
federal bankruptcy laws of the United States as now or hereafter in effect.
(i) ERISA. Any member of the ERISA Group fails to pay when due an amount or
amounts aggregating in excess of US $ 1,000,000 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 Liabilities in
excess of US $ 50,000,000 (collectively, a "Material Plan") is filed under
Title IV of ERISA by any member of the ERISA Group, any plan administrator
or any combination of the foregoing; or the PBGC institutes proceedings
under Title IV of ERISA to terminate, to impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or to cause a trustee
to be appointed to administer any Material Plan; or a condition exists by
<PAGE> 33
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reason of which the PBGC would be entitled to obtain a decree adjudicating
that any Material Plan must be terminated; or there occurs a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of US $ 50,000,000; provided that no
Termination Event shall exist under this sub-clause (i) with respect to any
Prior Plan unless it is reasonably likely that one or more members of the
ERISA Group is liable with respect to the relevant Unfunded Liabilities or
current payment obligation, as the case may be.
(j) Judgement Unsatisfied. A judgement or order for the payment of money in
excess of US $ 10,000,000 shall be rendered against any of the Obligors or
any of their respective Subsidiaries and such judgment or order shall
continue unsatisfied and unstayed for a period of 45 days.
(k) Change of Ownership of Guarantor. Any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 30 % or more of the outstanding shares of common stock of the
Guarantor; or Continuing Directors shall cease to constitute a majority of
the board of directors of the Guarantor.
(l) Change of Ownership of Borrower. The Guarantor ceases to hold, directly or
indirectly, the entire voting share capital of the Borrower.
(m) Unlawfulness or Repudiation. It is unlawful for any of the Obligors to
comply with, or any of the Obligors repudiates, any of its material
obligations under this Agreement.
(n) Change of Business. The Guarantor ceases, or threatens to cease, to conduct,
as a major portion of its business, the sale of building products.
(o) Material Adverse Change. There is a change in the financial condition or
business of the Guarantor and its Subsidiaries, considered as a whole, which
will in any material respect affect the ability of the Guarantor to perform
its material obligations under this Agreement.
(2) Consequences of a Termination Event. If a Termination Event occurs the Agent
may by notice to the Borrower:
(a) cancel the undrawn Facility; or
(b) demand immediate repayment of the Loan,
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or both. The Agent agrees to deliver a notice under this SECTION 19(2) if an
Instructing Group instructs the Agent to do so. In the case of cancellation the
Lenders will be under no further obligation to make an Advance. In the case of a
demand for repayment the Borrower agrees to pay the Lenders in accordance with
the notice.
(3) Indemnity. If there is a Termination Event the Borrower agrees to reimburse
the Agent and each Lender for the losses and expenses the Agent or that Lender
incurs, or will incur, as a result.
SECTION 20 THE AGENT AND THE ARRANGER
(1) Appointment. The Agent is appointed as an agent by each Lender. The Agent is
not acting as agent of the Borrower or the Guarantor under this Agreement.
(2) Authority. The Agent is authorised to exercise the rights, powers,
discretions and duties which are specified by this Agreement. The Agent may also
act in a manner reasonably incidental to these matters. The Agent shall be freed
from the restrictions of SECTION 181 of the Civil Code (Burgerliches
Gesetzbuch).
(3) Duties. In addition to the obligations of the Agent set out elsewhere in
this Agreement the Agent agrees as follows:
(a) Notices. The Agent will notify each Lender of the contents of each notice
received from the Borrower or the Guarantor under the terms of this
Agreement. If the notice only affects particular Lenders, the Agent may
elect to notify only those Lenders.
(b) Other Documents. When the Borrower or the Guarantor delivers to the Agent
any other document required to be delivered under this Agreement the Agent
will provide a copy to each Lender.
(c) Termination Events. The Agent will notify each Lender of any Termination
Event or Potential Termination Event. This obligation will not arise,
however, until there is a default of which the Agent has actual knowledge or
until the Agent receives express notice with reasonable supporting evidence
of the Termination Event or Potential Termination Event. Until this time the
Agent is entitled to assume that there is no Termination Event or Potential
Termination Event. The Agent is not required to make inquiries. Information
referred to in SECTION 20(11) does not have to be disclosed under this
paragraph.
(d) Other Information. The Agent will request the Borrower or the Guarantor, as
the case may be, to deliver to the Agent any information reasonably
requested by a Lender.
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(4) Powers. In addition to the powers of the Agent set out elsewhere in this
Agreement the Agent has the following powers:
(a) Professional Advisers. The Agent may instruct professional advisers
to provide advice in connection with the Facility.
(b) Authority from Instructing Group. The Agent may take any action which is not
inconsistent with this Agreement and which is authorised by an Instructing
Group.
(c) Views of Instructing Group. In exercising any of its rights, powers or
discretions the Agent may have regard to the views of an Instructing Group.
If it exercises those rights, powers or discretions in accordance with those
views the Agent will incur no liability.
(d) Proceedings. The Agent may institute legal proceedings against the Obligors
or any of them in the name of the Lenders if these proceedings are
authorised by an Instructing Group. No proceedings may be commenced in the
name of a Lender without such Lender's prior written consent.
(e) Compliance with Law. The Agent may take any action necessary for it to
comply with applicable laws.
The Agent is not required to exercise any of these powers and will incur no
liability if it fails to do so. In the context of legal proceedings the Agent
may decline to take any step until it has received indemnities or security
satisfactory to it.
(5) Reliance. The Agent is entitled to rely upon each of the following:
(a) Advice received from professional advisers.
(b) A certificate of fact received from the Borrower or the Guarantor and signed
by an Authorised Person.
(c) Any communication or document believed by the Agent to be genuine.
The Agent will not be liable for any of the consequences of relying on these
items.
(6) Extent of Agent's Duties.
(a) No Other Duties. The Agent has no obligations or duties other than
those expressly set out in this Agreement.
(b) Illegality and Liability. The Agent is not obliged to do anything which is
illegal or which may expose it to liability to any person.
<PAGE> 36
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(c) Not a Fiduciary. The Agent is not acting as a fiduciary for any purpose in
connection with this Agreement.
(7) Responsibility of the Lenders. Each Lender is responsible for its own
decision to become involved in the Facility and its decision to take or not take
action under the Facility. It shall make its own credit appraisal of the
Obligors and the terms of the Facility. Neither the Agent nor the Arranger makes
any representation that any information provided to a Lender before or after the
date of this Agreement is true. Accordingly each Lender should take whatever
action it believes is necessary to verify that information. In addition neither
the Agent nor the Arranger is responsible for the legality, validity or adequacy
of this Agreement. Each Lender will satisfy itself on these issues.
(8) Limitation of Liability.
(a) Agent. The Agent will not be liable for any action or non-action under or in
connection with the Facility unless caused by its gross negligence or
willful misconduct.
(b) Directors, Employees and Agents. No director, employee or agent of the Agent
will be liable to a Lender, the Borrower or the Guarantor in relation to the
Facility. Each Lender, the Borrower and the Guarantor agree not to seek to
impose this liability upon them.
(9) Business of the Agent. Despite its role as agent of the Lenders the Agent
may:
(a) participate as a Lender in the Facility,
(b) carry on all types of business with the Borrower and the Guarantor, and
(c) act as agent for other groups of lenders to the Borrower, the Guarantor or
other borrowers.
(10)Indemnity. Each Lender agrees to reimburse the Agent for all losses and
expenses reasonably incurred by the Agent as a result of its appointment as
Agent or arising from its activities as Agent. These losses and expenses will
take into account amounts reimbursed to the Agent by any Obligor. The liability
of each Lender under this SECTION 20(10) will be limited to the share of the
total losses and expenses which corresponds to that Lender's share of the Total
Commitments or, if an Advance has been made, the Loan. If the losses or expenses
are at tributable to an activity of the Agent which relates to only some of the
Lenders, the Agent may instead notify the Lenders of a different sharing
arrangement. In this case the limit of liability of a Lender under this
sub-clause will be determined by the Agent. The Lenders are not liable for
losses and expenses arising from the gross negligence or willful misconduct of
the Agent.
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(11) Information. The Agent is not required to disclose to the Lenders
any information which is not received by it in its capacity as Agent.
(12) Resignation. The Agent may resign by giving notice to the Borrower,
the Guarantor and the Lenders. The Agent may be removed by notice given
by the Instructing Group to the Agent, the Guarantor and the Lenders. In
either event the following shall apply:
(a) Appointment by Instructing Group. An Instructing Group may appoint
a new Agent.
(b) Appointment by the Resigning Agent. If an Instructing Group has not
appointed a new Agent within 30 days after the resigning Agent's notice,
the resigning Agent may appoint a new Agent.
(c) Mode of Appointment. A new Agent will be appointed in consultation with the
Borrower, by notice to the Borrower, the Guarantor and the Lenders. A new
Agent cannot be appointed without its consent.
(d) Timing of Appointment. If the Agent has resigned, the new Agent will become
Agent at a time agreed between the new Agent and the resigning Agent. If no
time is agreed, the new Agent will become Agent ten Business Days after the
notice referred to in paragraph (c). Any removal or resignation of the
Agent will not be effective until a new Agent has been appointed and
accepted its appointment.
(e) Effect of Appointment. Upon a new Agent becoming Agent the resigning or
removed Agent will cease to be Agent. Accordingly it will be discharged
from its obligations and duties as Agent. It will, however, continue to be
able to rely on the terms of this SECTION 20 in respect of all matters
relating to the period of its appointment. The new Agent will assume the
role of Agent. It will have all the rights, powers, discretions and duties
of the Agent provided for in this Agreement.
(f) Transition. The resigning or removed Agent and the new Agent agree to
co-operate to ensure an orderly transition. The resigning or removed Agent
agrees to deliver or make available to the new Agent all records, files and
information held by it as Agent. This obligation will not require the
resigning or removed Agent to disclose any confidential information.
(13) Arranger. The Arranger has no continuing role in connection with
the Facility and is not liable in respect of any matter concerning the
Facility.
SECTION 21 EVIDENCE AND CERTIFICATES
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(1) Evidence of Debt. The Agent will maintain in its books an account showing
all liabilities accrued and payments made in relation to the Facility. Details
of amounts outstanding recorded in this account will be prima facie evidence of
the Borrower's or Guarantor's obligations.
(2) Certificates. Each certificate delivered under this Agreement must contain
reasonable detail of the matters being certified. A certificate delivered by the
Agent or a Lender will be conclusive unless there is an obvious error.
SECTION 22 NOTICES
(1) Nature of Notices. No notice given by any of the Obligors under this
Agreement may be withdrawn or revoked. Each notice delivered by any of the
Obligors must be unconditional. It must also be signed by an Authorised Person.
(2) Delivery of Notices. A notice under this Agreement will only be effective if
it is in writing and is received. Notices may be given by post, telex, fax or
(in the case of notices among the Lenders and the Agent) SWIFT. If a notice
under SECTION 6(1) is given by fax, a hard copy must also be delivered.
(3) Notices through the Agent. Each notice from any of the Obligors or a Lender
will be delivered to the Agent. The Agent agrees to pass on the details of
notices received by it to the appropriate recipient as soon as practicable.
(4) Language.
(a) All notices given under this Agreement must be in English.
(b) All other documents delivered under this Agreement may be in English or
German and must be delivered in sufficient copies for the Agent and all
Lenders.
(5) Address Details. Notices will be delivered to the address of the intended
recipient as set out in Schedule 1. The Borrower, the Guarantor or a Lender may
change its address details by not less than 5 Business Days' notice to the
Agent. The Agent may change its address details by 5 Business Days' notice to
the Borrower, the Guarantor and the Lenders.
SECTION 23 TRANSFERS AND SUBSTITUTION
(1) Transfers by the Obligors. No Obligor may transfer or otherwise dispose of
any of its rights or obligations under this Agreement.
(2) Substitution of Lender. If a Lender fails to perform its obligations, or the
obligations of a Lender have been suspended or any Lender has demanded
compensation under SECTION 12, the Borrower shall have the right, with the
consent of
<PAGE> 39
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the Agent (such consent not to be
unreasonably withheld) to substitute such Lender by another bank or financial
institution which assumes such Lender's Commitment or, as the case may be,
participations in the Advances.
(3) Transfers by Lenders.
(a) General Right. A Lender (the "Existing Lender") may at any time transfer any
of its rights and/or obligations under this Agreement to:
(i) any other Lender,
(ii) any affiliate of any Lender being a bank or other financial
institution or,
(iii) with the prior consent of the Borrower (such consent not to be
unreasonably withheld) to another bank or other financial institution,
or
(iv) to any other party following the occurrence of a Termination Event.
(in each case the "New Lender").
If an Existing Lender transfers any of its rights and/or obligations under
this Agreement and at the time of such transfer there arises an obligation
on the part of the Borrower under SECTION 12(2)(b) or SECTION 12(4)(b) to
pay immediately or in respect of any future payment to the New Lender any
amount in excess of the amount it would have been obliged to pay to the
Existing Lender, the Borrower shall not be obliged to pay the amount of such
excess.
(b) Effectiveness. Any transfer to a New Lender other than a Lender will be
effective only if either:
(i) the obligations are transferred in accordance with SECTION 23(4); or
(ii) the New Lender in form and substance satisfactory to the Agent
confirms to the Agent, the Borrower and the Guarantor that it
undertakes to be bound by the terms of this Agreement as a Lender. On
the transfer becoming effective in this manner the Existing Lender
shall be released from its obligations under this Agreement to the
extent that they are transferred to the New Lender.
(c) Minimum Amount. Partial transfers may only be made for a minimum amount of
DM 5,000,000.
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(d) Sub-participation. Nothing in this Agreement restricts the ability of a
Lender to sub-participate its rights and obligations under this Agreement to
another person if that Lender remains liable under this Agreement for its
obligations.
(e) Agent's Fee. On each occasion an Existing Lender transfers any of its rights
and/or obligations under this Agreement, the New Lender shall, on the date
the transfer takes effect, pay to the Agent for its own account a fee of DM
2,000.
(f) Disclosure. A Lender may disclose to a proposed transferee or sub-
participant details of this Agreement and any information received by the
Lender under or in connection with this Agreement.
(4) Substitution.
(a) Procedure. A substitution of a Lender is effected if:
(i) the Existing Lender and the New Lender deliver to the Agent a duly
completed certificate, substantially in the form of Schedule 3 (a
"Substitution Certificate"); and
(ii) the Agent executes it.
(b) Authority of Agent. Each Party (other than the Existing Lender and the New
Lender) irrevocably authorises the Agent to execute any duly completed
Substitution Certificate on its behalf.
(c) Effects of Substitution. To the extent that they are expressed to be the
subject of the substitution in the Substitution Certificate:
(i) the Existing Lender and the other Parties (the "existing Parties")
will be released from their obligations to each other (the "discharged
obligations");
(ii) the New Lender and the existing Parties will assume obligations
towards each other which differ from the discharged obligations
insofar as they are owed to or assumed by the New Lender instead of
the Existing Lender;
(iii) the rights of the Existing Lender against the existing Parties and
vice versa (the "discharged rights") will be cancelled; and
(iv) the New Lender and the existing Parties will acquire rights against
each other which differ from the discharged rights only insofar as
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they are exercisable by or against the New Lender instead of the
Existing Lender,
all on the date of signing of the Substitution Certificate by the Agent or,
if later, the date specified in the Substitution Certificate.
SECTION 24 WAIVERS AND AMENDMENTS
(1) Authority of the Agent. If authorised by an Instructing Group the Agent may
grant waivers and agree amendments with the Obligors. These waivers and
amendments will be made on behalf of and be binding on all the Lenders,
including those which were not part of the Instructing Group. The Agent is not
authorized to grant any waiver or agree any amendment affecting any of the
following:
(a) The amount or method of calculation of interest;
(b) An alteration of the date for the payment of any sum;
(c) The definitions of "Commitment Expiry Date" or "Instructing Group";
(d) SECTIONS 3(1), 6(5)(c) and (d), 11, 13(9) and (10), 15, 20(4)(c), 20(10) and
this SECTION 24(1);
(e) The obligations of the Lenders;
(f) Any requirement (including the one in this sub-clause) that all the Lenders
or a certain proportion of them consent to a matter or deliver a notice.
Waivers or amendments affecting these matters require the consent of all
Lenders.
(2) Expenses. The Borrower agrees to reimburse the Agent and each Lender for the
expenses they incur as a result of any proposal made by the Borrower to waive or
amend a term of this Agreement.
SECTION 25 MISCELLANEOUS
(1) Exercise of Rights. If the Agent or a Lender does not exercise a right or
power when it is able to do so this will not prevent it exercising that right or
power. When it does exercise a right or power it may do so again in the same or
a different manner. The Agent's and the Lenders' rights and remedies under this
Agreement are in addition to any other rights and remedies they may have. Those
other rights and remedies are not affected by this Agreement.
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(2) Counterparts. There may be several signed copies of this Agreement. There is
intended to be a single Agreement and each signed copy is a counterpart of that
Agreement.
(3) Entire Agreement. This Agreement constitutes the whole and only agreement
between the parties relating to the Facility.
(4) SECTION 8a KStG Confirmation. Each Lender undertakes to the Borrower to
confirm in writing substantially in the form as attached in Schedule 5 within
the first quarter of a calendar year (commencing in 1999) that any interest paid
to such Lender under this Agreement is subject to taxation in Germany (after
deduction of related expenses) and that (according to the relevant Lender's
credit files pertaining to the Facility) the respective Lender has not made any
payment (directly or indirectly) to any entity belonging to the Masco Group (as
notified by the Guarantor to the Agent) that would be treated as a payment
related to the Facility.
(5) Introduction of EURO.
(a) As from the beginning of the third stage of the European Monetary Union,
except as provided in the following sentences, all payments by an Obligor
expressed to be made in a sub-denomination of EURO in respect of the Loan
or, as the case may be, the Guarantee will be made in EUROs. If upon the
introduction of the EURO an Obligor has the option whether to make payments
in respect of the Loan or, as the case may be, the Guarantee in EUROs or in
a sub-denomination of the EURO, the Obligor will make payments in the
relevant sub- denomination of the EURO until it has notified the Agent that
thereafter payments will be made in EURO.
(b) The parties agree to make such operational and administrative changes as are
necessary and appropriate in the circumstances of the above, having regard
to market practice existing at the time of the introduction of the EURO as
the lawful currency in the states participating in the third stage of the
European Monetary Union, provided that the parties hereby agree on the
EURIBOR (Euro Interbank Offered Rate) as the new reference interest rate for
EURO or any of its subdenominations.
(c) The introduction of the EURO as currency and any amendments of this
Agreement resulting therefrom will not entitle any party to this Agreement
to any legal remedy, including, without limitation, any right of rescission
or claim for damages.
<PAGE> 43
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SECTION 26 LAW AND JURISDICTION
(1) Law. This Agreement is governed by the law of the Federal Republic of
Germany.
(2) Submission. The courts of Frankfurt am Main shall have non-exclusive
jurisdiction for any proceedings arising under or in connection with this
Agreement. This submission to the jurisdiction of the courts in Frankfurt am
Main shall not limit the right of any Syndicate Party to take proceedings
against any of the Obligors in any other court of competent jurisdiction.
(3) Service of Process. Without prejudice to any other mode of service Masco
Corporation irrevocably appoints Masco GmbH, Hinterm Haag 10, 69207 Sandhausen
as its agent for service of process relating to any proceedings before the
German courts arising under or in connection with this Agreement.
SECTION 27 CONFIDENTIALITY
Each Lender agrees that all documentation and other information made available
by any of the Obligors to such Lender, whether under the terms of this Agreement
or any other loan agreement, shall (except to the extent required by legal or
governmental process or otherwise by law, or if such documentation and other
information is publicly available or thereafter becomes publicly available other
than by action of any Lender, or was theretofore known to such Lender
independent of any disclosure thereto by the Obligors) be held in the strictest
confidence by such Lender and used solely in connection with the administration
of loans from time to time outstanding from such Lender to any of the Obligors;
provided that (i) such Lender may disclose such documentation and other
information to any of its affiliates or any other bank, in each case, to which
such Lender sells or proposes to sell its Commitment or participation in the
Advances, or such Lender's advisers, if such affiliate or other bank or
advisers, prior to such disclosure, agrees for the benefit of the Obligors to
comply with the provisions of this SECTION 27, (ii) such Lender may disclose the
provisions of this Agreement and the amounts, maturities and interest rates of
the Advances to any purchaser or potential purchaser of such Lender's Commitment
or participation in any Advances and (iii) such Lender may disclose such
documentation and other information to the extent required, in such Lender's
good faith judgement, to enforce its rights under this Agreement.
Frankfurt am Main, ___________________
MASCO GMBH
<PAGE> 44
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By:
____________________________________
MASCO CORPORATION
By:
____________________________________
COMMERZBANK AKTIENGESELLSCHAFT
(in its capacity as Arranger)
By:
____________________________________
COMMERZBANK INTERNATIONAL S.A.
(in its capacity as Agent)
By:
____________________________________
<PAGE> 45
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COMMERZBANK AKTIENGESELLSCHAFT
Filiale Heidelberg
By:
____________________________________
BARCLAYS BANK PLC
DEUTSCHE BANK AG
Filiale Heidelberg
DRESDNER BANK AKTIENGESELLSCHAFT
Filiale Heidelberg
LANDESGIROKASSE
OFFENTLICHE BANK UND LANDESSPARKASSE
BANCA COMMERCIALE ITALIANA SPA
Frankfurt am Main Branch
BANCA MONTE DEI PASCHI DI SIENA
Frankfurt am Main Branch
BANK BRUSSEL LAMBERT AG
Niederlassung Koln
THE BANK OF NEW YORK
THE FIRST NATIONAL BANK OF CHICAGO
Frankfurt/Main Branch
KBC BANK N.V.
Zweigniederlassung Frankfurt
By:
____________________________________
(by power of attorney)
<PAGE> 46
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Without prejudice to the foregoing execution of the Agreement by the parties
hereto, COMMERZBANK INTERNATIONAL S.A. hereby expressly and specifically
confirms its agreement with the provisions of SECTION 26(2) hereof for the
purposes of Article 1 of the Protocol annexed to the Convention on Jurisdiction
and the Enforcement of Judgements in Civil and Commercial Matters signed at
Brussels on September 27, 1968.
COMMERZBANK INTERNATIONAL S.A.
By:
___________________________
<PAGE> 47
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ANNEX
INTERPRETATION
DEFINITIONS, REFERENCES AND CONSTRUCTION
1. DEFINITIONS
In this Agreement:
"ACQUIRED DEBT" means with respect to any person which becomes a Subsidiary
after the date of this Agreement. 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, provided that such Debt
shall no longer constitute "ACQUIRED DEBT" at any time that is more than six
months after such person becomes a Subsidiary
"ADVANCE" means an advance made, or to be made, under SECTION 6.
"ADVANCE DATE" means the date, or proposed date, of an Advance.
"AFFILIATE" means at any date a person (other than a Consolidated Subsidiary)
whose earnings or losses (or the appropriate proportionate share thereof) would
be included in determining the Consolidated Net Income of the Guarantor and its
Consolidated Subsidiaries for a period ending on such date under the equity
method of accounting for investments in common stock (and certain other
investments).
"AGENT" means Commerzbank International S.A. in its capacity as agent for the
Lenders, acting through its office at Luxembourg or any other office which it
may notify to the Borrower, the Guarantor and the Lenders. If there is a change
of agent in accordance with SECTION 20(12), "Agent" will instead mean the new
agent appointed under SECTION 20(12).
"AUTHORISED PERSON" means a person authorised to sign notices on behalf of the
Borrower or the Guarantor under this Agreement. In the case of the Borrower, the
authorisation is evidenced by a list of "Authorised Persons" duly signed on
behalf of the Borrower by one or more Geschaftsfuhrer (as appropriate), which
list has been delivered to the Agent. In the case of the Guarantor, the
authorisation is constituted by a resolution of the directors of the Guarantor,
a certified copy of which has been delivered to the Agent. A person will cease
to be an "Authorised Person" upon notice by the Borrower or the Guarantor, as
the case may be, to the Agent.
"AVAILABLE COMMITMENT" means the amount of a Lender's Commitment which
is available to be drawn by the Borrower. On any day it is the Lender's
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Commitment on that day less that Lender's participation in all
outstanding Advances. Participations in Advances in an Optional Currency
will be determined at their Original DM Amount.
"AVAILABLE FACILITY" means the aggregate amount which is available to the
Borrower under the Facility. On any day it is the Total Commitments on that day
less the Loan.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BUSINESS DAY" means a day on which banks
(a) with respect to the determination of an interest rate, are open for general
business in Luxembourg and London (or, with respect to Eurosterling, Paris);
(b) with respect to payments, are open for interbank payments in Luxembourg and
in the principal financial center of the relevant currency (which in the
case of payments in euro is Frankfurt),
(c) with respect to the determination of an Exchange Rate, are open for general
business in Luxembourg and London;
(d) in all other cases are open for general business in Luxembourg.
"COMMITMENT" means the amount of principal which a Lender has committed to the
Facility. Each Lender's initial "Commitment" is set out next to its name in
Schedule 1. This may be reduced or cancelled in accordance with this Agreement.
"COMMITMENT EXPIRY DATE" means the date which falls one month prior to the Final
Maturity Date.
"CONSOLIDATED ADJUSTED NET WORTH" means at any date (i) Consolidated Net Worth
at such date less (ii) the amount (if any) by which the aggregate amount of all
equity and other investments in Affiliates of the Guarantor reflected in such
Consolidated Net Worth exceeds US $ 350,000,000.
"CONSOLIDATED CURRENT ASSETS" means at any date the consolidated current assets
of the Guarantor and its Consolidated Subsidiaries determined as of such date.
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"CONSOLIDATED DEBT" means at any date the Debt of the Guarantor and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net in come of
the Guarantor and its Consolidated Subsidiaries for such period (considered as a
single accounting period), but excluding the net income or deficit of any person
(other than the equity in earnings or losses of an Affiliate previously included
in such consolidated net income determined under the equity method of accounting
for investments) prior to the effective date on which it becomes a Consolidated
Subsidiary or is merged into or consolidated with the Guarantor or a
Consolidated Subsidiary.
"CONSOLIDATED NET WORTH" means at any date the consolidated shareholders' equity
of the Guarantor and its Consolidated Subsidiaries determined as of such date.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary the accounts of which
would be consolidated with those of the Guarantor in its consolidated financial
statements as of such date.
"CONSOLIDATED TOTAL LIABILITIES" means at any date the aggregate of all
liabilities or other items which would appear on the liability side of a
consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries as
of such date, except the amount so appearing which constitutes Consolidated Net
Worth.
"CONTINUING DIRECTOR" means any member of the Guarantor's board of directors
who either (i) is a member of such board as of 1st September 1998 or (ii) is
thereafter elected to such board, or nominated for election by stockholders, by
a vote of at least two-thirds of the directors who are Continuing Directors at
the time of such vote; provided that an individual who is so elected or
nominated in connection with a merger, consolidation, acquisition or similar
transaction shall not be a Continuing Director unless such individual was a
Continuing Director prior thereto.
"DEBT" of any person means at any date, without duplication, (i) all obligations
of such person for borrowed money, (ii) all obligations of such person evidenced
by debentures, notes or other similar instruments, (iii) all obligations of such
person to pay the deferred purchase price of property, except trade accounts
payable, (iv) all obligations of such person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt of others
secured by a Lien on any asset of such person, whether or not such Debt is
assumed by such Person, and (iv) all Debt of others for which such person is
contingently liable. In calculating the amount of any Debt at any date for
purposes of this Agreement, accrued interest shall be excluded to the extent
that it would be properly classified as a current liability for interest under
the heading "Accrued liabilities" (and not under the heading "Notes payable") in
a balance sheet prepared as of such date in accordance with the accounting
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principles and practices used in preparing the balance sheet referred to in
SECTION 16(2)(d)(i) and the related footnotes thereto.
"DOMESTIC BUSINESS DAY" means each day other than a Saturday, Sunday or public
holiday in New York City.
"ENVIRONMENTAL LAWS" means any and all United States federal, state and local
statutes, laws, judicial decisions, regulations, ordinances, rules, judgements,
orders, decrees, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health 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.
"EQUIVALENT AMOUNT" means the amount in an Optional Currency equivalent to the
specified amount in DM. The Equivalent Amount will be calculated using the
Exchange Rate applicable to the date on which the amount in the Optional
Currency is to be or was advanced.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA GROUP" means the Guarantor, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Guarantor or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EXCHANGE RATE" means a rate of exchange for converting an amount in DM into an
amount in an Optional Currency or vice versa. The Exchange Rate applicable to
any date will be the mean of the Agent's spot buying and selling rates for the
exchange of these currencies at or around 11.00 a.m. on the third Business Day
before that date.
"FACILITY" means the loan facility provided by this Agreement.
"FINAL MATURITY DATE" means the date which falls on the fifth anniversary of the
date of this Agreement. If the Final Maturity Date is not a Business Day, the
Final Maturity Date will instead be the next Business Day.
"FISCAL QUARTER" means a fiscal quarter of the Guarantor.
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"GBP" means Eurosterling.
"GUARANTEE" means the guarantee contained in SECTION 11.
"GUARANTOR'S 1997 FORM 10-K" means the Guarantor's annual report on Form 10-K
for the year ended December 31, 1997, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.
"GUARANTOR'S EQUITY SECURITIES" means shares of any class of the Guarantor's
capital stock or options, warrants or other rights to acquire such shares.
"HIGH QUALITY INVESTMENT" means any investment in (i) direct obligations of the
United States of America or any agency thereof, or obligations guaranteed by the
United States of America or any agency thereof, (ii) commercial paper rated at
least A-1 by S&P and at least P-1 by Moody's or (iii) time deposits with,
including certificates of deposit issued by, any bank which was a party to US $
750,000,000 Amended and Restated Credit Agreement dated as of November 14, 1996
among the Guarantor, the banks party thereto and the Agent named therein on its
effective date or any office located in the United States of America of any bank
or trust company which is organized under the laws of the United States of
America or any State thereof and has capital, surplus and undivided profits
aggregating at least US $ 500,000,000; provided in each case that such
investment matures within six months from the date of acquisition thereof by the
Guarantor or a Subsidiary.
"INSTRUCTING GROUP" means Lenders whose Commitments exceed 50% in aggregate,
or, if an Advance has been made, Lenders whose participations in the Loan exceed
50% in aggregate.
"INTERNAL REVENUE CODE" means the United States Internal Revenue Code of 1986,
as amended, or any successor statute.
"LENDER" means a lender listed in Schedule 1 acting through the office appearing
under its name or any other office which it may notify to the Agent. A lender
which acquires an interest in this Facility by way of transfer or substitution
under SECTION 23 will become a "Lender" and will act through its office notified
to the Agent. The expression also includes universal successors to Lenders.
"LIBOR", in relation to any Term or other period in respect of which an interest
rate is to be determined pursuant to this Agreement, means:
(a) the interest rate per annum appearing on the Telerate Screen page 3740 or
3750 (or any successor page displaying this information) for the currency of
the Advance (as determined by the Agent) (the "Telerate
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Screen") at or about 11:00 a.m. London time on the applicable Rate Fixing
Day, as being the interest rate offered in the London Interbank Market for
deposits in the currency of the relevant Advance for delivery on the first
day of the Term of the Advance and for a period equal to such Term or any
other period selected by the Agent in accordance with this Agreement; and
(b) if such interest rate per annum does not appear on the Telerate Screen or
the Agent determines that no rate for a period of the duration of the
relevant Term (or other period selected by the Agent pursuant to the
provisions of this Agreement) appears on the Telerate Screen, the arithmetic
mean (rounded upwards, if necessary, to four decimal places) of the
respective rates of interest per annum, as supplied to the Agent at its
request, quoted by the Reference Banks to leading banks in the London
Interbank Market at or about 11:00 a.m. London time on the applicable Rate
Fixing Date for the offering of deposits in the relevant currency during
such Term in an amount comparable to the amount of the Advance to which such
Term relates; provided that:
(i) if any Reference Bank does not supply such quotation by 12 noon on the
applicable Rate Fixing Day, the relevant arithmetic mean shall be
determined on the basis of the quotations supplied by the remaining
Reference Banks; and
(ii) if fewer than two Reference Banks supply a quotation, SECTION 12(3).
shall apply.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or similar encumbrance of any kind in respect of such asset;
provided that a subordination agreement shall not be deemed to create a Lien.
For the purposes of this Agreement, the Guarantor 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 the principal amount borrowed and not repaid under the
Facility.
"MARGIN", in relation to any Term or other period in respect of which an
interest rate or commitment fee is to be determined pursuant to this Agreement,
means the rate determined by the Agent by reference to the credit rating
assigned from time to time by Moody's Investor Service, Inc. ("Moody's") or
Standard & Poors ("S&P") to the long-term debt of the Guarantor and shall be:
(a) 0.300 per cent. per annum if such rating is A2 (Moody's) or A (S&P)
or better;
(b) 0.325 per cent. per annum if such rating is A3 (Moody's) or A- (S&P);
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(c) 0.350 per cent. per annum if such rating is Baa1, Baa2 or Baa3 (Moody's) or
BBB+, BBB or BBB- (S&P); or
(d) 0.600 per cent. per annum if such rating is Ba1 (Moody's) or BB+ (S&P) or
worse.
provided that a change in rating shall not affect the Margin applicable to a
running Term.
In case the assigned credit ratings are not of an equal level, the better of the
two ratings shall be decisive, provided that if one of the ratings is worse than
Baa3 (Moody's) or BBB- (S&P) the worse of the two ratings shall be decisive.
"MASCO GROUP" means the Guarantor and its Subsidiaries.
"MATERIAL DEBT" means Debt of the Guarantor and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate outstanding principal amount exceeding US $ 25,000,000.
"MATERIAL PLAN" has the meaning set forth in SECTION 19(1)(i).
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan within
the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA
Group 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 which ceased to be a member of the ERISA Group during such five year
period.
"OBLIGOR" at any time means the Borrower or the Guarantor.
"OPTIONAL CURRENCY" means a currency:
(a) which is freely transferable,
(b) which is freely convertible into DM, and
(c) deposits of which are readily available and freely dealt on the London
Interbank Market or, in the case of GBP, the Paris Interbank Market.
"ORIGINAL DM AMOUNT" means the DM equivalent of an amount in an Optional
Currency calculated using the Exchange Rate applicable to the date on which the
amount in the Optional Currency is to be or was advanced.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
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"PIBOR" means the arithmetic mean (rounded upwards, if necessary, to four
decimal places) of the respective rates of interest per annum as supplied to
the Agent at its request, quoted by the Reference Banks to leading banks in
the Paris Interbank Market at or about 11.00 a.m. Paris time on the Rate
Fixing Day for the offering of GBP deposits for a period comparable to the
Term of the relevant Advance, provided that:
(i) if any Reference Bank does not supply such quotation by 12 noon on the
applicable Rate Fixing Day, the relevant arithmetic mean shall be
determined on the basis of the quotations supplied by the remaining
Reference Banks; and
(ii) if fewer than two Reference Banks supply a quotation, SECTION 12(3).
shall apply.
"PLAN" means at any time an 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 Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"POTENTIAL TERMINATION EVENT" means any event or circumstance which, with the
giving of notice and/or the lapse of time and/or the fulfillment of any other
condition, is likely to constitute a Termination Event.
"PRIOR PLAN" means at any time (i) any Plan which at such time is no longer
maintained or contributed to by any member of the ERISA Group or (ii) any
Multiemployer Plan to which no member of the ERISA Group is at such time any
longer making contributions or, pursuant to an applicable collective bargaining
agreement, accruing an obligation to make contributions.
"RATE FIXING DAY" means, in relation to any Term or other period for which an
interest rate is to be determined pursuant to this Agreement, the second
Business Day before the commencement of the Term or such other period.
"REFERENCE BANKS" means, initially, the principal London (for the determination
of LIBOR) or Paris (for the determination of PIBOR) offices of Commerzbank
Aktiengesellschaft, Deutsche Bank AG and Barclays Bank PLC. The Agent, following
consultation with the Borrower and the Lenders, may replace a "Reference Bank"
with another Lender or an affiliate of a Lender. This replacement will take
effect when notice is delivered to the Borrower and the Lenders.
<PAGE> 55
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"SECURITY" means security of any type created or existing over an asset.
"Security" includes also any arrangement providing a creditor with a prior right
to an asset, or its proceeds of sale, over other creditors in an insolvency or
liquidation.
"SIGNIFICANT SUBSIDIARIES" means any one or more Subsidiaries which, if
considered in the aggregate as a single Subsidiary, would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities
Exchange Act of 1934. For purposes of this Agreement, a type of event shall not
be deemed to have occurred with respect to Significant Subsidiaries unless such
type of event has occurred with respect to each of the Subsidiaries required to
be included to constitute "Significant Subsidiaries" as defined in the
preceding sentence.
"SUBSIDIARY", in relation to the Borrower, means a company controlled or
majority-owned by the Borrower within the meaning of Sections 16 and 17 of the
Stock Corporation Act ("Aktiengesetz"), and, in relation to the Guarantor, means
any corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time owned by the
Guarantor or by the Guarantor and one or more Subsidiaries or by one or more
Subsidiaries.
"SUBSTITUTION CERTIFICATE" means a document substantially in the form
set out in Schedule 3.
"SYNDICATE PARTY" means the Agent, the Arranger and any Lender.
"TERM" means the period for which an Advance is to be outstanding. If the last
day of this period is not a Business Day that Term will instead end on the next
Business Day, unless that day is in another calendar month. Where it is in
another calendar month the last day of that Term will be the previous Business
Day.
"TERMINATION EVENT" has the meaning described in Section 19(1).
"TOTAL COMMITMENTS" means the aggregate of the Commitments of all the
Lenders.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the amount
(if any) by which (i) the value of all benefit liabilities under such Plan,
determined on a plan termination basis using the assumptions prescribed by the
PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value
of all Plan assets allocable to such liabilities under Title IV of ERISA
(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
<PAGE> 56
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excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES SUBSIDIARY" means a Subsidiary which is incorporated under the
laws of the United States of America or any State thereof.
2. CERTAIN REFERENCES
Unless otherwise indicated, a reference in this Agreement to:
"Deutsche Mark" or "DM" is to the lawful currency for the time being of Germany
and, following the commencement of the third stage of the European Monetary
Union in Germany, is a reference to EURO or, as the case may be, to a
sub-denomination of EURO;
"EURO" is to the lawful currency of the member states of the European Monetary
Union participating in the third stage of the European Monetary Union to
commence on 1 January 1999;
"fees" or "expenses" includes any value added tax on those fees or expenses;
"Germany" is to the Federal Republic of Germany;
unless stated otherwise, a "time of day" is to Luxembourg time.
3. CONSTRUCTION
In relation to the Guarantor, and 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 United States generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by the Guarantor's independent
public accountants) with the most recent audited consolidated financial
statements of the Guarantor and its Consolidated Subsidiaries delivered to the
Lenders; provided that, if the Guarantor notifies the Agent that the Guarantor
wishes to amend any covenant in SECTION 18(2) to eliminate the effect of any
change in United States generally accepted accounting principles on the
operation of such covenant (or if the Agent notifies the Guarantor that an
Instructing Group wishes to amend SECTION 18(2) for such purpose), then the
Guarantor's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in United States generally accepted accounting principles became
effective, until either such notice is with drawn or such covenant is amended in
a manner satisfactory to the Guarantor and the Instructing Group.
<PAGE> 57
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SCHEDULE 1
LENDERS AND COMMITMENTS
ADDRESS DETAILS
Lender Commitment in DM
COMMERZBANK AKTIENGESELLSCHAFT 70,000,000
Filiale Heidelberg
Kurfurstenanlage 47 - 51
69007 Heidelberg
Telefax-No.: 06221-901846
BARCLAYS BANK PLC 40,000,000
Bockenheimer Landstrabbe 38 - 40
60323 Frankfurt am Main
Telefax-No.: 069-71612399
DEUTSCHE BANK AG 40,000,000
Filiale Heidelberg
Unternehmungen & Immobilien
Adenauer Platz 1
69115 Heidelberg
Telefax-No.: 06221-501316
DRESDNER BANK AKTIENGESELLSCHAFT 40,000,000
Filiale Heidelberg
FK-Team Rhein-Neckar I
Postfach 10 08 51
68008 Mannheim
Telefax-No.: 0621-179-2488
LANDESGIROKASSE OFFENTLICHE BANK 40,000,000
UND LANDESSPARKASSE
Kronenstrabe 20
70173 Stuttgart
Telefax-No.: 0711-124-3996
BANCA COMMERCIALE ITALIANA SPA 20,000,000
Frankfurt am Main Branch
Westendstrabe 58 - 62
60325 Frankfurt am Main
Telefax-No.: 069-7452-04/7452-34
BANCA MONTE DEI PASCHI DI SIENA 20,000,000
Frankfurt am Main Branch
Neue Mainzer Strabe 26
60311 Frankfurt am Main
Telefax-No.: 069-235536
<PAGE> 58
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BANK BRUSSEL LAMBERT AG 20,000,000
Niederlassung Koln
An Lyskirchen 14, Ecke Filzengraben
50676 Koln
Telefax-No.: 0221-2403294
THE BANK OF NEW YORK 20,000,000
Niedenau 61-63
60325 Frankfurt am Main
Telefax-No.: 069-721798/172198
THE FIRST NATIONAL BANK OF CHICAGO 20,000,000
Frankfurt/Main Branch
Hochstrabe 35 - 37
60313 Frankfurt am Main
Telefax-No.: 069-299876-80/283840
KBC BANK N.V. 20,000,000
Zweigniederlassung Frankfurt
Mendelssohnstrabe 75 - 77
60325 Frankfurt am Main
Telefax-No.: 069-75619366
-----------
Total: 350,000,000
===========
Arranger:
Commerzbank Aktiengesellschaft
Kaiserplatz
60261 Frankfurt am Main
Telephone-No.: 069-1362-4033
Telefax-No.: 069-1362-7111
Agent:
Commerzbank International S.A.
11, Rue Notre Dame
L-2240 Luxembourg
Telephone-No.: 00352-477 911-1
Telefax-No.: 00352-477 911 419
<PAGE> 59
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Borrower:
Masco GmbH
Hinterm Haag 10
69207 Sandhausen
Telephone-No.: 06224-93090
Telefax-No.: 06224-52709
Guarantor:
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
USA
Telephone-No.: 001313-3746258
Telefax-No.: 001313-3746135
<PAGE> 60
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SCHEDULE 2
CONDITIONS PRECEDENT
1. IN RESPECT OF THE BORROWER:
(a) A copy of the Articles of Association (Gesellschaftsvertrag) of the Borrower
as last filed with the Commercial Register and of the related certificate of
the Notary Public pursuant to SECTION 54(1) GmbHG, certified by two
Authorized Persons to be correct and up-to-date.
(b) An extract from the Commercial Register dated not earlier than 1 September
1998, certified by the Commercial Register.
(c) A list of Authorized Persons complying with the definition of "Authorized
Person".
2. IN RESPECT OF THE GUARANTOR:
A copy of the charter, by-laws and authorizing resolutions of the Guarantor,
certified by the corporate secretary of the Guarantor to be a true, correct
and up-to-date copy.
3. LEGAL OPINIONS FROM:
(a) John R. Leekley, General Counsel of the Guarantor;
(b) Davis Polk & Wardwell, legal advisers in the United States of America to the
Lenders; and
(c) Hengeler Mueller Weitzel Wirtz, legal advisers in Germany to the Lenders,
all legal opinions to be addressed to the Syndicate Parties and in the form of
drafts circulated to the Lenders prior to signing.
<PAGE> 61
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SCHEDULE 3
FORM OF SUBSTITUTION CERTIFICATE
To: Commerzbank International S.A.
From: [The Existing Lender] and [The New Lender]
MASCO GMBH - DM 350,000,000 MULTICURRENCY REVOLVING CREDIT FACILITY AGREEMENT
DATED 14 SEPTEMBER 1998 (THE "AGREEMENT")
We refer to SECTION 23(4) of the Agreement.
1. We (the "Existing Lender") and (the "New Lender")
agree to the New Lender substituting the Existing Lender in respect of all
the Existing Lender's rights and obligations referred to in the Schedule in
accordance with SECTION 23(4).
2. The specified date for the purposes of SECTION 23(4) is [date of
substitution].
3. The office through which the New Lender will be acting and the address for
notices of the New Lender for the purposes of SECTION 22(5) are set out in
the Schedule.
4. This Substitution Certificate is governed by the laws of the Federal
Republic of Germany.
The Existing Lender and the New Lender agree as follows:
1. The New Lender is responsible for its own decision to become
involved in the Facility. It should make its own credit appraisal
of the Borrower and the Guarantor and the terms of the Facility.
The Existing Lender makes no representation that any information
provided to the New Lender before or after the date of this
certificate is true. Accordingly the New Lender should take
whatever action it believes is necessary to verify that
information. In addition the Existing Lender is not responsible for
the legality, validity or adequacy of the Loan Agreement. The New
Lender will satisfy itself on these issues.
2. There is no obligation on the Existing Lender to accept any transfer back of
the rights and obligations referred to in this Substitution Certificate. The
Existing Lender accepts no obligation to indemnify the New Lender
<PAGE> 62
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for any losses incurred as a result of a failure by the Borrower or the
Guarantor to perform their obligations or for any other losses.
This Substitution Certificate is to be governed by the law of the Federal
Republic of Germany.
Existing Lender: New Lender:
[Name of Existing Lender] [Name of New Lender]
By: By:
-------------------------- --------------------------
Agent (on behalf of the other Lenders, the Borrower and itself)
Commerzbank International S.A.
By:
--------------------------
Date:
THE SCHEDULE
RIGHTS AND OBLIGATIONS TO BE SUBJECT TO THE SUBSTITUTION
[Insert details of the rights and obligations of the Existing Lender to
be subject to the substitution].
NAME OF NEW LENDER:
------------------------
Office through which the New Lender will be acting and address for notices:
Address:
------------------------
Fax Number:
------------------------
Telex Number:
------------------------
Attention:
------------------------
<PAGE> 63
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SCHEDULE 4
FORM OF BORROWING NOTICE
To: Commerzbank International S.A., in its capacity as Agent
From: Masco GmbH
MASCO GMBH
DM 350,000,000 MULTICURRENCY REVOLVING CREDIT FACILITY
Dear Sirs,
(1) With reference to SECTION 6(1) of the Credit Agreement, dated 14 September
1998 (the "Agreement") we herewith give notice of our intention to borrow under
the Facility, subject to the following conditions:
(a) Currency: [________] If Optional Currency is not
available according to SECTION
7(3), Advance shall be made in
DM
[ ] [ ]
Yes No
(b) Amount: [________]
(c) Advance Date: [________]
(d) Term: [________]
(2) We herewith confirm
(a) that the representations and warranties in SECTION 16(1) and SECTION 16(2)
except the representations set forth in SECTION 16(2)(d)(iii), (e), (f)
(other than clause (i) thereof), (g) and (j) of the Agreement are true on
the date of delivery of this notice and on the Advance Date; and
(b) no Termination Event or Potential Termination Event exists on the date of
delivery of this notice and on the Advance Date.
We request that the Advance be disbursed to our account No. [________]
with [________].
<PAGE> 64
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(3) Terms not defined herein shall have the meaning attributed to them in the
Agreement.
Yours sincerely
Masco GmbH
By:
-------------------------------
<PAGE> 65
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SCHEDULE 5
FORM OF TAX CONFIRMATION
[Letterhead of Lender]
Masco GmbH
[address]
MASCO GMBH
DM 350,000,000 MULTICURRENCY REVOLVING CREDIT FACILITY
Dear Sirs,
With reference to SECTION 25(4) of the Facility Agreement, dated 14 September
1998, entered into in connection with the DM 350,000,000 Multicurrency Revolving
Facility made available to you by a syndicate of banks including our
institution, we herewith confirm the following to you with respect to the
calendar year [___]:
Any interest paid to ourselves in respect of the Facility is subject to taxation
in Germany (after deduction of related expenses). We have not made any payments
(directly or indirectly) to any entity belonging to the Masco Group (in which
respect we have relied on the Schedule of entities belonging to the Masco Group
supplied by Masco Corporation to the Agent) that would according to our credit
files pertaining to the Facility be treated as a payment related to the
Facility.
Yours sincerely
<PAGE> 1
EXHIBIT 4.G
Dated 9th July, 1997
MASCO GMBH
as Borrower
and
MASCO CORPORATION
as Guarantor
and
COMMERZBANK AKTIENGESELLSCHAFT
as Arranger
and
COMMERZBANK INTERNATIONAL S.A.
as Agent
and
OTHERS
_________________________________
DM 400,000,000 TERM LOAN FACILITY
_________________________________
HENGELER MUELLER WEITZEL WIRTZ
Frankfurt am Main
<PAGE> 2
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CONTENTS
PAGE
SECTION 1 Interpretation 3
SECTION 2 The Facility 3
SECTION 3 The Lenders 3
SECTION 4 Fees and Expenses 4
SECTION 5 Advance of Funds 4
SECTION 6 Interest 6
SECTION 7 Repayment 7
SECTION 8 Prepayment 7
SECTION 9 Guarantee 7
SECTION 10 Changes of Circumstances 9
SECTION 11 Payments 13
SECTION 12 Late Payment 15
SECTION 13 Sharing among Lenders 16
SECTION 14 Representations and Warranties 17
SECTION 15 Delivery of Information 21
SECTION 16 General Covenants 24
SECTION 17 Early Termination 28
SECTION 18 The Agent and the Arranger 31
SECTION 19 Evidence and Certificates 35
SECTION 20 Notices 35
SECTION 21 Transfers and Substitution 36
SECTION 22 Waivers and Amendments 38
SECTION 23 Miscellaneous 38
SECTION 24 Law and Jurisdiction 39
SECTION 25 Confidentiality 40
Annex: Definitions, References and Construction 43
SCHEDULES
Schedule 1: Lenders and Commitments; Address Details 52
Schedule 2: Conditions Precedent 54
Schedule 3: Form of Substitution Certificate 55
Schedule 4: Form of Borrowing Notice 57
Schedule 5: Form of Tax Confirmation 58
<PAGE> 3
-3-
CREDIT AGREEMENT dated 9th July, 1997 between:
(1) MASCO GMBH, as borrower (the "Borrower"),
(2) MASCO CORPORATION, as guarantor (the "Guarantor"),
(3) COMMERZBANK AKTIENGESELLSCHAFT, as arranger (the "Arranger"),
(4) COMMERZBANK INTERNATIONAL S.A., as agent, and
(5) THE FINANCIAL INSTITUTIONS listed in Schedule 1, as lenders.
THE PARTIES agree as follows:
SECTION 1 INTERPRETATION
The defined expressions used in this Agreement are set out in the Annex.
SECTION 2 THE FACILITY
(1) Amount and Nature. The Facility is a five-year DM 400,000,000 term
loan facility.
(2) Purpose. The Borrower agrees to use the proceeds of the Facility to retire
debt of the Borrower outstanding at the date of this Agreement, but no
Syndicate Party needs to concern itself with the application of amounts
taken up by the Borrower under the Facility.
(3) Availability. The Borrower may borrow under the Facility after the
Agent has received all the items listed in Schedule 2 in a form
satisfactory to the Agent.
(4) Expiry of Availability. The Borrower may not borrow under the Facility
after the Commitment Expiry Date.
SECTION 3 THE LENDERS
(1) Rights and Obligations. The rights and obligations of each Lender
under this Agreement are separate and independent from the rights and
obligations of each other Lender. A Lender may take proceedings against any
Obligor on its own without involving any other Lender in those proceedings.
(2) Failure to Perform. If a Lender fails to perform its obligations the
Borrower will have rights solely against that Lender. The obligations of
any Obligor to the Agent, the Arranger and the other Lenders will not be
affected by this failure.
<PAGE> 4
-4-
SECTION 4 FEES AND EXPENSES
(1) Management Fee. The Borrower will pay to the Agent for the account of
the Arranger a management fee. The amount of this fee and the timing of
payment are described in a letter from the Arranger to the Borrower dated
the same date as this Agreement.
(2) Agency Fee. The Borrower agrees to pay to the Agent an agency fee. The
amount of this fee and the timing of payment are described in a letter from
the Agent to the Borrower dated the same date as this Agreement.
(3) Reimbursement of Initial Expenses. The Borrower agrees to reimburse
the Arranger for all reasonable out-of-pocket expenses incurred in
connection with the negotiation, preparation and signing (including, but
not limited to, legal expenses, travelling expenses and communication
charges) of this Agreement and the syndication of the Facility. In
addition, the Borrower agrees to bear and pay all expenses related to the
publication of any advertisements in connection with the Facility made with
the approval of the Borrower.
(4) Protection of Rights. A Syndicate Party may incur expenses in protecting,
preserving or enforcing its rights under this Agreement. The Borrower
agrees to reimburse that Syndicate Party for the reasonable amount of
expenses reasonably incurred.
(5) Documentary Taxes. The Borrower agrees to bear and pay any duty, fee
or other similar charge required to be paid on this Agreement, any document
referred to in or contemplated by this Agreement or any judgment obtained
in connection with this Agreement or payable in order for this Agreement or
any of these documents to be valid, binding and enforceable or for any of
them to be admitted as evidence in court. Alternatively, a Syndicate Party
may make the payment; if it does so, the Borrower agrees to reimburse that
Syndicate Party for the amount paid.
SECTION 5 ADVANCE OF FUNDS
(1) Notice of Borrower. When the Borrower wishes to borrow under the
Facility, it will deliver a notice to the Agent substantially in the form
attached hereto as Schedule 4. The notice shall specify the amount of the
Advance, the length of the Interest Period applicable to the Advance and
the Advance Date. The Advance Date must be no sooner than five Business
Days after the date the Agent receives the notice. For this purpose, if the
Agent receives the notice on a day which is not a Business Day or after
3.00 p.m. on a Business Day, it will be treated as having received the
notice on the following Business Day.
(2) Limitations on Advances. The following limitations apply to Advances:
<PAGE> 5
-5-
(a) No Advance may exceed the uncancelled and undrawn amount of the
Facility.
(b) An Advance must be a minimum of DM 50,000,000 or, if higher, an integral
multiple of DM 10,000,000, or be the uncancelled and undrawn
amount of the Facility.
(c) No more than three Advances may be made.
(d) Amounts undrawn on the Commitment Expiring Date are automatically
cancelled.
(3) Amount of the Lenders' Participation in the Advance. The amount of a
Lender's participation in an Advance shall be that proportion of the
Advance which its Commitment bears to the Total Commitments on the date of
receipt by the Agent of the relevant notice of borrowing.
(4) Notice to the Lenders. The Agent agrees to provide details of the
notice of borrowing to each Lender not later than close of business on the
fourth Business Day preceding the Advance Date. These details will also
include the amount of the Lender's participation in the Advance.
(5) Conditions to Borrowing. The Lenders will only be obliged to make an
Advance to the Borrower if:
(a) the Facility is available in accordance with SECTION 2;
(b) a properly completed and signed notice of borrowing has been received
by the Agent;
(c) the representations and warranties in SECTION 14 are true on the date of
delivery of the notice of borrowing and on the Advance Date; and
(d) no Termination Event or Potential Termination Event exists on the
Advance Date.
(6) Obligation to make an Advance. If the requirements of this Section 5 are
satisfied, each Lender agrees to make the amount of its participation in
the Advance available to the Agent for the Borrower on the Advance Date.
(7) Consequences of an Advance not being made. If a notice of borrowing is
delivered but no Advance is made due to any of the Conditions in SECTION 5(5)
not being satisfied, the Borrower agrees to reimburse each Lender for the
losses and expenses incurred by such Lender as a result of liquidating or
otherwise utilising amounts taken up by it to fund its participation in the
Advance or terminating commitments relating to the funding or hedging open
positions resulting from the Advance not being made.
<PAGE> 6
-6-
SECTION 6 INTEREST
(1) Interest Periods. Interest will accrue on each Advance by reference to
successive periods of time. These periods may be of one, two, three or six
months' duration as selected by the Borrower or any longer period on which
all Lenders may have agreed with the Borrower, and notified by the
Borrower, in the case of the first period applicable to an Advance, in the
relevant notice of borrowing, and in the case of any subsequent period, not
later than on the fourth Business Day before the commencement of such
period, subject to the following:
(a) First Period. The first of these periods will commence on the Advance
Date and will end on the date the selected number of months after that
date.
(b) No Selection by the Borrower. Where the Borrower fails to timely
select a certain period, the next period applicable to the Advance
will be of three months' duration.
(c) Subsequent Periods. Subsequent periods will commence on the last day
of the previous period and will end on the date the selected number of
months after that date. A period that would otherwise include the Repayment
Date will end on the Repayment Date and may be less than a
full Interest Period.
(d) Adjustments. Where a period starts on a date for which there is no
numerical equivalent in the month the selected number of months later,
it will end on the last day of that month. If any date on which a
period would otherwise end is not a Business Day, that period will be
extended to the next Business Day unless such Business Day would fall
into the next calendar month, in which case that period will end on
the immediate preceding Business Day.
(2) Rate of Interest. The rate of interest applicable during an Interest
Period will be a rate per annum equal to FIBOR for that Interest Period
plus the applicable Margin.
(3) Accrual and Payment. Interest on the Loan shall:
(a) accrue from day to day and be calculated for the actual number of days
elapsed and on the basis of a year of 360 days and
(b) be payable in arrears on the last day of each Interest Period and, in
the case of Interest Periods which are longer than six months, also on
the day falling six months after the first day of the Interest Period
as regards the interest accrued for the initial six months.
<PAGE> 7
-7-
(4) The Agent agrees to notify the Borrower and each Lender of any rate of
interest determined under this Agreement.
SECTION 7 REPAYMENT
The Borrower agrees to repay the Loan on the Repayment Date.
SECTION 8 PREPAYMENT
(1) Optional Prepayment. The Borrower may give notice that it will prepay
the whole or part of the Loan on the last day of an Interest Period. This
notice must state:
(a) the amount to be prepaid which, in the case of partial prepayment,
must be a minimum of DM 10,000,000 or, if higher, a multiple of
DM 5,000,000; and
(b) the date of prepayment which will be at least 15 days after the notice
is received by the Agent.
The Borrower agrees to prepay the Loan in accordance with its notice.
(2) No other Prepayment. The Borrower may not prepay the Loan except in
the manner permitted by this Agreement.
(3) No Re-borrowing. No amount prepaid may be re-borrowed.
SECTION 9 GUARANTEE
(1) Guarantee. The Guarantor unconditionally and irrevocably guarantees to
each Syndicate Party the performance of any and all obligations of the
Borrower under this Agreement and the payment of each amount expressed herein
to be payable by the Borrower as and when such amount becomes due and in
the same currency as the amount due. Payment shall be made forthwith upon
the written demand of the Agent.
(2) Nature of Guarantee Obligation. This Guarantee constitutes a
"Garantie" and not a "Burgschaft". Accordingly the obligations of the
Guarantor under this Guarantee (i) are separate and independent from the
obligations of the Borrower under this Agreement, (ii) exist irrespective
of the legality, validity, binding effect or enforceability of the
obligations of the Borrower under this Agreement, and (iii) are not
affected by any event, condition or circumstance of whatever nature,
whether factual or legal, save the full, definitive and irrevocable
satisfaction of any and all payment obligations expressed herein to be payable
by the Borrower.
<PAGE> 8
-8-
(3) Preservation of Rights. Any obligations of the Guarantor under this
Guarantee will not be affected by:
(a) Any change, waiver or release of the Borrower's obligations.
(b) Any concession or time being given to the Borrower.
(c) The winding-up or re-organisation of the Borrower.
(d) Any change in the condition, nature or status of the Borrower.
(e) Any of the above events occurring in relation to another guarantor or
provider of security of its obligations.
(f) Any failure of any Syndicate Party to take, retain or enforce any
other guarantee or security.
(g) Any circumstances affecting or preventing recovery of amounts due by
the Borrower.
(h) Any other matter which might discharge the Guarantor (other than full
and unconditional payment under the Guarantee).
(4) Covenants of the Guarantor. The Guarantor agrees as follows:
(a) Security. The Guarantor will not have the benefit of any Security
provided by the Borrower in respect of this Guarantee.
(b) Exercise of Rights. The Guarantor will not:
(i) take the benefit of any rights against the Borrower or any other
person in respect of amounts paid under this Guarantee; or
(ii) claim or exercise against the Borrower any right to any payment
(whether or not in connection with this Agreement).
(c) Competing Claim. An Instructing Group may request the Guarantor to
submit a claim in insolvency proceedings for amounts due to it by the
Borrower or any other guarantor. The Guarantor agrees to submit such
claim promptly in accordance with this request. The Guarantor hereby
assigns to the Agent (for the benefit of the Syndicate Parties) for
security purposes all its rights in respect of that claim.
The obligations in this SECTION 9(4) will cease to have effect when the
Facility has ceased to be available and there are no amounts
outstanding under the Facility. Paragraphs (a) and (b) only apply for
so long as there is a current Termination Event.
<PAGE> 9
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(5) Discharge Conditional. Any settlement with, or discharge of, the
Guarantor will be subject to the condition that the settlement or discharge
will be set aside if any prior payment, or any other guarantee or security
relating to any amount due under this Agreement, is set aside, invalidated
or reduced. In this event the Guarantor agrees to reimburse each Syndicate
Party for the value of the payment, guarantee or security which is set
aside, invalidated or reduced.
(6) Additional Security. This Guarantee is in addition to and is not in
any way prejudiced by any other security now or hereafter held by any
Syndicate Party.
SECTION 10 CHANGES OF CIRCUMSTANCES
(1) Illegality.
(a) Notice of Illegality. Each Lender may notify the Borrower if it
determines that it is or will be acting illegally (rechtswidrig) in
relation to the Facility. The illegality may relate to the performance
of the Lender's obligations, the maintenance of the Facility or the
Lender's funding arrangements.
(b) Cancellation and Prepayment. If a Lender delivers a notice of
illegality any outstanding Commitment of that Lender will be cancelled
on the date of that notice. The Borrower agrees to prepay the
participation of that Lender in the Loan on the last day of the
Interest Period during which the notice is received, unless the Lender
certifies that, because of a legal requirement (law, regulation or any
action by a court or administrative authority) applicable to the
Lender, it must be repaid earlier. In this event the Borrower agrees
to prepay the participation on the date specified by the Lender.
SECTION 10(5) applies to any cancellation or prepayment under this
paragraph.
(2) Increased Costs.
(a) Notice of Increased Costs. A Lender may give notice of increased costs
to the Borrower if:
(i) either:
(aa) there is a change in a legal or other requirement applicable to
the Lender (or its holding company) (including any change
relating to taxation or reserve asset, special deposit, cash
ratio, liquidity or capital adequacy requirements or any other
form of banking or monetary control) or a change in its
interpretation or application; or
<PAGE> 10
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(bb) the Lender (or its holding company) complies with a direction or
request (whether or not having the force of law) of any central
bank or other fiscal, monetary or other authority; and
(ii) as a result, any of the following occurs:
(aa) the Lender (or its holding company) incurs an expense;
(bb) the Lender's (or its holding company's) effective return from the
Facility or on its overall capital is reduced;
(cc) any amount payable to the Lender (or its holding company) is
reduced; or
(dd) the Lender (or its holding company) does not recover an amount
which would otherwise have been paid to it.
No account will be taken of tax on the overall net income of a Lender
in the country in which it has its principal office or the office
through which it is acting for the purposes of this Agreement; and
(iii) the losses, reductions and expenses arising as a result are
wholly or partly attributable to the Facility or the arrangements made
by a Lender in connection with the Facility.
(b) Payment of Additional Amounts. The Borrower agrees to reimburse each
Lender for the losses, reductions and expenses described in paragraph
(a)(ii) which are attributable to the Facility (as certified by the
Lender, which certification shall include a calculation of the amount
to be reimbursed). No reimbursement will be made for losses,
reductions or expenses attributable to the period prior to 30 days
prior to the receipt of the notice described in paragraph (a).
(c) Prepayment. If a Lender delivers a notice of increased costs the
Borrower may, on giving not less than 5 Business Days prior notice to
that Lender, prepay the participation of that Lender in the Loan,
together with compensation for such increased costs on the last day of
the Interest Period during which the notice is received, and any
outstanding Commitment of the Lender will be cancelled on the date of
that notice.
(3) Market Disruption.
(a) Notice of Market Disruption. The Agent agrees to give notice of market
disruption if:
<PAGE> 11
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(i) the Agent determines, upon consultation with the Reference Banks, that
there are no reasonable means to ascertain FIBOR because of circumstances
affecting the Frankfurt Interbank Market generally;
(ii) Lenders with Commitments exceeding 35% of the Total Commitments, or
with participations exceeding 35% of the Loan, notify the Agent that
they determine that FIBOR would not reflect fairly the cost to them of
funding an amount outstanding under this Agreement;
(iii) FIBOR cannot be determined because less than two Reference Banks
provide quotations; or
(iv) Lenders with Commitments exceeding 35% of the Total Commitments, or
with participations exceeding 35% of the Loan, notify the Agent that
funds necessary to fund their participation in the Loan are not
readily available in the Frankfurt Interbank Market.
(b) Alternative Interest Rate Arrangements. If the Agent gives a notice of
market disruption, the following applies:
(i) The means of determining the rates of interest applicable under this
Agreement will be suspended. Instead the Borrower agrees to pay
interest to the Lenders in the manner requested by the Agent. A request by
the Agent may specify periods to be used for the computation of
interest. It must also specify the rate of interest to apply for a
period. This rate will be the rate determined by the Agent to reflect
the cost to each Lender of funding for the period plus the applicable
Margin. In order to assist the Agent in this determination each Lender
agrees to provide to the Agent any information which the Agent may
reasonably request. If this information is received by the Agent
within any time period specified by the Agent it will be taken into
account by the Agent in making its determination.
(ii) The Borrower and the Agent will negotiate the terms of an alternative
arrangement for determining a rate of interest. The negotiations will
be carried on in good faith. Neither party is bound to continue the
negotiations after the date 30 days after the Borrower receives the
Agent's notice. If agreement is reached and if it is approved by an
Instructing Group, the rate of interest will be determined in
accordance with the agreement. Sub-paragraph (i) will not apply to the
extent that it is expressly excluded by such agreement.
(iii) If the circumstances described in paragraph (a) cease to apply,
the Agent will notify the Borrower and the Lenders. The Borrower
agrees to pay interest to the Lenders in the manner described in
sub-paragraph (i) or (ii) for the remainder of the period for which an
alternative interest rate arrangement has been made in respect of each
affected Advance unless
<PAGE> 12
-12-
a different arrangement is agreed by the Agent
and the Borrower and approved by an Instructing Group. In this case
the Borrower agrees to pay interest to the Lenders in the manner
agreed.
(c) Prepayment. If paragraph (b) applies, the Borrower may, on giving not
less than 2 Business Days' prior notice to the Agent, and unless there
is an agreement under subparagraph (ii), prepay the Loan on the last
day of the Interest Period during which the notice is received, and
any outstanding Commitments of the Lenders will be cancelled on the
date of such notice.
(4) Withholdings.
(a) Notice of Withholding. The Borrower agrees to give notice of
withholding or deduction on account of any taxes, duties or charges
("taxes") to the Agent if it is required by law to make a payment
under this Agreement net of a withholding or deduction on account of
taxes.
(b) Grossing Up. If the Borrower is so required, the Borrower agrees to in
crease the amount of any payment which is subject to a withholding or
deduction on account of taxes. As a result of this increase the person
entitled to the payment will be entitled to receive the same amount it
would have received if there had been no withholding or deduction on
account of taxes.
(c) Payment of Tax. The Borrower will pay to the appropriate authority all
amounts withheld or deducted. If a receipt or other evidence of
payment can be issued, the Borrower agrees to deliver this to the
Agent as soon as practicable.
(d) Prepayment. If the Borrower gives a notice of withholding, the
Borrower may, on giving not less than 5 Business Days' prior notice to
the Agent, subject to sub-paragraph 4(b) prepay that part of the Loan
which is subject (or the interest on which is subject) to the
withholding or deduction on account of taxes on the last day of the
Interest Period during which the notice is received.
(e) Refund of Tax Credits. If the Borrower makes a payment under this
SECTION 10(4) (a "Tax Payment"), the relevant Lender agrees to notify the
Borrower if it has obtained a refund of tax or obtained and used a
credit against tax on its overall net income (a "Tax Credit") which
that Lender is able to identify as directly attributable to that Tax
Payment. To the extent that it can in its opinion do so without
prejudicing its ability to retain such Tax Credit, the Lender shall
reimburse the Borrower such amount as that Lender shall have
determined to be the proportion of that Tax Credit as will leave the
Lender (after that reimbursement) in no better or worse position in
respect of its worldwide tax liabilities than it would have been
<PAGE> 13
-13-
in had no Tax Payment been required. Nothing in this paragraph affects
the right of any Syndicate Party to arrange its tax affairs as it
thinks fit or gives the Borrower or the Guarantor the right to inquire
into those tax affairs.
(f) SECTION 10(4) applies, mutatis mutandis, to payments to be made by the
Guarantor in respect of the Guarantee.
(5) Prepayment. If the Borrower is obliged to prepay the Loan or any part
of it under this SECTION 10 or SECTION 17(2), the Borrower agrees to pay on
the date on which payment is due interest accrued on the Loan (or the amount
to be repaid) up to that date. If the date on which repayment is due is not the
last day of an Interest Period, the Borrower will reimburse each affected
Lender for the losses and expenses which that Lender has incurred, or will
incur, in liquidating or otherwise utilising amounts taken up by the Lender
to fund the Loan or in hedging open positions resulting from the payment
(excluding loss of margin for the period after any such repayment).
SECTION 11 PAYMENTS
(1) Method, Timing and Currency of Payments. All payments under the
Facility must be made in immediately available and freely transferable funds.
Each payment must be received by 10 a.m. on the due date. Payments in
respect of principal, interest and fees will be made in Deutsche Mark,
payments in respect of costs, expenses and indemnities in the currency in
which the claim in respect thereof arises.
(2) Payments through the Agent
(a) Normal Arrangements. All payments under this Agreement will be made
through the Agent. Each payment, if in Deutsche Mark, will be made to
the account of the Agent, as notified by the Agent to the Borrower, if
in other currency to such account as the Agent may designate. The
Agent will pay on to the Lenders an amount received as soon as the
Agent has ascertained that it has been received.
(b) Alternative Arrangements. If the Agent determines that it is, or will
be, illegal or impossible for it to pay on to a Lender in accordance
with paragraph (a), it agrees to notify the Borrower and that Lender.
In this case the Borrower and that Lender may agree on alternative
arrangements for payments to be made to that Lender. Paragraph (a)
will not apply to the extent excluded by those alternative
arrangements. The Lender agrees to provide notice of the arrangements
to the Agent and will notify the Agent of payments in accordance with
SECTION 13(1).
<PAGE> 14
-14-
(3) Payments to the Borrower. Each payment by the Agent to the Borrower
will be made to the account of the Borrower specified by it in the request
for borrowing.
(4) Payments to Lenders. Each payment by the Agent to a Lender will be
made to the account of that Lender notified to the Agent for this purpose.
(5) Change of Account. The Borrower or a Lender may change its receiving
account by not less than five Business Days' notice to the Agent. The Agent
may change its receiving account by not less than five Business Days'
notice to each Obligor and the Lenders.
(6) Refunding of Payments by the Agent. If the Agent makes a payment out
in the mistaken belief that it has received or will receive an incoming
payment on a particular day, the person which received the payment from the
Agent agrees to return it. It will also reimburse the Agent for all losses
and expenses incurred by the Agent as a result of the payment. This
SECTION 11(6) does not affect the rights of the person which received the
payment against the person which failed to make the payment to the Agent.
(7) Non-Business Days. If a payment would be due on a non-Business Day the
payment obligation will be deferred until the next Business Day. Interest
will be adjusted accordingly.
(8) Payment in Full. All payments by any Obligor will be made in full and
without set-off, counterclaim, or retention. No payment by any Obligor will
be made net of a withholding or deduction, unless this is required by law.
In this event SECTION 10(4) applies.
(9) Set-off. After a Termination Event or Potential Termination Event has
occurred, any Syndicate Party may set off any obligation which it owes to
any Obligor against any obligation which that Obligor owes to that
Syndicate Party under this Agreement. The obligation of the Syndicate Party
may be in different currency, arise on a separate transaction, provide for
a different place of payment, or involve another branch. If its obligation
is in different currency, the Syndicate Party may convert the amount owed
into the same currency as the obligation of that Obligor using the then
current exchange rate. If a Lender so sets off an obligation, that Lender
agrees to notify the Agent thereof. The notice will provide details of the
amount set off.
(10) Application of Partial Payments. If the Agent receives a payment
insufficient to discharge all the amounts then due and payable by the
Borrower under this Agreement, the Agent shall apply that payment towards
the obligations of the Borrower under this Agreement in the following
order:
<PAGE> 15
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(a) first, in or towards payment pro rata of any unpaid costs or expenses
due to the Agent in its capacity as such under or in connection with
this Agreement;
(b) secondly, in or towards payment pro rata of any agency fee due but
unpaid under SECTION 4;
(c) thirdly, in or towards payment pro rata of any other accrued fees due
but unpaid under SECTION 4;
(d) fourthly, in or towards payment pro rata of any accrued interest due
but unpaid under this Agreement;
(e) fifthly, in or towards payment pro rata of any principal due but
unpaid under this Agreement;
(f) sixthly, in or towards payment pro rata of any other sums due but
unpaid under this Agreement.
The Agent will vary the order set out in paragraphs (d) to (f) inclusive
above if requested by all the Lenders. The provisions of this SECTION 11(10)
will override any appropriation made by the Borrower.
(11) Currency Indemnity. Where a payment due by any Obligor under or in
connection with this Agreement is made in a currency other than the
currency owed, to the extent that the amount received, when converted into
the currency owed, is less than the amount due that Obligor agrees to
reimburse the person entitled to the payment for the difference. For the
purposes of the computation of this amount that person will apply to the
amount received a rate of exchange prevailing on an established currency
market on the date of receipt. If, however, that person is unable to use
the amount received to buy the currency owed on the date of receipt, the
rate of exchange prevailing on the first date on which that person could
buy the currency owed will be used instead. The obligation in this
SECTION 11(11) is a separate and independent obligation.
SECTION 12 LATE PAYMENT
(1) Default interest. If any Obligor fails to make a payment other than
interest on the due date, that Obligor agrees to pay interest on the amount
unpaid from its due date for payment. This interest will be computed by
reference to successive periods not exceeding six months selected by the
Agent. The first of these periods will start on the due date for payment of
the unpaid amount. The rate of interest applicable during each of these
periods will be a rate per annum equal to 1% plus FIBOR for that period
plus the applicable Margin. This interest will be paid in arrear on the
last day of each of these periods and on the date of payment of the unpaid
amount.
<PAGE> 16
-16-
(2) Indemnity. If the Borrower fails to make a payment other than interest
on the due date the Borrower agrees to reimburse the person entitled to the
payment for the losses and expenses (including loss of profit) that person
incurs, or will incur, as a result. The computation of these losses and
expenses will take into account any amount received under SECTION 12(1).
(3) Late Interest Payment. If the Borrower fails to pay an amount of
interest on the due date the Borrower agrees to pay to the Agent by way of
indemnification and in addition to such amount, a lump sum computed on that
amount due from the due date up to the date of payment by reference to the
sum of (i) 1.6 per cent. per annum and (ii) FIBOR for the period selected
by the Agent if SECTION 12(1) were to apply.
SECTION 13 SHARING AMONG LENDERS
(1) Notice. If an amount due to a Lender (the "Recipient") under this
Agreement is discharged other than by payment through the Agent the Lender
agrees to notify the Agent. This may occur because of the exercise of a
right of set-off, by virtue of a combination of accounts, because of a
voluntary or involuntary payment by the Borrower direct to the Lender or
otherwise. The notification will provide details of the amount discharged
and will be delivered no later than ten Business Days after the discharge.
(2) Determination by the Agent. Where a Lender has issued a notice under
SECTION 13(1) the Agent will determine what payments, if any, are due under
SECTION 13(4). This determination will be made on the basis of the information
contained in all the notices delivered to the Agent under SECTION 13(1). The
determination will be notified to the Borrower and the Lenders.
(3) Litigation. In determining the amount due under SECTION 13(4) no account
will be taken of an amount due to a Lender which has declined to
participate in legal proceedings which resulted in the payment described in
SECTION 13(1). This only applies if that Lender could have joined in the
proceedings or could have instituted its own proceedings, but failed to do
so.
(4) Payment to the Agent. The Recipient agrees to pay to the Agent an
amount equal to the amount discharged, less the amount to be received by
the Recipient if the discharge had been made by payment to the Agent. This
amount will be paid no later than five Business Days after receipt of a
notice from the Agent under SECTION 13(2).
(5) Obligations of the Borrower. Any amount due to the Recipient which
would otherwise have been discharged as described in SECTION 13(1) will be
treated as not having been discharged to the extent of an amount which is
or will be payable under SECTION 13(4) as a result. Accordingly the Borrower
agrees to pay this amount to the Recipient as if it had not been
discharged. This payment is re-
<PAGE> 17
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quired to be made whether or not the Agent has issued a determination under
SECTION 13(2).
(6) Distribution. The Agent agrees to distribute to the Lenders the amount
received by it under SECTION 13(4) as if that amount had been received from the
Borrower in discharge of amounts due under the Agreement.
(7) Recovery. If an amount discharged as described in SECTION 13(1) is
recovered or is required to be repaid, each Lender which received the benefit
of a payment made under SECTION 13(4) agrees to repay to the Recipient the
amount it received. Each of these Lenders will also reimburse the Recipient
for any interest or other losses or expenses which the Recipient has incurred in
connection with the discharged amount or its recovery or repayment. The
rights and obligations of the parties shall be restored to the position
before any payment became due under SECTION 13(4).
SECTION 14 REPRESENTATIONS AND WARRANTIES
(1) By the Borrower. The Borrower represents and warrants that:
(a) Corporate Existence and Power. The Borrower is a corporation duly
incorporated and validly existing, and the Borrower and its
Subsidiaries have the power and all material governmental licenses,
authorizations, consents and approvals required to own their assets
and conduct their businesses, considered as a whole, substantially as
now being conducted.
(b) Binding Obligations. This Agreement has been duly authorized, signed
and delivered by the Borrower and the obligations of the Borrower
under this Agreement are valid and binding obligations of the Borrower
in accordance with their terms.
(c) Legality and Contraventions. Its signing and delivery of this
Agreement and its exercise of rights and performance of obligations
under this Agreement:
(i) do not require any approval, filing, registration or exemption (except
for filings under the Securities Exchange Act of 1934);
(ii) do not contravene any provision of its Articles of Association or any
law, regulation or order;
(iii) are not prohibited by, and do not constitute a default under, and
do not result in an obligation to create Security under, any document
or arrangement to which it is a party.
<PAGE> 18
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(d) No Termination Event. No Termination Event or Potential Termination
Event has occurred and is continuing and none will occur as a result
of the exercise of the Borrower's rights or the performance of its
obligations under this Agreement.
(e) Accuracy of Information. All information supplied, and to be supplied,
on behalf of the Borrower to any Syndicate Party is, and will be,
accurate and not misleading in any material respects.
(f) No Breach. Neither the Borrower nor any of its Subsidiaries is in
breach of any agreement to which it is a party or which is binding on
it or any of its assets which breach has a material adverse effect on
the ability of the Borrower to perform any of its obligations under
this Agreement.
(g) Financial Statements. Its audited financial statements for the year
ended December 31, 1996 give a true and fair view of the results of
its operations and financial position. They were prepared in
accordance with German law and generally accepted accounting
principles consistently applied except to the extent otherwise
described in the accompanying notes.
(2) By the Guarantor. The Guarantor represents and warrants that:
(a) Corporate Existence and Power. The Guarantor and its United States
Subsidiaries are corporations duly incorporated, validly existing and
in good standing under the laws of their respective states of
incorporation, and have all corporate powers and all material
governmental licenses, authorizations, consents and approvals required
to carry on their businesses, considered as a whole, substantially as
now conducted.
(b) Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by the Guarantor of this Agreement
are within the Guarantor's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official (except
filings under the Securities Exchange Act of 1934) and do not
contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or by-laws of
the Guarantor or of any agreement, judgement, injunction, order,
decree or other instrument binding upon the Guarantor or result in the
creation or imposition of any Lien on any asset of the Guarantor or
any of its Subsidiaries.
(c) Binding Effect. This Agreement constitutes a valid and binding
agreement of the Guarantor.
(d) Financial statements.
<PAGE> 19
-19-
(i) The consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of December 31, 1996 and the related consolidated
statements of income and cash flows for the fiscal year then ended, re
ported on by Coopers & Lybrand L.L.P. and set forth in the Guarantor's
1996 Form 10-K, a copy of which has been delivered to each of the Lenders,
fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Guarantor and its
Consolidated Subsidiaries as of such date and the consolidated results of
their operations and their cash flows for such fiscal year.
(ii) The unaudited condensed consolidated balance sheet of the Guarantor and
its Consolidated Subsidiaries as of March 31, 1997 and the related
unaudited condensed statements of consolidated income and consolidated
cash flows for the three months then ended, set forth in the Guarantor's
quarterly report for the Fiscal Quarter ended March 31, 1997 as filed with
the Securities and Exchange Commission on Form 10-Q, a copy of which has
been delivered to each of the Lenders, fairly present, on a basis
consistent with the financial statements referred to in SECTION
14(2)(d)(i), the consolidated financial position of the Guarantor and its
Consolidated Subsidiaries as of such date and their consolidated results
of operations and cash flows for such three- months period (subject to
normal year-end adjustments).
(iii) There has been no material adverse change since December 31, 1996
in the business or financial position of the Guarantor and its
Consolidated Subsidiaries, considered as a whole, as reflected in the
financial statements referred to in SECTION 14(2)(d)(i).
(e) Litigation. There is no action, suit or proceeding pending against, or
to the knowledge of the Borrower threatened against or affecting, the
Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which, in the reasonable opinion of
the Guarantor, is likely to have a material adverse effect on the business
or financial position of the Guarantor and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question the
validity of this Agreement.
(f) Compliance with ERISA. Each member of the ERISA Group (i) has
fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and (ii) is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (x) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue 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
<PAGE> 20
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resulted or could result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Internal
Revenue Code, in each case securing an amount greater than
US $ 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 the Guarantor and its Consolidated Subsidiaries.
(g) Environmental Matters. In the ordinary course of its business, the
Guarantor conducts appropriate reviews of the effect of Environmental
Laws on the business, operations and properties of the Guarantor 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, the Guarantor 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 the
Guarantor and its Consolidated Subsidiaries, considered as a whole.
(h) Taxes. United States Federal income tax returns of the Guarantor and
its Subsidiaries have been examined and closed through the Fiscal Year
ended December 31, 1993. The Guarantor and its Subsidiaries have filed
all United States Federal income tax returns and all other material
tax returns which are required to be filed by them and have paid all
taxes shown as due pursuant to such returns or pursuant to any
assessment received by the Guarantor or any Subsidiary, except such
taxes, if any, as are being contested in good faith and as to which,
in the opinion of the Guarantor, adequate reserves have been provided.
The charges, accruals and reserves on the books of the Guarantor and
its Subsidiaries in respect of taxes or other governmental charges are
in the opinion of the Guarantor adequate.
(i) Not an Investment Company. The Guarantor is not an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended,
(j) Compliance with Laws. The Guarantor 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 (i) the
necessity of compliance therewith is contested in good faith by
appropriate pro-
<PAGE> 21
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ceedings, (ii) no officer of the Guarantor is aware that the Guarantor or
the relevant Subsidiary has failed to comply therewith or (iii) the
Guarantor 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 the Guarantor and its Consolidated Subsidiaries,
taken as a whole.
(3) Repetition. The representations in SECTION 14(1)and SECTION 14(2)(except the
representations set forth in SECTION 14(2)(d)(iii), (e), (f) (other than
clause (i) thereof), (g) and (j)) will be deemed repeated by the
Borrower and the Guarantor, respectively, on the first day of each
Interest Period. This repetition will be by reference to the facts on
that day. If on that day audited accounts for a period subsequent to
December 31,1996 have been finalised SECTION 14(1)(g)and SECTION 14(2)(d)(i)
will be treated as referring to the audited profit and loss accounts
and audited balance sheets contained in the then latest audited
financial statements of the Borrower or the Guarantor, respectively.
If on that day unaudited, condensed quarterly accounts of the
Guarantor for a period subsequent to March 31, 1997 have been
finalised, SECTION 14(2)(d)(ii) will be treated as referring to the then
latest quarterly accounts of the Guarantor.
(4) Survival of representations. Each of the representations made under
this Agreement shall survive the making of the Advances.
SECTION 15 DELIVERY OF INFORMATION
(1) By the Borrower.
(a) Periodic Reports. The Borrower agrees to deliver each of the following
to the Agent as soon as they become available and, in any event, by
the latest date indicated:
Document/Information Latest date
Consolidated audited annual 90 days after the end of the
financial statements of the Borrower's financial year
Borrower
Half-year consolidated 60 days after the end of the
financial statements of the first half of the Borrower's
Borrower financial year (except for
the first half of 1997 for
which the consolidated
financial statements shall
be delivered within 90 days
after the end of such half
year)
<PAGE> 22
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(b) Other information. The Borrower agrees to deliver to the Agent from
time to time such additional information regarding the financial
position or business of the Borrower as the Agent may reasonably
request.
(c) Termination Events. The Borrower agrees to deliver to the Agent within
15 days after any officer of the Borrower becomes aware of the
existence of any Termination Event or Potential Termination Event
unless such Termination Event or Potential Termination Event shall
have been cured before the end of such 15 day period, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower setting forth the details of such Termination Event or
Potential Termination Event and the action which the Borrower is
taking or proposes to take with respect thereto;
(2) By the Guarantor.
(a) Reports, Documents and Certificates. The Guarantor agrees to deliver
to the Agent:
(i) as soon as available and in any event within 90 days after the
end of each fiscal year, a consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of income and
cash flows for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous
fiscal year, all reported on by Coopers & Lybrand L.L.P. or other
independent public accountants of nationally recognized standing,
whose report shall be without material qualification;
(ii) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year, a
condensed consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as of the end of such quarter, the
related condensed consolidated statement of income for such
quarter and the related condensed consolidated statements of
income and cash flows for the portion of such fiscal year ended
at the end of such quarter, setting forth in each case in
comparative form the corresponding figures to the corresponding
periods of the previous fiscal year, all in reasonable detail and
certified, to the best of its knowledge (subject to normal year-
end adjustments), as to fairness of presentation, and consistency
with generally accepted accounting principles (except for changes
concurred in by the Guarantor's independent public accountants)
by the chief financial officer or the chief accounting officer of
the Guarantor.
<PAGE> 23
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(iii) simultaneously with the delivery of each set of financial
statements referred to in sub-paragraphs (i) and (ii), a certificate
of the chief financial officer or the chief accounting officer of the
Guarantor (x) setting forth in reasonable detail the calculations
required to establish whether the Guarantor was in compliance with
the requirements of SECTION 16(2)(a) to (c), inclusive, on the date
of such financial statements, (y) stating, to the best of its
knowledge, whether any Termination Event or Potential Termination
Event exists on the date of such certificate and (z) if any
Termination Event or Potential Termination Event then exists, setting
forth the details thereof and the action which the Guarantor is
taking or proposes to take with respect thereto;
(iv) within 15 days after any officer of the Guarantor becomes aware
of the existence of any Termination Event or Potential Termination
Event unless such Termination Event or Potential Termination Event
shall have been cured before the end of such 15 day period, a
certificate of the chief financial officer or the chief accounting
officer of the Guarantor setting forth the details of such
Termination Event or Potential Termination Event and the action which
the Guarantor is taking or proposes to take with respect thereto;
(v) promptly upon the mailing thereof to the shareholders of the
Guarantor generally, copies of all financial statements, reports
and proxy statements so mailed;
(vi) promptly upon the filing thereof, copies of all reports on Forms
10-K, 10-Q and 8-K and similar regular and periodic reports which
the Guarantor shall have filed with the Securities and Exchange
Commission;
(vii) if and when any member of the ERISA Group (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 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 Internal Revenue Code, a copy of
<PAGE> 24
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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 the Guarantor setting forth details
as to such occurrence and action, if any, which the Guarantor or
applicable member of the ERISA Group is required or proposes to take;
provided that no such certificate shall be required unless the
aggregate unpaid actual or potential liability of members of the
ERISA Group involved in all events referred to in (i) through (vii)
above of which officers of the Guarantor have obtained knowledge and
have not previously reported under this sub-paragraph (vii) exceeds
US $ 25,000,000;
(viii) immediately after any officer of the Guarantor obtains
knowledge of a change or a proposed change in the rating of the
Guarantor's outstanding senior unsecured long-term debt securities by
Moody's Investor Service, Inc. or Standard & Poor's Rating Group, a
certificate of the chief financial officer or chief accounting
officer of the Guarantor setting forth the details thereof; and
(b) Other Information. The Guarantor agrees to deliver to the Agent from
time to time such additional information regarding the financial
position or business of the Guarantor as the Agent may reasonably
request.
SECTION 16 GENERAL COVENANTS
(1) By the Borrower. The Borrower agrees as follows:
(a) Disposal of Assets. The Borrower and its Subsidiaries, considered as a
whole, will not, without the prior approval of an Instructing Group,
dispose of the whole or the substantial part of their assets. This
does not apply to disposals on commercial terms for full market value
and on an arms-length basis.
(b) Maintenance of Representations. It will take all steps necessary to
ensure that the representations and warranties in SECTION 14(1) remain true
and correct.
(c) Insurance. The Borrower and its Subsidiaries, considered as a whole,
will maintain insurances on and in relation to their businesses,
assets and operations with reputable insurance companies which are, in
the
<PAGE> 25
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reasonable opinion of the Borrower, appropriate to insure the
Borrower and its Subsidiaries against risks involved in carrying on
their businesses, including, in particular, product liability and
environmental liability.
(2) By the Guarantor. The Guarantor agrees as follows:
(a) Minimum Consolidated Tangible Net Worth. At no time will Consolidated
Tangible Net Worth be less than Minimum Consolidated Tangible Net
Worth. "Minimum Consolidated Tangible Net Worth" means
US $ 800,000,000; provided that such amount shall be adjusted at the
end of each Fiscal Quarter ending after June 30, 1996 as follows:
(i) increased by 50% of Consolidated Net Income for such Fiscal
Quarter; provided that, if Consolidated Net Income for such
Fiscal Quarter is a negative number (a "Consolidated Net Loss"),
an amount up to 50% of such Consolidated Net Loss shall be
applied first to reduce Minimum Consolidated Tangible Net Worth
to the extent of offsetting prior increases (if any) in Minimum
Consolidated Tangible Net Worth made pursuant to this sub-
paragraph (i) during the same fiscal year and second to reduce
(but not below zero) any future increase in Minimum Consolidated
Tangible Net Worth that would otherwise be made pursuant to this
sub-paragraph (i) during the same fiscal year; and
(ii) increased by an amount equal to 50% of all increases in Consolidated
Tangible Net Worth during such Fiscal Quarter attributable
to sales or issuances of the Guarantor's Equity Securities; provided
that an amount up to 50% of all decreases in Consolidated
Tangible Net Worth during such Fiscal Quarter attributable to
purchases or other retirements of the Guarantor's Equity
Securities shall be applied first to offset any increase in
Minimum Consolidated Tangible Net Worth that would otherwise be
made pursuant to this sub-paragraph (ii) at the end of such
Fiscal Quarter, second to reduce Minimum Consolidated Tangible
Net Worth to the extent of offsetting prior increases (if any) in
Minimum Consolidated Tangible Net Worth made pursuant to this sub-
paragraph (ii) and third to reduce (but not below zero) any
future increase in Minimum Consolidated Tangible Net Worth that
would otherwise be made pursuant to this sub-paragraph (ii).
(b) Limitations on Debt.
(i) It will not at any time, and will not suffer or permit any
Consolidated Subsidiary at any time to, create, incur, issue,
guarantee or assume any Debt if, immediately after giving effect
thereto, the
<PAGE> 26
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ratio of (y) Consolidated Debt to (z) the sum of Consolidated Debt
and Consolidated Adjusted Net Worth would exceed 57%.
(ii) It will not at any time suffer or permit any Consolidated
Subsidiary to create, incur, issue, guarantee or assume any Debt if,
immediately after giving effect thereto, the aggregate outstanding
amount (determined at that time) of Debt of all Consolidated
Subsidiaries (other than Debt owed to the Borrower or one or more
other Consolidated Subsidiaries) would exceed 30% of Shareholders'
Equity.
(iii) Sub-paragraphs (i) and (ii) shall not prevent (i) the
Guarantor from creating, incurring, issuing, guaranteeing or assuming
Debt for the purpose of extending, renewing or Refunding (as such
term is defined in this subsection) an equal or greater principal
amount of Debt then outstanding of the Guarantor or of Debt then
outstanding of a Consolidated Subsidiary or (ii) a Consolidated
Subsidiary from creating, incurring, issuing, guaranteeing or
assuming Debt for the purpose of extending, renewing or Refunding an
equal or greater principal amount of Debt then outstanding of such
Consolidated Subsidiary, or (iii) the creation, incurrence, issuance,
guarantee or assumption of Debt owed to or owned by the Guarantor or
a Consolidated Subsidiary. For purposes of this sub-paragraph (iii),
Debt is deemed to be for the purpose of "Refunding" other Debt if and
to the extent that (x) no later than 5 Domestic Business Days after
the refunding Debt is incurred, the Guarantor delivers to the Agent
written notice stating that the purpose of such Debt is to refund
outstanding Debt and specifying the Debt to be refunded, (y) the
proceeds of such refunding Debt are held in the form of cash or High
Quality Investments (free of any Lien except a Lien securing the
specified Debt to be refunded) until such specified Debt is repaid
and (z) such specified Debt to be refunded is repaid within 45 days
after the refunding Debt is incurred.
(iv) For purposes of the limitations provided in, and computations under,
this SECTION 16(2)(b), (x) when a corporation becomes a Consolidated
Subsidiary it shall be deemed to create at such time all the Debt it
has outstanding immediately after such time (provided that, if after
giving effect to this clause (x), the aggregate outstanding amount of
Debt of all Consolidated Subsidiaries (other than Debt owed to the
Guarantor or one or more other Consolidated Subsidiaries) would be
greater than 30% but less than 60% of Shareholders' Equity, this
clause (x) shall not apply at the time such corporation becomes a
Consolidated Subsidiary, but such corporation shall be deemed to
create on the 15th day after it becomes a Consolidated Subsidiary all
the Debt it has
<PAGE> 27
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outstanding on such 15th day), (y) the disposition (other than to a
Consolidated Subsidiary or the Guarantor) by the Guarantor or a
Subsidiary of capital stock of any Consolidated Subsidiary which
holds Debt of the Guarantor or any other Consolidated Subsidiary so
that the Consolidated Subsidiary ceases to be a Consolidated
Subsidiary after such disposition) shall be deemed the creation of
such Debt, and (z) the disposition (other than to a Consolidated
Subsidiary or the Guarantor) of Debt of the Guarantor or any
Consolidated Subsidiary by any Consolidated Subsidiary or the
Guarantor shall be deemed the creation of such Debt.
(c) Negative Pledge. Neither the Guarantor nor any Consolidated Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned
or hereafter acquired by it, except:
(i) Liens existing on March 31, 1997 securing Debt outstanding on
March 31, 1997 in an aggregate principal amount not exceeding US $
30,000,000;
(ii) 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;
(iii) any Lien on any asset securing Debt incurred or assumed
solely 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;
(iv) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Guarantor
or a Consolidated Subsidiary and not created in contemplation of such
event;
(v) any Lien existing on any asset prior to the acquisition thereof
by the Guarantor or a Consolidated Subsidiary and not created in
contemplation of such acquisition;
(vi) 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;
(vii) any Lien in favour of the holder of Debt (or any person or
entity 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
<PAGE> 28
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enforcement thereof is effectively stayed and the claims secured
thereby are being contested in good faith by appropriate proceedings;
(viii) Liens incidental to the normal conduct of its business or
the ownership of its assets which (x) do not secure Debt, (y) do not
secure any obligation in an amount exceeding US $ 100,000,000 and (z)
do not in the aggregate materially detract from the value of the
assets of the Guarantor and its Consolidated Subsidiaries taken as a
whole or in the aggregate materially impair the use thereof in the
operation of the business of the Guarantor and its Consolidated
Subsidiaries taken as a whole; and
(ix) Liens securing Debt which are not otherwise permitted by the
foregoing clauses of this subparagraph (c); provided that (y) the
aggregate outstanding principal amount of Debt secured by all such
Liens on current assets shall not at any time exceed 20% of
Consolidated Current Assets and (z) the aggregate outstanding
principal amount of Debt secured by all such Liens (including Liens
referred to in clause (y) of this proviso) shall not at any time
exceed the sum of (A) 20% of Consolidated Current Assets plus (B) 5%
of Consolidated Tangible Net Worth.
(d) Consolidations, Mergers and Sale of Assets.
(i) The Guarantor will not directly or indirectly sell, lease,
transfer or otherwise dispose of all or substantially all of its
assets, or merge or consolidate with any other Person, or acquire any
other Person through purchase of assets or capital stock, unless
either (y) the Guarantor shall be the continuing or surviving
corporation or (z) the successor or acquiring corporation (if other
than the Guarantor) shall be a corporation organized under the laws
of one of the States of the United States of America and shall
assume, by a writing satisfactory in form and substance to the
Instructing Group, all of the obligations of the Guarantor under this
Agreement, including all covenants herein and therein contained, in
which case such successor or acquiring corporation shall succeed to
and be substituted for the Guarantor with the same effect as if it
had been named herein as a party hereto.
(ii) No disposition of assets, merger, consolidation or acquisition
referred to in sub-paragraph (i) shall be permitted if, immediately
after giving effect thereto, the Guarantor would be in default under
any of the terms or provisions of this Agreement.
(e) Compliance with Laws. The Guarantor will comply, and cause each Subsidiary
to comply, in all material respects with all applicable laws, ordi-
<PAGE> 29
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nances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except where (x) the
necessity of compliance therewith is contested in good faith by
appropriate proceedings, (y) no officer of the Guarantor is aware
that the Guarantor or the relevant Subsidiary has failed to comply
therewith or (z) the Guarantor 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 the
Guarantor and its Consolidated Subsidiaries, taken as a whole.
(2) Duration of covenants. The obligations of the Borrower and the Guarantor
under this SECTION 16 and SECTION 15 will cease to have effect when the
Facility has ceased to be available and there are no amounts outstanding
under the Facility.
SECTION 17 EARLY TERMINATION
(1) Termination Events. Each of the following is a Termination Event:
(a) Non-payment. The Borrower fails to pay when due any principal, or
fails to pay within five days of the due date thereof, any other sum
payable under this Agreement.
(b) Certain Covenants. The Borrower fails to observe or perform any
covenant contained in SECTION 16(1)(a) to (c) or the Guarantor fails
to observe or perform any covenant contained in SECTION 16(2)(a) to
(d).
(c) Other Covenants. Any of the Obligors fails to observe or perform any
other covenant or agreement contained in this Agreement for 30 days
after written notice thereof has been given to the Borrower and the
Guarantor by the Agent;
(d) Incorrect Statements. Any statement made by any of the Obligors in
SECTION 14 or in any document delivered pursuant to this Agreement is
incorrect in any material respect when made or deemed to have been
repeated; provided that, if any statement deemed to have been made by
the Obligor pursuant to SECTION 14(3) shall have been incorrect
solely by reason of the existence of a Termination Event or Potential
Termination Event of which the Obligor was not aware when such
statement was deemed to have been made and which was cured before or
promptly after the Obligor became aware thereof, then such statement
shall be deemed not to have been incorrect in any material respect.
(e) Cross Default. The Guarantor or any Subsidiary fails to make one or
more payments in respect of Material Debt (other than Acquired Debt
in an aggregate outstanding principal amount not exceeding
<PAGE> 30
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US $ 50,000,000) when due or within any applicable grace period, and
such failure has not been waived.
(f) Default on Other Obligations. The Guarantor or any Consolidated
Subsidiary fails to observe or perform any term, covenant or agreement
contained in any instrument or agreement (other than this Agreement)
by which it is bound relating to Material Debt (other than Acquired
Debt in an aggregate outstanding principal amount not exceeding
US $ 50,000,000), or any other event or condition referred to therein
shall occur, and the effect of all such failures, events and
conditions (each a "default") is to cause the maturity of Material
Debt to be accelerated or to permit (any applicable period of grace
having expired) the holder or holders of Material Debt (or any Person
acting on their behalf) to accelerate the maturity thereof.
(g) Voluntary Insolvency. The Borrower, the Guarantor or any Significant
Subsidiary commences a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law or
seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its
property under any such law, or consents to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it under any
such law, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due, or a resolution shall be adopted by either the shareholders or
the board of directors of such corporation to authorize any of the
foregoing.
(h) Involuntary Insolvency. An involuntary case or other proceeding is commenced
against the Borrower, the Guarantor or any Significant Subsidiary in
any court of competent jurisdiction seeking in each case liquidation,
reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property under
any such law, and in each case such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Guarantor or
any Significant Subsidiary as debtors under the federal bankruptcy
laws of the United States as now or hereafter in effect.
(i) ERISA. Any member of the ERISA Group fails to pay when due an amount
or amounts aggregating in excess of US $ 1,000,000 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 Liabilities in excess of US $ 50,000,000
<PAGE> 31
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(collectively, a "Material Plan") is filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC institutes proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a condition exists by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there
occurs a complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of
US $ 50,000,000; provided that no Termination Event shall exist under
this sub-clause (j) with respect to any Prior Plan unless it is reason
ably likely that one or more members of the ERISA Group is liable with
respect to the relevant Unfunded Liabilities or current payment obligation,
as the case may be.
(j) Judgement Unsatisfied. A judgement or order for the payment of money
in excess of US $ 10,000,000 shall be rendered against any of the
Obligors or any of their respective Subsidiaries and such judgment or
order shall continue unsatisfied and unstayed for a period of 45 days.
(k) Change of Ownership of Guarantor. Any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) of 30 % or more of the outstanding shares
of common stock of the Guarantor; or Continuing Directors shall cease
to constitute a majority of the board of directors of the Guarantor.
(l) Change of Ownership of Borrower. The Guarantor ceases to hold, directly
or indirectly, the entire voting share capital of the Borrower.
(m) Unlawfulness or Repudiation. It is unlawful for any of the Obligors to
comply with, or any of the Obligors repudiates, any of its material
obligations under this Agreement.
(n) Change of Business. The Guarantor ceases, or threatens to cease, to
conduct, as a major portion of its business, the sale of building
products.
(o) Material Adverse Change. There is a change in the financial condition
or business of the Guarantor and its Subsidiaries, considered as a
whole, which will in any material respect affect the ability of the
Guarantor to perform its material obligations under this Agreement.
(2) Consequences of a Termination Event. If a Termination Event occurs the
Agent may by notice to the Borrower:
<PAGE> 32
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(a) cancel the undrawn Facility; or
(b) demand immediate repayment of the Loan,
or both. The Agent agrees to deliver a notice under this SECTION 17(2) if an
Instructing Group instructs the Agent to do so. In the case of cancellation
the Lenders will be under no further obligation to make an Advance. In the
case of a demand for repayment the Borrower agrees to pay the Lenders in
accordance with the notice.
(3) Indemnity. If there is a Termination Event the Borrower agrees to reimburse
the Agent and each Lender for the losses and expenses the Agent or
that Lender incurs, or will incur, as a result.
SECTION 18 THE AGENT AND THE ARRANGER
(1) Appointment. The Agent is appointed as an agent by each Lender. The
Agent is not acting as agent of the Borrower or the Guarantor under this
Agreement.
(2) Authority. The Agent is authorised to exercise the rights, powers,
discretions and duties which are specified by this Agreement. The Agent may
also act in a manner reasonably incidental to these matters. The Agent
shall be freed from the restrictions of SECTION 181 of the Civil Code
(Burgerliches Gesetzbuch).
(3) Duties. In addition to the obligations of the Agent set out elsewhere
in this Agreement the Agent agrees as follows:
(a) Notices. The Agent will notify each Lender of the contents of each
notice received from the Borrower or the Guarantor under the terms of
this Agreement. If the notice only affects particular Lenders, the
Agent may elect to notify only those Lenders.
(b) Other Documents. When the Borrower or the Guarantor delivers to the
Agent any other document required to be delivered under this Agreement
the Agent will provide a copy to each Lender.
(c) Termination Events. The Agent will notify each Lender of any Termination
Event or Potential Termination Event. This obligation will not
arise, however, until there is a payment default of which the Agent is
aware or until the Agent receives express notice with reasonable
supporting evidence of the Termination Event or Potential Termination
Event. Until this time the Agent is entitled to assume that there is
no Termination Event or Potential Termination Event. The Agent is not
required to make inquiries. Information referred to in SECTION 18(11) does
not have to be disclosed under this paragraph.
<PAGE> 33
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(d) Other Information. The Agent will request the Borrower or the
Guarantor, as the case may be, to deliver to the Agent any information
reasonably requested by a Lender.
(4) Powers. In addition to the powers of the Agent set out elsewhere in
this Agreement the Agent has the following powers:
(a) Professional Advisers. The Agent may instruct professional advisers to
provide advice in connection with the Facility.
(b) Authority from Instructing Group. The Agent may take any action which
is not inconsistent with this Agreement and which is authorised by an
Instructing Group.
(c) Views of Instructing Group. In exercising any of its rights, powers or
discretions the Agent may have regard to the views of an Instructing
Group. If it exercises those rights, powers or discretions in
accordance with those views the Agent will incur no liability.
(d) Proceedings. The Agent may institute legal proceedings against the Obligors
or any of them in the name of the Lenders if these proceedings
are authorised by an Instructing Group.
(e) Compliance with Law. The Agent may take any action necessary for it to
comply with applicable laws.
The Agent is not required to exercise any of these powers and will incur no
liability if it fails to do so. In the context of legal proceedings the
Agent may decline to take any step until it has received indemnities or
security satisfactory to it.
(5) Reliance. The Agent is entitled to rely upon each of the following:
(a) Advice received from professional advisers.
(b) A certificate of fact received from the Borrower or the Guarantor and
signed by an Authorised Person.
(c) Any communication or document believed by the Agent to be genuine.
The Agent will not be liable for any of the consequences of relying on
these items.
(6) Extent of Agent's Duties.
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(a) No Other Duties. The Agent has no obligations or duties other than
those expressly set out in this Agreement.
(b) Illegality and Liability. The Agent is not obliged to do anything
which is illegal or which may expose it to liability to any person.
(c) Not a Fiduciary. The Agent is not acting as a fiduciary for any
purpose in connection with this Agreement.
(7) Responsibility of the Lenders. Each Lender is responsible for its own
decision to become involved in the Facility and its decision to take or not
take action under the Facility. It shall make its own credit appraisal of
the Obligors and the terms of the Facility. Neither the Agent nor the
Arranger makes any representation that any information provided to a Lender
before or after the date of this Agreement is true. Accordingly each Lender
should take whatever action it believes is necessary to verify that
information. In addition neither the Agent nor the Arranger is responsible
for the legality, validity or adequacy of this Agreement. Each Lender will
satisfy itself on these issues.
(8) Limitation of Liability.
(a) Agent. The Agent will not be liable for any action or non-action under
or in connection with the Facility unless caused by its gross
negligence or wilful misconduct.
(b) Directors, Employees and Agents. No director, employee or agent of the
Agent will be liable to a Lender, the Borrower or the Guarantor in
relation to the Facility. Each Lender, the Borrower and the Guarantor
agree not to seek to impose this liability upon them.
(9) Business of the Agent. Despite its role as agent of the Lenders the
Agent may:
(a) participate as a Lender in the Facility,
(b) carry on all types of business with the Borrower and the Guarantor,
and
(c) act as agent for other groups of lenders to the Borrower, the
Guarantor or other borrowers.
(10) Indemnity. Each Lender agrees to reimburse the Agent for all losses
and expenses incurred by the Agent as a result of its appointment as Agent
or arising from its activities as Agent. These losses and expenses will
take into account amounts reimbursed to the Agent by any Obligor. The
liability of each Lender under this SECTION 18(10) will be limited to the share
of the total losses and expenses which corresponds to that Lender's share
of the Total Commitments or, if an Advance has been made, the Loan. If the
losses or expenses are at-
<PAGE> 35
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tributable to an activity of the Agent which relates to only some of the
Lenders, the Agent may instead notify the Lenders of a different sharing
arrangement. In this case the limit of liability of a Lender under this
sub-clause will be determined by the Agent. The Lenders are not liable
for losses and expenses arising from the gross negligence or wilful
misconduct of the Agent.
(11) Information. The Agent is not required to disclose to the Lenders any
information which is not received by it in its capacity as Agent.
(12) Resignation. The Agent may resign by giving notice to the Borrower,
the Guarantor and the Lenders. The Agent may be removed by notice given by
the Instructing Group to the Agent, the Guarantor and the Lenders. In
either event the following apply:
(a) Appointment by Instructing Group. An Instructing Group may appoint a
new Agent.
(b) Appointment by the Resigning Agent. If an Instructing Group has not
appointed a new Agent within 30 days after the resigning Agent's notice,
the resigning Agent may appoint a new Agent.
(c) Mode of Appointment. A new Agent will be appointed in consultation
with the Borrower, by notice to the Borrower, the Guarantor and the
Lenders. A new Agent cannot be appointed without its consent.
(d) Timing of Appointment. If the Agent has resigned, the new Agent will
become Agent at a time agreed between the new Agent and the resigning
Agent. If no time is agreed, the new Agent will become Agent ten
Business Days after the notice referred to in paragraph (c). Any removal
or resignation of the Agent will not be effective until a new Agent
has been appointed and accepted its appointment.
(e) Effect of Appointment. Upon a new Agent becoming Agent the resigning
or removed Agent will cease to be Agent. Accordingly it will be
discharged from its obligations and duties as Agent. It will, however,
continue to be able to rely on the terms of this SECTION 18 in respect of
all matters relating to the period of its appointment. The new Agent
will assume the role of Agent. It will have all the rights, powers,
discretions and duties of the Agent provided for in this Agreement.
(f) Transition. The resigning or removed Agent and the new Agent agree to
co-operate to ensure an orderly transition. The resigning or removed
Agent agrees to deliver or make available to the new Agent all
records, files and information held by it as Agent. This obligation
will not require the resigning or removed Agent to disclose any
confidential information.
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(13) Arranger. The Arranger has no continuing role in connection with the
Facility and is not liable in respect of any matter concerning the
Facility.
SECTION 19 EVIDENCE AND CERTIFICATES
(1) Evidence of Debt. The Agent will maintain in its books an account showing
all liabilities accrued and payments made in relation to the Facility.
Details of amounts outstanding recorded in this account will be prima facie
evidence of the Borrower's or Guarantor's obligations.
(2) Certificates. Each certificate delivered under this Agreement must contain
reasonable detail of the matters being certified. A certificate delivered by
the Agent or a Lender will be conclusive unless there is an obvious error.
SECTION 20 NOTICES
(1) Nature of Notices. No notice given by any of the Obligors under this
Agreement may be withdrawn or revoked. Each notice delivered by any of the
Obligors must be unconditional. It must also be signed by an Authorised
Person.
(2) Delivery of Notices. A notice under this Agreement will only be
effective if it is in writing and is received. Notices may be given by
post, telex, fax or (in the case of notices among the Lenders and the
Agent) SWIFT. If a notice under SECTION 5(1) is given by fax, a hard copy must
also be delivered.
(3) Notices through the Agent. Each notice from any of the Obligors or a
Lender will be delivered to the Agent. The Agent agrees to pass on the
details of notices received by it to the appropriate recipient as soon as
practicable.
(4) Language.
(a) All notices given under this Agreement must be in English.
(b) All other documents delivered under this Agreement may be in English
or German.
(5) Address Details. Notices will be delivered to the address of the
intended recipient as set out in Schedule 1. The Borrower, the Guarantor or
a Lender may change its address details by not less than 5 Business Days'
notice to the Agent. The Agent may change its address details by notice to
the Borrower, the Guarantor and the Lenders.
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SECTION 21 TRANSFERS AND SUBSTITUTION
(1) Transfers by the Obligors. No Obligor may transfer or otherwise
dispose of any of its rights or obligations under this Agreement.
(2) Substitution of Lender. If a Lender fails to perform its obligations,
or the obligations of a Lender have been suspended or any Lender has
demanded compensation under SECTION 10, the Borrower shall have the right, with
the consent of the Agent (such consent not to be unreasonably withheld) to
substitute such Lender, to assume such Lender's Commitment or, as the case
may be, participations in the Advances.
(3) Transfers by Lenders.
(a) General Right. A Lender (the "Existing Lender") may at any time
transfer any of its rights and/or obligations under this Agreement to:
(i) any other Lender,
(ii) any affiliate of the Lender or any other Lender being a bank
or other financial institution or,
(iii) with the prior consent of the Borrower (such consent not to
be unreasonably withheld) to another bank or other financial
institution,
(in each case the "New Lender"),
provided that the New Lender shall not be entitled to receive
additional amounts pursuant to SECTION 10(2)(b) or SECTION 10(4)(b) if
at the time of transfer the Existing Lender had not been entitled to
receive such additional amounts.
(b) Effectiveness. Any transfer to a New Lender other than a Lender will
be effective only if either:
(i) the obligations are transferred in accordance with SECTION 21(4); or
(ii) the New Lender in form and substance satisfactory to the Agent
confirms to the Agent, the Borrower and the Guarantor that it
undertakes to be bound by the terms of this Agreement as a Lender.
On the transfer becoming effective in this manner the Existing
Lender shall be released from its obligations under this Agreement
to the extent that they are transferred to the New Lender.
(c) Sub-participation. Nothing in this Agreement restricts the ability of
a Lender to sub-participate in its rights and obligations under this
Agree-
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ment another person if that Lender remains liable under this
Agreement for its obligations.
(d) Agent's Fee. On each occasion an Existing Lender transfers any of its
rights and/or obligations under this Agreement, the New Lender shall,
on the date the transfer takes effect, pay to the Agent for its own
account a fee of DM 2,000.
(e) Disclosure. A Lender may disclose to a proposed transferee or
sub-participant details of this Agreement and any information received by
the Lender under or in connection with this Agreement.
(4) Substitution.
(a) Procedure. A substitution of a Lender is effected if:
(i) the Existing Lender and the New Lender deliver to the Agent a
duly completed certificate, substantially in the form of
Schedule 3 (a "Substitution Certificate"); and
(ii) the Agent executes it.
(b) Authority of Agent. Each Party (other than the Existing Lender and the
New Lender) irrevocably authorises the Agent to execute any duly completed
Substitution Certificate on its behalf.
(c) Effects of Substitution. To the extent that they are expressed to be
the subject of the substitution in the Substitution Certificate:
(i) the Existing Lender and the other Parties (the "existing
Parties") will be released from their obligations to each other
(the "discharged obligations");
(ii) the New Lender and the existing Parties will assume obligations
towards each other which differ from the discharged obligations
insofar as they are owed to or assumed by the New Lender instead
of the Existing Lender;
(iii) the rights of the Existing Lender against the existing
Parties and vice versa (the "discharged rights") will be
cancelled; and
(iv) the New Lender and the existing Parties will acquire rights
against each other which differ from the discharged rights only
insofar as they are exercisable by or against the New Lender
instead of the Existing Lender,
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all on the date of signing of the Substitution Certificate by the
Agent or, if later, the date specified in the Substitution
Certificate.
SECTION 22 WAIVERS AND AMENDMENTS
(1) Authority of the Agent. If authorised by an Instructing Group the
Agent may grant waivers and agree amendments with the Obligors. These
waivers and amendments will be made on behalf of and be binding on all the
Lenders, including those which were not part of the Instructing Group. The
Agent is not authorized to grant any waiver or agree any amendment
affecting any of the following:
(a) The amount or method of calculation of interest;
(b) An alteration of the date for the payment of any sum;
(c) The definitions of "Commitment Expiry Date" or "Instructing Group";
(d) SECTIONS 3(1), 5(5)(c) and (d), 9, 11(8) and (9), 13, 18(4)(c), 18(10) and
this SECTION 22(1);
(e) The obligations of the Lenders;
(f) Any requirement (including the one in this sub-clause) that all the
Lenders or a certain proportion of them consent to a matter or deliver
a notice.
Waivers or amendments affecting these matters require the consent of all
Lenders.
(2) Expenses. The Borrower agrees to reimburse the Agent and each Lender
for the expenses they incur as a result of any proposal made by the
Borrower to waive or amend a term of this Agreement.
SECTION 23 MISCELLANEOUS
(1) Exercise of Rights. If the Agent or a Lender does not exercise a right
or power when it is able to do so this will not prevent it exercising that
right or power. When it does exercise a right or power it may do so again
in the same or a different manner. The Agent's and the Lenders' rights and
remedies under this Agreement are in addition to any other rights and
remedies they may have. Those other rights and remedies are not affected by
this Agreement.
(2) Counterparts. There may be several signed copies of this Agreement.
There is intended to be a single Agreement and each signed copy is a
counterpart of that Agreement.
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(3) Entire Agreement. This Agreement constitutes the whole and only
agreement between the parties relating to the Facility.
(4) SECTION 8a KStG Confirmation. Each Lender undertakes to the Borrower to
confirm in writing substantially in the form as attached in Schedule 5
within the first quarter of a calendar year (commencing in 1998) that any
interest paid to such Lender under this Agreement is subject to taxation in
Germany (after deduction of related expenses) and that the respective
Lender has not made any payment (directly or indirectly) to any entity
belonging to the Masco Group (as notified by the Guarantor to the Agent)
that would be treated as a "related payment" as such term is construed by
the German tax Authorities for the purpose of SECTION 8a KStG.
(5) Introduction of EURO.
(a) In the event that the EURO is introduced as the lawful currency of the
Federal Republic of Germany, except as provided in the following
sentences, at any time after the official substitution date all
payments by an Obligor in respect of the Loan or, as the case may be,
the Guarantee will be made in EUROs. If upon the introduction of the
EURO an Obligor has the option whether to make payments in respect of
the Loan or, as the case may be, the Guarantee in EUROs or in Deutsche
Mark, the Obligor will make payments in Deutsche Mark until it has
notified the Agent that forthwith payments will be made in EURO.
(b) The parties agree to make such operational and administrative changes
as are necessary and appropriate in the circumstances of the above,
having regard to market practice existing at the time of the
introduction of the EURO as the lawful currency of the Federal
Republic of Germany.
(c) The introduction of the EURO as currency and any amendments of this
Agreement resulting therefrom will not entitle any party to this
Agreement to any legal remedy, including, without limitation, any
right of rescission or claim for damages.
SECTION 24 LAW AND JURISDICTION
(1) Law. This Agreement is governed by the law of the Federal Republic of
Germany.
(2) Submission. The courts of Frankfurt am Main shall have non-exclusive
jurisdiction for any proceedings arising under or in connection with this
Agreement. This submission to the jurisdiction of the courts in Frankfurt
am Main shall not limit the right of any Syndicate Party to take
proceedings against any of the Obligors in any other court of competent
jurisdiction.
<PAGE> 41
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(3) Service of Process. Without prejudice to any other mode of service
Masco Corporation irrevocably appoints Masco GmbH, Hinterm Haag 10, 69207
Sandhausen as its agent for service of process relating to any proceedings
before the German courts arising under or in connection with this
Agreement.
SECTION 25 CONFIDENTIALITY
Each Lender agrees that all documentation and other information made
available by any of the Obligors to such Lender, whether under the terms of
this Agreement or any other loan agreement, shall (except to the extent
required by legal or governmental process or otherwise by law, or if such
documentation and other information is publicly available or thereafter
becomes publicly available other than by action of any Lender, or was
theretofore known to such Lender independent of any disclosure thereto by
the Obligors) be held in the strictest confidence by such Lender and used
solely in connection with the administration of loans from time to time
outstanding from such Lender to any of the Obligors; provided that (i) such
Lender may disclose such documentation and other information to any other
bank to which such Lender sells or proposes to sell its Commitment or
participation in the Advances, if such other bank, prior to such
disclosure, agrees for the benefit of the Obligors to comply with the
provisions of this SECTION 25, (ii) such Lender may disclose the provisions of
this Agreement and the amounts, maturities and interest rates of the
Advances to any purchaser or potential purchaser of such Lender's
Commitment or participation in any Advances and (iii) such Lender may
disclose such documentation and other information to the extent required,
in such Lender's good faith judgement, to enforce its rights under this
Agreement.
Frankfurt am Main, 9th July, 1997
MASCO GMBH
By: /s/ Boch
MASCO CORPORATION
By: /s/ Rosowski
COMMERZBANK AKTIENGESELLSCHAFT
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(in its capacity as Arranger)
By: /s/ Stoltenberg Kempf
COMMERZBANK INTERNATIONAL S.A.
(in its capacity as Agent)
By: /s/ Kempf
COMMERZBANK AKTIENGESELLSCHAFT,
FILIALE HEIDELBERG
By: /s/ Kern Mantel
BAYERISCHE VEREINSBANK AG
FILIALE HEIDELBERG
By: /s/ Kempf
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
ZWEIGNIEDERLASSUNG FRANKFURT AM MAIN
By: /s/ Kempf
ROYAL BANK OF CANADA EUROPE LIMITED
ZWEIGNIEDERLASSUNG FRANKFURT AM MAIN
By: /s/ Kempf
<PAGE> 43
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THE BANK OF TOKYO - MITSUBISHI, LTD.
DUSSELDORF BRANCH
By: /s/ Stoltenberg
THE DAI-ICHI KANGYO BANK, LTD.
FILIALE DUSSELDORF
By: /s/ Stoltenberg
THE FIRST NATIONAL BANK OF CHICAGO
FRANKFURT AM MAIN BRANCH
By: /s/ Stoltenberg
Without prejudice to the foregoing execution of the Agreement by the
parties hereto, COMMERZBANK INTERNATIONAL S.A. hereby expressly and
specifically confirms its agreement with the provisions of SECTION 24(2) hereof
for the purposes of Article 1 of the Protocol annexed to the Convention on
Jurisdiction and the Enforcement of Judgements in Civil and Commercial
Matters signed at Brussels on September 27, 1968.
COMMERZBANK INTERNATIONAL S.A.
/s/Kempf
<PAGE> 44
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ANNEX
INTERPRETATION
DEFINITIONS, REFERENCES AND CONSTRUCTION
1. DEFINITIONS
In this Agreement:
"ACQUIRED DEBT" means with respect to any person which becomes a Subsidiary
after the date of this Agreement. 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, provided that such Debt
shall no longer constitute "ACQUIRED DEBT" at any time that is more than
six months after such person becomes a Subsidiary
"ADVANCE" means an advance made, or to be made, under SECTION 5.
"ADVANCE DATE" means the date, or proposed date, of an Advance.
"AFFILIATE" means at any date a person (other than a Consolidated Subsidiary)
whose earnings or losses (or the appropriate proportionate share
thereof) would be included in determining the Consolidated Net Income of
the Guarantor and its Consolidated Subsidiaries for a period ending on such
date under the equity method of accounting for investments in common stock
(and certain other investments).
"AGENT" means Commerzbank International S.A. in its capacity as agent for
the Lenders, acting through its office at Luxembourg or any other office
which it may notify to the Borrower, the Guarantor and the Lenders. If
there is a change of agent in accordance with SECTION 19(12), "Agent" will
instead mean the new agent appointed under SECTION 18(12).
"AUTHORISED PERSON" means a person authorised to sign notices on behalf of
the Borrower or the Guarantor under this Agreement. In the case of the
Borrower, the authorisation is evidenced by a list of "Authorised Persons"
duly signed on behalf of the Borrower by one or more Geschaftsfuhrer (as
appropriate), which list has been delivered to the Agent. In the case of
the Guarantor, the authorisation is constituted by a resolution of the
directors of the Guarantor, a certified copy of which has been delivered to
the Agent. A person will cease to be an "Authorised Person" upon notice by
the Borrower or the Guarantor, as the case may be, to the Agent.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan
<PAGE> 45
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and which is maintained or otherwise contributed to by any member of the
ERISA Group.
"BUSINESS DAY" means a day on which banks are open for inter-bank payments
in Frankfurt am Main and Luxembourg.
"COMMITMENT" means the amount of principal which a Lender has committed to
the Facility. Each Lender's initial "Commitment" is set out next to its
name in Schedule 1. This may be reduced or cancelled in accordance with
this Agreement.
"COMMITMENT EXPIRY DATE" means the date which falls 30 days after the date
of this Agreement.
"CONSOLIDATED ADJUSTED NET WORTH" means at any date (i) Shareholders'
Equity at such date less (ii) the amount (if any) by which the aggregate
amount of all equity and other investments in Affiliates of the Guarantor
reflected in such Shareholders' Equity exceeds US $ 250,000,000.
"CONSOLIDATED CURRENT ASSETS" means at any date the consolidated current as
sets of the Guarantor and its Consolidated Subsidiaries determined as of
such date.
"CONSOLIDATED DEBT" means at any date the Debt of the Guarantor and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net income of
the Guarantor and its Consolidated Subsidiaries for such period (considered as a
single accounting period), but excluding the net income or deficit of any person
(other than the equity in earnings or losses of an Affiliate previously included
in such consolidated net income determined under the equity method of accounting
for investments) prior to the effective date on which it becomes a Consolidated
Subsidiary or is merged into or consolidated with the Guarantor or a
Consolidated Subsidiary.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary the accounts of
which would be consolidated with those of the Guarantor in its consolidated
financial statements as of such date.
"CONSOLIDATED TANGIBLE NET WORTH" means at any date the aggregate of all as
sets (excluding treasury stock) which would be shown on a consolidated balance
sheet of the Guarantor and its Consolidated Subsidiaries as of such
date; provided that there shall be deducted from the amount of such assets,
to the extent otherwise included therein, (i) any reserves on assets of the
Guarantor and its Consolidated Subsidiaries where a reserve is proper in
accordance with generally accepted accounting principles, including,
without limitation, reserves for depreciation, amortization or
obsolescence, loss on receivables or inventory
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valuations, (ii) any unamortized goodwill, patents, trademarks, trade names
or other like in tangible assets of the Guarantor and its Consolidated
Subsidiaries, (iii) unamortized debt discount or expense of the Guarantor and
its Consolidated Subsidiaries and (iv) any deferred charges or prepaid expenses
of the Guarantor and its Consolidated Subsidiaries which are not Consolidated
Current Assets; and provided further that there shall also be deducted from
such amount (v) Consolidated Total Liabilities at such date.
"CONSOLIDATED TOTAL LIABILITIES" means at any date the aggregate of all
liabilities or other items which would appear on the liability side of a
consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of such date, except the amount so appearing which
constitutes Shareholders' Equity.
"CONTINUING DIRECTOR" means any member of the Guarantor's board of directors
who either (i) is a member of such board as of 1st July 1997 or
(ii) is thereafter elected to such board, or nominated for election by
stockholders, by a vote of at least two-thirds of the directors who are
Continuing Directors at the time of such vote; provided that an individual
who is so elected or nominated in connection with a merger, consolidation,
acquisition or similar transaction shall not be a Continuing Director
unless such individual was a Continuing Director prior thereto.
"DEBT" of any person means at any date, without duplication, (i) all
obligations of such person for borrowed money, (ii) all obligations of such
person evidenced by debentures, notes or other similar instruments, (iii) all
obligations of such person to pay the deferred purchase price of property,
except trade accounts payable, (iv) all obligations of such person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (v) all Debt of others secured by a Lien on any asset of such
person, whether or not such Debt is assumed by such Person, and (iv) all Debt
of others for which such person is contingently liable. In calculating the
amount of any Debt at any date for purposes of this Agreement, accrued interest
shall be excluded to the extent that it would be properly classified as a
current liability for interest under the heading "Accrued liabilities" (and not
under the heading "Notes payable") in a balance sheet prepared as of such date
in accordance with the accounting principles and practices used in preparing
the balance sheet referred to in SECTION 14(2)(d)(i) and the related footnotes
thereto.
"DOMESTIC BUSINESS DAY" means each day other than a Saturday, Sunday or
public holiday in New York City.
"ENVIRONMENTAL LAWS" means any and all United States federal, state and
local statutes, laws, judicial decisions, regulations, ordinances, rules,
judgements, orders, decrees, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on human health
or to emissions, discharges or releases of pollutants, contaminants,
petroleum or
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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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Group" means the Guarantor, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Guarantor or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"FACILITY" means the loan facility provided by this Agreement.
"FIBOR", in relation to any Interest Period or other period in respect of
which an interest rate is to be determined pursuant to this Agreement,
means:
(a) the interest rate per annum appearing on Telerate Screen page 22000 or
any equivalent successor to such page (as determined by the Agent)
(the "Telerate Screen") at or about 11:00 a.m. Luxembourg time on the
applicable Rate Fixing Day, as being the interest rate offered in the
Frankfurt Interbank Market for deposits in Deutsche Mark for delivery
on the first day of such Interest Period or such other period and for
a period equal to such Interest Period or such other period; and
(b) if such interest rate per does not appear on the Telerate Screen or
the Agent determines that no rate for a period of the duration of the
relevant Interest Period (or other period selected by the Agent
pursuant to the provisions of this Agreement) appears on the Telerate
Screen, the arithmetic mean (rounded upwards, if necessary, to four
decimal places) of the respective rates of interest per annum, as
supplied to the Agent at its request, quoted by the Reference Banks to
leading banks in the Frankfurt Interbank Market at or about 11:00 a.m.
Luxembourg time on the applicable Rate Fixing Date for the offering of
deposits in Deutsche Mark during such Interest Period (or such other
period) in an amount comparable to the amount of the Advance to which
such Interest Period relates or, upon all Advances having been made,
the Loan (or, if in relation to such other period, in an amount
comparable to the unpaid sum); provided that:
(i) if any Reference Bank does not supply such quotation by 12 noon
on the applicable Rate Fixing Day, the relevant arithmetic mean
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shall be determined on the basis of the quotations supplied by
the remaining Reference Banks; and
(ii) if fewer than two Reference Banks supply a quotation, SECTION 10(3).
shall apply.
"FISCAL QUARTER" means a fiscal quarter of the Guarantor.
"GUARANTEE" means the guarantee contained in SECTION 9.
"GUARANTOR'S 1996 FORM 10-K" means the Guarantor's annual report on Form 10-K
for the year ended December 31, 1996, as filed with the Securities and Ex
change Commission pursuant to the Securities Exchange Act of 1934, as
amended.
"GUARANTOR'S EQUITY SECURITIES" means shares of any class of the
Guarantor's capital stock or options, warrants or other rights to acquire
such shares.
"HIGH QUALITY INVESTMENT" means any investment in (i) direct obligations of
the United States of America or any agency thereof, or obligations
guaranteed by the United States of America or any agency thereof,
(ii) commercial paper rated at least A-1 by S&P and at least P-1 by Moody's
or (iii) time deposits with, including certificates of deposit issued by,
any bank which was a party to US $ 750,000,000 Amended and Restated Credit
Agreement dated as of November 14, 1996 among the Guarantor, the banks
party thereto and the Agent named therein on its effective date or any
office located in the United States of America of any bank or trust company
which is organized under the laws of the United States of America or any
State thereof and has capital, surplus and undivided profits aggregating at
least US $ 500,000,000; provided in each case that such investment matures
within six months from the date of acquisition thereof by the Guarantor or
a Subsidiary.
"INSTRUCTING GROUP" means Lenders whose Commitments exceed 66% in aggregate,
or, if an Advance has been made, Lenders whose participations in
the Loan exceed 66% in aggregate.
"INTEREST PERIOD" means each period described in SECTION 6(1).
"INTERNAL REVENUE CODE" means the United States Internal Revenue Code of
1986, as amended, or any successor statute.
"LENDER" means a lender listed in Schedule 1 acting through the office
appearing under its name or any other office which it may notify to the
Agent. A lender which acquires an interest in this Facility by way of
transfer or substitution under SECTION 21 will become a "Lender" and will act
through its office notified to the Agent. The expression also includes
universal successors to Lenders.
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"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or similar encumbrance of any kind in respect of
such asset; provided that a subordination agreement shall not be deemed to
create a Lien. For the purposes of this Agreement, the Guarantor 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 the principal amount borrowed and not repaid under the
Facility.
"MARGIN", in relation to any Interest Period or other period in respect of
which an interest rate is to be determined pursuant to this Agreement,
means the rate determined by the Agent by reference to the credit rating
assigned from time to time by Moody's Investor Service, Inc. ("Moody's") to
the long-term debt of the Guarantor as at the Rate Fixing Day and shall be:
(a) 0.325 per cent. per annum if such rating is A2 or higher;
(b) 0.350 per cent. per annum if such rating is A3;
(c) 0.375 per cent. per annum if such rating is Baa1, Baa2 or Baa3; or
(d) 0.600 per cent. per annum if such rating is Ba1 or lower.
provided that a change in rating shall not affect the Margin applicable to
a running Interest Period.
"MASCO GROUP" means the Guarantor and its Subsidiaries.
"MATERIAL DEBT" means Debt of the Guarantor and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions, in
an aggregate outstanding principal amount exceeding US $ 25,000,000.
"MATERIAL PLAN" has the meaning set forth in SECTION 17(1)(j).
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group 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 which ceased to be a member of the ERISA Group
during such five year period.
"OBLIGOR" at any time means the Borrower or the Guarantor.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
<PAGE> 50
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"PLAN" means at any time an 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 Internal Revenue Code
and either (i) is maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees
of any Person which was at such time a member of the ERISA Group.
"POTENTIAL TERMINATION EVENT" means any event or circumstance which, with
the giving of notice and/or the lapse of time and/or the fulfilment of any
other condition, is likely to constitute a Termination Event.
"PRIOR PLAN" means at any time (i) any Plan which at such time is no longer
maintained or contributed to by any member of the ERISA Group or (ii) any
Multiemployer Plan to which no member of the ERISA Group is at such time
any longer making contributions or, pursuant to an applicable collective
bargaining agreement, accruing an obligation to make contributions.
"RATE FIXING DAY" means, in relation to any Interest Period or other period
for which an interest rate is to be determined pursuant to this Agreement,
the second Business Day before the commencement of the Interest Period or
such other period.
"REFERENCE BANKS" means, initially, the principal Frankfurt offices of
Commerzbank Aktiengesellschaft, Morgan Guaranty Trust Company of New York,
Zweigniederlassung Frankfurt am Main and The Bank of Tokyo-Mitsubishi Ltd.,
Dusseldorf Branch. The Agent, following consultation with the Borrower and
the Lenders, may replace a "Reference Bank" with another Lender or an
affiliate of a Lender. This replacement will take effect when notice is
delivered to the Borrower and the Lenders.
"REPAYMENT DATE" means the date which falls on the fifth anniversary of the
date of this Agreement. If the "Repayment Date" date is not a Business Day,
the "Repayment Date" will instead be the next Business Day.
"SECURITY" means security of any type created or existing over an asset.
"Security" includes also any arrangement providing a creditor with a prior
right to an asset, or its proceeds of sale, over other creditors in an
insolvency or liquidation.
"SHAREHOLDERS' EQUITY" means at any date the shareholder's equity of the
Guarantor.
"SIGNIFICANT SUBSIDIARIES" means any one or more Subsidiaries which, if
considered in the aggregate as a single Subsidiary, would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities
<PAGE> 51
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Exchange Act of 1934. For purposes of this Agreement, a type of event shall
not be deemed to have occurred with respect to Significant Subsidiaries
unless such type of event has occurred with respect to each of the
Subsidiaries required to be included to constitute "Significant
Subsidiaries" as defined in the preceding sentence.
"SUBSIDIARY", in relation to the Borrower, means a company controlled or
majority-owned by the Borrower within the meaning of SECTIONS 16 and 17 of the
Stock Corporation Act ("Aktiengesetz"), and, in relation to the Guarantor,
means any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the
time owned by the Guarantor or by the Guarantor and one or more
Subsidiaries or by one or more Subsidiaries.
"SUBSTITUTION CERTIFICATE" means a document substantially in the form set
out in Schedule 3.
"SYNDICATE PARTY" means the Agent, the Arranger and any Lender.
"TERMINATION EVENT" has the meaning described in SECTION 17(1).
"TOTAL COMMITMENTS" means the aggregate of the Commitments of all the Lenders.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such liabilities
under Title IV of ERISA (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
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"UNITED STATES SUBSIDIARY" means a Subsidiary which is incorporated under
the laws of the United States of America or any State thereof.
2. CERTAIN REFERENCES
Unless otherwise indicated, a reference in this Agreement to:
"Deutsche Mark" or "DM" is to the lawful currency for the time being of
Germany;
"fees" or "expenses" includes any value added tax on those fees or expenses;
<PAGE> 52
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"Germany" is to the Federal Republic of Germany;
unless stated otherwise, a "time of day" is to Frankfurt time.
3. CONSTRUCTION
In relation to the Guarantor, and 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 United
States generally accepted accounting principles as in effect from time to
time, applied on a basis consistent (except for changes concurred in by the
Guarantor's independent public accountants) with the most recent audited
consolidated financial statements of the Guarantor and its Consolidated
Subsidiaries delivered to the Lenders; provided that, if the Guarantor notifies
the Agent that the Guarantor wishes to amend any covenant in SECTION 14(2)(d)
to eliminate the effect of any change in United States generally accepted
accounting principles on the operation of such covenant (or if the
Agent notifies the Guarantor that an Instructing Group wishes to amend
SECTION 14(2)(d) for such purpose), then the Guarantor's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in United
States generally accepted accounting principles became effective, until
either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Guarantor and the Instructing Group.
<PAGE> 53
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SCHEDULE 1
LENDERS AND COMMITMENTS
ADDRESS DETAILS
Lender Commitment in DM
------ --------------------
Commerzbank Aktiengesellschaft 100,000,000
Filiale Heidelberg
Kurfurstenanlage 47 - 51
69007 Heidelberg
Telefax-No.: 06221-901846
Bayerische Vereinsbank AG 50,000,000
Filiale Heidelberg
Postfach 10 14 46
69004 Heidelberg
Telefax-No.: 06221-503-485
Morgan Guaranty Trust Company of 50,000,000
New York
Zweigniederlassung Frankfurt am
Main
Borsenstrabe 2 - 4
60313 Frankfurt am Main
Telefax-No.: 069-7124-1223
Royal Bank of Canada Europe Limited 50,000,000
Zweigniederlassung Frankfurt am
Main
Lyoner Strabe 15
60528 Frankfurt am Main
Telefax-No.: 069-66905-256
The Bank of Tokyo - Mitsubishi, 50,000,000
Ltd.
Dusseldorf Branch
Immermannstrabe 43
40210 Dusseldorf
Telefax-No.: 0211-3667-433
The Dai-Ichi Kangyo Bank, Ltd. 50,000,000
Filiale Dusseldorf
Konigsallee 60 D
40212 Dusseldorf
Telefax-No.: 0211-3249-35
The First National Bank of Chicago 50,000,000
Frankfurt am Main Branch
Hochstrabe 35 - 37
60313 Frankfurt am Main
Telefax-No.: 069-299876-80
-----------
Total: 400,000,000
===========
<PAGE> 54
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Arranger:
Commerzbank Aktiengesellschaft
Neue Mainzer Strabe 32 - 36
60261 Frankfurt am Main
Telephone-No.: 069-1362-4033
Telefax-No.: 069-1362-7111
Agent:
Commerzbank International S.A.
z.H. Herrn Jahns
11, Rue Notre Dame
L-2240 Luxembourg
Telephone-No.: 00352-477 911 262
Telefax-No.: 00352-477 911 419
Borrower:
Masco GmbH
Hinterm Haag 10
69207 Sandhausen
Telephone-No.: 06224-93090
Telefax-No.: 06224-52709
Guarantor:
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
USA
Telephone-No.: 001313-3746258
Telefax-No.: 001313-3746135
<PAGE> 55
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SCHEDULE 2
CONDITIONS PRECEDENT
1. IN RESPECT OF THE BORROWER:
(a) A copy of the Articles of Association (Gesellschaftsvertrag) of the
Borrower as last filed with the Commercial Register and of the related
certificate of the Notary Public pursuant to SECTION 54(1) GmbHG, certified
by two Authorized Persons to be correct and up-to-date.
(b) An extract from the Commercial Register dated not earlier than
1st July, 1997 certified by the Commercial Register.
(c) A list of Authorized Persons complying with the definition of
"Authorized Person".
2. IN RESPECT OF THE GUARANTOR:
A copy of the charter, by-laws and authorizing resolutions of the
Guarantor, certified by the corporate secretary of the Guarantor.
3. LEGAL OPINIONS FROM:
(a) John R. Leekley, General Counsel of the Guarantor;
(b) Davis Polk & Wardwell, legal advisers in the United States of America
to the Agent; and
(c) Hengeler Mueller Weitzel Wirtz, legal advisers in Germany to the
Agent,
all legal opinions to be addressed to the Syndicate Parties and to be in a
form satisfactory to the Agent.
<PAGE> 56
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SCHEDULE 3
FORM OF SUBSTITUTION CERTIFICATE
To: Commerzbank International S.A.
From: [The Existing Lender] and [The New Lender]
MASCO GMBH - DM 400,000,000 TERM LOAN FACILITY AGREEMENT DATED 9TH JULY,
1997 (THE "AGREEMENT")
We refer to SECTION 21(4) of the Agreement.
1. We (the "EXISTING LENDER") and (the "NEW LENDER") agree to the New
Lender substituting the Existing Lender in respect of all the Existing
Lender's rights and obligations referred to in the Schedule in
accordance with SECTION 21(4).
2. The specified date for the purposes of SECTION 21(4) is [date of
substitution].
3. The office through which the New Lender will be acting and the address
for notices of the New Lender for the purposes of SECTION 20(5) are set out
in the Schedule.
4. This Substitution Certificate is governed by the laws of the Federal
Republic of Germany.
The Existing Lender and the New Lender agree as follows:
1. The New Lender is responsible for its own decision to become involved
in the Facility. It should make its own credit appraisal of the
Borrower and the Guarantor and the terms of the Facility. The Existing
Lender makes no representation that any information provided to the
New Lender before or after the date of this certificate is true.
Accordingly the New Lender should take whatever action it believes is
necessary to verify that information. In addition the Existing Lender
is not responsible for the legality, validity or adequacy of the Loan
Agreement. The New Lender will satisfy itself on these issues.
2. There is no obligation on the Existing Lender to accept any transfer
back of the rights and obligations referred to in this Substitution
Certificate. The Existing Lender accepts no obligation to indemnify
the New Lender
<PAGE> 57
-57-
for any losses incurred as a result of a failure by the
Borrower or the Guarantor to perform their obligations or for any
other losses.
This Substitution Certificate is to be governed by the law of the Federal
Republic of Germany.
Existing Lender: New Lender:
[Name of Existing Lender] [Name of New Lender]
By: ___________________ By: ___________________
Agent (on behalf of the other Lenders, the Borrower and itself)
Commerzbank International S.A.
By: ___________________
Date:
THE SCHEDULE
RIGHTS AND OBLIGATIONS TO BE SUBJECT TO THE SUBSTITUTION
[Insert details of the rights and obligations of the Existing Lender to be
subject to the substitution].
NAME OF NEW LENDER: __________________________
Office through which the New Lender will be acting and address for notices:
Address: __________________________
Fax Number: __________________________
Telex Number: __________________________
Attention: __________________________
<PAGE> 58
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SCHEDULE 4
FORM OF BORROWING NOTICE
To: Commerzbank International S.A., in its capacity as Agent
From: Masco GmbH
MASCO GMBH
DM 400,000,000 TERM LOAN FACILITY
Dear Sirs,
(1) With reference to SECTION 5(1) of the Credit Agreement, dated 9th July,
1997 (the "Agreement") we herewith give notice of our intention to borrow under
the Facility, subject to the following conditions:
(a) Advance Date: [________]
(b) Amount: DM [________](1)
(c) First Interest Period: [________]
(2) We herewith confirm
(a)that the representations and warranties in SECTION 14 of the Agreement are
true on the date of delivery of this notice and on the Advance Date;
and
(b)no Termination Event or Potential Termination Event exists on the
Advance Date.
We request that the Advance be disbursed to our account No. [________] with
[________].
(3) Terms not defined herein shall have the meaning attributed to them in
the Agreement.
Yours sincerely
Masco GmbH
By: _______________________
(1) DM 50 Mio. or any higher integral multiple of DM 10 Mio.
<PAGE> 59
-59-
SCHEDULE 5
FORM OF TAX CONFIRMATION
[Letterhead of Lender]
Masco GmbH
[address]
MASCO GMBH
DM 400 MIO. TERM LOAN FACILITY
Dear Sirs,
With reference to SECTION 23(4) of the Facility Agreement, dated 9th July, 1997,
entered into in connection with the DM 400 Mio. Term Loan Facility made
available to you by a syndicate of banks including our institution, we
herewith confirm the following to you with respect to the calendar year
[___]:
Any interest paid to ourselves in respect of the Facility is subject to
taxation in Germany (after deduction of related expenses). We have not made
any payments (directly or indirectly) to any entity belonging to the Masco
Group (in which respect we have relied on the Schedule of entities
belonging to the Masco Group supplied by Masco Corporation to the Agent)
that would be treated as a "related payment", as such term is construed by
the German tax authorities for the purpose of SECTION 8(a) KStG.
Yours sincerely
<PAGE> 60
AMENDMENT TO
CREDIT AGREEMENT
AMENDMENT dated as of June 12, 1998 to the DEM 400 Million Credit Agreement
dated as of July 9, 1997 among MASCO GmbH (the "Borrower"), MASCO CORPORATION
(the "Guarantor"), the BANKS party thereto (the "Lenders") and COMMERZBANK
INTERNATIONAL S.A.; (the "Agent").
WHEREAS, the parties hereto desire to amend the Credit Agreement with effect
from the date hereof (the "Amendment Effective Date") to:
(i) change the minimum tangible net worth covenant to a minimum net worth
covenant and update the minimum amount specified therein,
(ii) reduce the maximum permitted ratio of (x) Consolidated Debt to (y) the
sum of Consolidated Debt and Consolidated Adjusted Net Worth from 57%
to 53% and
(iii) replace the defined term "Shareholders' Equity with the term
"Consolidated Net Worth";
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit
Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the
Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Definitions.
(a) The definitions of "Consolidated Tangible Net Worth" and
"Shareholders' Equity" in the Annex of the Credit Agreement are
deleted.
(b) the following new definition is added to the Annex of the Credit
Agreement in the appropriate alphabetical order.
"Consolidated Net Worth" means at any date the consolidated
shareholders' equity of the Guarantor and its Consolidated
Subsidiaries determined as of such date.
<PAGE> 61
(c) The definitions of "Consolidated Adjusted Net Worth" and
"Consolidated Total Liabilities" in the Annex of the Credit
Agreement are amended by changing the words "Shareholders' Equity"
to Consolidated Net Worth".
SECTION 3. Minimum Consolidated Net Worth.Section 16 (2) (a) of the Credit
Agreement is amended to read in full as follows:
Section 16 (2) (a). Minimum Consolidated Net Worth. At no time will
Consolidated Net Worth be less than Minimum Consolidated Net Worth.
"Minimum Consolidated Net Worth" means US$ 1,700,000,000 provided
that such amount shall be adjusted at the end of each Fiscal Quarter
ending after March 31, 1998, as follows:
(i) increased by 50% of Consolidated Net Income for such Fiscal
Quarter; provided that, if Consolidated Net Income for such Fiscal
Quarter is a negative number (a "Consolidated Net Loss"), an amount
up to 50% of such Consolidated Net Loss shall be applied first to
reduce Minimum Consolidated Net Worth to the extent of offsetting
prior increases (if any) in Miminum Consolidated Net Worth made
pursuant to the sub-paragraph (i) during the same fiscal year and
second to reduce (but not below zero) any future increase in Minimum
Consolidated Net Worth that would otherwise be made pursuant to this
sub-paragraph (i) during the same fiscal year; and
(ii) increased by an amount equal to 50% of all increases in
Consolidated Net Worth during such Fiscal Quarter attributable to
sales or issuances of the Guarantor's Equity Securities: provided
that an amount up to 50% of all decreases in Consolidated Net Worth
during such Fiscal Quarter attributable to purchases or other
retirements of the Guarantor's Equity Securities shall be applied
first to offset any increase in Minimum Consolidated Net Worth that
would otherwise be made pursuant to this sub-paragraph (ii) at the
end of such Fiscal Quarter, second to reduce Minimum Consolidated
Net Worth to the extent of offsetting prior increases (if any) in
Minimum Consolidated Net Worth made pursuant to this clause (ii) and
third to reduce (but not below zero) any future increase in Minimum
Consolidated Net Worth that would otherwise be made pursuant to this
clause (ii).
SECTION 4. Limitations on Debt.Section 16 (2) (b) of the Credit Agreement
is amended as follows:
a) Section 16 (2) (b) (i) is amended to read in full as follows: (i)
It will not at any time, and will not suffer or permit any
Consolidated Subsidiary at any time to, create, incur, issue,
guarantee or assume any
<PAGE> 62
Debt if, immediately after giving effect thereto, the ratio of (y)
Consolidated Debt to (z) the sum of Consolidated Debt and
Consolidated Adjusted Net Worth would exceed 53%.
b) sub-paragraphs (ii) and (iv) of Section 16 (2)(b) of the Credit
Agreement are amended by changing the words "Shareholders' Equity"
to "Consolidated Net Worth".
SECTION 5. Negative Pledge. sub-paragraph (ix) of Section 16 (2)(c) of the
Credit Agreement is amended by changing "5% of Consolidated Tangible
Net Worth" to 3% of "Consolidated Net Worth".
SECTION 6. Financial Statements.Section 14(2) of the Credit Agreement is
amended to read as follows:
Section 14(2)(d), Financial statements.
(i) The consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as of December 31, 1997 and the
related consolidated statements of income and cash flows for
the fiscal year then ended, reported on by Coopers & Lybrand
L.L.P. and set forth in the Guarantor's 1997 Form 10-K, a copy
of which has been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting
principles, the consolidated financial position of the
Guarantor and its consolidated Subsidiaries as of such date
and the consolidated results of their operations and their
cash flows for such fiscal year.
(ii) The unaudited condensed consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of March 31,
1998 and the related unaudited condensed statements of
consolidated income and consolidated cash flows for the three
months then ended, set forth in the Guarantor's quarterly
report for the Fiscal Quarter ended March 31, 1998 as filed
with the Securities and Exchange Commission on Form 10-Q, a
copy of which has been delivered to each of the Lenders,
fairly present, on a basis consistent with the financial
statements referred to inSection 14 (2) (d) (i), the
consolidated financial position of the Guarantor and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
three-months period (subject to normal year-end adjustments).
<PAGE> 63
(iii) There has been no material adverse change since December 31,
1997 in the business or financial position of the Guarantor
and its Consolidated Subsidiaries, considered as a whole, as
reflected in the financial statements referred to in
sub-paragraph (2) (d) (i) of this Clause.
SECTION 7. Representations of Guarantor. The Guarantor represents and warrants
that (i) the representations and warranties of the Guarantor set
forth in Article 14 of the Credit Agreement will be true on and as
of the Amendment Effective Date and (ii) no Default will have
occurred and be continuing on such date.
SECTION 8. Law. This Amendment is governed by the law of the Federal Republic
of Germany.
SECTION 9. Submission. The courts of Frankfurt am Main shall have non-exclusive
jurisdiction for any proceedings arising under or in connection with
this Agreement. This submission to the jurisdiction of the courts in
Frankfurt am Main shall not limit the right of any Syndicate party
to take proceedings against any of the Obligors in any court of
competent jurisdiction.
SECTION 10. Service of Process Without prejudice to any other mode of
service MASCO CORPORATION irrevocably appoints MASCO GmbH, Hinterm
Haag 10, 69207 Sandhausen, as its agent for service of process
relating to any proceedings before the German courts arising under
or in connection with this Agreement.
SECTION 11. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
MASCO GMBH MASCO CORPORATION
By: /s/ By: /s/ Robert B. Rosowski
Vice President -
Controller & Treasurer
COMMERZBANK INTERNATIONAL S.A.
(in its capacity as Agent)
By: /s/
COMMERZBANK INTERNATIONAL S.A.
(on behalf of the Lenders)
/s/
<PAGE> 1
EXHIBIT 10.d
STOCK REPURCHASE AGREEMENT
This Agreement is made as of May 1, 1984 between Masco Corporation, a
Delaware corporation ("Masco"), and Masco Industries, Inc., a Delaware
corporation ("Industries").
WHEREAS, Masco is transferring to Industries certain assets pursuant to
the Masco Corporation Corporate Restructuring Plan (the "Plan") dated as of May
1, 1984 and proposes thereafter, pursuant to the Plan, to distribute as a
dividend (the "Distribution") in excess of 40% of Industries' Common Stock,
$1.00 par value (the "Common Stock"), to the stockholders of Masco;
WHEREAS, as a result of the Distribution, Industries will become a
publicly held corporation and Masco will initially own approximately 50% of the
Common Stock;
WHEREAS, employees of the consultants to Masco and Industries and their
respective subsidiaries may on the date of the Distribution possess share awards
of Common Stock under the Masco Corporation 1984 Restricted Stock (Industries)
Incentive Plan (the "Masco Plan") which are forfeitable to Masco upon the
occurrence of the events specified therein, Industries has established its own
Restricted Stock Incentive Plan and may in the future establish additional plans
(the "Industries Plans") under which shares of Common Stock of Industries could
be awarded to employees of the consultants to Industries and its subsidiaries
and affiliated companies subject to forfeiture to Industries, and Industries may
in the future desire to repurchase shares of its outstanding Common Stock; and
WHEREAS, Masco desires to prevent any of the foregoing events, without the
concurrence of Masco, from resulting in an increase in Masco's percentage
ownership of
<PAGE> 2
the outstanding Common Stock as it exists immediately prior to
occurrence of such event;
NOW, THEREFORE, the parties hereby agree as follows:
1. If at any time prior to May 1, 1994, (a)
Industries or any of its subsidiaries shall repurchase any Common Stock or (b)
any shares of Common Stock, which have been awarded to any employees of or
consultants to Industries or its subsidiaries or affiliated companies pursuant
to the Industries Plans, or which have been awarded to any employees of or
consultants to Industries or its subsidiaries or affiliated companies or Masco
or its subsidiaries or affiliated companies pursuant to the Masco Plan, shall be
forfeited to Industries or Masco pursuant to the terms thereof, Industries shall
offer to Masco the opportunity to sell to Industries on the terms and conditions
hereinafter set forth, the number of shares of Common Stock (the "Offered
Shares") necessary to prevent any increase in the percentage of outstanding
shares of Common Stock owned by Masco immediately prior to such repurchase or
forfeiture.
2. Promptly after any forfeiture pursuant to the Masco Plan should Masco
desire to sell shares of Common Stock to Industries, Masco shall notify
Industries thereof, specifying the number of shares of Common Stock so
forfeited. Promptly after any such repurchase by Industries or forfeiture
pursuant to the Industries Plans, Industries shall notify Masco thereof in
writing, specifying the number of shares of Common Stock so repurchased or
forfeited and the number of shares of Common Stock required to be sold by Masco
to Industries to prevent the increase in percentage ownership as provided in
Paragraph 1. Industries shall thereafter offer Masco the opportunity for 30 days
from the date of either of such notices to sell to Industries all (or such
lesser number as is
<PAGE> 3
specified by Masco in its acceptance referred to in Paragraph 3) of the Offered
Shares for a purchase price (the "Purchase Price") equal to (a) in the case of a
repurchase of Common Stock by Industries, the highest repurchase price paid by
Industries to a third party during the 30-day period ending on the date of such
repurchase or (b) in the case of the forfeiture of shares of Common Stock
pursuant to the Industries Plans or the Masco Plan, as the case may be, the fair
market value of shares of the Common Stock at the close of trading on the date
of such forfeiture.
3. If Masco shall accept Industries' offer within the 30-day period
specified in Paragraph 2 above by written notice to Industries, then on the date
5 days after the date of Masco's acceptance, Masco shall deliver to Industries
duly executed certificates representing the Offered Shares as to which
Industries' offer has been accepted against receipt from Industries of the
amount of the Purchase Price for such Offered Shares.
4. This agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
5. This Agreement shall not be assigned by either party, except to a
successor to substantially all of the business of a party, without the express
written consent of the other party.
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/Wayne B. Lyon By /s/Richard A. Manoogian
Executive Vice President President
<PAGE> 4
September 20, 1985
Mr. Richard G. Mosteller
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Re: Restricted Stock Incentive Plans
Dear Mr. Mosteller:
This will confirm (i) our arrangements regarding reimbursement of costs
relating to unvested incentive award shares of Masco Corporation ("Masco")
common stock and Masco Industries, Inc. ("Industries") common stock upon
transfers of employment and consulting relationships between Masco and
Industries, (ii) our arrangements regarding reimbursement upon forfeitures of
such shares, and (iii) our prior understandings on the implementation of the
Stock Repurchase Agreement dated May 1, 1984 between Masco and Industries with
respect to Industries' repurchases of its common stock from Masco following the
forfeiture of shares of Industries common stock granted under either Masco's or
Industries' restricted stock incentive plan (the "Industries Stock Incentive
Plans") and following open market repurchases of such stock by Industries. These
procedures have been established in order to attribute the cost of such
incentive shares in respect of the employees of consultants to Masco and
Industries and to permit Masco, among other things, to achieve its expressed
objective of maintaining its equity ownership in Industries at not more than 50%
after any forfeiture of Industries incentive award shares. These procedures are
not intended to alter the rights of the parties under the Corporate
Restructuring Plan or the Stock Repurchase Agreement except as expressly
provided herein, and may be terminated by Masco or Industries at any time
without cause, effective ten days after notice of termination.
<PAGE> 5
Mr. Richard G. Mosteller
September 20, 1985
Page Two
1. Transfers.
If a person changes employment or a consulting relationship from Masco to
Industries or from Industries to Masco, the new employer will reimburse the
former employer for the cost on the books of the former employer which is
associated with unvested shares of Masco common stock or Industries common stock
awarded under a Masco or Industries incentive plan, to the extent such shares
may continue to vest while the person is engaged by the new employer.
2. Forfeitures By Industries Employees and Consultants.
A. Shares of Industries common stock forfeited by an Industries employee
or consultant which were granted pursuant to either of the Industries Stock
Incentive Plans are deemed automatically acquired by Industries from the
employee or consultant as of the date of the forfeiture notwithstanding any
contrary provision in either of the Industries Stock Incentive Plans. Industries
waives its right under Paragraph 4.02 of the Corporate Restructuring Plan to
require Masco to pay Industries an amount equal to the unamortized cost of
Industries shares forfeited by Industries employees which were granted under
Masco's Industries Stock Incentive Plan and no amount is payable by Industries
to Masco on account of Industries' acquisition of such forfeited shares.
B. Shares of Masco common stock that were granted under the Masco
Restricted Stock Incentive Plan are forfeited by Industries employees and
consultants to Masco upon termination of employment or the consulting
relationship. Masco will reimburse Industries for the cost on Industries' books
which is associated with such forfeited Masco shares.
3. Forfeitures By Masco Employees and Consultants.
If Masco's equity ownership in Industries would exceed 50% at the end of
any month, shares of Industries common stock forfeited by Masco employees and
consultants during such month are deemed automatically acquired by Industries
from those employees and consultants (notwithstanding any contrary provision in
Masco's Industries Stock Incentive Plan) on the last day of such month to the
extent necessary so that Masco's ownership will not exceed 50% as of such date.
Industries will reimburse Masco for its loss arising from such forfeiture by
paying to Masco an amount equal to the fair market value of such shares (as
determined under Paragraph 4 hereof) on the last trading day of such month.
<PAGE> 6
Mr. Richard G. Mosteller
September 20, 1985
Page Three
4. Repurchase Of Industries Shares On Account of Forfeitures.
If Masco's equity ownership in Industries would exceed 50% at the end of
any month in which forfeited Industries shares are deemed automatically acquired
by Industries, Industries is deemed to repurchase from Masco, on the last day of
such month, additional shares of Industries common stock to the extent necessary
so that Masco's ownership of Industries common stock does not exceed 50% as of
the last day of such month. Pursuant to Paragraph 2(b) of the Stock Repurchase
Agreement, the price for the Industries shares so repurchased from Masco is the
fair market value of such shares at the close of trading on the last trading day
of such month (which is determined by the last sale price for Industries shares
as reported in the NASDAQ National Market System).
5. Repurchase of Industries Shares On Account Of Open Market Purchases.
If Masco's equity ownership in Industries would exceed 50% at the end of
any month in which Industries makes open market purchases of its common stock in
connection with awards of shares under its Industries Stock Incentive Plan or in
connection with employee stock options, Industries is deemed to repurchase from
Masco, on the last day of such month, shares of Industries common stock to the
extent necessary so that Masco's ownership of Industries common stock does not
exceed 50% as of the day of such month. Notwithstanding Paragraph 2(a) of the
Stock Repurchase Agreement, the price for the Industries shares so repurchased
from Masco is the weighted average price paid by Industries for its open market
share purchases during such month. If Masco's equity ownership of Industries
would exceed 50% at the end of any month in which forfeited Industries shares
are deemed automatically acquired by Industries and in which Industries makes
open market purchases of the types contemplated under Paragraph 5 hereof, shares
shall be deemed to be repurchased by Industries first pursuant to paragraph 4.
If, after such repurchases pursuant to paragraph 4, Masco's equity ownership
would still exceed 50%, shares shall then be deemed to be repurchased by
Industries pursuant to this Paragraph 5.
6. Quarterly Settlement. Masco and Industries will effect a quarterly
settlement of the amounts required hereunder to be (i) reimbursed upon the
transfer of employment or a consulting relationship between Masco and
Industries, (ii) reimbursed to Masco upon the forfeiture of Industries shares by
Masco employees and consultants, (iii) reimbursed to Industries upon the
forfeiture of Masco shares by Industries employees and consultants, and (iv)
paid to Masco for any repurchase of Industries shares pursuant to Paragraphs 4
and 5 hereof.
<PAGE> 7
Mr. Richard G. Mosteller
September 20, 1985
Page Four
7. Additional Provisions.
A. Appropriate instructions will be given to Industries' transfer agent
to reflect Industries' ownership of forfeited Industries shares and repurchase
of additional Industries shares.
B. Masco and Industries will promptly notify each other of forfeitures of
shares which are subject to these procedures.
C. These procedures are deemed to be effective as of May 1, 1984,
notwithstanding the fact that certain reports prepared prior to the date hereof
are inconsistent herewith, and this letter supersedes any prior arrangements
with respect to such procedures.
Please confirm your agreement with the foregoing procedures.
Sincerely,
/s/James J. Sigouin
James J. Sigouin
Vice President - Finance
Confirmed by
Masco Corporation:
By /s/Richard G. Mosteller
Richard G. Mosteller
Senior Vice President -
Finance
<PAGE> 8
AMENDMENT TO STOCK REPURCHASE AGREEMENT
AMENDMENT dated as of December 20, 1990 between Masco corporation, a
Delaware corporation ("Masco"), and Masco Industries, Inc., a Delaware
corporation ("Industries").
WHEREAS, Masco and Industries are parties to a Stock Repurchase Agreement
dated as of May 1, 1984 and a related letter agreement dated September 20, 1985;
and
WHEREAS, Masco and Industries desire to amend the Stock Repurchase
Agreement in connection with the transactions contemplated by the Exchange
Agreement dated as of December 18, 1990 between Masco and Industries;
NOW, THEREFORE, the parties agree that Paragraph 1 of the Stock Repurchase
Agreement dated as of May 1, 1984 is amended to read as follows:
"1. If at any time prior to May 1, 1994, (a) Industries or any of its
subsidiaries shall repurchase any Common Stock or (b) any shares of Common
Stock, which have been awarded to any employees of or consultants to Industries
or its subsidiaries or affiliated companies pursuant or Masco or its
subsidiaries or affiliated companies pursuant to the Masco Plan, shall be
forfeited to Industries or Masco pursuant to the terms thereof, and as a result
of such repurchase or forfeiture the percentage of outstanding shares of Common
Stock owned by Masco would increase to an amount in excess of 49%, Industries
shall offer to Masco the opportunity to sell to Industries on the terms and
conditions hereinafter set forth, the number of shares of Common Stock (the
"Offered Shares") necessary to reduce the percentage of outstanding shares of
Common Stock owned by Masco to 49%."
Except as specifically amended hereby, the Stock Repurchase Agreement and
related letter agreement referred to above remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
MASCO CORPORATION MASCO INDUSTRIES, INC.
BY/s/Gerald Bright BY/s/ Erwin H. Billig
Vice President President and Chief
and Secretary Operating Officer
<PAGE> 1
EXHIBIT 10.e
MASCO CORPORATION
1991 LONG TERM STOCK INCENTIVE PLAN
(Restated July 10, 1998)
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 pro vision 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 NonQualified 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.
(m) "Performance Award" shall mean any right granted under Section 6(d) of the
Plan.
<PAGE> 2
(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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<PAGE> 3
(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 16,000,000
Shares initially available for issuance under the Plan.
(ii) Acquired Shares. In addition to the amount set forth above, up to
16,000,000 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 here under 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,
(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
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<PAGE> 4
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 2,000,000 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 authority may be
delegated pursuant to Section 3 hereof in its or their discretion, is eligible
to be designated a Participant.
4
<PAGE> 5
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 exercise, 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 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.
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<PAGE> 6
(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 ex tent 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 deter mine, 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.
(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
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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
certificates.
(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
bonafide 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.
(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.
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(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.
(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.
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(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;
(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 at tempt 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
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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 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
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(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
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
PricewaterhouseCoopers LLP, 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
PricewaterhouseCoopers LLP, 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
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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 outstanding
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.
(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
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.
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(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.
(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.
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EXHIBIT 10.j
MASCO CORPORATION
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
(as Amended July 10, 1998)
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 1,000,000.
(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 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
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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 Company?s stockholders, each
Eligible Director on the date of such approval will be granted on such date a
stock option to purchase 8,000 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
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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.k
MASCOTECH, INC.
1991 LONG TERM STOCK INCENTIVE PLAN
(Restated July 15, 1998)
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 pro vision 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 NonQualified 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.
(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.
<PAGE> 2
(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;
(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;
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(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,
(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
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<PAGE> 4
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 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.
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<PAGE> 5
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 exercise, 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 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.
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(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.
(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 certificates.
(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
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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 Re stricted 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.
(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.
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(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.
(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
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 as signed, 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 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
9
<PAGE> 10
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.
(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.
10
<PAGE> 11
(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 PricewaterhouseCoopers LLP, 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 PricewaterhouseCoopers LLP,
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 outstanding
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.
(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.
11
<PAGE> 12
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.
(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.
12
<PAGE> 1
EXHIBIT 10.q
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, dated as of
November 23, 1993 (hereinafter referred to as "this Agreement"), amends and
restates the Securities Purchase Agreement, dated as of March 31, 1993, between
MascoTech, Inc., a Delaware corporation (formerly known as Masco Industries,
Inc., the "Company"), and Masco Corporation, a Delaware
corporation ("Masco").
WHEREAS, the Company desires to have the right to sell to Masco, and Masco
is willing to purchase from the Company at its request, from time to time, up to
$200 million principal amount of subordinated debt securities upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. Authorization of Issues of Securities. (a) The Company has authorized
the issuance and delivery of separate series of subordinated debt securities
("Securities"), such Securities to have substantially the same terms and
provisions as the form of subordinated note attached hereto as Exhibit A.
(b) The Securities shall be issued in separate series with the interest
rate on each such series being a rate per annum that is 400 basis points over
the average Treasury Rate (as hereinafter defined) for the week preceding the
week in which the notice of purchase referred to in Paragraph 2 is given to
Masco. "Treasury Rate" means the rate for noncallable direct obligations of the
United States ("Treasury Notes") having a remaining maturity of five years, as
published in the Federal Reserve Statistical Release H.15(519) (or any successor
publication provided by the Board of Governors of the Federal Reserve System)
under the heading "Treasury Constant Maturities." If a rate for Treasury Notes
having a remaining maturity of five years has not been so published or reported
for the preceding week as provided above by 1:00 P.M., New York City time, on
the day such notice is given to Masco, then the Treasury Rate shall be
calculated by the Company and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 1:30 P.M., New York City time, on the date of such
notice, of three leading primary United States government securities dealers
selected by the Company for the purchase of Treasury Notes with a remaining
maturity of five years.
(c) Each issuance of Securities shall constitute a separate and discrete
series of securities and may be redeemed pursuant to Section 5.1 of the form of
subordinated note attached hereto as Exhibit A without regard to the redemption
of any other Securities.
<PAGE> 2
(d) The parties confirm that the Securities constitute "Subordinated
Debentures" under the Registration Agreement between them dated as of
March 31, 1993.
2. Obligation to Purchase. (a) Subject to the terms and conditions set
forth herein, Masco agrees to purchase, at par, at any time or from time to time
on or before March 31, 1997, upon the Company's written notice, up to $200
million aggregate principal amount of Securities (the "Commitment"). The
Company's written notice shall specify the principal amount of Securities that
Masco is required to purchase (which for each respective issuance of Securities
shall be $10 million or any larger multiple of $1 million) and the interest
rate, as determined in accordance with the provisions of Paragraph 1(b). The
interest rate set forth in such notice shall be final and binding in the absence
of manifest error.
(b) The Commitment is not revolving in nature, and any Securities
repurchased, redeemed or otherwise acquired by the Company shall not restore the
Commitment. The Company may reduce or terminate the unused portion of the
Commitment at any time by written notice to Masco.
3. Closing. (a) Any closing of a sale of Securities to Masco hereunder
shall occur at Masco's offices on the tenth Business Day (as hereinafter
defined) after the Company gives Masco the written notice referred to in
Paragraph 2. The term "Business Day" shall mean any day, except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized by
law to close, on which commercial banks are open for international business
(including dealings in dollar deposits) in London.
(b) At each closing, provided the Company has paid all commitment fees then
due and payable under Paragraph 4 and provided the Company's representations and
warranties set forth in Paragraphs 6(b) through 6(f) shall then be true and
correct, Masco shall deliver to the Company immediately available funds in an
amount equal to the aggregate principal amount of Securities being purchased.
(c) At each closing, the Company shall deliver to Masco one or more
certificates for the Securities being issued, registered in the name of Masco
(or such other person as Masco may designate prior to the closing) with any such
legend that may be appropriate and in such denominations of $1,000 and any
multiple thereof as Masco may specify prior to the closing. The Company's
delivery of the certificates representing the Securities being purchased shall
automatically be deemed to be a representation by the Company that all of the
representations and warranties set forth in Paragraphs 6(b) through 6(f) are
true and correct as of the date of closing. The accuracy of such representations
and warranties shall be a condition to Masco's obligation to purchase such
Securities.
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<PAGE> 3
4. Commitment Fee. (a) The Company shall pay Masco a commitment fee for
Masco's Commitment hereunder at the rate of 0.125% per annum on the daily
average amount by which the Commitment exceeds the principal amount of
Securities purchased by Masco hereunder (including Securities previously issued
and redeemed).
(b) The commitment fee shall continue to accrue from and including the date
hereof to but excluding the date on which the aggregate principal amount of
Securities purchased by Masco hereunder (including Securities previously issued
and redeemed) equals the Commitment (as may be reduced or terminated by the
Company pursuant to Paragraph 2(b)). Such fee shall be computed for the actual
number of days elapsed and shall be payable quarterly on the last day of each
calendar quarter, and upon fulfillment of the Commitment in its entirety or the
earlier termination of the Commitment.
5. Representations of Masco. Masco represents and warrants to the Company
that:
(a) Masco is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is authorized by its
certificate of incorporation to carry on its business as now conducted.
(b) The execution, delivery and performance by Masco of this Agreement and
the consummation by Masco of the transactions contemplated hereby are within the
corporate powers of Masco and have been duly authorized by all necessary
corporate action on the part of Masco. This Agreement constitutes a valid and
binding agreement of Masco.
(c) The execution, delivery and performance of this Agreement do not result
in any violation by Masco of any indenture, mortgage or other agreement or
instrument by which Masco or any of its Subsidiaries (as hereinafter defined) is
bound.
(d) No authorization, consent or approval of, or registration or filing
with, any governmental or public body or regulatory authority is required on the
part of Masco which has not been obtained for the purchase by Masco of the
Securities contemplated by this Agreement, and such a purchase will not result
in any violation by Masco of any of the terms or provisions of its certificate
of incorporation or by-laws.
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<PAGE> 4
(e) Masco has received such information from the Company as it deems
necessary and sufficient in order to make an informed investment decision
regarding its commitment to purchase Securities hereunder. Masco is a
sophisticated investor, with such knowledge and experience in financial matters
that it is capable of evaluating the risks and merits of an investment in the
Securities, and is purchasing such Securities for its own account for investment
and (subject, to the extent necessary, to the disposition of its property being
at all times within its control) not with a view to any distribution or other
disposition thereof, and is proceeding on the assumption that it must bear the
economic risk of any such investment for an indefinite period since such
Securities may not be sold except as set forth below. If Masco decides to
dispose of any of the Securities acquired pursuant to this Agreement or any
securities issued in exchange or substitution therefor (which it does not
presently contemplate), it will not offer, sell or deliver any such securities,
directly or indirectly, except in compliance with the Securities Act of 1933.
6. Representations of the Company. The Company represents and warrants to
Masco that:
(a) (i) As of the date hereof, the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
(ii) As of the date hereof, (1) each of the Company's Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all
material governmental licenses, authorization, consents and approvals
required to carry on its business as now conducted, and (2) all of the
outstanding shares of capital stock of each such Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable and are
owned directly or indirectly by the Company (except for directors'
qualifying shares of certain such Subsidiaries and equity interests in
Subsidiaries owned by Persons (as hereinafter defined) other than the
Company which individually or in the aggregate are not material to the
Company and its Subsidiaries taken as a whole) free and clear of all Liens
(as hereinafter defined), except Liens not material to the Company and its
Subsidiaries taken as a whole.
(iii) The following terms, as used herein, have the following
meanings:
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<PAGE> 5
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof. "Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
(b) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby are within the Company's corporate powers and have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement
constitutes a valid and binding agreement of the Company.
(c) The Securities issuable from time to time pursuant to this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company and, if and when such Securities are issued pursuant to this Agreement,
such Securities will constitute valid and binding obligations of the Company.
(d) Assuming the truth and accuracy of Masco's representations and
warranties set forth in Paragraph 5(e), no authorization, consent or approval
of, or registration or filing with, any governmental or public body or
regulatory authority is required on the part of the Company for the issuance of
the Securities pursuant to this Agreement prior to the issuance of Securities
hereunder, and such issuance will not result in any violation by the Company of
any of the terms or provisions of the certificate of incorporation or bylaws of
the Company.
(e) The execution, delivery and performance by the Company of this
Agreement and the issuance of Securities pursuant to this Agreement do not
result in any violation by the Company of any of the terms or provisions of any
indenture, mortgage or other agreement or instrument by which the Company or any
of its Subsidiaries is bound.
(f) The Company is not and, after giving effect to any proposed issuance of
Securities for which the Company has given written notice, will not be in
default with respect to any of the Securities or any other of the Company's
securities acquired from the Company by Masco or any of its Subsidiaries; and
there is no event which, with the giving of notice or passage of time, would
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<PAGE> 6
constitute a default with respect to any of the Securities or any other of the
Company's securities acquired from the Company by Masco or any of its
Subsidiaries.
7. Opinions of Counsel. Concurrently with the execution
hereof,
(a) Masco is delivering to the Company an opinion of John R. Leekley,
counsel to Masco, dated the date hereof, to the effect specified in
Paragraphs 5(a) through 5(d).
(b) The Company is delivering to Masco an opinion of Dykema Gossett,
counsel to the Company, dated the date here of, to the effect specified in
Paragraphs 6(a)(i) and 6(b) through 6(d).
8. Miscellaneous. All notices, requests and other communications to either
party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be delivered by hand and receipted for by the party to whom
such communication shall have been directed or mailed by certified mail return
receipt requested to the following address (or to such other address as the
party receiving such communication has theretofore advised the other party in
the manner provided for herein):
(a) If to Masco, to:
21001 Van Born Road
Taylor, Michigan 48180
Telecopy: (313) 374-6430
Attention: President
with a copy to:
John R. Leekley
Vice President and
General Counsel
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Telecopy: (313) 374-6430
except in the case of notices required under Paragraph 2, in which
case each such notice shall be deemed delivered only upon actual
receipt, directed to:
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Telecopy: (313) 374-6135
Attention: Robert B. Rosowski
Vice President - Controller
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<PAGE> 7
(b) If to the Company, to:
21001 Van Born Road
Taylor, Michigan 48180
Telecopy: (313) 374-6136
Attention: President
with a copy to:
Lloyd A. Semple
Dykema Gossett
400 Renaissance Center
Detroit, Michigan 48243
Telecopy: (313) 568-6915
9. Amendments; No Waivers. This Agreement may not be amended or terminated,
nor any condition or term hereof be waived orally, but only by an instrument in
writing duly executed by the parties hereto or, in the case of a waiver, by the
party otherwise entitled to performance. No failure or delay by either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
10. Expenses. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.
11. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that neither party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other party hereto, except that Masco may transfer or assign,
in whole or from time to time in part, to one or more of its affiliates, its
obligation to purchase all or a portion of the Securities, but no such transfer
or assignment will relieve Masco of its obligations hereunder.
12. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Michigan.
13. Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be deemed an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other party hereto.
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<PAGE> 8
14. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MASCO CORPORATION
By /s/Richard G. Mosteller
-------------------------------
Its Senior Vice President-Finance
----------------------------
MASCOTECH, INC.
By Timothy Wadhams
-------------------------------
Its Vice President - Controller
---------------------------
-8-
<PAGE> 9
Exhibit A
FORM OF SUBORDINATED NOTE
[insert appropriate legend]
No. [ ] $[Principal Amount]
MASCOTECH, INC.
__% Subordinated Note Due [5 years from original issue
date], Series ___
MascoTech, Inc., a Delaware corporation (together with its successors and
assigns the "Issuer"), for value received hereby promises to pay to
______________________ or registered assigns the principal sum of __________, on
the Stated Maturity Date (as hereinafter defined) or any earlier redemption
date, 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, semiannually in arrears, on April 1 and October 1 (unless such
day is not a Business Day (as hereinafter defined), in which event on the next
succeeding Business Day) (each an "Interest Payment Date") of each year in which
this Note remains outstanding, commencing with___________________, 19__, on the
unpaid principal sum hereof outstanding in like coin or currency, at the rates
per annum set forth below, by check mailed to the address of the holder as such
address shall appear in the Register (as hereinafter defined), from the most
recent Interest Payment Date to which interest has been paid on this Note, or if
no interest has been paid on this Note, from ____________, 19__, until payment
in full of the principal sum hereof has been made.
The interest rate shall be a rate per annum that is specified on the face
hereof (the "Interest Rate"). Further, the Issuer shall pay interest on overdue
principal at a rate per annum 1% above the rate borne by this Note at the time
the same became overdue (the "Overdue Rate"), and interest on overdue
installments of interest, to the extent lawful, at the Overdue Rate. Interest
payments on this Note will include interest accrued to but excluding the
Interest Payment Dates or the Stated Maturity Date (or any earlier redemption or
repayment date), as the case may be. Interest on this Note will be calculated on
the basis of a 360 day year of twelve 30-day months.
-1-
<PAGE> 10
Notwithstanding anything herein to the contrary, the interest or any amount
deemed to be interest payable by the Issuer with respect to this Note shall not
exceed the maximum amount permitted by applicable law and, to the extent that
any payments in excess of such permitted amount are received by the holder, such
excess shall be considered payments in respect of the principal amount of this
Note. All sums paid or agreed to be paid to the holder for the use, forbearance
or retention of the indebtedness of the Issuer to the holder shall, to the
extent permitted by applicable law, be deemed to be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full of the principal so that the interest on account of such
indebtedness shall not exceed the maximum amount permitted by applicable law.
This Note is one of a duly authorized issue of subordinated notes
designated as the ___% Subordinated Notes Due _____, Series ____ of the Issuer,
limited in aggregate principal amount to $________ (hereinafter called the
"Notes").
This Note is transferable and assignable to one or more purchasers (in any
multiple of $10,000), subject to the restrictions on transfer, if any, referred
to on the face hereof. The Issuer agrees to issue from time to time replacement
Notes in the form hereof to facilitate such transfers and assignments. In
addition, after delivery of an indemnity in form and substance satisfactory to
the Issuer, the Issuer also agrees to issue replacement Notes for Notes which
have been lost, stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the "Register")
in which shall be entered the names and addresses of the registered holders of
the Notes and particulars of the respective Notes held by them and of all
transfers of such Notes. The ownership of the Notes shall be proven by the
Register. For the purpose of paying interest and principal on the Notes, the
Issuer shall be entitled to rely on the names and addresses in the Register and
notwithstanding anything to the contrary contained in this Note, no Event of
Default shall occur under Section 4.l(a) or (b) if payment of interest and
principal is made in accordance with the names and addresses and particulars
contained in the Register.
SECTION 1.1. Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Note shall have the respective meanings specified
below. All accounting terms used herein and not expressly defined shall have the
meanings given to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" shall mean
such accounting principles which are generally accepted as of the time of any
such determination. The terms defined in this Section 1.1 include the plural as
well as the singular.
<PAGE> 11
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the 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, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Event of Default" means any event or condition specified as such in
Section 4 which shall have continued for the period of time, if any, therein
designated.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Senior Indebtedness" means (a) all indebtedness of the Issuer for money
borrowed (including without limitation obligations of the Issuer in respect of
overdrafts, foreign exchange contracts, swaps, letters of credit, bankers'
acceptance, or any loan or advance from a bank whether or not evidenced by
promissory notes or other instruments) or incurred in connection with the
acquisition of property, whether outstanding on the date of execution of this
Note or thereafter created, assumed or incurred, including but not limited to,
the Issuer's 6% Convertible Subordinated Debentures due 2011, the Issuer's 10%
Senior Subordinated Notes due 1995 and the Issuer's 10-1/4% Senior Subordinated
Notes due 1997, except (i) other notes issued pursuant to the Amended and
Restated Securities Purchase Agreement between the Issuer and Masco
Corporation,a Delaware corporation ("Masco"), dated as of November 23, 1993, all
of which notes shall rank pari passu inter sese, (ii) such indebtedness of the
Issuer as is by its terms expressly stated to be not superior in right of
payment to the Notes or to rank pari passu with the Notes, and (iii)
indebtedness of the Issuer to an Affiliate of the Issuer provided that in no
event will Masco Corporation or any Affiliate of Masco Corporation (other than
the Issuer or Affiliates controlled by the Issuer) be deemed to be an affiliate
of the Issuer for purposes of this definition of Senior Indebtedness, (b) any
guaranty, endorsement or other contingent obligation of the Issuer in respect
of, or to purchase or otherwise acquire, any indebtedness of another for money
borrowed or incurred in connection with the acquisition of property, and (c) any
deferrals, renewals or extensions of any such Senior Indebtedness, or
debentures, notes or other evidences of indebtedness issued in exchange for such
Senior Indebtedness. The term "indebtedness of
<PAGE> 12
the Issuer for money borrowed" as used in the foregoing sentence shall mean any
obligation of the Issuer for borrowed money, whether or not evidenced by notes
or other written obligations, and any indebtedness of the Issuer evidenced by
bonds, notes or debentures or other similar instruments. The term "indebtedness
of the Issuer incurred in connection with the acquisition of property" as used
in the first sentence of this definition shall mean any purchase money
obligation (whether or not secured by any lien or other security interest)
created or assumed as all or part of the consideration for the acquisition of
property whether by purchase, merger, consolidation or otherwise (but not
including any account payable or any other obligation created or assumed by the
Issuer in the ordinary course of business in connection with the obtaining of
materials or services) and any indebtedness arising under a lease of property,
equipment or other assets which, pursuant to generally accepted accounting
principles then in effect, is classified as a liability on the Issuer's balance
sheet.
"Stated Maturity Date" means [the date that is five years from the date of
issuance]
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
SECTION 2.1. Payment of Principal and Interest. No provision of this Note
shall alter or impair the obligations of the Issuer, which are absolute and
unconditional, to pay the principal of and interest on this Note at the place,
times, and rate, and in the currency, herein prescribed.
SECTION 3. Covenants.
SECTION 3.1. Offices for Notices and Transfers, etc. So long as any of the
Notes remain outstanding, the Issuer will maintain an office or agency where the
Notes may be presented for registration of transfer and for exchange and an
office or agency where notices and demands to or upon the Issuer in respect of
the Notes may be served. The Issuer will give to the holders of the Notes
written notice of any change of location of any such office or agency thereof.
SECTION 3.2. Provision as to Paying Agent. The Issuer shall act as its own
paying agent and will, on or not more than seven days before each due date of
the principal of or interest on the Notes, set aside, segregate and hold in
trust for the benefit of the holders of the Notes of such series a sum
sufficient to pay such principal or interest so becoming due.
<PAGE> 13
SECTION 3.3 Subordination of Subsidiary Indebtedness. The Issuer shall
obtain an agreement from each of its Subsidiaries, comparable to the letter
agreement dated January 29, 1987 between the Issuer and its subsidiaries
executed in connection with the sale of convertible subordinated debentures and
senior subordinated notes, to the effect that, so long as any Notes are
outstanding, all indebtedness of the Issuer to such Subsidiary for money
borrowed or incurred in connection with the acquisition of property shall be
subordinated and junior in right of payment to the prior payment in full of all
such Notes in the same manner and to the same extent as such Notes are
subordinated and junior in right of payment to the prior payment in full of all
Senior Indebtedness (as defined herein).
SECTION 4. Events of Default and Remedies.
SECTION 4.1. Events of Default. "Event of Default", whenever used herein
with respect to any Note means any one of the following events:
(a) default in the payment of interest upon any Note when it becomes
due and payable and continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal of any
Note as and when the same shall become due and payable either at maturity,
upon redemption, by declaration or otherwise; or
(c) default in the performance, or breach, of any covenant of the
Issuer in any Note (other than a covenant, a default in whose performance
or whose breach is elsewhere in this Section or elsewhere in the
corresponding provision in any such other Note specifically dealt with),
and continuance of such default or breach for a period of 90 days after
there has been given, by registered or certified mail, to the Issuer by the
holders of at least 25% in principal amount of the outstanding Notes, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Notes; or
(d) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Issuer in an involuntary case under
any applicable bankruptcy, insolvency or other similar law or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar official of the Issuer or for any substantial
part of its property, or ordering the winding-up or liquidation of its
affairs and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or
<PAGE> 14
(e) the Issuer shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any substantial
part of its property, or shall make any general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due.
If an Event of Default described in clause (a), (b) or (c) occurs and is
continuing, then, and in each and every such case, unless the principal of all
of the Notes shall have already become due and payable, the holders of not less
than 25% in aggregate principal amount of the Notes of this Series then out
standing, by notice in writing to the Issuer, may declare the entire principal
of all the Notes and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable. If an Event of Default described in clause (d) or (e) occurs, the
principal of and accrued interest on the Notes shall become and be immediately
due and payable without any declaration or other act on the part of any holder
of Notes.
The foregoing provisions, however, are subject to the condition that if, at
any time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Issuer shall
pay or shall deposit in trust for the benefit of the holders of the Notes a sum
sufficient to pay all matured installments of interest upon all of the Notes and
the principal of the Notes (with interest upon such principal and, to the extent
that payment of such interest is enforceable under applicable law, on overdue
installments of interest to the date of such payment or deposit) and if any and
all Events of Default under this Note other than the non-payment of the
principal shall have been cured, waived or otherwise remedied as provided
herein, then and in every such case the holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the Issuer,
may waive all defaults with respect to the Notes and rescind and annul such
declaration and its consequences, but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
SECTION 4.2. Powers and Remedies Cumulative; Delay or Omission Not Waiver
of Default. All powers and remedies given by this Section 4 to the holders of
Notes shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
holders of the Notes, by judicial proceedings or otherwise, to
<PAGE> 15
enforce the performance or observance of the covenants and agreements contained
in this Note and no delay or omission of any holder of any of the Notes to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, every power and
remedy given by this Note or by law to the holders of Notes may be exercised
from time to time, and as often as shall be deemed expedient, by the holders of
Notes.
SECTION 4.3. Waiver of Past Defaults by Majority of Holders. Subject to
Section 4.1, the holders of a majority in aggregate principal amount of the
Notes at the time outstanding may on behalf of the holders of all of the Notes
waive such default or Event of Default and its consequences except a default in
the payment of principal of or interest on any of the Notes. Upon any such
waiver the Issuer and the holders of the Notes shall be restored to their former
positions and rights hereunder, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default shall have been waived as
permitted by this Section 4.3, said default or Event of Default shall for all
purposes of the Notes be deemed to have been cured and to be not continuing.
SECTION 5. Redemption.
SECTION 5.1. Optional Redemption. The Notes may be redeemed at the option
of the Issuer as a whole, or from time to time in part, at any time prior to
maturity, at a price equal to the principal amount of the Notes so redeemed,
together in each case with accrued interest to the date fixed for redemption,
upon mailing notice of such redemption not less than 30 nor more than 60 days
prior to the date fixed for redemption to the holders of Notes at their last
addresses as the same appear on the Register. Such mailing shall be by first
class mail. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notices to the holder of any Note designated for redemption shall
not affect the validity of the proceedings for the redemption of any other Note.
If less than all of the Notes are to be redeemed, the Issuer will select
(a) by lot or by such other manner as may be prescribed by resolution of the
Board of Directors of the Issuer and (b) to the extent Masco, or any Subsidiary
thereof, holds Notes, the Issuer shall allow Masco to select, in its sole
discretion, the specific Notes then owned by Masco or its Subsidiaries to be
redeemed (provided that Masco informs the Issuer no later than the day prior to
the date of such redemption of the specific Notes selected for redemption), the
Notes or portions thereof (in integral multiples of $1,000) to be redeemed in a
minimum amount of
<PAGE> 16
$1,000,000 unless less than $1,000,000 of the Notes remain out standing in which
case all of the Notes must be redeemed.
Upon presentation of any Note redeemed in part only, the Issuer shall
execute and deliver to the holder thereof, at the expense of the Issuer, a new
Note or Notes of authorized denominations, in principal amount equal to the
unredeemed portion of the Note so presented.
SECTION 5.2. Change of Control Put. (a) The holder of this Note shall have
the right, at such holder's option, upon the giving of notice of the occurrence
of any event described in clause (b) below, and subject to the terms and
provisions hereof, to tender any Note, in whole or in part, without regard to
whether the Note is then otherwise redeemable, for cash in an amount equal to
the principal amount of such Note plus accrued interest to the date fixed for
redemption. Such redemption shall occur on the sixty-fifth day after the date of
the notice provided pursuant to clause (c) below (the "Mandatory Redemption
Date"). The holder's right to tender shall continue up to the sixtieth day after
the date of such notice and shall be exercised by any surrender of such Note to
the office or agency to be main tained by the Issuer pursuant to Section 3.1,
accompanied by written notice that the holder elects to tender such Note and (if
so required by the Issuer) by a written instrument or instruments of transfer in
form satisfactory to the Issuer duly executed by the holder or such holder's
duly authorized legal representative and transfer tax stamps or funds therefor,
if required. All Notes surrendered for redemption shall be cancelled by the
Issuer.
(b) The holder's right to tender under clause (a) above shall be triggered
upon the occurrence of either of the following events:
(i) Any person or group (an "other entity"), within the meaning of
Section 13(d) (3) of the Securities Exchange Act of 1934, shall attain
beneficial ownership, within the meaning of Rule 13d-3 adopted under the
Securities Exchange Act of 1934, of at least 50% of the voting power for
election of the Directors of the Issuer, unless approved in advance by a
majority of the Issuer's Continuing Directors has hereinafter defined), or
(ii) The Issuer, directly or indirectly, consolidates or merges with
any other entity or sells or leases its properties and assets substantially
as an entirety to any other entity, unless approved in advance by a
majority of the Issuer's Continuing Directors.
A "Continuing Director" is a Director who is a member of the Board of
Directors of the Issuer elected by stockholders prior to the time the other
entity acquires in excess of 10% of the voting
<PAGE> 17
power for the election of Directors of the Issuer or a person recommended to
succeed a Continuing Director by a majority of the Continuing Directors.
(c) The Issuer shall mail to each holder of Notes at such holder's last
address appearing on the Register, as promptly as possible but in any event not
more than ten days after learning of an occurrence specified in subclause (b)
(i) above or not more than ten days after an occurrence specified in subclause
(b) (ii) above, a notice stating that the event specified in the notice has
occurred and that each holder has the right to tender such holder's Notes for
cash pursuant to the terms hereof. Upon demand to the Issuer at any time by any
holder of Notes, such notice shall be mailed to each holder of Notes, unless the
Issuer can demonstrate to the holder's satisfaction that no event described in
clause (b) has occurred.
(d) On or before the sixty-second day after the date of the notice
provided pursuant to clause (c) above, the Issuer shall set aside, segregate and
hold in trust for the benefit of the holders of the Notes to be redeemed an
amount of money sufficient to pay the principal of, and accrued interest on, all
the Notes to be redeemed on the Mandatory Redemption Date.
(e) After giving the notice of redemption as provided above, the Notes to
be redeemed shall, on the Mandatory Redemption Date, become due and payable at a
price equal to the principal amount thereof plus accrued interest and from and
after such date (unless the Issuer shall default in the payment of principal and
accrued interest thereon) such Notes shall cease to bear interest. Upon
surrender of any such Note for redemption in accordance herewith, such Note
shall be paid on the Mandatory Redemption Date by the Issuer at a price equal to
the principal amount thereof, together with accrued interest to the Mandatory
Redemption Date.
If any Note to be redeemed shall not be so paid on the Mandatory Redemption
Date, the principal and accrued interest thereon shall, until paid, bear
interest from the Mandatory Redemption Date at the Overdue Rate.
(f) Notes may be redeemed in whole or in any integral multiple of $1,000.
Any Note which is to be redeemed only in part shall be surrendered at an office
or agency of the Issuer designated for that purpose (with, if the Issuer so
requires, due endorsement by, or a written instrument to transfer in form
satisfactory to the Issuer duly executed by, the holder thereof or such holder's
attorney duly authorized in writing), and the Issuer shall execute and deliver
to the holder of such Note without service charge, a new Note or Notes, of any
authorized denomination in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal amount.
<PAGE> 18
SECTION 6. Subordination of Notes.
SECTION 6.1. Agreement to Subordinate. The Issuer covenants and agrees,
and each holder of Notes by such holder's acceptance thereof likewise covenants
and agrees, that all Notes shall be issued subject to the provisions of this
Section; and each Person holding any Note, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions. The provisions of this Section are made for the benefit of the
holders of Senior Indebtedness, and such holders shall, at any time, be entitled
to enforce such provisions against the Issuer or any holders of Notes.
All Notes shall, to the extent and in the manner hereinafter in this
Section set forth, be subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness.
SECTION 6.2. No Payment on Notes if Senior Indebtedness in Default. No
payment on account of principal or interest on the Notes shall be made unless
full payment of amounts then due for principal, premium, if any, sinking funds
and interest on all Senior Indebtedness has been made or duly provided for. No
payment on account of principal or interest on the Notes shall be made if, at
the time of such payment or immediately after giving effect thereto, (i) there
shall exist a default in the payment of principal, premium, if any, sinking
funds or interest with respect to any Senior Indebtedness, or (ii) there shall
have occurred an event of default (other than a default in the payment of
principal, premium, if any, sinking funds or interest) with respect to any
Senior Indebtedness, as defined therein or in the instrument under which the
same is outstanding, permitting the holders thereof to accelerate the maturity
thereof, and such event of default shall not have been cured or waived or shall
not have ceased to exist.
SECTION 6.3. Priority of Senior Indebtedness. In the event of any
insolvency or bankruptcy proceedings, and any receiver ship, liquidation,
reorganization under the Federal Bankruptcy Code or any other similar applicable
Federal or state law, or other similar proceedings in connection therewith,
relative to the Issuer or to its creditors, as such, or to its property, and in
the event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Issuer or assignment for the benefit of creditors or any other
marshalling of assets of the Issuer, whether or not involving insolvency or
bankruptcy, then the holders of Senior Indebtedness shall be entitled to receive
payment in full of all principal of and premium, if any, and interest on all
Senior Indebtedness including interest on such Senior Indebtedness after the
date of filing of a petition or other action commencing such proceeding before
the holders of the Notes are entitled to receive any payment on account of the
principal of or interest on the Notes and any payment or distribution of any
kind or character which may be payable or deliverable in any such proceedings
in respect of the
<PAGE> 19
Notes, except securities which are subordinate and junior in right of payment to
the payment of all Senior Indebtedness then outstanding, shall be paid by the
person making such payment or distribution directly to the holders of Senior
Indebtedness to the extent necessary to make payment in full of all Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
the holders of Senior Indebtedness. In the event that any payment or
distribution of cash, property or securities shall be received by the holders of
the Notes in contravention of this Section before all Senior Indebtedness is
paid in full, or provision made for the payment thereof, such payment or
distribution shall be held in trust for the benefit of and shall be paid over to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture under which
any instrument evidencing any of such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay in full
all Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
In the event that any Note is declared due and payable before its expressed
maturity because of the occurrence of an Event of Default (under circumstances
when the provisions of the first paragraph of this Section shall not be
applicable), the holders of the Senior Indebtedness outstanding at the time the
Notes so become due and payable because of such occurrence of such an Event of
Default shall be entitled to receive payment in full of all principal of and
premium, if any, and interest on all Senior Indebtedness before the holders of
the Notes are entitled to receive any payment on account of the principal of or
interest on the Notes.
SECTION 6.4. Subrogation of Notes. Subject to the payment in full of all
Senior Indebtedness, the holders of the Notes shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
assets of the Issuer made on the Senior Indebtedness until the principal of and
interest on the Notes shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the holders of the Notes would be
entitled except for the provisions of this Section, and no payment over pursuant
to the provisions of this Section to the holders of Senior Indebtedness by
holders of the Notes, shall, as between the Issuer, its creditors other than the
holders of Senior Indebtedness, and the holders of Notes, be deemed to be a
payment by the Issuer to or on account of Senior Indebtedness, and no payments
or distributions to the holders of the Notes of cash, property or securities
payable or distributable to the holders of the Senior Indebtedness to which the
holders of the Notes shall become entitled pursuant to the provisions of this
Section, shall, as between the Issuer, its creditors other than the holders of
Senior Indebtedness, and the holders of the Notes, be
<PAGE> 20
deemed to be a payment by the Issuer to the holders of or on account of the
Notes.
SECTION 6.5. Issuer Obligation to Pay Unconditional. The provisions of this
Section are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the holders of the Notes on
the other hand, and nothing herein shall impair, as between the Issuer and the
holders of the Notes, the obligation of the Issuer, which is unconditional and
absolute, to pay to the holders thereof the principal thereof and interest
thereon in accordance with the terms of the Notes nor shall anything herein
prevent the holders of the Notes from exercising all remedies otherwise
permitted by applicable law or under the Notes upon default under the Notes,
subject to the rights of holders of Senior Indebtedness under the provisions of
this Section to receive cash, property or securities otherwise payable or
deliverable to the holders of the Notes.
SECTION 7. Miscellaneous.
SECTION 7.1. Modification of Notes. The Notes may be modified without prior
notice to any holder but with the written consent of the holders of a majority
in principal amount of the Notes. Subject to Section 4.1 and Section 4.3, the
holders of a majority in principal amount of the Notes may waive compliance by
the Issuer with any provision of the Notes without prior notice to any holder.
However, without the consent of each holder affected, an amendment, supplement
or waiver may not (1) reduce the amount of Notes whose holders must consent to
an amendment, supplement or waiver, (2) reduce the rate or extend the time for
payment for interest on any Notes, (3) reduce the principal amount of or extend
the fixed maturity of any Notes or alter the redemption provisions with respect
thereto or (4) make any Notes payable in money or property other than as stated
in the Notes.
The Issuer will use its best efforts to qualify an indenture with respect
to this Note at or prior to the time such qualification is required under the
Trust Indenture Act of 1939, as amended, or similar law then in effect.
SECTION 7.2. Miscellaneous. This Note shall be deemed to be a contract
under the laws of the State of Michigan and for all purposes shall be construed
in accordance with the laws of said State, except as may otherwise be required
by mandatory provisions of law. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The holder of this Note by acceptance of this Note agrees to be bound by
the provisions (including the subordination provisions) of this Note
<PAGE> 21
which are expressly binding on such holder. In determining whether the holders
of the requisite aggregate principal amount of Notes have concurred in any
direction, consent or waiver as provided under the Notes, Notes which are owned
by the Issuer or any Subsidiary of the Issuer shall be disregarded and deemed
not to be outstanding for the purpose of any such determination. The Section
headings herein are for convenience only and shall not affect the construction
hereof.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
[Seal] MASCOTECH, INC.
By:
Name:
Title:
<PAGE> 22
AGREEMENT
This Agreement is dated as of November 23, 1993 between MascoTech, Inc., a
Delaware corporation (the "Company"), and Masco Corporation, a Delaware
corporation ("Masco").
WHEREAS, in addition to certain shares of Company common stock, par value
$1.00 per share (the "Common Stock"), and warrants to purchase Common Stock,
Masco holds (i) $130 million (the "Masco Debentures") of the Company's 6%
Convertible Subordinated Debentures Due 2011 (the "Debentures"), which are
redeemable at any time by the Company and convertible at any time into Common
Stock at $18 per share of Common Stock, and (ii) the one million outstanding
shares of the Company's 10% Exchangeable Preferred Stock (the "Preferred
Stock").
WHEREAS, the Company has been contemplating calling for redemption all of
the Debentures (including the Masco Debentures), and Masco is willing to refrain
from selling or otherwise disposing of Common Stock or other Company securities
for a period of time in order to facilitate the call for redemption of all of
the Debentures.
WHEREAS, it is in the interest of the Company to repurchase the Preferred
Stock for cash in order to reduce its financing costs and such repurchase is not
inconsistent with Masco's previously stated intention to reduce its investment
in the Company.
WHEREAS, the Company and Masco have entered into a Securities Purchase
Agreement dated as of March 31, 1993 (the "Securities Purchase Agreement")
pursuant to which Masco has agreed to purchase from the Company at its request
on or before March 31, 1995 additional preferred stock or subordinated debt
securities for an aggregate purchase price of up to $200 million, and the
parties desire to amend and restate the Securities Purchase Agreement in certain
respects.
WHEREAS, the Company and Masco have entered into a Stock Repurchase
Agreement dated as of May 1, 1984, as amended (the "Stock Repurchase
Agreement"), pursuant to which the Company has agreed to repurchase from
Masco,until May 1, 1994, such number of shares of Common Stock as may be
necessary to prevent Masco's Common Stock ownership interest in the Company from
exceeding 49%, and the parties are agreeable to extending the term thereof.
NOW, THEREFORE, the parties agree as follows:
1. Conversion of Debentures. Masco agrees that (a) on
<PAGE> 23
or before December 31, 1993 it will surrender for conversion the Masco
Debentures, and (b)it will not sell or otherwise dispose of any Common Stock,
warrants to purchase Common Stock or Debentures (whether now held or acquired on
conversion) on or before December 31, 1993. If Masco surrenders the Masco
Debentures for conversion prior to December 15, 1993, the Company will pay Masco
an amount equal to the interest accrued on the Masco Debentures from the last
regular semi-annual interest payment date to the date of conversion.
2. Repurchase of Preferred Stock. The Company shall repurchase the
Preferred Stock for $100 per share, plus an amount equal to accrued and unpaid
dividends from October 1, 1993 to the date of repurchase, payable in cash on the
date of such repurchase. Such repurchase shall occur as soon as practicable
after the execution of this Agreement.
3. Amendment to Securities Purchase Agreement. Concurrently herewith the
parties are entering into an Amended and Restated Securities Purchase Agreement.
The parties hereby confirm that all securities issuable pursuant to the Amended
and Restated Securities Purchase Agreement will be "Registrable Securities"
under the Registration Agreement between them dated as of March 31, 1993.
4. Amendment to Stock Repurchase Agreement. The parties hereby amend
Paragraph 1 of the Stock Repurchase Agreement by deleting the date "May 1, 1994"
and substituting therefor the date "May 1, 2004". Except as otherwise
specifically set forth herein, the Stock Repurchase Agreement shall continue in
full force and effect.
5. Representations and Warranties. (a) Each party represents and warrants
to the other that the following statements are true and correct as of the date
hereof and will be true and correct at the time Masco surrenders the Masco
Debentures for conversion and at the time of the repurchase of the Preferred
Stock:
(i) It is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and is authorized by its
certificate of incorporation to carry on its business as now conducted.
(ii) The execution, delivery and performance of this Agreement by
such party and the consummation by such party of the transactions contemplated
hereby are within the corporate powers of such party and have been duly
authorized by all necessary corporate action on its part. This Agreement
constitutes a valid and binding agreement of such party.
<PAGE> 24
(iii) No authorization, consent or approval of, or registration or
filing with, any governmental or public body or regulatory authority is required
and which has not been obtained on the part of such party for the execution,
delivery and performance of this Agreement by such party.
(iv) The execution, delivery and performance of this Agreement by
such party do not result in any violation by it of any of the terms or
provisions of its certificate of incorporation or by-laws or of any indenture,
mortgage or other agreement or instrument by which it or any of its Subsidiaries
(as hereinafter defined) is bound.
(b) Masco represents and warrants to the Company that Masco has, and at
the time of the repurchase of the Preferred Stock will have, unencumbered title
to the Preferred Stock, free and clear of any Liens (as hereinafter defined),
and delivery by Masco of the Preferred Stock will pass unencumbered title to the
Company, free and clear of any Liens .
(c) The Company represents and warrants to Masco that the repurchase of
the Preferred Stock from Masco will be effected in compliance with the Delaware
General Corporation Law.
6. Legal Opinions. Concurrently with the execution hereof, Masco is
delivering to the Company an opinion of John R. Leekley, counsel to Masco, and
the Company is delivering to Masco an opinion of Dykema Gossett, counsel to the
Company, in each case dated the date hereof and to the effect of certain of the
matters specified in Paragraph 5 hereof.
7. Definitions. The following terms, as used herein, have the following
meanings:
(a) "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
(b) "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
(c) "Subsidiary" means, with respect to any Person, any corporation
or other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
<PAGE> 25
8. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
WHEREFORE, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
MASCO CORPORATION
By /s/Richard G. Mosteller
Its Senior Vice President -
Finance
MASCOTECH, INC.
By /s/Timothy Wadhams
Its Vice President -
Controller
<PAGE> 26
AMENDMENT NO. 1 TO AMENDED AND
RESTATED SECURITIES PURCHASE AGREEMENT
This Amendment is made as of October 31, 1996, between Masco Corporation,
a Delaware corporation ("Masco"), and MascoTech, Inc., f/k/a Masco Industries,
Inc., a Delaware corporation (the "Company" or the "Issuer"), concerning that
certain Amended and Restated Securities Purchase Agreement (the "Securities
Purchase Agreement"), dated as of November 23, 1993, between Masco and the
Company. All capitalized terms not otherwise defined in this Amendment shall
have the meanings given them in the Securities Purchase Agreement.
A. Masco holds 24,824,690 shares of the Common Stock, par value $1.00
per share, of the Company (the "Tech Common Stock");
B. Concurrently herewith, the Company has, among other things,repurchased
from Masco 17,000,000 shares of Tech Common Stock;
C. In connection therewith, Masco and the Company desire to amend certain
provisions of the Securities Purchase Agreement as set forth herein.
IN CONSIDERATION of the mutual covenants and agreements contained in
this Amendment, the parties agree to amend the Securities Purchase Agreement as
follows:
1. Paragraph 1(b) is hereby amended to read in its entirety as follows:
(b) The Securities shall be issued in separate series with the
interest rate on each such series being a rate per annum that is the
higher of: (I) 400 basis points over the average Treasury Rate (as
hereinafter defined) for the week preceding the week in which the
notice of purchase referred to in Paragraph 2 is given to Masco; or
(ii) 75 basis points over the Comparable Debt Issuance Rate (as
hereinafter defined).
"Treasury Rate" means the rate for noncallable direct
obligations of the United States ("Treasury Notes") having a
remaining maturity of five years, as published in the Federal
Reserve Statistical Release H.15(519) (or any successor publication
provided by the Board of Governors of the Federal Reserve System)
under the heading "Treasury Constant Maturities." If a rate for
Treasury Notes having a remaining maturity of five years has not
been so published or reported for the preceding week as provided
above by 1:00 P.M., New York City time, on the day such notice is
given to Masco, then the Treasury Rate shall be calculated by the
<PAGE> 27
Company and shall be a yield to maturity (expressed as a bond equivalent, on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
1:30 P.M., New York City time, on the date of such notice, of three leading
primary United States government securities dealers selected by the Company
for the purchase of Treasury Notes with a remaining maturity of five years.
The "Comparable Debt Issuance Rate" means a per annum rate of interest
determined as follows:
Each of the Company and Masco shall select an investment banker within 3
business days from the date the notice of purchase referred to in
Paragraph 2 is given to Masco, and those two investment bankers shall have
3 business days to select a third investment banker. Each of the three
investment bankers shall have qualifications with respect to the sale of
debt instruments of manufacturing and industrial companies. Each of the
three investment bankers shall have 3 business days to determine, in its
good faith opinion, the per annum rate of interest that the Company would
be required to pay if it were to issue the relevant series of Securities
to third party investors in a transaction negotiated at arms'-length and
priced as of the date the notice of purchase referred to in Paragraph 2 is
given to Masco, and each banker shall set forth its conclusion in a letter
addressed to each of Masco and the Company and delivered to each of them
by 12:00 noon EST on the 10th day from the date of the notice of purchase
given to Masco. The arithmetic mean of the interest rates determined by
each of the three investment bankers shall be the Comparable Debt Issuance
Rate.
2. Paragraph 2(a) is hereby amended to read in its entirety as follows:
(a) Subject to the terms and conditions set forth herein, Masco agrees to
purchase, at par, at any time or from time to time on or before March 31, 2002,
upon the Company's written notice, up to $200 million aggregate principal amount
of Securities (the "Commitment"). The Company's written notice shall specify the
principal amount of Securities that Masco is required to purchase (which for
each respective issuance of Securities shall be $10 million or any larger
multiple of $1,000,000). The interest rate for such Securities shall be
determined in accordance with the provisions of Paragraph 1(b).
<PAGE> 28
3. The first sentence of Paragraph 3(a) is hereby amended to read in its
entirety as follows:
(a) Any closing of a sale of Securities to Masco hereunder shall occur
at Masco's offices on the 10th Business Day (as hereinafter defined)
after the Company gives Masco the written notice referred to in
Paragraph 2.
4. Section 5.2(b) of the Form of Subordinated Note attached as Exhibit A
to the Securities Purchase Agreement is hereby amended to read in its entirety
as follows:
(b) The holder's right to tender under clause (a) above shall be
triggered upon the occurrence of either of the following events:
(i) Any person or group (an "other entity"), within the
meaning of Section 13 (d) (3) of the Securities Exchange Act of
1934, shall attain beneficial ownership, within the meaning of Rule
13d-3 adopted under the Securities Exchange Act of 1934, or at
least 50% of the voting power for election of the Directors of the
Issuer, or,
(ii) The Issuer, directly or indirectly, consolidates or
merges with any other entity or sells or leases its properties and
assets substantially as an entirety to any other entity, provided
that this clause shall not apply to a transaction in which the
Company is the surviving company in any merger or consolidation and
in which the stock issued in such a transaction is less than 40% of
the common stock of the Company issued and outstanding after the
transaction.
5. A new Section 2 (c) is hereby added to read in its entirety as follows:
(c) The Commitment shall terminate upon the occurrence of either of
the following events:
(i) Any person or group (an "other entity"), within the meaning of
Section 13 (d) (3) of the Securities Exchange Act of 1934, shall
attain beneficial ownership, within the meaning of Rule 13d-3
adopted under the Securities Exchange Act of 1934, or at least 50%
of the voting power for election of the Directors of the Issuer,
or,
<PAGE> 29
(ii) The Issuer, directly or indirectly, consolidates or
merges with any other entity or sells or leases its properties
and assets substantially as an entirety to any other entity,
provided that this clause shall not apply to a transaction in
which the Company is the surviving company in any merger or
consolidation and in which the stock issued in such a
transaction is less than 40% of the common stock of the
Company issued and outstanding after the transaction.
6. All other terms and conditions of the Securities Purchase Agreement are
hereby ratified and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Amendment as of the date first above written.
MASCO CORPORATION
By:/s/ John R. Leekley
Name: John R. Leekley
Title: Senior Vice President and
General Counsel
MASCOTECH, INC.
By: /s/ Timothy Wadhams
Name: Timothy Wadhams
Title: Vice President-Controller and
Treasurer
<PAGE> 1
EXHIBIT 10.r
REGISTRATION AGREEMENT
This Agreement is made as of March 31, 1993, between Masco Industries,
Inc., a Delaware corporation (the "Company") and Masco Corporation, a Delaware
corporation ("Masco").
WHEREAS, Masco currently holds certain Company securities; and
WHEREAS, Masco is acquiring certain Company securities pursuant to a
Purchase Agreement (the "Purchase Agreement") and an Exchange Agreement (the
"Exchange Agreement"), each with the Company of even date herewith, and may
acquire additional Company securities pursuant to a Securities Purchase
Agreement (the "Securities Purchase Agreement") with the Company of even date
herewith; and
WHEREAS, in connection with the Purchase Agreement, the Exchange Agreement
and the Securities Purchase Agreement, the Company has agreed to provide to
Masco certain registration rights with respect to certain Company securities as
provided
herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
"Common Stock" means the Company's Common Stock, par value $1.00 per share.
"Convertible Debentures" means the Company's 6% Convertible Subordinated
Debentures due 2011.
"Preferred Stock" means the Company's 10% Exchangeable Preferred Stock
issued pursuant to the Exchange Agreement and the Company's exchangeable
preferred stock that may be issued pursuant to the Securities Purchase
Agreement.
"Registrable Securities" means (i) the 17,946,498 shares of Common Stock
held by Masco as of the date hereof (after giving effect to the Company's
acquisition of 10 million shares of Common Stock pursuant to the Exchange
Agreement between the Company and Masco of even date herewith) and shares of
Common Stock that may be reacquired by Masco pursuant to the Masco Corporation
1984 Restricted Stock (Industries) Plan, (ii) $130 million principal amount of
Convertible Debentures held by Masco, (iii) Preferred Stock, (iv) Subordinated
Debentures, (v) Warrants, (vi) Common Stock issuable upon conversion of the
Convertible Debentures and upon exercise of the Warrants, and (vii) any
securities issued or issuable with respect to, or derived from, the securities
referred to in clauses (i) through (vi) by way of stock dividend, stock split or
other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
-1-
<PAGE> 2
"Subordinated Debentures" means the Company's subordinated debentures that
are issuable upon redemption and exchange of the Preferred Stock and the
Company's subordinated debentures that may be issued pursuant to the Securities
Purchase Agreement.
"Warrants" means the warrants issued by the Company to purchase 10 million
shares of Common Stock, which warrants were issued pursuant to the Purchase
Agreement.
2 (a). Registration of Registrable Securities. Whenever the Company shall
receive a written request signed by Masco requesting the Company to file a
registration statement under the Securities Act of 1933, as in effect at the
relevant time, or a comparable statement under any similar Federal statute then
in effect (a "Registration Statement"), covering any class or series of
Registrable Securities held by Masco, the Company shall promptly prepare and
file a Registration Statement covering the Registrable Securities requested to
be registered. The registration request may, at the option of Masco, require the
Registration Statement to include Registrable Securities held by persons who
acquired such Registrable Securities directly from Masco in a private placement
(hereinafter referred to, together with Masco, as a "Selling Holder"). The
Company shall use its best efforts to cause the Registration Statement to become
effective and remain effective for the period required to permit the offering
and sale of the Registrable Securities covered thereby, which may be an
indefinite period of time if the registration request shall specify a delayed or
continuous offering pursuant to Rule 415 of the Securities and Exchange
Commission or any successor or comparable provision then in effect ("Shelf
Registration").
2(b). Limitations on Registration and Disposition. (i) The Company shall
not be obligated to (A) file a Registration Statement with respect to less than
$25 million market value of Registrable Securities (as determined in good faith
by Masco at the time of the request), except that if the Company shall have
redeemed or exchanged any class or series of Registrable Securities such that
Masco holds less than $25 million market value of such class or series, Masco
may request registration of all of any such class or series then held, or (B)
make any such filing within 6 months from the effective date of the next
preceding filing made pursuant hereto, except Masco may, within the period
commencing with the date of issuance of Preferred Stock or Subordinated
Debentures issued pursuant to the Securities Purchase Agreement or Subordinated
Debentures issued upon redemption and exchange of Preferred Stock and ending six
months from such effective date, require the filing of a Registration Statement
covering such Preferred Stock or Subordinated Debentures.
(ii) No disposition of Registrable Securities shall be made under a Shelf
Registration unless the Selling Holder of such securities shall give the Company
five days' prior written notice of such holder's intent to make such
disposition.
(iii) The Company may elect to defer, for a period not exceeding a total of
90 days, the preparation of any Registration Statement or the disposition of
Registrable Securities pursuant to an effective Shelf Registration if in the
Company's good faith judgment pending or prospective business developments
(including financing plans) justify a temporary delay or the prospectus
contained in an effective Shelf Registration contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
made in the light of the circumstances in which they were made, not misleading.
-2-
<PAGE> 3
(iv) The exercise of Warrants or conversion of Convertible Debentures shall
not constitute a disposition of Registrable Securities for purposes of clauses
(ii) and (iii) above.
2(c). Registration Procedures. (i) Whenever the Company shall file a
Registration Statement pursuant hereto, the Company shall (A) thereafter, for
such period of time as shall be required in connection with the transactions
contemplated thereby and permitted by applicable rules, regulations and
administrative practice, file all post-effective amendments and supplements
thereto or to the prospectus contained therein and all filings under the
Securities Exchange Act of 1934 that are necessary or appropriate so that
neither the Registration Statement nor any related prospectus shall contain any
material misstatement or omission relative to the Company or any of its assets
or its business or affairs and so that the Registration Statement and such
prospectus will otherwise comply with all applicable legal requirements, subject
to the provisions of Paragraph 2(b) (iii) above, (B) furnish to the Selling
Holders of the registered Registrable Securities such number of copies of the
Registration Statement and any related preliminary prospectus, prospectus,
post-effective amendment or supplement as such Selling Holders reasonably may
request, and (C) take all action that may be necessary under the securities or
Blue Sky laws of any state and as reasonably may be requested to permit the
public offering and sale of the Registered Securities covered by the
Registration Statement; provided, however, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now
qualified or to take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Registrable
Securities, in any jurisdiction where it is not now subject. In connection with
any such Registration Statement, the Company shall deliver to such Selling
Holders and any underwriters such indemnities, contribution agreements,
opinions of counsel and letters of independent public accountants as are then
customarily given to underwriters of registered public offerings and selling
security holders. The underwriters and such Selling Holders shall deliver to the
Company such indemnities, contribution agreements and opinions as are then
customarily given to issuers of registered public offerings.
(ii) Anything in this Agreement to the contrary notwithstanding, the
Company shall not be obligated to file a Registration Statement unless the
Selling Holders of the Registrable Securities being registered shall have
furnished the Company in writing all information with respect to such Selling
Holders, the Registrable Securities held by such Selling Holders requested to be
so included, the transaction or transactions which such Selling Holders
contemplate and each underwriter, if any, who will act for such Selling Holders
in connection therewith, that any law, rule or regulation requires to be
disclosed therein.
(iii) The Company covenants that it will file the reports required to be
filed by it under the Securities Exchange Act of 1934, as in effect from time to
time, and the rules and regulations adopted by the Securities and Exchange
Commission thereunder, and will deliver to Masco at its request a written
statement affirming that it has complied with such requirements.
-3-
<PAGE> 4
(iv) Whenever a Registration Statement is requested with respect to
Subordinated Debentures, the Company will enter into an indenture on
substantially similar terms and conditions (but not materially inconsistent with
the terms of such Subordinated Debentures) as those contained in the Indenture
dated as of November 1, 1986 between the Company and Morgan Guaranty Trust
Company of New York. The trustee designated by the Company to act as trustee
under the Indenture shall be a bank or trust company or national banking
association which has a combined capital and surplus in excess of $50,000,000.
(v) The Company will, at it own expense, take whatever action is necessary
to cause all Registrable Securities registered pursuant to these registration
rights to be listed on a national securities exchange or to be included for
quotation in the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation System or similar organization.
(vi) All expenses (other than fees (including underwriters' discounts and
commissions) and expenses of any underwriters and counsel to the Selling
Holders) in connection with registrations undertaken pursuant hereto shall be
borne by the Company, provided, however, that if Masco withdraws or abandons its
request, then Masco shall reimburse the Company for all expenses reasonably
incurred by the Company in complying with such request.
(vii) Masco shall be deemed to be the representative of all Selling
Holders, with full authority to select a managing underwriter, withdraw or
abandon the Registration Statement, and make comparable decisions on behalf of
all Selling Holders after reasonable consultation therewith.
(viii) The Company will make available for inspection any Selling Holder,
any underwriter participating in any disposition pursuant to a Registration
Statement and any attorney, accountant or other professional retained by any
Selling Holder or any such underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any Inspectors in connection with such registration statement. Records which
the Company determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Information obtained as a result of such inspections
shall be deemed confidential and shall not be used as the basis for any market
transactions in the securities of the Company unless and until such is made
generally available to the public. Each Selling Holder of such Registrable
Securities will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent disclosure
of the Records deemed confidential.
3 (a). Amendments and Waivers. This Agreement may not be amended or
terminated, nor any condition or term hereof be waived orally, but only by an
instrument in writing duly executed by the parties hereto or, in the case of a
waiver, by the party otherwise entitled to performance.
-4-
<PAGE> 5
3 (b). Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and upon their respective successors and
assigns, provided, however, that Masco may not assign any of its rights
hereunder.
3 (c). Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Michigan.
3 (d). Paragraph and Other Headings. The paragraph and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
MASCO CORPORATION
By /s/ Wayne B. Lyon
-----------------
MASCO INDUSTRIES, INC.
By /s/ Timothy Wadhams
-------------------
<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
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EARNINGS BEFORE INCOME TAXES AND FIXED CHARGES:
Income from continuing operations before income
taxes.......................................... $755,000 $630,900 $502,700 $351,790 $292,830
Deduct/add equity in undistributed (earnings)
loss of fifty-percent-or-less-owned
companies...................................... (24,070) (19,470) (12,310) (17,770) 106,200
Add interest on indebtedness, net................ 86,230 80,390 74,790 73,400 60,360
Add amortization of debt expense................. 1,230 1,260 1,400 1,930 2,220
Add estimated interest factor for rentals........ 10,000 8,150 6,150 4,970 4,220
-------- -------- -------- -------- --------
Earnings before income taxes and fixed charges... $828,390 $701,230 $572,730 $414,320 $465,830
======== ======== ======== ======== ========
FIXED CHARGES:
Interest on indebtedness......................... $ 90,320 $ 83,520 $ 77,250 $ 76,460 $ 63,220
Amortization of debt expense..................... 1,230 1,260 1,400 1,930 2,220
Estimated interest factor for rentals............ 10,000 8,150 6,150 4,970 4,220
-------- -------- -------- -------- --------
Fixed charges.................................... $101,550 $ 92,930 $ 84,800 $ 83,360 $ 69,660
======== ======== ======== ======== ========
Ratio of earnings to fixed charges................. 8.2 7.5 6.8 5.0 6.7
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 21
MASCO CORPORATION
(A DELAWARE CORPORATION)
Subsidiaries as of March 9, 1999*
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
Alsons Corporation Michigan
American Metal Products Company Delaware
A.M.P. Industrial Mexicana S.A. de C.V. (97%) Mexico
Registers Unique, Inc. Delaware
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
Brugman, L.L.C. Delaware
Brush Creek Ranch II, Inc. Missouri
Cal-Style Furniture Mfg. Co. California
Cobra Products, Inc. Delaware
Composite Products, Inc. Delaware
Delta Faucet Services International, Inc. Delaware
Epic Fine Arts Company Delaware
Beacon Hill Fine Art Corporation New York
Morning Star Gallery, Ltd. New Mexico
The Faucet-Queens Company Acquisition, Inc. Delaware
Fieldstone Cabinetry, Inc. Iowa
Flint & Walling Industries, Inc. Delaware
Franklin Brass Manufacturing Co. Delaware
Gale Industries, Inc. Florida
Tri-State Industries, Inc. Delaware
Gamco Products Company Delaware
General Accessory Manufacturing Co. Oklahoma
KraftMaid Cabinetry, Inc. Ohio
KraftMaid Trucking, Inc. Ohio
KraftMaid Distribution Centers, Inc. Delaware
Landex, Inc. Michigan
Landex of Wisconsin, Inc. Wisconsin
1
<PAGE> 2
*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.
2
<PAGE> 3
Liberty Hardware Mfg. Corp. Florida
The Marvel Group, Inc. Delaware
Masco A.G. Disposition, Inc. Kentucky
Masco B.V. Netherlands
Turad B.V. Netherlands
Brugman Radiatorenfabriek B.V. Netherlands
Masco Building Products Corp. Delaware
Computerized Security Systems, Inc. Michigan
Computerized Security Systems of Canada, Inc. Ontario
Weiser Lock Corporation California
Weiser Lock Mexico S.A. de C.V. Mexico
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
Delta International Services, Inc. Delaware
Hydrotech, Inc. Michigan
Masco Canada Limited Ontario
Masco Corporation Limited United Kingdom
Berglen Group Limited United Kingdom
[Gummers] United Kingdom
Heritage Bathrooms, Plc United Kingdom
Kiloheat Limited United Kingdom
Moore Group Limited United Kingdom
Moore Furniture Group Limited United Kingdom
NewTeam Export (Jersey) Limited Jersey
NewTeam Management Services Ltd. Jersey
NewTeam Ltd. United Kingdom
Chromeco Ltd. United Kingdom
Harplace Ltd. United Kingdom
Masco Europe, Inc. Delaware
3
<PAGE> 4
(Subsidiaries of Masco Corporation of Indiana continued)
Masco GmbH (98%) Germany
Alfred Reinecke GmbH & Co. KG Germany
Alma Kuechen Aloys Meyer GmbH & Co. KG Germany
Dusakabin - Wien Austria Austria
E. Missel GmbH & Co. Germany
Gebhardt Flaektteknik Aktiebolag Sweden
Gebhardt Ventilatoren GmbH & Co. Germany
Gebhardt Singapore Singapore
Gebhardt Ventilatoren A/S Denmark
Gebhart Venblodores, S.L. Spain
Hueppe Belgium N.V./S.A. Belgium
Hueppe GesmbH Austria
Hueppe GmbH & Co. Germany
Hueppe Sarl France
Hueppe Czech Republik Czech Republic
Hueppe Netherlands Holland
Hueppe Poland Poland
Hueppe Switzerland Switzerland
Hueppe Italy Italy
Intermart Insaat Malzemeleri
Sanayi ve Ticaret AS Turkey
Jung Pumpen GesmbH Austria
Jung Pumpen GmbH&Co. Germany
Jung Pumpen SARL France
Jung Pumpen Ltd. 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 Sl Spain
4
<PAGE> 5
(Subsidiaries of Masco GmbH which is a 98% owned subsidiary of
Masco Corporation of Indiana other 2% owned by Masco Corporation
continued)
SKS Stakusit-Bautechnik GmbH Germany
Bauelemente Bertram GmbH Germany
BBD Bauelemente Bertram Duisburg GmbH Germany
elket Kunststoff-Technik GmbH&Co. Germany
SKS Stakusit-STAHL-Kunststoff Germany
SKS Stakusit POLSKA Sp.Z.0.0. Poland
SKS Stakusit GmbH Austria
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 Ltd. 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
Mirolin Industries, Inc. Ontario
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
5
<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, 333-27765 and 333-36477) and Form S-8
(Registration Nos. 2-95969, 33-28142, 33-42229, 333-30867, 333-64573, and
333-74815) of our report dated February 17, 1999, on our audits of the
consolidated financial statements and financial statement schedule of Masco
Corporation and subsidiaries as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998, 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.
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
March 25, 1999
<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, 333-27765 and 333-36477) and Form S-8
(Registration Nos. 2-95969, 33-28142, 33-42229, 333-30867, 333-64573 and
333-74815) of our report dated February 19, 1999, on our audits of the
consolidated financial statements and financial statement schedule of MascoTech,
Inc. and subsidiaries as of December 31, 1998 and 1997 and for each of the three
years in the period ended December 31, 1998, 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.
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S DECEMBER 31, 1998 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 541,740
<SECURITIES> 0
<RECEIVABLES> 721,630
<ALLOWANCES> 21,500
<INVENTORY> 558,990
<CURRENT-ASSETS> 1,862,620
<PP&E> 1,811,710
<DEPRECIATION> 647,460
<TOTAL-ASSETS> 5,167,350
<CURRENT-LIABILITIES> 846,580
<BONDS> 1,391,420
0
0
<COMMON> 339,330
<OTHER-SE> 2,389,250
<TOTAL-LIABILITY-AND-EQUITY> 5,167,350
<SALES> 4,345,000
<TOTAL-REVENUES> 4,345,000
<CGS> 2,793,990
<TOTAL-COSTS> 2,793,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,260
<INCOME-PRETAX> 755,000
<INCOME-TAX> 279,000
<INCOME-CONTINUING> 476,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 476,000
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.39
</TABLE>
