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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, 1999 COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<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)
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Registrant's Telephone Number, Including Area Code: 313-274-7400
Securities Registered Pursuant to Section 12(b) of the Act:
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<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, 2000 (based on the closing sale
price of $19 5/16 of the Registrant's Common Stock, as reported on the New York
Stock Exchange Composite Tape on such date) was approximately $8,447,786,200.
Number of shares outstanding of the Registrant's Common Stock at March 15, 2000:
447,382,000 shares of Common Stock, par value $1.00 per share
Portions of the Registrant's definitive Proxy Statement to be filed for its 2000
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report.
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MASCO CORPORATION
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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ITEM PAGE
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PART I
1. Business.................................................... 2
2. Properties.................................................. 6
3. Legal Proceedings........................................... 6
4. Submission of Matters to a Vote of Security Holders......... 7
Supplementary Item. Executive Officers of Registrant........ 7
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 7
6. Selected Financial Data..................................... 8
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 8
8. Financial Statements and Supplementary Data................. 18
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 42
PART III
10. Directors and Executive Officers of the Registrant.......... 42
11. Executive Compensation...................................... 42
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 42
13. Certain Relationships and Related Transactions.............. 42
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 43
Signatures.................................................. 47
FINANCIAL STATEMENT SCHEDULES
Masco Corporation Financial Statement Schedules............. F-1
MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements and Financial Statement Schedule............... F-3
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PART I
ITEM 1. BUSINESS.
Masco Corporation manufactures and sells home improvement and building
products, with emphasis on brand name products holding leadership positions in
their markets. The Company's principal product and service categories are
faucets, kitchen and bath cabinets, other kitchen and bath products,
architectural coatings, builders' hardware products and other specialty products
and services. The Company is among the largest manufacturers in North America of
brand name consumer products designed for the home improvement and home building
industries. Except as the context otherwise indicates, the terms "Masco" and the
"Company" refer to Masco Corporation and its consolidated subsidiaries.
The Company's operations consist of two business segments, North America
and International. Approximately 83% of the Company's sales are generated by
operations in North America (primarily in the United States). International
operations, currently established in 13 countries (principally in Europe),
comprise the balance. European operations are located principally in England,
Denmark and Germany. Additional financial information concerning the Company's
operations by segments as of and for the three years ended December 31, 1999 is
set forth in the Note to the Company's Consolidated Financial Statements
captioned "Segment Information," included in Item 8 of this Report. The
following table sets forth, for the three years ended December 31, 1999, the
contribution of the Company's segments to net sales and operating profit, in
thousands.
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NET SALES(1)
------------------------------------
1999 1998 1997
---------- ---------- ----------
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North America............................. $5,238,000 $4,441,000 $3,820,000
International, principally Europe......... 1,069,000 839,000 688,000
---------- ---------- ----------
Total................................ $6,307,000 $5,280,000 $4,508,000
========== ========== ==========
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<CAPTION>
OPERATING PROFIT(1)(2)
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
North America............................. $ 867,000 $ 829,000 $ 689,000
International, principally Europe......... 136,000 123,000 99,000
---------- ---------- ----------
Total................................ $1,003,000 $ 952,000 $ 788,000
========== ========== ==========
</TABLE>
(1) Amounts for 1998 and 1997 have been restated to reflect the
change in the segments' composition and to include the
operations of acquired companies accounted for as
pooling-of-interests transactions.
(2) Amounts are before general corporate expense and include
goodwill amortization.
Acquisitions have been a key factor in the Company's growth. During 1999
and early 2000, the Company merged with or acquired 13 businesses with aggregate
annual sales of approximately $2 billion. Of these, eight are based in North
America and five in Europe. The most significant North American transactions are
the mergers with Behr Process Corporation, a manufacturer of premium
architectural coatings and Mill's Pride, L.L.P., a manufacturer of
ready-to-assemble and assembled kitchen and bath cabinetry, bath vanities, home
office workstations, entertainment centers, storage products, bookcases and
kitchen utility products. More information about these transactions is set forth
in the following discussion and under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in Item 7 of this
Report.
NORTH AMERICA SEGMENT
The Company manufactures a wide variety of faucet models under several
brand names. 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 by manufacturers' representatives and Company sales personnel
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, are sold primarily
2
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through manufacturers' representatives directly to retail outlets such as mass
merchandisers, home centers and hardware stores and are also sold under private
label.
The percentage of operating profit to net sales on faucets is somewhat
higher than that on most other products offered by the Company. The Company
believes that the quality, styling and reliability of and available finishes for
its faucets, 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 North American
market, with Moen, Price Pfister, Kohler and American Standard as major brand
competitors. Competition from import products is also a major factor in the
Company's markets.
The Company manufactures economy, stock and semi-custom kitchen and bath
cabinetry in a broad range of styles and price points. The 1999 acquisition of
Mill's Pride, L.L.P. added a leading manufacturer of ready-to-assemble and
assembled cabinetry to the existing cabinet manufacturing operations. The
Company's cabinets are sold in North America under a number of trademarks,
including MERILLAT(R), KRAFTMAID(R), QUALITY CABINETS(R), STARMARK(R) and MILL'S
PRIDE(R), with sales to distributors, home centers and dealers and direct to
builders for both the home improvement and new construction markets. The cabinet
manufacturing industry in the United States is very competitive, with several
large competitors and hundreds of smaller companies. Management believes that
the Company is the largest manufacturer of kitchen and bath cabinetry in North
America. Significant competitors are Aristokraft, Shrock, American Woodmark and
Omega.
Other kitchen and bath products sold by the Company include AQUA GLASS(R)
acrylic and gelcoat bath and shower units and whirlpools, and MIROLIN(R) bath
units, which are sold primarily to wholesale plumbing distributors for use in
the home improvement and new home construction markets. Bath and shower
enclosure units, shower trays and laundry tubs are sold under the brand names
AMERICAN SHOWER & BATH(TM), PLASKOLITE(TM) and TRAYCO(TM) to the home
improvement market through hardware stores and home centers. The Company
manufactures bath and shower accessories under the brand names BALDWIN(R),
FRANKLIN BRASS(R) and MELARD(TM) and bathroom storage products under the brand
name ZENITH PRODUCTS(R). These products are sold 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.
Also included in other kitchen and bath products are brass and copper
plumbing system components and other plumbing specialties, which 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 in North America for the wholesale trade under the BRASSCRAFT(R)
trademark and for the "do-it-yourself" market under the PLUMB SHOP(R), HOME
PLUMBER(R), MASTER PLUMBER(R) and MELARD(TM) trademarks and are also sold under
private label.
In 1999, the Company added a new line of products with the acquisition of
Behr Process Corporation. Behr is a manufacturer of premium architectural
coatings, including paints, stains, varnishes and waterproofings. BEHR(R)
products are sold in the United States and Canada primarily to the
"do-it-yourself" market through home centers.
Included in the builders' hardware product category are 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. LIBERTY HARDWARE(R) cabinet and builders' hardware is
manufactured for original equipment manufacturers as well as for the home center
and wholesale markets. WEISER(R) lock sets and related hardware are sold through
contractor supply outlets, hardware distributors and home centers. SAFLOK(TM)
electronic lock sets and WINFIELD(TM) mechanical lock sets are sold primarily to
the hospitality market. The Company also manufactures electronic lock sets under
the brand name LA GARD(TM) for use by the banking industry on safes, vaults and
ATMs and related cabinetry. Key competitors to Baldwin and Weiser in the North
American lock set market are Kwikset and Schlage. Imported products are also
becoming a significant factor in this market.
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Since 1996, the Company has featured on many of its decorative brass
faucets and other products a durable coating that offers tarnish protection and
scratch resistance, under the trademarks BRILLIANCE(R) and THE LIFETIME FINISH
FROM BALDWIN(R). This innovative finish is currently available on many of the
Company's kitchen and bath products and door hardware.
Through local offices of Gale Industries, Inc. and Cary Corporation ("The
Cary Group") 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. The acquisition of INRECON, L.L.C. during
1999 expanded the Company's service operations with numerous North American
locations that perform repair, remodeling and restoration of residential,
commercial and institutional facilities damaged by fire, wind, water and other
disasters.
The Company manufactures heating, ventilating and air conditioning
accessories under the trademark AMERICAN METAL PRODUCTS(TM) (grilles, registers,
diffusers and Type B Gas Vents), and decorative registers under REGISTERS
UNIQUE(TM), which are sold through wholesale distribution and home centers.
The Company's product offerings were expanded in 1999 through the
acquisition of Arrow Fastener Co., with a complete line of manual and electric
staple guns, hammer and wiring tackers and other fastening tools. Arrow Fastener
products are sold through various distribution channels including wholesalers,
home centers and other retailers.
INTERNATIONAL SEGMENT
The Company manufactures faucets and various other plumbing products under
the brand names DAMIXA(R), GUMMERS(TM) and MARIANI(TM) which are sold throughout
Europe through multiple distribution channels. There are several major
competitors among the European manufacturers of faucets and accessories,
primarily in Germany and Italy, and hundreds of smaller companies throughout
Europe.
The Company manufactures cabinetry in Germany, England, Spain and Denmark
with sales to European consumers, wholesalers and builders through distribution
channels that parallel domestic distribution. European cabinet manufacturers
sell under the brand names, THE MOORES GROUP(TM) for distribution in the United
Kingdom, ALMA KUCHEN(TM) in Germany, and ALVIC(TM) and GMU(TM), primarily in
Spain. The Company significantly expanded its ready-to-assemble cabinet
manufacturing operations in January 2000 with the acquisition of Tvilum-Scanbirk
A/S, headquartered in Denmark, which sells cabinetry, shelving, storage units,
workstations and other products throughout Europe and in the U.S. under several
brand names. Tvilum-Scanbirk had sales in 1999 in excess of $200 million. The
cabinetry manufacturing industry in Europe is highly fragmented, with several
leading producers located in Germany, France and Italy, and hundreds of smaller
manufacturers throughout Europe.
Other kitchen and bath products include HUPPE(R) luxury bath and shower
enclosures sold by the Company through wholesale channels primarily in Germany.
HERITAGE(TM) ceramic and acrylic bath fixtures and faucets are sold in the
United Kingdom directly to selected retailers.
AVOCET(R) builders' hardware products include locks and door and window
hardware. These are distributed to home centers and other retailers, builders
and original equipment door and window manufacturers, primarily in the United
Kingdom.
Commercial ventilating products are manufactured and distributed by the
Company in Europe under the GEBHARDT(TM) brand name. The Company also
manufactures residential hydronic radiators and heat convectors under the brand
names VASCO(R), BRUGMAN(TM) and SUPERIA(TM) and distributes to the European
market from operations in Belgium and Holland. JUNG(TM) water pumps are
manufactured and distributed by the Company primarily in Germany. Certain
International Segment operations manufacture acoustical insulation materials
used for plumbing systems in both residential and commercial buildings.
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ADDITIONAL INFORMATION
- The Company's sales of faucets aggregated approximately $937 million in
1999, $884 million in 1998 and $815 million in 1997. Aggregate sales of
kitchen and bath cabinets were approximately $1,971 million in 1999,
$1,698 million in 1998 and $1,371 million in 1997.
- Direct sales of the Company's product lines to home center retailers have
increased substantially in recent years, and in 1999 sales to The Home
Depot were $1,539 million (approximately 24 percent of sales). Although
builders, dealers and other retailers represent other channels of
distribution for the Company's products, the Company believes that the
loss of The Home Depot as a customer would have a material adverse impact
on the Company.
- The major 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.
- The Company's operations in the International Segment 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 North American and
International segments, as of and for the three years ended December 31,
1999, is set forth in Item 8 of this Report in the Note to the Company's
Consolidated Financial Statements captioned "Segment Information."
- Although the architectural coatings division experiences stronger sales
during the second and third calendar quarters, corresponding to peak
building and remodeling seasons, no material portion of the Company's
business is seasonal.
- The Company maintains a higher investment in inventories for certain of
its businesses than the average manufacturing company, a result of its
strategies of providing superior customer service, establishing efficient
production scheduling and benefiting from larger, more cost-effective
purchasing, but otherwise has no special working capital requirements.
- The Company does not consider backlog orders to be material.
- No material portion of the Company's business is subject to renegotiation
of profits or termination of contracts at the election of the U.S.
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 adverse 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 changes.
PATENTS AND TRADEMARKS
The Company holds United States and foreign patents covering its vapor
deposition finish and various design features and valve constructions used in
certain of its faucets, and holds numerous 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.
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EMPLOYEES
At December 31, 1999, the Company employed approximately 42,500 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 17.5 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 1999 were approximately $1.7 billion.
MascoTech's 44 principal manufacturing facilities located in the United
States range in size from approximately 10,000 square feet to 420,000 square
feet, the majority of which are in Michigan, Ohio and Indiana. It also operates
17 manufacturing facilities in nine foreign countries: Australia, Brazil,
Canada, Czech Republic, England, Germany, Italy, Mexico and Spain. Substantially
all of MascoTech's manufacturing facilities 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.
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.
ITEM 2. PROPERTIES.
In general, each of the Company's business units arranges for the
manufacturing, distribution and other facilities that will meet its operating
needs. The Company has approximately 70 manufacturing facilities and
approximately 60 warehousing and distribution facilities throughout North
America, including four in Canada and three in Mexico. The majority of the
Company's manufacturing facilities range in size from approximately 10,000
square feet to over 1,000,000 square feet. The Company owns most of its
manufacturing facilities and none of the Company-owned properties is subject to
significant encumbrances. A substantial number of its warehousing and
distribution facilities are leased.
In North America, the Company also operates approximately 180 service
facilities, a majority of which supply and install insulation and other building
products. Separate facilities perform repair, remodeling and restoration to
buildings damaged by fire, wind, water or storms. The majority of the service
locations are leased.
The International Segment operates approximately 50 manufacturing and 40
distribution facilities in 13 countries, most of which are located in England,
Denmark and Germany. The manufacturing facilities are generally owned by the
Company and the distribution facilities are primarily leased.
The Company's corporate headquarters are located in Taylor, Michigan and
are owned by the Company. The Company owns an additional building near its
corporate headquarters that is used by its 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 and distribution requirements.
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.
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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).
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OFFICER
NAME POSITION AGE SINCE
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Richard A. Manoogian......................... Chairman of the Board and Chief 63 1962
Executive Officer
Raymond F. Kennedy........................... President and Chief Operating Officer 57 1989
Dr. Lillian Bauder........................... Vice President -- Corporate Affairs 60 1996
David A. Doran............................... Vice President -- Taxes 58 1984
Daniel R. Foley.............................. Vice President -- Human Resources 58 1996
Eugene A. Gargaro, Jr. ...................... Vice President and Secretary 57 1993
John R. Leekley.............................. Senior Vice President and General 56 1979
Counsel
Richard G. Mosteller......................... Senior Vice President -- Finance 67 1962
Robert B. Rosowski........................... Vice President -- Controller and 59 1973
Treasurer
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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. From 1984 to 1996, Dr. Bauder
served as President and Chief Executive Officer of Cranbrook Educational
Community.
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:
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MARKET PRICE (1)
----------------- DIVIDENDS
QUARTER HIGH LOW DECLARED (1)
- ------- ---- ---- ------------
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1999
Fourth................................. $31 3/4 $22 1/2 $.12
Third.................................. 33 11/16 28 3/16 .12
Second................................. 32 3/8 25 1/4 .11
First.................................. 32 7/16 25 5/16 .11
----
Total............................... $.46
====
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
====
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(1) After giving effect to the Company's 100 percent 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, 2000, there were 6,445 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.
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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. Such
information has been restated for 1999 poolings of interests, except for
dividends.
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1999 1998 1997 1996 1995
---------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net sales........................ $6,307,000 $5,280,000 $4,508,000 $3,854,000 $3,435,000
Income from continuing
operations..................... $ 569,600 $ 565,100 $ 444,100 $ 355,100 $ 237,500
Per share of common stock:(1)
Income from continuing
operations:
Basic....................... $1.31 $1.30 $1.05 $.85 $.57
Diluted..................... $1.28 $1.26 $1.02 $.83 $.56
Dividends declared............. $ .46 $ .43 1/2 $ .41 $.39 $.37
Dividends paid................. $ .45 $ .43 $ .40 1/2 $.38 1/2 $.36 1/2
At December 31:
Total assets................... $6,634,920 $5,618,850 $4,696,600 $4,030,340 $4,039,800
Long-term debt................. $2,431,270 $1,638,290 $1,553,950 $1,279,740 $1,628,700
Shareholders' equity........... $3,136,500 $2,774,040 $2,224,820 $2,064,040 $1,820,710
</TABLE>
(1) After giving effect to the 100 percent stock distribution in July 1998.
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 financial and business analysis for prior
years has been restated to include the accounts and operations of transactions
accounted for as poolings of interests ("pooled companies"). See Corporate
Development section below.
The following discussion and certain 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 may 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, nature of competition, relationships with key
customers, industry consolidation, influence of e-commerce 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 and sale 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. The Company also supplies and installs insulation and
other building products directly to builders and consumers and performs repair
and restoration of residential, commercial and institutional facilities damaged
by fire, wind, water and other disasters.
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Factors that 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 euro 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 in the face of 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.
CORPORATE DEVELOPMENT
Mergers and acquisitions have historically contributed significantly to
Masco's long-term growth, even though generally the initial impact on earnings
is minimal after deducting transaction-related costs and expenses such as
interest and added depreciation and amortization. The important earnings benefit
to Masco arises from subsequent growth of such companies, since incremental
sales are not impacted by these expenses.
Pooling-of-Interests Transactions:
During the third quarter of 1999, the Company completed mergers with Behr
Process Corporation, a manufacturer of premium architectural coatings; Mill's
Pride, L.L.P., a manufacturer of ready-to-assemble and assembled kitchen and
bath cabinetry, bath vanities, home office workstations and entertainment
centers, storage products, bookcases and kitchen utility products; and a smaller
company. The Company issued approximately 104 million shares of common stock in
exchange for all of the outstanding shares of these companies. The transactions
have been accounted for as poolings of interests and, accordingly, the
consolidated financial statements and related shares and per share data for all
prior periods presented have been restated to include the accounts and
operations of the pooled companies. The Company's net sales and net income prior
to these poolings for the first six months of 1999 (unaudited) were $2,416
million and $262.9 million, respectively, and for the years 1998 and 1997 were
$4,345 million and $476.0 million and $3,760 million and $382.4 million,
respectively.
Purchase Acquisitions:
During the third quarter of 1999, the Company acquired Arrow Fastener
Company, a manufacturer of manual and electric staple gun tackers and staples
and other fastening tools; H&H Tube, a manufacturer of brass, copper, steel and
aluminum tubes; and Superia Radiatoren N.V., a Belgian-based manufacturer of
standard plate radiators. The Company also acquired INRECON, L.L.C., a company
specializing in repair and restoration of residential, commercial and
institutional facilities damaged by fire, wind, water and other disasters.
During the second quarter of 1999, the Company acquired Avocet Hardware
PLC, a U.K. supplier of locks and other builders' hardware; The Cary Group, an
insulation services company; and The GMU Group, a manufacturer and distributor
of kitchen cabinets and cabinet components, headquartered in Spain. In the first
quarter of 1999, the Company acquired A&J Gummers, a U.K. manufacturer of shower
valve products, and The Faucet Queens, Inc., a supplier of plumbing accessories
and hardware products.
The aggregate net purchase price for these 1999 purchase acquisitions was
approximately $850 million, including 1.6 million shares of Company common stock
valued at $48 million. The excess of the aggregate acquisition costs for these
purchase acquisitions over the calculated fair value of net assets acquired
totaled approximately $680 million and has been recorded as acquired goodwill.
Purchase agreements for certain of the 1999 purchase acquisitions include
provisions for additional consideration to be paid if the acquired business
achieves specific operating results in future periods, ranging from one to five
years. Such additional consideration, when earned, is recorded as additional
purchase price.
The results of operations for these 1999 purchase acquisitions are included
in the consolidated financial statements from the dates of acquisition. Had
these companies been acquired effective January 1, 1998, pro forma unaudited
consolidated net sales and net income would have approximated $6,537 million and
$579 mil-
9
<PAGE> 11
lion for 1999 and $5,889 million and $590 million for 1998, respectively, and
pro forma unaudited consolidated diluted earnings per share would have increased
approximately $.02 for 1999 and $.05 for 1998.
SECURITIES OF FURNISHINGS INTERNATIONAL INC.
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% pay-in-kind junior debt
securities, and equity securities totaling $57 million, consisting of 13%
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% pay-in-kind interest income from these securities.
The Company records dividend income from the 13% 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
The percentage of operating profit on the Company's faucet sales is
somewhat higher than that on most other products offered by the Company. The
Company believes that the quality, styling, reliability of and available
finishes for its faucets, 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.
Net income as a percentage of sales was 9.0 percent in 1999 as compared
with 10.7 percent and 9.9 percent in 1998 and 1997, respectively. After-tax
return on shareholders' equity as measured by net income was 20.5 percent in
1999 as compared with 25.4 percent in 1998. Net income as a percentage of sales
and after-tax profit return on shareholders' equity for 1999 were negatively
affected by unusual third quarter after-tax expense, principally related to
transactions accounted for as poolings of interests.
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.
Bank credit lines are maintained to ensure availability of short-term
funds. At December 31, 1999, the Company had fully utilized its $750 million
bank revolving-credit facility, principally to finance recent purchase
acquisitions. Outstanding balances under this facility are due and payable in
November 2001. During 1999, the Company entered into a $400 million 364-day
credit facility. There was no outstanding balance due under this credit facility
at December 31, 1999. Subsequent to December 31, 1999, the Company amended and
restated this credit facility, increasing the amount of such facility to $1
billion and extending the maturity to March 2001. Certain debt agreements
contain limitations on additional borrowings and a requirement for maintaining a
certain level of net worth. At December 31, 1999, the Company was in compliance
with these borrowing limitations, and the Company's net worth exceeded that
requirement by approximately $806 million.
During 1999, the Company increased its quarterly dividend nine percent to
$.12 per share. This marks the 41st consecutive year in which dividends have
been increased. Although the Company is aware of the greater interest in yield
by many investors and has maintained an increased dividend payout in recent
years, the Company continues to believe that its shareholders' long-term
interests are best served by investing a significant portion of its earnings in
the future growth of the Company.
10
<PAGE> 12
Maintaining high levels of liquidity and cash flow are among the Company's
financial strategies. The Company's total debt as a percent of total
capitalization increased to 44 percent at December 31, 1999 from approximately
41 percent at December 31, 1998 due principally to borrowings for purchase
acquisitions. The relatively high cash flow of acquired companies should help
the Company to reduce its total debt to total capitalization ratio. The
Company's working capital ratio was 2.5 to 1 at December 31, 1999 compared with
2.1 to 1 at December 31, 1998; excluding $200 million of 6.625% notes, which
matured September 15, 1999, the Company's working capital ratio was 2.4 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:
CASH SOURCES (USES)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net cash from operating activities........... $ 490,610 $ 537,670 $ 470,220
Acquisition of companies, net of cash
acquired................................... (794,950) (322,880) (186,920)
Cash proceeds from sale of subsidiary and
TriMas investment.......................... -- 137,640 --
Capital expenditures......................... (350,850) (243,380) (215,190)
Increases in debt, net....................... 578,990 315,740 262,270
Purchase of Company common stock for:
Treasury................................... (99,600) (43,330) --
Long-term stock incentive award plan....... (6,840) (46,800) (29,110)
Cash dividends paid.......................... (164,990) (145,290) (131,680)
Capital contributions from shareholders of
pooled companies........................... 11,490 1,520 245,450
Distributions to shareholders of pooled
companies.................................. -- (45,950) (536,060)
Other, net................................... 13,770 (42,440) 60,100
--------- --------- ---------
Cash increase (decrease)........... $(322,370) $ 102,500 $ (60,920)
========= ========= =========
</TABLE>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Cash from operating activities was $490.6 million in 1999 as compared with
$537.7 million in 1998 and $470.2 million in 1997. During 1999, the Company's
accounts receivable and inventories increased in total by $202.4 million and
$122.9 million, respectively, primarily as a result of acquisitions, higher
actual sales volume and higher anticipated sales volume. As compared with the
average manufacturing company, the Company maintains a higher investment in
inventories, which relates to the Company's business strategies of providing
better customer service, establishing efficient production scheduling and
benefiting from larger, more cost-effective purchasing.
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
Cash used for investing activities was $1,132.0 million in 1999, $471.1
million in 1998 and $342.0 million in 1997.
Cash used for investing activities in 1999 included $795.0 million for 1999
purchase acquisitions. Such purchase acquisitions are set forth in the Note to
the Company's Consolidated Financial Statements captioned "Purchase
Acquisitions." Investing activities for 1998 and 1997 included cash for purchase
acquisitions of $322.9 million and $186.9 million, respectively.
Capital expenditures totaled $350.9 million in 1999 as compared with $243.4
million in 1998 and $215.2 million in 1997. These amounts primarily pertain to
expenditures for additional facilities related to increased demand for existing
products as well as for new products. The Company also continues to invest in
11
<PAGE> 13
automating its manufacturing operations and increasing its productivity, in
order to be a more efficient producer and to improve customer service. The
Company expects capital expenditures for 2000, excluding those of any 2000
acquisitions, to exceed $350 million. Depreciation and amortization expense for
1999 totaled $181.8 million, compared with $156.7 million for 1998 and $131.5
million for 1997; for 2000, depreciation and amortization expense, excluding any
2000 acquisitions, is expected to approximate $230 million.
Costs of environmental responsibilities and compliance with existing
environmental laws and regulations have not had, nor in the opinion of the
Company are they expected to have, a materially adverse effect on the Company's
capital expenditures, financial position or results of operations.
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Financing activities for 1999 provided cash of $319.1 million. Cash from
financing activities for 1999 included $300 million from the issuance of 7.75%
debentures, $479.0 million from a net increase in other debt (primarily bank
debt to finance purchase acquisitions) and $11.5 million of capital
contributions from shareholders of pooled companies. After giving effect to the
issuance of debt securities in 1999, the Company has on file with the Securities
and Exchange Commission ("SEC") an unallocated shelf registration pursuant to
which the Company is able to issue up to a combined total of $109 million of
debt and equity securities. The Company intends to file a shelf registration
statement with the SEC during 2000 to authorize the issuance of additional debt
and equity securities. Cash used for financing activities for 1999 included $200
million for the retirement of 6.625% notes, which matured September 15, 1999,
$165 million for cash dividends paid, $99.6 million for the acquisition of
approximately 3.7 million shares of Company common stock in open-market
transactions and $6.8 million for the acquisition of Company common stock for
the Company's long-term stock incentive award plan. Acquisitions of Company
common stock occurred during the first six months of 1999. As a result of
pooling-of-interests requirements, the Company in mid-1999 canceled its share
buy-back program.
Financing activities for 1998 provided cash of $35.9 million. Cash from
financing activities for 1998 included $250 million from the issuance of 6.625%
debentures, $100 million from the issuance of 5.75% notes and a net increase in
other debt of $74.3 million. 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, $145.3
million for cash dividends paid, $43.3 million for the acquisition of
approximately 1.9 million shares of Company common stock in open-market
transactions, $46.8 million for the acquisition of Company common stock for the
Company's long-term stock incentive award plan and $44.4 million of net
distributions to shareholders of pooled companies.
Cash used for financing activities for 1997 totaled $189.1 million. Cash
from financing activities for 1997 included a net increase in debt of $262.3
million. Cash used for financing activities included $29.1 million for the
acquisition of Company common stock for the Company's long-term stock incentive
award plan, $131.7 million for cash dividends paid and $536.1 million for
distributions to shareholders of pooled companies. During 1997, one of the
pooled companies completed a recapitalization. Such recapitalization resulted in
the distribution of $512 million to existing shareholders and contributions from
new shareholders totaling $234.1 million. Other distributions to and
contributions from shareholders of pooled companies in 1997 totaled $24.1
million and $11.4 million, respectively.
Capital contributions from and distributions to shareholders of pooled
companies as described above occurred prior to August 31, 1999, the date of the
pooling mergers.
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, from bank borrowings, from future
financial market activities and from proceeds from asset sales.
12
<PAGE> 14
CONSOLIDATED RESULTS OF OPERATIONS
Sales and Operations
Net sales for 1999 were $6,307 million, representing an increase of 19
percent over 1998. Excluding results from purchase acquisitions and
divestitures, net sales for 1999 increased 12 percent over 1998. Net sales for
1998 increased 17 percent to $5,280 million from $4,508 million in 1997; after
adjusting for purchase acquisitions and divestitures, net sales increased 13
percent in 1998 over 1997.
Cost of sales as a percentage of sales for both 1999 and 1998 was 63.4
percent as compared with 62.7 percent for 1997. Cost of sales as a percentage of
sales for 1997 was lower principally due to the influence of product sales mix.
Excluding amortization of acquired goodwill ($45.4 million, $29.0 million and
$18.7 million in 1999, 1998 and 1997, respectively), selling, general and
administrative expenses as a percent of sales were 21.5 percent in 1999 as
compared with 19.6 percent in 1998 and 21.2 percent in 1997. Selling, general
and administrative expense in 1999 includes the influence of unusual expense
principally related to transactions accounted for as poolings of interests.
Excluding such unusual expense, selling, general and administrative expenses as
a percent of sales declined slightly in 1999 as compared with 1998. The
reduction in selling, general and administrative expense from the 1997
percentage reflects the continuation of cost containment initiatives and the
leveraging of fixed costs over a higher sales base.
Operating profit margin, before general corporate expense, was 15.9 percent
in 1999 as compared with 18.0 percent in 1998 and 17.5 percent in 1997 (general
corporate expense includes those expenses not specifically attributable to the
Company's business segments). The decrease in 1999 from 1998 included the
negative effect of unusual expense principally related to transactions accounted
for as poolings of interests.
Operating profit margin, after general corporate expense, was 14.5 percent
in 1999, 16.4 percent in 1998 and 15.7 percent in 1997. General corporate
expense was $92 million in 1999, as compared with $86 million in 1998 and $82
million in 1997. General corporate expense as a percent of sales decreased to
1.5 percent in 1999 from 1.6 percent in 1998 and 1.8 percent in 1997.
Other Income (Expense), Net
Included in other income (expense), net are equity earnings from MascoTech
of $15.4 million for both 1999 and 1998 and $14.6 million for 1997.
Included in other, net under other income (expense), net is interest income
for 1999, 1998 and 1997 of $46.6 million, $41.5 million and $36.8 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 is interest income of $7.5 million from a $151 million note receivable
from MascoTech, which was paid on September 30, 1997.
Included in other, net under other income (expense), net for 1999 were
approximately $30 million of income and gains, net, regarding certain
non-operating assets and $7.6 million of dividend income from the Company's
investment in Furnishings International's 13% cumulative preferred stock. Also
included in other, net for 1999 were approximately $4 million of expenses
related to the early retirement of debt.
Included in other, net under other income (expense), net in 1998 were
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, net for 1998 were $7 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 in other, net under other income (expense), 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.
13
<PAGE> 15
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.
Net Income and Earnings Per Share
Net income for 1999 was $569.6 million as compared with $565.1 million for
1998 and $444.1 million for 1997. Diluted earnings per share for 1999 were $1.28
compared with $1.26 for 1998 and $1.02 for 1997. Net income and earnings per
share for 1999 were negatively affected by unusual expense, principally related
to transactions accounted for as poolings of interests. The Company's effective
tax rate decreased to 37.0 percent in 1999 from 37.6 percent in 1998 and 39.5
percent in 1997, due principally to the increased utilization of foreign tax
credits. The Company estimates that its effective tax rate should approximate
37.0 percent for 2000.
BUSINESS SEGMENT RESULTS
The following table sets forth the Company's net sales and operating profit
information by business segment, in millions. As a result of significant mergers
and acquisitions during 1999, the Company redefined its business segments;
accordingly, segment information for prior years has been restated.
<TABLE>
<CAPTION>
PERCENT
INCREASE
-----------
1999 1998
VS. VS.
BUSINESS SEGMENT 1999 1998 1997 1998 1997
- ---------------- ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
NET SALES:
North America.................................... $5,238 $4,441 $3,820 18% 16%
International, principally Europe................ 1,069 839 688 27% 22%
------ ------ ------
Total....................................... $6,307 $5,280 $4,508 19% 17%
====== ====== ======
OPERATING PROFIT:*
North America.................................... $ 867 $ 829 $ 689 5% 20%
International, principally Europe................ 136 123 99 11% 24%
------ ------ ------
Total....................................... $1,003 $ 952 $ 788 5% 21%
====== ====== ======
OPERATING PROFIT MARGIN:*
North America.................................... 16.6% 18.7% 18.0%
International, principally Europe................ 12.7% 14.7% 14.4%
</TABLE>
* Before general corporate expense, but including goodwill amortization.
14
<PAGE> 16
NET SALES BY PRODUCT GROUP
The following table sets forth the Company's world-wide net sales by
product group, in millions.
<TABLE>
<CAPTION>
PERCENT
INCREASE
-----------
NET SALES 1999 1998
------------------------ VS. VS.
PRODUCT GROUP 1999 1998 1997 1998 1997
- ------------- ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Faucets.............................................. $ 937 $ 884 $ 815 6% 8%
Kitchen and Bath Cabinets............................ 1,971 1,698 1,371 16% 24%
Other Kitchen and Bath Products...................... 1,125 1,076 1,042 5% 3%
Architectural Coatings............................... 539 437 353 23% 24%
Builders' Hardware................................... 415 302 261 37% 16%
Other Specialty Products and Services................ 1,320 883 666 49% 33%
------ ------ ------ --- ---
Total...................................... $6,307 $5,280 $4,508 19% 17%
====== ====== ====== === ===
</TABLE>
NORTH AMERICA
Excluding purchase acquisitions and divestitures, North American net sales
for 1999 increased 14 percent over 1998 due largely to higher unit sales volume
of cabinets, architectural coatings and other kitchen and bath products, higher
installation sales of fiberglass insulation, and to a lesser extent, new product
introductions and selling price increases. Operating profit margin for 1999 was
negatively affected by unusual expense principally related to transactions
accounted for as poolings of interests, which more than offset the favorable
influence of purchase acquisitions. Excluding unusual 1999 expense, operating
profit margin modestly exceeded the 1998 level.
Excluding purchase acquisitions and divestitures, North American net sales
for 1998 increased 14 percent over 1997 due largely to higher unit sales volume
of cabinets, architectural coatings and faucets, higher installation sales of
fiberglass insulation and to a lesser extent, new product introductions and
selling price increases. Operating profit margin for 1998 compared with 1997 was
favorably influenced by higher unit sales volume, offset in part by the
influence of product sales mix and stronger than anticipated demand for lower
margin cabinets.
Results of the Company's North American business segment for 1999, 1998 and
1997 benefited from demographic and economic conditions principally in the
United States, including favorable 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.
INTERNATIONAL, PRINCIPALLY EUROPE
Excluding purchase acquisitions, net sales of this segment increased 1
percent in 1999 compared with 1998 and were flat for 1998 compared with 1997.
Operating profit margin for 1999 and 1998 was favorably influenced by recent
acquisitions. Operating results of existing European operations in this segment
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 effect 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 1999 compared with 1998 as well as 1998 compared with 1997,
lowering European net sales in 1999 and 1998 by approximately 3 percent and 2
percent, respectively.
Operating results of the Company's business segments for 1999, 1998 and
1997 benefited from the leveraging of fixed selling, general and administrative
expenses over higher sales.
15
<PAGE> 17
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
increases in both sales and earnings for 2000. The Company believes that its
results should 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 attempt to increase market
share; and actively pursue acquisition candidates that complement or support the
Company's core competencies.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at fair value. Changes
in the fair value of derivatives are to be 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. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133." SFAS No. 137 defers the effective adoption date of
SFAS No. 133 to January 1, 2001. SFAS No. 133 should not have a material effect
on the Company's financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has 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, 1999. 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, 1999, 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 Company did not experience any significant disruptions to its operating
systems as a result of the date change to year 2000 ("Y2K").
The Company has in place a team that has been and is continuing to address
any remaining Y2K issues that encompass operating and administrative areas of
the Company. Also, the Company continues to monitor the status of its
remediation plans. The process includes an assessment of issues and development
of remediation plans, where necessary, as they relate to internally used
software, computer hardware and the use of computer applications in the
Company's manufacturing processes.
The approximate cost of the Y2K program, including planned upgrades, is
less than $20 million. This cost, most of which has been incurred and expensed
at December 31, 1999, is not material to the Company's results of operations or
financial position.
16
<PAGE> 18
EURO CONVERSION
A single currency called the euro was introduced in Europe on January 1,
1999. Eleven of the fifteen member countries of the European Union adopted the
euro as their common legal currency as of that date. Fixed conversion rates
between these participating countries' existing currencies (the "legacy
currencies") and the euro were established as of that date. The legacy
currencies will remain legal tender as denominations of the euro until at least
January 1, 2002 (but not intended to be later than July 1, 2002). During this
transition period, parties may settle non-cash transactions using either the
euro or a participating country's legacy currency. Cash transactions will
continue to be settled in the legacy currencies of participating countries until
January 1, 2002, when euro-denominated currency will be issued. The Company is
currently completing changes to existing systems to facilitate a smooth
transition to the new currency and believes that conversion to the euro will not
have a material effect on the Company's financial position or results of
operations.
17
<PAGE> 19
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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the
United States, 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 16, 2000
18
<PAGE> 20
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash investments................................. $ 230,780,000 $ 553,150,000
Receivables............................................... 1,002,630,000 800,280,000
Inventories............................................... 769,870,000 646,930,000
Prepaid expenses and other................................ 106,500,000 81,640,000
-------------- --------------
Total current assets.............................. 2,109,780,000 2,082,000,000
Equity investment in MascoTech, Inc. ....................... 69,930,000 59,830,000
Equity investments in other affiliates...................... 133,550,000 165,020,000
Securities of Furnishings International Inc. ............... 481,270,000 434,640,000
Property and equipment...................................... 1,624,360,000 1,357,830,000
Acquired goodwill, net...................................... 1,742,930,000 1,055,790,000
Other assets................................................ 473,100,000 463,740,000
-------------- --------------
Total Assets...................................... $6,634,920,000 $5,618,850,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ 62,300,000 $ 309,320,000
Accounts payable.......................................... 243,810,000 196,930,000
Accrued liabilities....................................... 540,320,000 470,090,000
-------------- --------------
Total current liabilities......................... 846,430,000 976,340,000
Long-term debt.............................................. 2,431,270,000 1,638,290,000
Deferred income taxes and other............................. 220,720,000 230,180,000
-------------- --------------
Total Liabilities................................. 3,498,420,000 2,844,810,000
-------------- --------------
Shareholders' Equity:
Common shares authorized: 900,000,000; issued:
1999-443,510,000; 1998-443,280,000..................... 443,510,000 443,280,000
Preferred shares authorized: 1,000,000.................... -- --
Paid-in capital........................................... 601,990,000 584,530,000
Retained earnings......................................... 2,151,520,000 1,762,800,000
Other comprehensive income (loss)......................... (60,520,000) (16,570,000)
-------------- --------------
Total Shareholders' Equity........................ 3,136,500,000 2,774,040,000
-------------- --------------
Total Liabilities and Shareholders' Equity........ $6,634,920,000 $5,618,850,000
============== ==============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 21
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales..................................... $6,307,000,000 $5,280,000,000 $4,508,000,000
Cost of sales................................. 3,995,530,000 3,347,900,000 2,825,610,000
-------------- -------------- --------------
Gross profit........................ 2,311,470,000 1,932,100,000 1,682,390,000
Selling, general and administrative
expenses.................................... 1,354,640,000 1,036,700,000 957,770,000
Amortization of acquired goodwill............. 45,430,000 29,000,000 18,720,000
-------------- -------------- --------------
Operating profit.................... 911,400,000 866,400,000 705,900,000
-------------- -------------- --------------
Other income (expense), net:
Re: MascoTech, Inc.:
Equity earnings.......................... 15,430,000 15,360,000 14,580,000
Gain from change in investment........... -- -- 29,500,000
Equity earnings, other affiliates........... 8,500,000 13,840,000 9,560,000
Other, net.................................. 89,190,000 124,300,000 68,540,000
Interest expense............................ (120,420,000) (114,400,000) (94,280,000)
-------------- -------------- --------------
(7,300,000) 39,100,000 27,900,000
-------------- -------------- --------------
Income before income taxes.......... 904,100,000 905,500,000 733,800,000
Income taxes.................................. 334,500,000 340,400,000 289,700,000
-------------- -------------- --------------
Net income.......................... $ 569,600,000 $ 565,100,000 $ 444,100,000
============== ============== ==============
Earnings per share:
Basic............................... $1.31 $1.30 $1.05
============== ============== ==============
Diluted............................. $1.28 $1.26 $1.02
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 22
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From (For):
Operating Activities:
Net income..................................... $ 569,600,000 $ 565,100,000 $ 444,100,000
Depreciation and amortization.................. 181,820,000 156,670,000 131,510,000
Unremitted equity earnings of affiliates....... (18,720,000) (24,070,000) (19,470,000)
Interest accrual on pay-in-kind notes
receivable.................................. (46,630,000) (41,500,000) (36,800,000)
Deferred income taxes.......................... 5,240,000 61,660,000 34,640,000
Gain from:
Sale of subsidiary and TriMas investment.... -- (59,300,000) --
Change in MascoTech investment.............. -- -- (29,500,000)
Increase in receivables........................ (116,830,000) (98,930,000) (74,940,000)
Increase in inventories........................ (68,280,000) (55,870,000) (52,660,000)
Increase in accounts payable and accrued
liabilities, net............................ 14,300,000 20,340,000 75,360,000
Other, net..................................... (29,890,000) 13,570,000 (2,020,000)
--------------- ------------- -------------
Net cash from operating activities........ 490,610,000 537,670,000 470,220,000
--------------- ------------- -------------
Investing Activities:
Acquisition of companies, net of cash
acquired.................................... (794,950,000) (322,880,000) (186,920,000)
Capital expenditures........................... (350,850,000) (243,380,000) (215,190,000)
Cash proceeds from sale of subsidiary and
TriMas investment........................... -- 137,640,000 --
Other, net..................................... 13,770,000 (42,440,000) 60,100,000
--------------- ------------- -------------
Net cash (for) investing activities....... (1,132,030,000) (471,060,000) (342,010,000)
--------------- ------------- -------------
Financing Activities:
Issuance of 7.75% debentures................... 300,000,000 -- --
Issuance of 6.625% debentures.................. -- 250,000,000 --
Issuance of 5.75% notes........................ -- 100,000,000 --
Increase in other debt......................... 915,830,000 436,430,000 325,100,000
Retirement of 9% notes......................... -- (108,620,000) --
Retirement of 6.625% notes..................... (200,000,000) -- --
Payment of other debt.......................... (436,840,000) (362,070,000) (62,830,000)
Purchase of Company common stock for:
Treasury.................................... (99,600,000) (43,330,000) --
Long-term stock incentive award plan........ (6,840,000) (46,800,000) (29,110,000)
Cash dividends paid............................ (164,990,000) (145,290,000) (131,680,000)
Capital contributions from shareholders of
pooled companies............................ 11,490,000 1,520,000 245,450,000
Distributions to shareholders of pooled
companies................................... -- (45,950,000) (536,060,000)
--------------- ------------- -------------
Net cash from (for) financing
activities............................. 319,050,000 35,890,000 (189,130,000)
--------------- ------------- -------------
Cash and Cash Investments:
Increase (decrease) for the year............... (322,370,000) 102,500,000 (60,920,000)
At January 1................................... 553,150,000 450,650,000 511,570,000
--------------- ------------- -------------
At December 31................................. $ 230,780,000 $ 553,150,000 $ 450,650,000
=============== ============= =============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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, 1997...... $2,064,040,000 $212,840,000 $ 230,020,000 $1,618,660,000 $ 2,520,000
Net income.................. 444,100,000 444,100,000
Cumulative translation
adjustments............... (28,000,000) (28,000,000)
--------------
Total comprehensive income.... 416,100,000
Shares issued................. 169,250,000 4,700,000 164,550,000
Cash dividends declared....... (134,440,000) (134,440,000)
Re: Shareholders of pooled
companies:
Capital contributions
from...................... 245,450,000 245,450,000
Distribution to............. (536,060,000) (536,060,000)
Compensatory stock
options................... 480,000 480,000
-------------- ------------ ------------- -------------- ------------
Balance, December 31, 1997.... 2,224,820,000 217,540,000 640,500,000 1,392,260,000 (25,480,000)
Net income.................. 565,100,000 565,100,000
Cumulative translation
adjustments............... 8,910,000 8,910,000
--------------
Total comprehensive income.... 574,010,000
Shares issued................. 206,590,000 5,670,000 200,920,000
100 percent stock
distribution................ -- 221,960,000 (221,960,000)
Shares repurchased............ (43,330,000) (1,890,000) (41,440,000)
Cash dividends declared....... (148,610,000) (148,610,000)
Re: Shareholders of pooled
companies:
Capital contributions
from...................... 1,520,000 1,520,000
Distribution to............. (45,950,000) (45,950,000)
Compensatory stock
options................... 4,990,000 4,990,000
-------------- ------------ ------------- -------------- ------------
Balance, December 31, 1998.... 2,774,040,000 443,280,000 584,530,000 1,762,800,000 (16,570,000)
Net income.................. 569,600,000 569,600,000
Cumulative translation
adjustments............... (43,950,000) (43,950,000)
--------------
Total comprehensive income.... 525,650,000
Shares issued................. 85,550,000 3,960,000 81,590,000
Shares repurchased............ (99,600,000) (3,730,000) (95,870,000)
Cash dividends declared....... (180,880,000) (180,880,000)
Re: Shareholders of pooled
companies:
Capital contributions
from...................... 11,490,000 11,490,000
Compensatory stock
options................... 20,250,000 20,250,000
-------------- ------------ ------------- -------------- ------------
Balance, December 31, 1999.... $3,136,500,000 $443,510,000 $ 601,990,000 $2,151,520,000 $(60,520,000)
============== ============ ============= ============== ============
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 24
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of Masco Corporation and all majority-owned subsidiaries. All
significant intercompany transactions have been eliminated. The consolidated
financial statements for prior years and related notes have been restated to
include the accounts and operations of transactions accounted for as poolings of
interests.
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 an initial 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, 1999 and 1998, accounts and notes receivable are presented net of
allowances for doubtful accounts of $26.1 million and $22.2 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 $114.6
million, $107.5 million and $95.8 million in 1999, 1998 and 1997, respectively.
Acquired goodwill is being amortized using the straight-line method over
periods not exceeding 40 years; at December 31, 1999 and 1998 such accumulated
amortization totaled $153.9 million and $108.5 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, 1999 and 1998.
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 totaled $67.2 million, $49.2 million and $35.7 million in
1999, 1998 and 1997, respectively.
Fair Value of Financial Instruments. The carrying value of financial
instruments reported in the balance sheet for current assets, current
liabilities and long-term variable rate debt 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 fixed-rate debt
instruments was based principally on quoted market prices for the same or
similar issues or the current rates available to the Company for debt with
similar terms and remaining maturities. The aggregate market value of the
Company's long-term investments and long-term debt at December 31, 1999 was
approximately $772 million and $2,370 million, as compared with the Company's
aggregate carrying value of $706 million and $2,431 million, respectively, and
at December 31,
23
<PAGE> 25
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING POLICIES -- (CONCLUDED)
1998 the aggregate market value was approximately $650 million and $1,663
million, as compared with the Company's aggregate carrying value of $639 million
and $1,638 million, respectively.
POOLING-OF-INTERESTS TRANSACTIONS
During the third quarter of 1999, the Company completed mergers with Behr
Process Corporation, a manufacturer of premium architectural coatings; Mill's
Pride, L.L.P., a manufacturer of ready-to-assemble and assembled kitchen and
bath cabinetry, bath vanities, home office workstations and entertainment
centers, storage products, bookcases and kitchen utility products; and a smaller
company. The Company issued approximately 104 million shares of common stock in
exchange for all of the outstanding shares of these companies. The transactions
have been accounted for as poolings of interests and, accordingly, the
consolidated financial statements and related shares and per share data for all
prior periods presented have been restated to include the accounts and
operations of the pooled companies. The Company's net sales and net income prior
to these poolings for the first six months of 1999 (unaudited) were $2,416
million and $262.9 million, respectively, and for the years 1998 and 1997 were
$4,345 million and $476 million and $3,760 million and $382.4 million,
respectively.
PURCHASE ACQUISITIONS
During the third quarter of 1999, the Company acquired Arrow Fastener
Company, a manufacturer of manual and electric staple gun tackers and staples
and other fastening tools; H&H Tube, a manufacturer of brass, copper, steel and
aluminum tubes; and Superia Radiatoren N.V., a Belgian-based manufacturer of
standard plate radiators. The Company also acquired INRECON, L.L.C., a company
specializing in repair and restoration of residential, commercial and
institutional facilities damaged by fire, wind, water and other disasters.
During the second quarter of 1999, the Company acquired Avocet Hardware
PLC, a U.K. supplier of locks and other builders' hardware; The Cary Group, an
insulation services company; and The GMU Group, a manufacturer and distributor
of kitchen cabinets and cabinet components, headquartered in Spain. In the first
quarter of 1999, the Company acquired A&J Gummers, a U.K. manufacturer of shower
valve products, and The Faucet Queens, Inc., a supplier of plumbing accessories
and hardware products.
The aggregate net purchase price of these 1999 purchase acquisitions was
approximately $850 million, including 1.6 million shares of Company common stock
valued at $48 million. The excess of the aggregate acquisition cost for these
purchase acquisitions over the calculated fair value of net assets acquired
totaled approximately $680 million and has been recorded as acquired goodwill.
Purchase agreements for certain of the 1999 purchase acquisitions include
provisions for additional consideration to be paid if the acquired business
achieves specific operating results in future periods, ranging from one to five
years. Such additional consideration, when earned, is recorded as additional
purchase price.
The results of operations for these 1999 purchase acquisitions are included
in the consolidated financial statements from the dates of acquisition. Had
these companies been acquired effective January 1, 1998, pro forma unaudited
consolidated net sales and net income would have approximated $6,537 million and
$579 million for 1999 and $5,889 million and $590 million for 1998,
respectively, and pro forma unaudited consolidated diluted earnings per share
would have increased approximately $.02 for 1999 and $.05 for 1998.
24
<PAGE> 26
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Raw material................................................ $307,060 $262,410
Finished goods.............................................. 290,440 236,610
Work in process............................................. 172,370 147,910
-------- --------
$769,870 $646,930
======== ========
</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 interests:
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------
1999 1998 1997
----- ---- ----
<S> <C> <C> <C>
MascoTech, Inc. ........................................... 17.5% 17% 17%
Emco Limited............................................... 42 % 42% 42%
Hans Grohe, a German company............................... 27 % 27% 27%
TriMas Corporation......................................... -- -- 4%
</TABLE>
Excluding 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, 1999 (which may differ from the amounts that could then have been
realized upon disposition), based upon quoted market prices at that date, was
$125 million, as compared with the Company's related aggregate carrying value of
$165 million. The Company's carrying value in common stock of these equity
affiliates exceeded its equity in the underlying net book value by approximately
$49 million at December 31, 1999. This excess is being amortized over a period
not to exceed 40 years.
Pursuant to a corporate services agreement, the Company provides MascoTech,
Inc. with certain corporate staff and administrative services. The fees charged
to MascoTech approximated $6 million in 1999, $8 million in 1998 and $10 million
in 1997, and are included as a reduction of general corporate expense. MascoTech
holds an option expiring in 2002 to require the Company to purchase up to $200
million aggregate amount of subordinated debt securities of MascoTech.
During January 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.
25
<PAGE> 27
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES -- (CONCLUDED)
Approximate combined condensed financial data of the affiliates listed on
the previous page at December 31, 1999 and 1998 and for the three years then
ended, are summarized in U.S. dollars as follows, in thousands:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Net sales.............................................. $ 2,847,000 $ 2,732,600 $2,745,600
=========== =========== ==========
Gross Profit........................................... $ 727,800 $ 704,700 $ 689,300
=========== =========== ==========
Income from continuing operations before income
taxes................................................ $ 191,400 $ 203,800 $ 287,400
=========== =========== ==========
Net income attributable to common shareholders......... $ 124,000 $ 142,900 $ 172,700
=========== =========== ==========
The Company's net equity in above net income........... $ 23,900 $ 29,200 $ 24,100
=========== =========== ==========
Cash dividends received by the Company from
affiliates........................................... $ 5,200 $ 5,100 $ 4,600
=========== =========== ==========
At December 31:
Current assets....................................... $ 859,300 $ 832,300
Current liabilities.................................. (400,200) (412,700)
----------- -----------
Working capital................................... 459,100 419,600
Property and equipment............................... 886,500 839,100
Other assets......................................... 942,000 968,400
Long-term liabilities................................ (1,809,300) (1,741,500)
----------- -----------
Shareholders' equity.............................. $ 478,300 $ 485,600
=========== ===========
</TABLE>
Equity in undistributed earnings of affiliates of $70 million at December
31, 1999, $57 million at December 31, 1998 and $43 million at December 31, 1997
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
-------------------
1999 1998
-------- --------
<S> <C> <C> <C>
Junior debt securities (12% pay-in-kind)............. $423,900 $377,270
Preferred stock (13% cumulative).....................
Common stock (15% ownership)......................... ) 57,370 57,370
Convertible preferred stock..........................
-------- --------
$481,270 $434,640
======== ========
</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.
26
<PAGE> 28
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Land and improvements.................................... $ 101,000 $ 87,050
Buildings................................................ 643,190 563,910
Machinery and equipment.................................. 1,694,910 1,440,530
---------- ----------
2,439,100 2,091,490
Less, accumulated depreciation........................... 814,740 733,660
---------- ----------
$1,624,360 $1,357,830
========== ==========
</TABLE>
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Salaries, wages and related benefits..................... $ 162,900 $ 116,130
Advertising and sales promotion.......................... 110,450 87,830
Insurance................................................ 49,860 55,360
Income taxes............................................. 33,130 49,460
Dividends payable........................................ 53,220 37,330
Interest................................................. 39,570 34,280
Property, payroll and other taxes........................ 24,260 27,900
Other.................................................... 66,930 61,800
---------- ----------
$ 540,320 $ 470,090
========== ==========
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Notes and Debentures:
6.625%, due Sept. 15, 1999............................. -- $ 200,000
9%, due Oct. 1, 2001............................... $ 77,030 77,030
6.125%, due Sept. 15, 2003............................. 200,000 200,000
5.75%, due Oct. 15, 2008............................... 100,000 100,000
7.125%, due Aug. 15, 2013.............................. 200,000 200,000
6.625%, due Apr. 15, 2018.............................. 250,000 250,000
7.75%, due Aug. 1, 2029............................... 300,000 --
Notes payable to banks................................... 750,000 --
Bank term loans.......................................... -- 202,750
European bank debt....................................... 470,060 505,970
Other.................................................... 146,480 211,860
---------- ----------
2,493,570 1,947,610
Less, current portion.................................... 62,300 309,320
---------- ----------
$2,431,270 $1,638,290
========== ==========
</TABLE>
All of the notes and debentures above, other than bank notes, are
nonredeemable.
27
<PAGE> 29
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT -- (CONCLUDED)
During August 1999, the Company issued $300 million of 7.75% debentures due
August 1, 2029. Proceeds from this issuance were largely used to retire the
6.625% notes which matured September 15, 1999.
The notes payable to banks relate to a $750 million bank revolving-credit
agreement, with any outstanding balance due and payable in November 2001.
Interest is payable on borrowings under this agreement based upon various
floating rate options as selected by the Company (approximately 6 percent at
December 31, 1999). During 1999, the Company entered into a $400 million 364-day
credit facility. There was no outstanding balance due under this credit facility
at December 31, 1999. Subsequent to December 31, 1999, the Company amended and
restated this credit facility, increasing the amount of such facility to $1
billion and extending the maturity to March 2001. Interest is payable on
borrowings under this credit facility based on various floating rate options as
selected by the Company.
European bank debt relates to borrowings of local currency for European
acquisitions and expansion. At December 31, 1999, approximately $206 million of
European debt related to a term loan facility expiring in 2002. The balance of
$264 million represents borrowings under lines of credit primarily expiring in
2003. Interest is payable on European borrowings based upon various floating
rates as selected by the Company (approximately 4 percent at December 31, 1999).
Certain debt agreements contain limitations on additional borrowings and a
requirement for maintaining a certain level of net worth. At December 31, 1999,
the Company was in compliance with these borrowing limitations, and the
Company's net worth exceeded that requirement by approximately $806 million.
At December 31, 1999, the maturities of long-term debt during each of the
next five years, assuming that the bank debt is refinanced, were approximately
as follows: 2000 -- $62.3 million; 2001 -- $113.9 million; 2002 -- $28.6
million; 2003 -- $222.4 million; and 2004 -- $17.4 million.
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 $109 million of debt and equity securities.
Interest paid was approximately $126 million, $114 million and $95 million
in 1999, 1998 and 1997, respectively.
SHAREHOLDERS' EQUITY
During the first six months of 1999, pursuant to the Company's share
repurchase program, as authorized by the Board of Directors, the Company
repurchased approximately 3.7 million of its common shares in open-market
transactions at a cost aggregating $99.6 million. As a result of
pooling-of-interests transaction requirements, the Company in mid-1999 canceled
its share buy-back program. During 1998, the Company acquired approximately 1.9
million of its common shares in open-market transactions at a cost aggregating
$43.3 million.
Included in the consolidated statements of shareholders' equity for 1999,
1998 and 1997 are distributions to and contributions from shareholders of pooled
companies. Such distributions and contributions occurred prior to August 31,
1999, the date of the pooling mergers. During 1997, one of the pooled companies
completed a recapitalization; such recapitalization resulted in the distribution
of $512 million to existing shareholders and contributions from new shareholders
totaling $234 million. Other distributions to shareholders of pooled companies
in 1998 and 1997 totaled $46 million and $24 million, respectively. Other
contributions from shareholders of pooled companies in 1999, 1998 and 1997
totaled $11 million, $2 million and $11 million, respectively.
On the basis of amounts paid (declared) and after giving effect to the 1998
stock split, cash dividends per share were $.45 ($.46) in 1999, $.43 ($.43 1/2)
in 1998 and $.40 1/2 ($.41) in 1997.
28
<PAGE> 30
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY -- (CONCLUDED)
In July 1998, the Company effected a two-for-one stock split in the form of
a 100 percent stock distribution to shareholders, which, after giving effect to
1999 poolings of interests, resulted in the issuance of approximately 222
million shares of common stock and reduced paid-in capital by approximately $222
million.
In 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
cumulative translation adjustments in shareholders' equity, included in other
comprehensive income (loss).
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, 1999,
outstanding stock-based incentives were primarily in the form of restricted
long-term stock awards, stock appreciation rights, phantom stock awards and
stock options. Additionally, the Company's 1997 Non-Employee Directors Stock
Plan (the "1997 Plan") provides for the payment of compensation to non-employee
Directors in part in Company common stock.
RESTRICTED LONG-TERM STOCK AWARDS
The Company granted long-term stock awards, net of cancellations, for
402,000, 1,149,000 and 1,581,000 shares of Company common stock during 1999,
1998 and 1997, 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 1999, 1998 and 1997 was $29, $26 and $21,
respectively. Early vesting of certain of these awards is contingent upon the
market price of Company common stock equaling 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 $20
million, $17 million and $14 million in 1999, 1998 and 1997, respectively. The
unamortized costs of unvested stock awards, aggregating approximately $118
million at December 31, 1999, are included in other assets and are being
amortized over the typical 10-year vesting periods.
STOCK APPRECIATION RIGHTS AND PHANTOM STOCK AWARDS
In connection with transactions accounted for as poolings of interests in
1999, the Company converted existing stock appreciation rights ("SARs") into
Company SARs with annual cash compensation linked to the value of approximately
330,000 shares of Company common stock. In connection with other acquisitions in
1999, the Company generated phantom stock awards linked to the value of 664,000
shares of Company common stock. Compensation expense related to SARs and phantom
stock awards for 1999 was $66.6 million, of which approximately $61 million
pertained to transactions accounted for as poolings of interests; for 1998 and
1997, such expense was $8.3 million and $13.0 million, respectively.
NON-COMPENSATORY STOCK OPTIONS
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 equals the market price of Company
29
<PAGE> 31
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONTINUED)
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 1999, 1998 and 1997, the
Company granted restoration stock options for 1,956,000, 692,000 and 278,000
shares of Company common stock with grant date exercise prices ranging from $25
to $33, $25 to $31 and $17 1/2 to $26, respectively (the market prices on the
grant dates), and stock options for 64,000 shares in each of 1999 and 1998 and
56,000 shares in 1997 to non-employee Directors of the Company with exercise
prices of $30, $29 and $19 1/2, respectively.
The Compensation Committee of the Board of Directors, in acceding to the
Chief Executive Officer's request that his annual salary and bonus be reduced to
$1.00 per year, effective January 1, 1996, 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.
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). Annual
vestings of such stock options commenced in 1997 as a result of the Company
common stock price exceeding $20 1/2 per share for the required period. 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 fixed stock options for the three
years ended December 31, 1999 is presented below.
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Option shares outstanding, January 1................... 14,396 16,200 14,616
Weighted average exercise price...................... $18 $17 $14
Option shares granted, including restoration options... 2,020 756 6,014
Weighted average exercise price...................... $29 $28 $20
Option shares exercised................................ 3,780 2,486 4,276
Weighted average exercise price...................... $17 $13 $13
Option shares canceled................................. -- 74 154
Weighted average exercise price...................... -- $10 $11
Option shares outstanding, December 31................. 12,636 14,396 16,200
Weighted average exercise price...................... $20 $18 $17
Weighted average remaining option term (in years).... 5.9 6.6 7.2
Option shares exercisable, December 31................. 4,952 3,781 4,588
Weighted average exercise price...................... $21 $17 $16
</TABLE>
30
<PAGE> 32
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONCLUDED)
The following table summarizes information for option shares outstanding
and exercisable at December 31, 1999 (shares in thousands).
<TABLE>
<CAPTION>
OPTION SHARES OUTSTANDING OPTION SHARES EXERCISABLE
- ------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OF OPTION EXERCISE NUMBER OF EXERCISE
PRICES SHARES TERM PRICE SHARES PRICE
- -------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$10-15 1,870 2 Years $11 1,552 $10
16-19 2,892 6 Years 16 519 17
20-27 5,600 7 Years 20 830 21
28-33 2,274 6 Years 29 2,051 30
------ ------ -------- --- ----- ---
$10-33 12,636 6 Years $20 4,952 $21
====== ====== ======== === ===== ===
</TABLE>
At December 31, 1999, a combined total of 11,239,000 shares and 765,000
shares of Company common stock was available under the 1991 Plan, and the 1997
Plan, respectively, for the granting of stock options and long-term stock
awards.
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
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 $.04, $.01 and $.02 in
1999, 1998 and 1997, respectively.
For SFAS No. 123 calculation purposes, the weighted average grant date fair
values of option shares, including restoration options granted in 1999, 1998 and
1997 were $7.28, $6.00 and $6.27, 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 1999, 1998 and 1997, respectively: risk-free
interest rate -- 5.0%, 4.9% and 6.7%; dividend yield -- 1.6%, 2.1% and 2.5%;
volatility factor -- 34%, 28% and 27%; and expected option life -- 3 years, 3
years and 7 years.
COMPENSATORY STOCK OPTION
In connection with transactions accounted for as poolings of interests, the
Company converted an existing variable stock option into a Company stock option
to acquire 1.4 million shares of Company common stock at an exercise price of
$7.66 per share, expiring in 2027. Such stock option was outstanding and
exercisable at December 31, 1999. Compensation expense related to such stock
option was $20.3 million, $5.0 million and $.5 million in 1999, 1998 and 1997,
respectively. Approximately $15.7 million of compensation expense for 1999
relates to the accelerated vesting of such option, which resulted from the
consummation of transactions accounted for as poolings of interests.
EMPLOYEE RETIREMENT PLANS
The Company sponsors defined-benefit and defined-contribution pension 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
31
<PAGE> 33
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS -- (CONTINUED)
pension, retirement and profit-sharing plans were $57.3 million in 1999, $35.8
million in 1998 and $26.4 million in 1997.
Net periodic pension cost for the Company's qualified pension plans
includes the following components, in thousands:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost..................................... $ 9,630 $ 8,530 $ 7,090
Interest cost.................................... 12,470 11,260 10,170
Expected return on plan assets................... (10,610) (11,870) (11,140)
Amortization of transition asset................. (620) (620) (620)
Amortization of prior-service cost............... 380 320 330
Amortization of net loss......................... 2,250 1,530 770
-------- -------- --------
Net periodic pension cost........................ $ 13,500 $ 9,150 $ 6,600
======== ======== ========
</TABLE>
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>
1999 1998
-------- --------
<S> <C> <C>
Changes in projected benefit obligation:
Benefit obligation at January 1........................ $175,980 $152,320
Service cost........................................... 9,220 8,140
Interest cost.......................................... 12,470 11,260
Plan amendments........................................ 980 (1,720)
Actuarial (gain)/loss.................................. (28,600) 11,780
Benefit payments....................................... (7,110) (5,800)
-------- --------
Projected benefit obligation at December 31......... $162,940 $175,980
======== ========
Changes in fair value of plan assets:
Fair value of plan assets at January 1................. $112,860 $106,520
Actual return on plan assets........................... (8,700) 6,110
Cash contributions..................................... 10,650 6,460
Benefit payments....................................... (7,110) (5,800)
Expenses/other......................................... (400) (430)
-------- --------
Fair value of plan assets at December 31............ $107,300 $112,860
======== ========
Funded status of qualified pension plans:
Plan assets (less than) projected benefit obligation at
December 31......................................... $(55,640) $(63,120)
Unamortized net asset at transition.................... (1,560) (2,180)
Unamortized prior-service cost......................... 4,880 4,150
Unamortized net loss................................... 41,250 52,930
-------- --------
Net liability recognized............................ $(11,070) $ (8,220)
======== ========
</TABLE>
The major assumptions used in accounting for the Company's pension plans
are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ------ -----
<S> <C> <C> <C>
Discount rate for obligations......................... 7.75% 6.75% 7.0%
Expected return on plan assets........................ 9.0 % 11.0 % 11.0%
Rate of compensation increase......................... 5.0 % 5.0 % 5.0%
</TABLE>
32
<PAGE> 34
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS -- (CONCLUDED)
In addition to the Company's qualified pension and retirement plans, the
Company has non-qualified unfunded supplemental pension plans covering certain
employees, which provide for 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 totaled $41.4 million and $48.9 million, and $37.0 million and
$46.2 million at December 31, 1999 and 1998, respectively. Net periodic pension
cost for these plans was $7.9 million, $7.1 million and $4.7 million in 1999,
1998 and 1997, respectively.
The Company sponsors certain post-retirement 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, 1999,
the aggregate present value of the unfunded accumulated postretirement benefit
obligation approximated $3 million.
SEGMENT INFORMATION
As a result of significant mergers and acquisitions during 1999, the
Company redefined its business segments; accordingly, segment information for
prior years has been restated. The Company's operating segments are organized
according to geographic area, as this organization most closely aligns with the
way in which the Company manages its businesses. The Company's operations
consist of the manufacture and sale and certain installation of the following
home improvement and building products:
North America:
Kitchen and Bath Products -- kitchen and bath cabinets; faucets;
plumbing fittings; bathtubs and shower tub enclosures; whirlpools and
spas; and bath accessories.
Architectural Coatings -- stains, varnishes and paints.
Builders' Hardware and Other Specialty Products and
Services -- builders' hardware, including mechanical and electronic
lock sets; other cabinets; grilles, registers and diffusers for
heating/cooling systems; insulation; staple gun tackers and staples
and other fastening tools; and water pumps.
International, principally Europe:
Kitchen and bath cabinets; faucets; plumbing fittings; shower tub
enclosures; bath accessories; builders' hardware, including
mechanical lock sets; standard plate radiators, hydronic radiators
and heat convectors; venting and ventilation systems; rolling
shutters; and water pumps.
The following table sets forth the Company's world-wide net sales for the
above products by product group, in millions.
<TABLE>
<CAPTION>
NET SALES
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Faucets................................................... $ 937 $ 884 $ 815
Kitchen and Bath Cabinets................................. 1,971 1,698 1,371
Other Kitchen and Bath Products........................... 1,125 1,076 1,042
Architectural Coatings.................................... 539 437 353
Builders' Hardware........................................ 415 302 261
Other Specialty Products and Services..................... 1,320 883 666
------ ------ ------
Total........................................... $6,307 $5,280 $4,508
====== ====== ======
</TABLE>
33
<PAGE> 35
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION -- (CONCLUDED)
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.
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.
The following table presents information about the Company by segment:
<TABLE>
<CAPTION>
NET SALES (1)(2)(3)(4) OPERATING PROFIT
------------------------------------ --------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
The Company's operations by
segment were:
North America.............. $5,238,000 $4,441,000 $3,820,000 $ 867,000 $829,000 $689,000
International, principally
Europe................... 1,069,000 839,000 688,000 136,000 123,000 99,000
---------- ---------- ---------- ---------- -------- --------
Total.................. $6,307,000 $5,280,000 $4,508,000 1,003,000 952,000 788,000
========== ========== ==========
General corporate expense............................................ (92,000) (86,000) (82,000)
---------- -------- --------
Operating profit, after general corporate expense.................... 911,000 866,000 706,000
Other income (expense), net.......................................... (7,000) 39,000 28,000
---------- -------- --------
Income before income taxes (6)....................................... $ 904,000 $905,000 $734,000
========== ======== ========
Equity investments in affiliates........................................................................
Securities of Furnishings International Inc. ...........................................................
Corporate assets........................................................................................
Total assets....................................................................................
<CAPTION>
(IN THOUSANDS)
ASSETS AT DECEMBER 31 (5)
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
The Company's operations by
segment were:
North America......................................... $3,746,000 $2,672,000 $2,508,000
International, principally
Europe.............................................. 1,437,000 1,176,000 711,000
---------- ---------- ----------
Total............................................. 5,183,000 3,848,000 3,219,000
General corporate expense.................................
Operating profit, after general corporate expense.........
Other income (expense), net...............................
Income before income taxes (6)............................
Equity investments in affiliates.......................... 203,000 225,000 228,000
Securities of Furnishings International Inc. ............. 481,000 435,000 393,000
Corporate assets.......................................... 768,000 1,111,000 857,000
---------- ---------- ----------
Total assets...................................... $6,635,000 $5,619,000 $4,697,000
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND
PROPERTY ADDITIONS (7) AMORTIZATION
------------------------------ ------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
The Company's operations by segment were:
North America............................................. $316,000 $182,000 $211,000 $110,000 $100,000 $ 84,000
International, principally Europe......................... 95,000 90,000 47,000 48,000 38,000 28,000
-------- -------- -------- -------- -------- --------
Total............................................... $411,000 $272,000 $258,000 $158,000 $138,000 $112,000
======== ======== ======== ======== ======== ========
</TABLE>
(1) Included in net sales in 1999, 1998 and 1997 are export sales from the U.S.
of $127 million, $112 million and $89 million, respectively.
(2) Intra-company sales between segments represented less than one percent of
consolidated net sales in 1999, 1998 and 1997.
(3) Includes net sales to one customer in 1999, 1998 and 1997 of $1,539 million,
$1,236 million and $983 million, respectively.
(4) Net sales from the Company's operations in the U.S. were $5,024 million,
$4,275 million and $3,655 million in 1999, 1998 and 1997, respectively.
(5) Long-lived assets of the Company's operations in the U.S. and Europe were
$2,135 million and $997 million, $1,392 million and $813 million and $1,296
million and $467 million at December 31, 1999, 1998 and 1997, respectively.
(6) Income before income taxes and net income pertaining to non-U.S. operations
were $120 million and $69 million, $118 million and $59 million, and $93
million and $45 million for 1999, 1998 and 1997, respectively.
(7) Property additions include assets of purchase acquisitions.
34
<PAGE> 36
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Re: MascoTech, Inc.:
Equity earnings.............................. $ 15,430 $ 15,360 $ 14,580
--------- --------- --------
Gain from change in investment............... -- -- 29,500
--------- --------- --------
Equity earnings, other affiliates.............. 8,500 13,840 9,560
--------- --------- --------
Other, net:
Income from cash and cash investments........ 9,330 21,540 17,280
Other interest income........................ 52,530 46,340 47,620
Other items.................................. 27,330 56,420 3,640
--------- --------- --------
89,190 124,300 68,540
--------- --------- --------
Interest expense............................... (120,420) (114,400) (94,280)
--------- --------- --------
$ (7,300) $ 39,100 $ 27,900
========= ========= ========
</TABLE>
Other interest income for 1999, 1998 and 1997 includes $46.6 million, $41.5
million and $36.8 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 includes $7.5 million of interest
income from a $151 million note receivable from MascoTech, which was paid on
September 30, 1997.
Other items in 1999 include approximately $30 million of income and gains,
net regarding certain non-operating assets and $7.6 million of dividend income
from the Company's investment in Furnishings International's 13% cumulative
preferred stock. Also included in other items for 1999 were approximately $4
million of expenses related to the early retirement of debt.
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 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.
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.
35
<PAGE> 37
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Income before income taxes:
U.S. ......................................... $ 783,910 $ 787,090 $640,660
Foreign....................................... 120,190 118,410 93,140
--------- --------- --------
$ 904,100 $ 905,500 $733,800
========= ========= ========
Provision for income taxes:
Currently payable:
U.S. Federal............................... $ 256,420 $ 203,200 $183,430
State and local............................ 27,800 28,290 30,520
Foreign.................................... 45,040 47,250 41,110
Deferred:
U.S. Federal............................... (1,270) 49,250 28,000
Foreign.................................... 6,510 12,410 6,640
--------- --------- --------
$ 334,500 $ 340,400 $289,700
========= ========= ========
Deferred tax assets at December 31:
Intangibles................................... $ 11,540 $ 18,160
Inventories................................... 5,530 12,210
Accrued liabilities........................... 59,170 51,580
Capital loss carryforward..................... 100,570 117,760
Other, principally equity investments......... 60,550 52,060
--------- ---------
237,360 251,770
Valuation allowance........................... (127,320) (156,700)
--------- ---------
110,040 95,070
--------- ---------
Deferred tax liabilities at December 31:
Property and equipment........................ 206,110 193,340
Other......................................... 37,610 30,170
--------- ---------
243,720 223,510
--------- ---------
Net deferred tax liability at December 31....... $ 133,680 $ 128,440
========= =========
</TABLE>
At December 31, 1999 and 1998, net deferred tax liability consists of net
short-term deferred tax assets of $25.0 million and $25.9 million, respectively,
and net long-term deferred tax liabilities of $158.7 million and $154.3 million,
respectively.
A valuation allowance of approximately $127.3 million and $156.7 million
was recorded at December 31, 1999 and 1998, 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
pertains to a $100.6 million and $117.8 million after-tax capital loss
carryforward at December 31, 1999 and 1998, respectively, on the 1996
disposition of the Company's home furnishings products segment and a $26.7
million and $38.9 million benefit of a capital nature on the Company's equity
and other investments at December 31, 1999 and 1998, respectively.
36
<PAGE> 38
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>
1999 1998 1997
---- ---- ----
<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........................... 1 2 3
Dividends-received deduction............................... - - (1)
Amortization in excess of tax.............................. 1 1 1
Change in valuation allowance.............................. (2) (2) (2)
Other, net................................................. - - 1
-- -- --
Effective tax rate....................................... 37% 38% 39%
== == ==
</TABLE>
Income taxes paid were approximately $326 million, $216 million and $194
million in 1999, 1998 and 1997, respectively.
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, 1999 for U.S. or additional foreign withholding
taxes on approximately $57.6 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, in thousands:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Numerator:
Basic (Net income)............................ $569,600 $565,100 $444,100
Add convertible debenture interest, net (1)... -- 700 5,880
-------- -------- --------
Diluted (Net income).......................... $569,600 $565,800 $449,980
======== ======== ========
Denominator:
Basic shares (based on weighted average)...... 435,600 435,500 423,200
Add:
Contingently issued shares................. 7,300 7,200 6,600
Stock option dilution...................... 3,300 3,800 3,200
Convertible debentures (1)................. -- 1,000 8,400
-------- -------- --------
Diluted shares................................ 446,200 447,500 441,400
======== ======== ========
</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.
37
<PAGE> 39
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For 1999 and 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, 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
------------------------
1999 1998
---------- ----------
<S> <C> <C>
COMBINED BALANCE SHEETS
Assets
Current assets:
Cash and cash investments........................... $ 235,270 $ 582,540
Receivables......................................... 1,221,590 1,023,620
Prepaid expenses and other.......................... 169,570 131,940
Inventories:
Raw material..................................... 358,480 324,990
Finished goods................................... 376,680 324,420
Work in process.................................. 218,310 195,870
---------- ----------
953,470 845,280
---------- ----------
Total current assets........................... 2,579,900 2,583,380
Equity investments in affiliates...................... 244,280 258,580
Securities of Furnishings International Inc. ......... 481,270 434,640
Property and equipment................................ 2,347,040 2,035,960
Acquired goodwill, net................................ 2,519,530 1,836,450
Other assets.......................................... 511,510 516,990
---------- ----------
Total assets................................... $8,683,530 $7,666,000
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable....................................... $ 62,300 $ 314,140
Accounts payable.................................... 358,300 306,940
Accrued liabilities................................. 654,230 605,320
---------- ----------
Total current liabilities...................... 1,074,830 1,226,400
Long-term debt........................................ 3,804,160 3,026,530
Deferred income taxes and other....................... 420,320 428,540
Other interests in combined affiliates................ 247,720 210,490
---------- ----------
Total liabilities.............................. 5,547,030 4,891,960
Equity of shareholders of Masco Corporation........... 3,136,500 2,774,040
---------- ----------
Total liabilities and shareholders' equity..... $8,683,530 $7,666,000
========== ==========
</TABLE>
38
<PAGE> 40
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
COMBINED STATEMENTS OF INCOME
Net sales.............................................. $ 7,976,720 $ 6,902,620 $ 6,071,450
Cost of sales.......................................... (5,232,220) (4,543,950) (3,982,430)
Selling, general and administrative expenses........... (1,617,670) (1,285,460) (1,167,710)
----------- ----------- -----------
Operating profit............................. 1,126,830 1,073,210 921,310
----------- ----------- -----------
Other income (expense), net:
Interest expense..................................... (201,240) (195,900) (128,730)
Other, net........................................... 102,550 157,350 151,820
----------- ----------- -----------
(98,690) (38,550) 23,090
----------- ----------- -----------
Income before income taxes and other
interests.................................. 1,028,140 1,034,660 944,400
Income taxes........................................... (382,180) (388,230) (388,310)
Other interests in combined affiliates................. (76,360) (81,330) (111,990)
----------- ----------- -----------
Net income................................... $ 569,600 $ 565,100 $ 444,100
=========== =========== ===========
Earnings per share:
Basic................................................ $1.31 $1.30 $1.05
=========== =========== ===========
Diluted.............................................. $1.28 $1.26 $1.02
=========== =========== ===========
</TABLE>
39
<PAGE> 41
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------
1999 1998 1997
----------- ----------- ---------
<S> <C> <C> <C>
COMBINED STATEMENTS OF CASH FLOWS
Cash Flows From (For) Operating Activities:
Net income............................................ $ 569,600 $ 565,100 $ 444,100
Depreciation and amortization......................... 265,120 240,310 200,650
Interest accrual on pay-in-kind notes receivable...... (46,630) (41,500) (36,800)
Unremitted equity earnings of affiliates.............. (15,730) (16,820) (9,060)
Deferred income taxes................................. 14,800 61,550 56,990
Gains on disposition of businesses, net............... (14,440) (14,720) (4,980)
Gain from change in investment........................ -- (7,000) (4,980)
Other interests in net income of combined affiliates,
net................................................ 76,360 81,330 111,990
Increase in receivables............................... (120,330) (105,630) (73,630)
Increase in inventories............................... (67,880) (75,510) (55,760)
Increase in accounts payable and accrued liabilities,
net................................................ 9,150 14,280 76,600
Other, net............................................ (29,760) 15,860 (11,220)
----------- ----------- ---------
Net cash from operating activities............ 640,260 717,250 693,900
----------- ----------- ---------
Cash Flows From (For) Investing Activities:
Acquisition of other interests in TriMas
Corporation........................................ -- (869,680) --
Acquisitions, net of cash acquired.................... (883,500) (377,770) (198,020)
Capital expenditures.................................. (486,590) (349,680) (298,530)
Cash proceeds from sale of subsidiaries............... 92,620 108,020 76,560
Proceeds from redemption of debt by affiliates........ -- 80,500 --
Other, net............................................ 13,150 (37,380) (47,500)
----------- ----------- ---------
Net cash (for) investing activities........... (1,264,320) (1,445,990) (467,490)
----------- ----------- ---------
Cash Flows From (For) Financing Activities:
Increase in debt...................................... 1,244,370 1,894,460 355,930
Payment of debt....................................... (676,990) (826,710) (135,400)
Purchase of Company common stock for:
Treasury........................................... (119,130) (106,880) (14,970)
Long-term stock incentive award plan............... (6,840) (46,800) (29,110)
Cash dividends paid................................... (176,110) (155,500) (151,970)
Capital contributions from shareholders of pooled
companies.......................................... 11,490 1,520 245,450
Distributions to shareholders of pooled companies..... -- (45,950) (536,060)
----------- ----------- ---------
Net cash from (for) financing activities...... 276,790 714,140 (266,130)
----------- ----------- ---------
Cash and Cash Investments:
Decrease for the year................................. (347,270) (14,600) (39,720)
At January 1.......................................... 582,540 597,140 636,860
----------- ----------- ---------
At December 31........................................ $ 235,270 $ 582,540 $ 597,140
=========== =========== =========
</TABLE>
40
<PAGE> 42
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>
1999:
Net sales....................... $6,307,000 $1,645,000 $1,704,000 $1,567,000 $1,391,000
Gross profit.................... $2,311,470 $ 592,070 $ 622,000 $ 580,800 $ 516,600
Net income...................... $ 569,600 $ 178,700 $ 64,900 $ 174,100 $ 151,900
Earnings per share:
Basic......................... $1.31 $.41 $.15 $.40 $.35
Diluted....................... $1.28 $.40 $.15 $.39 $.34
1998:
Net sales....................... $5,280,000 $1,327,000 $1,380,000 $1,327,000 $1,246,000
Gross profit.................... $1,932,100 $ 463,800 $ 510,400 $ 496,300 $ 461,600
Net income...................... $ 565,100 $ 137,800 $ 152,800 $ 144,100 $ 130,400
Earnings per share:
Basic......................... $1.30 $.32 $.35 $.33 $.30
Diluted....................... $1.26 $.31 $.34 $.32 $.29
Diluted earnings per share,
excluding amortization of
acquired goodwill:
1999.......................... $1.37 $.43 $.17 $.41 $.36
1998.......................... $1.32 $.33 $.36 $.33 $.30
</TABLE>
Net income and earnings per share for the third quarter and year of 1999
include unusual after-tax expense, principally related to transaction costs
associated with poolings of interests.
41
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers required by this Item is set forth
as a Supplementary Item at the end of Part I hereof (pursuant to Instruction 3
to Item 401(b) of Regulation S-K). Other information required by this Item will
be contained in the Company's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders, to be filed on or before April 29, 2000, 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 2000 Annual Meeting of Stockholders, to be
filed on or before April 29, 2000, 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 2000 Annual Meeting of Stockholders, to be
filed on or before April 29, 2000, 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 2000 Annual Meeting of Stockholders, to be
filed on or before April 29, 2000, and such information is incorporated herein
by reference.
42
<PAGE> 44
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,
1999 and 1998, and for the years ended December 31, 1999, 1998 and
1997, 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, 1999, 1998 and
1997, consists of the following:
II. Valuation and Qualifying Accounts
(ii) (A) MascoTech, Inc. and Subsidiaries Consolidated Financial
Statements appended hereto, at December 31, 1999 and 1998,
and for the years ended December 31, 1999, 1998 and 1997,
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,
1999, 1998 and 1997, 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.(5)
3.ii Bylaws of Masco Corporation, as amended.(7)
4.a.i Indenture dated as of December 1, 1982 between Masco
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee,(3) and Directors' resolutions establishing Masco
Corporation's: (i) 9% Notes Due October 1, 2001(3), (ii)
6 1/8 Notes Due September 15, 2003(7), (iii) 7 1/8%
Debentures Due August 15, 2013(7), (iv) 6.625% Debentures
Due April 15, 2018(7), (v) 5.75% Notes Due 2008(7) and (vi)
7 3/4% Debentures Due August 1, 2029. (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. (filed herewith)
4.a.iii Supplemental Indenture dated as of July 26, 1994 between
Masco Corporation and The First National Bank of Chicago.
(filed herewith)
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(3) and Amendment No. 1 dated April 30, 1997(4) and
Amendment dated as of March 30, 1998.(5)
</TABLE>
43
<PAGE> 45
<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(1) and
Amendment No. 1 to Rights Agreement dated as of September
23, 1998.(6)
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; 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;
Supplemental Indenture dated as of August 5, 1994 among
MascoTech, Inc. and The First National Bank of Chicago, as
Trustee(7); Directors' resolutions establishing Masco
Industries, Inc.'s 4 1/2% Convertible Subordinated
Debentures Due 2003(7); and Form of Note. (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.(4)
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
(Arranger) and Commerzbank International S.A. (Agent).(7)
4.g DM 400,000,000 Term Loan Facility dated July 9, 1997 among
Masco GmbH, as Borrower, Masco Corporation, as Guarantor,
Commerzbank Aktiengesellschaft (Arranger) and Commerzbank
International S.A. (Agent) for the banks party thereto, and
Amendment dated as of June 12, 1998 to Credit Agreement.(7)
4.h $1,000,000,000 Amended and Restated Credit Agreement dated
as of March 20, 2000 among Masco Corporation, the banks
party thereto, Commerzbank Aktiengesellschaft and Bank of
America, N.A., as syndication agents, and Bank One, NA, as
administrative agent. (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.).(1)
10.b Corporate Services Agreement and Annex dated as of January
1, 1987 between Masco Corporation and Masco Industries, Inc.
(now known as MascoTech, Inc.), Amendment No. 1 dated as of
October 31, 1996, and related letter agreements dated
January 22, 1998 and June 17, 1998. (all filed herewith)
10.c Corporate Opportunities Agreement dated as of May 1, 1984
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(1) and Amendment No. 1 dated as of
October 31, 1996.(2)
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.(7)
</TABLE>
44
<PAGE> 46
<TABLE>
<S> <C> <C>
10.e 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.(7)
10.f Registration Agreement dated as of March 31, 1993, between
Masco Corporation and Masco Industries, Inc. (now known as
MascoTech, Inc.).(7)
NOTE: Exhibits 10.g through 10.q constitute the management
contracts and executive compensatory plans or arrangements
in which certain of the Directors and executive officers of
the Company participate.
10.g Masco Corporation 1991 Long Term Stock Incentive Plan
(Restated July 10, 1998).(7)
10.h Masco Corporation 1988 Restricted Stock Incentive Plan
(Restated December 6, 1995).(1)
10.i Masco Corporation 1988 Stock Option Plan (Restated September
22, 1999). (filed herewith)
10.j Masco Corporation Supplemental Executive Retirement and
Disability Plan. (filed herewith)
10.k Masco Corporation 1997 Annual Incentive Compensation
Plan.(4)
10.l Masco Corporation 1997 Non-Employee Directors Stock Plan (as
amended July 10, 1998).(7)
10.m MascoTech, Inc. 1991 Long Term Stock Incentive Plan
(Restated July 15, 1998).(7)
10.n MascoTech, Inc. 1984 Restricted Stock Incentive Plan
(Restated December 6, 1995).(1)
10.o MascoTech, Inc. 1984 Stock Option Plan (Restated September
21, 1999). (filed herewith)
10.p MascoTech, Inc. 1997 Non-Employee Directors Stock Plan.(4)
10.q Description of the Masco Corporation Program for Estate,
Financial Planning and Tax Assistance.(4)
10.r 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.(3)
10.s Stock Purchase Agreement dated as of October 15, 1996
between Masco Corporation and MascoTech, Inc.(2)
10.t Registration Rights Agreement among Masco Corporation and
the Investors listed therein dated as of August 31, 1999.(8)
12 Computation of Ratio of Earnings to Fixed Charges. (filed
herewith)
21 List of Subsidiaries. (filed herewith)
</TABLE>
45
<PAGE> 47
<TABLE>
<S> <C> <C>
23.a Consent of PricewaterhouseCoopers LLP relating to Masco
Corporation's Consolidated Financial Statements and
Financial Statement Schedules. (filed herewith)
23.b Consent of PricewaterhouseCoopers LLP relating to MascoTech,
Inc.'s Consolidated Financial Statements and Financial
Statement Schedule. (filed herewith)
27.a Financial Data Schedule as of and for the year ended
December 31, 1999. (filed herewith)
27.b Financial Data Schedule as of and for the year-to-date
period ended March 31, 1998, amended for transactions
accounted for as poolings of interests in the third quarter
of 1999. (filed herewith)
27.c Financial Data Schedule as of and for the year ended
December 31, 1997, restated for transactions accounted for
as poolings of interests in the third quarter of 1999.
(filed herewith)
</TABLE>
- -------------------------
(1) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's
Current Report on Form 8-K dated November 13, 1996.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 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, 1999.
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
46
<PAGE> 48
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 29, 2000
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 March 29, 2000
- ---------------------------------------------
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>
47
<PAGE> 49
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, 1999, 1998 and
1997:
<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> 50
MASCO CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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:
1999....................... $22,235,500 $12,514,200 $4,326,300 $(12,950,400) $26,125,600
=========== =========== ========== ============ ===========
1998....................... $20,634,400 $ 4,248,600 $1,224,200 $ (3,871,700) $22,235,500
=========== =========== ========== ============ ===========
1997....................... $19,081,900 $ 2,959,800 $2,504,100 $ (3,911,400) $20,634,400
=========== =========== ========== ============ ===========
</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> 51
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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the
United States, 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 25, 2000
F-3
<PAGE> 52
MASCOTECH, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash investments................................. $ 4,490,000 $ 29,390,000
Receivables............................................... 218,960,000 223,340,000
Inventories............................................... 183,600,000 198,350,000
Deferred and refundable income taxes...................... 46,750,000 26,590,000
Prepaid expenses and other assets......................... 16,320,000 23,710,000
-------------- --------------
Total current assets.............................. 470,120,000 501,380,000
Equity and other investments in affiliates.................. 110,730,000 93,560,000
Property and equipment, net................................. 722,680,000 678,130,000
Excess of cost over net assets of acquired companies........ 759,330,000 764,220,000
Notes receivable and other assets........................... 38,410,000 53,250,000
-------------- --------------
Total assets...................................... $2,101,270,000 $2,090,540,000
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 114,490,000 $ 114,830,000
Accrued liabilities....................................... 113,910,000 135,230,000
-------------- --------------
Total current liabilities......................... 228,400,000 250,060,000
Convertible subordinated debentures......................... 305,000,000 310,000,000
Other long-term debt........................................ 1,067,890,000 1,078,240,000
Deferred income taxes....................................... 100,680,000 88,140,000
Other long-term liabilities................................. 98,920,000 110,220,000
-------------- --------------
Total liabilities................................. 1,800,890,000 1,836,660,000
-------------- --------------
Shareholders' equity:
Preferred stock, $1 par:
Authorized: 25 million;
Outstanding: None...................................... -- --
Common stock, $1 par:
Authorized: 250 million;
Outstanding: 44.6 million and 45.8 million............. 44,640,000 45,780,000
Paid-in capital........................................... -- 16,820,000
Retained earnings......................................... 324,290,000 245,860,000
Accumulated other comprehensive loss...................... (24,870,000) (7,460,000)
Less: Restricted stock awards............................. (43,680,000) (47,120,000)
-------------- --------------
Total shareholders' equity........................ 300,380,000 253,880,000
-------------- --------------
Total liabilities and shareholders' equity........ $2,101,270,000 $2,090,540,000
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 53
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- -------------
<S> <C> <C> <C>
Net sales....................................... $ 1,679,690,000 $ 1,635,500,000 $ 922,130,000
Cost of sales................................... (1,246,660,000) (1,208,930,000) (735,470,000)
--------------- --------------- -------------
Gross profit............................... 433,030,000 426,570,000 186,660,000
Selling, general and administrative expenses.... (214,530,000) (204,180,000) (89,930,000)
Gains (charge) on disposition of businesses,
net........................................... 14,440,000 (15,580,000) 4,980,000
Charge for asset impairment..................... (17,510,000) -- --
--------------- --------------- -------------
Operating profit........................... 215,430,000 206,810,000 101,710,000
--------------- --------------- -------------
Other income (expense), net:
Interest expense, Masco Corporation........... -- -- (7,500,000)
Other interest expense........................ (80,820,000) (81,500,000) (29,030,000)
Equity and other income from affiliates....... 13,230,000 10,150,000 43,360,000
Gain (charge) from disposition of, or changes
in, investments in equity affiliates....... (3,150,000) -- 64,350,000
Deferred gain recognized from disposition of
business................................... -- 7,000,000 --
Other, net.................................... (5,220,000) 2,060,000 17,400,000
--------------- --------------- -------------
(75,960,000) (62,290,000) 88,580,000
--------------- --------------- -------------
Income before income taxes................. 139,470,000 144,520,000 190,290,000
Income taxes.................................... 47,040,000 47,050,000 75,050,000
--------------- --------------- -------------
Net income................................. $ 92,430,000 $ 97,470,000 $ 115,240,000
=============== =============== =============
Preferred stock dividends....................... -- -- $ 6,240,000
=============== =============== =============
Earnings attributable to common
stock.................................... $ 92,430,000 $ 97,470,000 $ 109,000,000
=============== =============== =============
</TABLE>
<TABLE>
<CAPTION>
BASIC DILUTED BASIC DILUTED BASIC DILUTED
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share:
Earnings attributable to common stock...... $2.25 $1.84 $2.23 $1.83 $2.70 $2.12
===== ===== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 54
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- -------------- -------------
<S> <C> <C> <C>
CASH FROM (USED FOR):
OPERATING ACTIVITIES:
Net income.................................. $ 92,430,000 $ 97,470,000 $ 115,240,000
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gains) charge on disposition of
businesses, net........................ (14,440,000) 15,580,000 (4,980,000)
Charges (gains) from disposition or other
changes in investments in equity
affiliates............................. 6,270,000 (7,000,000) (64,350,000)
Charge for asset impairment............... 17,510,000 -- --
Depreciation and amortization............. 83,300,000 83,640,000 43,460,000
Equity earnings, net of dividends......... (10,100,000) (6,080,000) (27,180,000)
Deferred income taxes..................... 9,560,000 (110,000) 17,520,000
Decrease (increase) in marketable
securities, net........................ -- 45,970,000 (8,210,000)
(Increase) decrease in receivables........ (3,500,000) (6,700,000) 2,670,000
Decrease (increase) in inventories........ 400,000 (19,640,000) 1,950,000
(Increase) decrease in prepaid expenses
and other current assets............... (14,390,000) 1,240,000 (1,280,000)
(Decrease) increase in accounts payable
and accrued liabilities................ (5,150,000) (6,060,000) 11,140,000
Other, net................................ (9,260,000) 2,290,000 (7,480,000)
------------- -------------- -------------
Net cash from operating
activities...................... 152,630,000 200,600,000 78,500,000
------------- -------------- -------------
FINANCING ACTIVITIES:
Increase in debt............................ 28,540,000 1,162,670,000 7,080,000
Payment of debt............................. (40,150,000) (410,660,000) (16,590,000)
Payment of note due to Masco Corporation.... -- -- (45,580,000)
Retirement of preferred stock............... -- -- (8,360,000)
Retirement of Company Common Stock.......... (19,530,000) (63,550,000) (6,610,000)
Payment of dividends........................ (13,470,000) (12,240,000) (15,900,000)
Other, net.................................. (5,490,000) (13,480,000) (9,070,000)
------------- -------------- -------------
Net cash (used for) from financing
activities...................... (50,100,000) 662,740,000 (95,030,000)
------------- -------------- -------------
INVESTING ACTIVITIES:
Cash received from sale of businesses,
net....................................... 92,620,000 25,020,000 76,560,000
Acquisition of businesses, net of cash
acquired.................................. (88,550,000) (879,370,000) (11,100,000)
Capital expenditures........................ (135,740,000) (106,300,000) (54,780,000)
Receipt of cash from notes receivable....... 2,180,000 4,880,000 17,330,000
Proceeds from redemptions of debt by
affiliates................................ -- 80,500,000 --
Other, net.................................. 2,060,000 210,000 10,230,000
------------- -------------- -------------
Net cash (used for) from investing
activities...................... (127,430,000) (875,060,000) 38,240,000
------------- -------------- -------------
CASH AND CASH INVESTMENTS:
(Decrease) increase for the year............ (24,900,000) (11,720,000) 21,710,000
At January 1................................ 29,390,000 41,110,000 19,400,000
------------- -------------- -------------
At December 31.................... $ 4,490,000 $ 29,390,000 $ 41,110,000
============= ============== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 55
MASCOTECH, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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, 1997..... $ 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
Comprehensive income:
Net income................ 92,430 92,430
Foreign currency
translation............. (18,110) (18,110)
Minimum pension liability
(net of tax, $450)...... 700 700
--------
Total comprehensive
income............. 75,020
Common stock dividends...... (13,470) (13,470)
Retirement of common
stock..................... (1,280) (18,580) (19,860)
Exercise of stock options... 140 1,760 (530) 1,370
Restricted stock awards, net
of amortization........... 3,440 3,440
-------- ------- -------- -------- -------- -------- -------- --------
Balances, December 31, 1999... -- $44,640 -- $324,290 $(14,870) $(10,000) $(43,680) $300,380
======== ======= ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 56
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, 1999 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 aggregated approximately $6.4
million in 1999, $8.7 million in 1998 and $5.5 million in 1997.
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.
Marketable Securities and Derivative Financial Instruments. In prior years,
the Company had marketable equity securities holdings which were categorized as
trading and, as a result, were stated at fair value. Changes in the fair value
of trading securities were recognized in earnings. The Company may enter into
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 changes 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 $4.3 million and $3.4 million at December 31, 1999 and
1998, respectively. The Company does a significant amount of business with a
number of individual customers in the transportation industry. The Company
monitors its exposure for credit losses and maintains adequate allowances for
doubtful accounts; the Company does not believe that significant credit risk
exists.
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
F-8
<PAGE> 57
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
impairment of the excess of cost over net assets of acquired companies by
comparing anticipated undiscounted future cash flows from operating activities
with the carrying amount of the excess of cost over net assets of acquired
companies. The factors considered by management in performing this assessment
include current operating results, business prospects, market trends, potential
product obsolescence, competitive activities and other economic factors. Based
on this assessment, there was no permanent impairment related to the excess of
cost over net assets of acquired companies at December 31, 1999.
At December 31, 1999 and 1998, accumulated amortization of the excess of
cost over net assets of acquired companies and patents was $68.5 million and
$56.4 million, respectively. Amortization expense was $28.4 million, $31.8
million and $9.3 million in 1999, 1998 and 1997, respectively.
New Accounting Pronouncements and Reclassifications. On June 15, 1998, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that
all derivative instruments be recorded on the balance sheet at fair value.
Changes in 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. In June 1999, FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 defers the effective adoption date of SFAS No.
133 to January 1, 2001. 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 did not have a material impact on the Company's
financial statements.
F-9
<PAGE> 58
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER SHARE:
The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per common share:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Weighted average number of shares outstanding............... 41,110 43,630 40,300
======== ======== ========
Net income.................................................. $ 92,430 $ 97,470 $115,240
Less: Preferred stock dividends............................. -- -- (6,240)
-------- -------- --------
Earnings used for basic earnings per share
computation............................................ $ 92,430 $ 97,470 $109,000
======== ======== ========
Basic earnings per share.................................... $2.25 $2.23 $2.70
======== ======== ========
Total shares used for basic earnings per share
computation............................................... 41,110 43,630 40,300
Dilutive securities:
Stock options............................................. 530 1,060 1,250
Assumed conversion of preferred stock at January 1,
1997................................................... -- -- 5,210
Convertible debentures.................................... 9,840 10,000 10,000
Contingently issuable shares.............................. 3,720 3,830 2,160
-------- -------- --------
Total shares used for diluted earnings per share
computation....................................... 55,200 58,520 58,920
======== ======== ========
Earnings used for basic earnings per share computation...... $ 92,430 $ 97,470 $109,000
Add back of preferred stock dividends....................... -- -- 6,240
Add back of debenture interest.............................. 9,310 9,530 9,530
-------- -------- --------
Earnings used for diluted earnings per share
computation............................................ $101,740 $107,000 $124,770
======== ======== ========
Diluted earnings per share............................ $1.84 $1.83 $2.12
======== ======== ========
</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.
SUPPLEMENTARY CASH FLOWS INFORMATION:
Significant transactions not affecting cash were: in 1999, the assumption
of approximately $10 million of liabilities in an acquisition; 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; and in 1997, the
conversion of the Company's outstanding shares of Dividend Enhanced Convertible
Preferred Stock for approximately 10 million shares of Company Common Stock (see
"Shareholders' Equity" note); the exchange of approximately 9.9 million shares
of the outstanding common stock of Emco Limited ("Emco") with a value of
approximately $106 million, in addition to the cash payment of approximately $46
million, in payment of a promissory note due to Masco Corporation.
Income taxes paid were $54 million, $38 million and $44 million in 1999,
1998 and 1997, respectively. Interest paid was $79 million, $79 million and $39
million in 1999, 1998 and 1997, 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
F-10
<PAGE> 59
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 Company acquired a business operation and a product line extension in
1999, which will provide annual sales of approximately $85 million, for an
aggregate purchase price of approximately $93 million. These transactions have
been accounted for as purchases and the excess of the aggregate purchase price
over the fair value of net assets acquired of approximately $51 million is being
amortized over 40 years. The results for 1999 reflect sales and operating
results from the dates of acquisition.
DISPOSITIONS OF BUSINESSES:
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 certain businesses sold in 1996. This gain, which is non-taxable,
is included in the caption "gains (charge) on disposition of businesses, net" in
the consolidated statement of income.
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.
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. In April 1999, the Company completed the sale of these
aftermarket-related and vacuum metalizing businesses for total proceeds
aggregating approximately $105 million, including $90 million of cash which was
applied to reduce the Company's indebtedness, a note receivable of $6 million
and retained equity interests in the ongoing businesses. These transactions
resulted in a pre-tax gain of approximately $26 million ($15 million after-tax).
In 1999, management adopted a plan to sell its specialty tubing business
which resulted in a pre-tax loss of approximately $7 million and an after-tax
gain of approximately $5.5 million, due to the tax basis in the net assets of
the businesses exceeding book carrying values. This business was sold in January
2000 for proceeds of approximately $6 million consisting of cash and notes.
In addition, the Company recorded in the second quarter 1999 a non-cash
pre-tax charge of approximately $17.5 million related to impairment of certain
long-lived assets, which included its hydroforming equipment and related
intellectual property.
In the fourth quarter 1999, the Company announced the closure of a plant
and recorded a non-cash pre-tax charge of approximately $4 million ($2 million
after-tax) related principally to employee benefit costs and asset impairments.
Accrued exit costs at January 1, 1999 were approximately $12 million, new
accruals in 1999 were approximately $2 million, payments and adjustments to
accrued estimates approximated $2 million and the accrual at December 31, 1999
was approximately $12 million.
F-11
<PAGE> 60
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INVENTORIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Finished goods........................................... $ 86,240 $ 87,810
Work in process.......................................... 45,940 47,960
Raw material............................................. 51,420 62,580
-------- --------
$183,600 $198,350
======== ========
</TABLE>
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
------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
TriMas Corporation........................................ -- -- 37%
Titan International, Inc. ................................ 16% 16% 15%
Delco Remy International, Inc. (voting)................... 17% 17% 18%
</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, 1999 and
1998 and quoted market values at December 31, 1999 for publicly traded
affiliates (which may differ from the amounts that could have been realized upon
disposition) are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999
QUOTED 1999 1998
MARKET CARRYING CARRYING
VALUE AMOUNT AMOUNT
------- -------- --------
<S> <C> <C> <C>
Common stock:
Titan International, Inc. ..................... $21,550 $ 40,880 $46,900
Delco Remy International, Inc. ................ 24,960 15,300 10,920
------- -------- -------
Investments in publicly traded affiliates........ $46,510 56,180 57,820
=======
Other non-public affiliates...................... 54,550 35,740
-------- -------
Total............................................ $110,730 $93,560
======== =======
</TABLE>
The Company's carrying value in common stock of these equity affiliates
exceeded its equity in the underlying net book value by approximately $12
million at December 31, 1999. This excess is being amortized over 40 years.
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.
F-12
<PAGE> 61
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In September 1997, the Company exchanged its equity holdings in Emco
Limited, with a value approximating $106 million (resulting in a pre-tax gain of
approximately $46 million), and approximately $46 million in cash to satisfy an
indebtedness to Masco Corporation.
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 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 36 percent common equity
ownership in Saturn Electronics & Engineering, Inc., a manufacturer of
electromechanical and electronic automotive components; a 45 percent common
equity ownership in MSX International, Inc., a provider of technology-based
business services and product development services; and a 16 percent common
equity ownership in Qualitor, Inc., a supplier of automotive aftermarket
products.
Equity in undistributed earnings of affiliates of $15 million at December
31, 1999, $6 million at December 31, 1998 and $68 million at December 31, 1997
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,
Qualitor since its formation in early 1999, 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
-----------------------
1999 1998
----------- ---------
<S> <C> <C>
Current assets.......................................... $ 1,180,990 $ 948,370
Current liabilities..................................... (708,150) (451,200)
----------- ---------
Working capital....................................... 472,840 497,170
Property and equipment, net............................. 632,530 473,460
Excess of cost over net assets of acquired companies and
other assets.......................................... 499,040 349,060
Long-term debt.......................................... (1,087,650) (846,330)
Deferred income taxes and other long-term liabilities... (70,250) (52,030)
----------- ---------
Shareholders' equity.................................. $ 446,510 $ 421,330
=========== =========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales................................. $3,304,610 $2,764,860 $3,484,540
========== ========== ==========
Operating profit.......................... $ 177,220 $ 125,730 $ 264,590
========== ========== ==========
Earnings attributable to common stock..... $ 41,070 $ 32,480 $ 108,230
========== ========== ==========
</TABLE>
F-13
<PAGE> 62
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Equity and other income from affiliates consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
---------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
The Company's equity in affiliates' earnings
available for common shareholders............ $10,300 $ 7,340 $31,330
Interest and dividend income................... 2,930 2,810 12,030
------- ------- -------
Equity and other income from affiliates........ $13,230 $10,150 $43,360
======= ======= =======
</TABLE>
PROPERTY AND EQUIPMENT, NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
---------------------
1999 1998
---------- --------
<S> <C> <C>
Cost:
Land and land improvements............................ $ 30,650 $ 33,160
Buildings............................................. 184,170 179,870
Machinery and equipment............................... 830,400 777,710
---------- --------
1,045,220 990,740
Less: Accumulated depreciation.......................... 322,540 312,610
---------- --------
$ 722,680 $678,130
========== ========
</TABLE>
Depreciation expense totalled $55 million, $52 million and $34 million in
1999, 1998 and 1997, respectively.
ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
---------------------
1999 1998
---------- --------
<S> <C> <C>
Salaries, wages and commissions......................... $ 8,800 $ 16,550
Vacation, holiday and bonus............................. 18,550 19,420
Income taxes............................................ 3,940 8,790
Interest................................................ 5,250 4,300
Insurance............................................... 24,130 22,470
Property, payroll and other taxes....................... 5,380 5,490
Pension................................................. 20,850 13,600
Other................................................... 27,010 44,610
---------- --------
$ 113,910 $135,230
========== ========
</TABLE>
F-14
<PAGE> 63
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LONG-TERM DEBT:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
4 1/2% Convertible Subordinated Debentures, due 2003
and convertible into Company Common Stock at $31 per
share............................................... $ 305,000 $ 310,000
Bank revolving credit agreement....................... 606,000 500,000
Bank term loan........................................ 383,000 475,000
Other................................................. 85,660 108,060
---------- ----------
1,379,660 1,393,060
Less: Current portion of long-term debt............... 6,770 4,820
---------- ----------
Long-term debt........................................ $1,372,890 $1,388,240
========== ==========
</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: 2000 -- $60 million; 2001 -- $75 million; 2002 -- $138 million; and
2003 -- $110 million. The credit facility also includes an $800 million revolver
which terminates in 2003. The Company has recorded the $60 million principal
payment due in 2000 as long-term because the Company has the ability and intent
to refinance amounts due in 2000 on a long-term basis utilizing the revolver.
Other debt at December 31, 1999 principally consists of borrowings
denominated in foreign currencies under the revolving credit agreement by the
Company's subsidiaries. At December 31, 1999, there was approximately $120
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 seven percent at December 31,
1999. 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 in 2000 through 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 $26
million would have been available at December 31, 1999 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.
Masco Corporation has agreed to purchase from the Company, at the Company's
option, up to $200 million of subordinated debentures through 2002.
The maturities of debt as at December 31, 1999 during the next five years
are as follows (in millions): 2000 -- $67; 2001 -- $84; 2002 -- $141;
2003 -- $1,033; and 2004 -- $2.
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.
F-15
<PAGE> 64
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company repurchased and retired approximately 1.3 million shares of its
common stock in 1999, 3.6 million shares of its common stock in 1998 and
approximately .3 million shares of its common stock and approximately .5 million
shares of its preferred stock in 1997, pursuant to Board of Directors'
authorized repurchase programs. At December 31, 1999, the Company may repurchase
approximately 3.3 million additional shares of Company Common Stock pursuant to
the repurchase authorization.
In 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. In addition, Masco
Corporation has agreed to purchase from the Company, at the Company's option, up
to $200 million of subordinated debentures through 2002.
MascoTech has 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.
On the basis of amounts paid (declared), cash dividends per common share
were $.30 ($.30) in 1999, $.26 ($.20) in 1998 and $.22 ($.28) in 1997.
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, 1999,
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
622,000, 908,000 and 565,000 shares of Company Common Stock during 1999, 1998
and 1997, respectively, to key employees of the Company. The weighted average
fair value per share of long-term stock awards granted during 1999, 1998 and
1997 on the date of grant was $14, $19 and $19, respectively. Compensation
expense for the vesting of long-term stock awards was approximately $4.7
million, $5.2 million and $4.7 million in 1999, 1998 and 1997, respectively. The
unamortized value of unvested stock awards, aggregating approximately $44
million at December 31, 1999, 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 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.
F-16
<PAGE> 65
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of the Company's stock options granted under the
Plan or prior plans for the three years ended December 31, 1999 is presented
below.
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
1999 1998 1997
----- ------ -----
<S> <C> <C> <C>
Option shares outstanding, January 1........................ 3,950 3,770 4,290
Weighted average exercise price........................... $14 $10 $10
Option shares granted....................................... 180 1,480 80
Weighted average exercise price........................... $14 $19 $20
Option shares exercised..................................... (140) (1,160) (500)
Weighted average exercise price........................... $5 $10 $8
Option shares canceled...................................... (110) (140) (100)
Weighted average exercise price........................... $18 $15 $16
Option shares outstanding, December 31...................... 3,880 3,950 3,770
Weighted average exercise price........................... $14 $14 $10
Weighted average remaining option term (in years)......... 5.9 6.6 4.7
Option shares exercisable, December 31...................... 1,200 750 1,430
Weighted average exercise price........................... $9 $9 $9
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
NUMBER NUMBER
RANGE OF OUTSTANDING WEIGHTED AVERAGE WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES AT 12/31/99 REMAINING LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
- ----------------- ----------- ---------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$4.50 -- $14 1,060 1.6 $ 5.46 790 $ 5.06
$14 -- $18 1,380 7.0 $14.51 360 $14.58
$18 -- $25 1,440 7.9 $19.20 50 $22.16
----- -----
Total Outstanding 3,880 Total Exercisable 1,200
===== =====
</TABLE>
At December 31, 1999, 1998 and 1997, a combined total of 3,450,000,
3,820,000 and 5,223,000 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 $3.60, $6.30 and $7.70 in 1999, 1998 and 1997, 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,
$.04 and $.02 in 1999, 1998 and 1997, 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>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Risk-free interest rate............................... 5.1% 5.5% 6.5%
Dividend yield........................................ 1.9% 1.3% 1.4%
Volatility factor..................................... 26.2% 28.8% 35.0%
Expected option life (in years)....................... 5.5 5.5 5.5
</TABLE>
F-17
<PAGE> 66
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 $21 million in 1999, $15 million in 1998 and $9 million
in 1997.
Net periodic pension cost for the Company's defined-benefit pension plans
includes the following components for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Service cost..................................... $ 7,590 $ 6,470 $ 3,480
Interest cost.................................... 12,640 11,380 6,650
Expected return on assets........................ (9,670) (11,430) (6,600)
Amortization of transition obligation (asset).... 130 (170) (120)
Amortization of prior-service cost............... 650 750 690
Amortization of net loss......................... 1,440 670 410
------- -------- -------
Net periodic pension cost........................ $12,780 $ 7,670 $ 4,510
======= ======== =======
</TABLE>
Major assumptions used in accounting for the Company's defined-benefit
pension plans are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ------ ------
<S> <C> <C> <C>
Discount rate for obligations...................... 7.75% 6.75% 7.25%
Rate of increase in compensation levels............ 5.00% 5.00% 5.00%
Expected long-term rate of return on plan assets... 9.00% 11.00% 11.00%
</TABLE>
F-18
<PAGE> 67
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, 1999, and the funded status
as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998
--------- ---------
<S> <C> <C>
CHANGES IN PROJECTED BENEFIT OBLIGATIONS
Benefit obligations at January 1........................ $(184,030) $ (99,150)
Acquisitions.......................................... -- (63,720)
Service cost.......................................... (7,130) (5,900)
Interest cost......................................... (12,640) (11,380)
Plan amendments....................................... (1,460) (650)
Actuarial gain (loss)................................. 22,830 (9,580)
Benefit payments...................................... 8,660 6,350
--------- ---------
Projected benefit obligations at December 31............ $(173,770) $(184,030)
--------- ---------
CHANGES IN PLAN ASSETS
Fair value of plan assets at January 1.................. $ 110,760 $ 63,020
Actual return on plan assets.......................... (12,110) 1,890
Acquisitions.......................................... -- 46,420
Contributions......................................... 11,520 6,430
Benefit payments...................................... (8,480) (6,350)
Expenses/Other........................................ (430) (650)
--------- ---------
Fair value of plan assets at December 31................ $ 101,260 $ 110,760
========= =========
FUNDED STATUS
Plan assets less than projected benefits at December
31.................................................... $ (72,510) $ (73,270)
Unamortized transition obligation (asset)............. 270 (1,100)
Unamortized prior-service cost........................ 7,500 7,640
Unamortized net loss.................................. 29,340 36,600
--------- ---------
Net liability recognized at December 31................. $ (35,400) $ (30,130)
========= =========
</TABLE>
The following provides the amounts related to the plans at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998
-------- --------
<S> <C> <C>
Accrued benefit liability................................ $(56,650) $(51,370)
Intangible asset......................................... 11,250 10,540
Accumulated other comprehensive income................... 10,000 10,700
-------- --------
Net liability recognized............................... $(35,400) $(30,130)
======== ========
</TABLE>
F-19
<PAGE> 68
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, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Service cost......................................... $ 400 $ 300 $ 300
Interest cost........................................ 1,200 1,200 1,400
Net amortization..................................... 500 (100) 700
------ ------ ------
Net periodic postretirement benefit cost............. $2,100 $1,400 $2,400
====== ====== ======
</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, 1999 and the status as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998
-------- --------
<S> <C> <C>
CHANGES IN BENEFIT OBLIGATIONS
Benefit obligations at January 1.......................... $(18,900) $(12,400)
Acquisitions............................................ -- (4,400)
Service cost............................................ (400) (300)
Interest cost........................................... (1,200) (1,200)
Employee contributions.................................. (100) (100)
Actuarial gain (loss)................................... 1,000 (1,900)
Benefit payments........................................ 1,300 1,200
Curtailment............................................. 100 200
-------- --------
Benefit obligations at December 31........................ $(18,200) $(18,900)
======== ========
STATUS
Benefit obligations at December 31........................ $(18,200) $(18,900)
Unamortized transition obligation....................... 8,400 9,300
Unrecognized prior-service cost......................... 400 500
Unrecognized net gain................................... (6,700) (6,200)
-------- --------
Net liability at December 31.............................. $(16,100) $(15,300)
======== ========
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation increased from 6.75 percent in 1998 to 7.75 percent in 1999.
The assumed health care cost trend rate in 1999 was eight 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 $1.3 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> 69
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 $197 million, $184 million and $156 million in 1999, 1998 and 1997,
respectively; sales to another customer, attributed mainly to the Specialty
Metal Formed Products segment, of $140 million in 1997; sales to a third
customer, attributed mainly to the Specialty Metal Formed Products segment, of
$79 million in 1997; and sales to a fourth customer, attributed mainly to the
Specialty Metal Formed Products segment, of $62 million in 1997. Specialty Metal
Formed Products' operating profit for 1997 was reduced by $17 million of
nonrecurring charges.
The Company's export sales approximated $143 million, $142 million and $71
million in 1999, 1998 and 1997, respectively.
F-21
<PAGE> 70
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intersegment transactions represent principally transactions occurring in
the ordinary course of business.
<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>
1999
- -----------------------------
Revenue from external
customers.................. $817,000 $260,000 $241,000 $216,000 $107,000 $ 39,000 $1,680,000
Intersegment revenue......... 9,000 8,000 4,000 -- 1,000 1,000 23,000
Depreciation and
amortization............... 35,000 10,000 12,000 13,000 5,000 2,000 77,000
Segment operating profit..... 112,000 37,000 35,000 41,000 14,000 4,000 243,000
Segment net assets........... 602,000 289,000 329,000 422,000 140,000 -- 1,782,000
Capital expenditures......... 87,000 9,000 12,000 19,000 7,000 -- 134,000
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
</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)
1999 1998 1997
---------------------- ---------------------- ----------------------
SALES NET ASSETS SALES NET ASSETS SALES NET ASSETS
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Europe.......................... $165,000 $182,000 $149,000 $171,000 $100,000 $111,000
Australia....................... 23,000 14,000 18,000 10,000 -- --
Other North America............. 12,000 18,000 16,000 12,000 -- --
-------- -------- -------- -------- -------- --------
Total foreign................. $200,000 $214,000 $183,000 $193,000 $100,000 $111,000
======== ======== ======== ======== ======== ========
</TABLE>
F-22
<PAGE> 71
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)
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
REVENUE FROM EXTERNAL CUSTOMERS
Revenue from external customers for reportable segments.... $1,680,000 $1,672,000 $922,000
TriMas sales prior to acquisition.......................... -- (36,000) --
---------- ---------- --------
Total net sales.................................. $1,680,000 $1,636,000 $922,000
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
OPERATING PROFIT
Total operating profit for reportable segments............. $ 243,000 $ 252,000 $119,000
General corporate expense.................................. (24,000) (24,000) (22,000)
Gain (loss) on disposition of businesses................... 14,000 (41,000) --
Charge for asset impairment................................ (18,000) -- --
MSTI earnout............................................... -- 25,000 5,000
TriMas operating profit prior to acquisition............... -- (5,000) --
---------- ---------- --------
Total operating profit........................... $ 215,000 $ 207,000 $102,000
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
NET ASSETS AT DECEMBER 31
Total net operating assets for reportable segments......... $1,782,000 $1,768,000 $588,000
Corporate net assets....................................... 91,000 72,000 372,000
---------- ---------- --------
Total net assets................................. $1,873,000 $1,840,000 $960,000
========== ========== ========
</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. Included in corporate net
assets for 1999 were capital expenditures of $2 million.
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
DEPRECIATION AND AMORTIZATION
Segment totals............................................. $ 77,000 $ 75,000 $ 38,000
Adjustments................................................ 6,000 9,000 5,000
---------- ---------- --------
Consolidated totals.............................. $ 83,000 $ 84,000 $ 43,000
========== ========== ========
</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> 72
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Other, net:
Net realized and unrealized gains from
marketable securities....................... $ -- $ 3,330 $13,130
Interest income................................ 2,170 4,180 3,440
Other, net..................................... (7,390) (5,450) 830
------- ------- -------
$(5,220) $ 2,060 $17,400
======= ======= =======
</TABLE>
INCOME TAXES:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes:
Domestic...................................... $123,610 $115,630 $173,410
Foreign....................................... 15,860 28,890 16,880
-------- -------- --------
$139,470 $144,520 $190,290
======== ======== ========
Provision for income taxes:
Currently payable:
Federal.................................... $ 26,810 $ 28,210 $ 40,290
State and local............................ 5,450 3,950 6,810
Foreign.................................... 5,220 15,000 10,430
Deferred:
Federal.................................... 7,390 590 18,840
Foreign.................................... 2,170 (700) (1,320)
-------- -------- --------
Income taxes............................... $ 47,040 $ 47,050 $ 75,050
======== ======== ========
</TABLE>
The components of deferred taxes at December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Inventories............................................ $ 2,920 $ 2,990
Accrued liabilities and other long-term liabilities.... 47,880 51,910
Expected capital loss benefit from disposition of
businesses.......................................... 8,900 7,910
-------- --------
59,700 62,810
-------- --------
Deferred tax liabilities:
Property and equipment................................. 111,680 101,640
Other, principally equity investments in affiliates.... 26,710 26,170
-------- --------
138,390 127,810
-------- --------
Net deferred tax liability............................... $ 78,690 $ 65,000
======== ========
</TABLE>
F-24
<PAGE> 73
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:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
U.S. federal statutory rate......................... 35% 35% 35%
------- ------- -------
Tax at U.S. federal statutory rate.................. $48,810 $50,580 $66,600
State and local taxes, net of federal tax benefit... 3,540 2,570 4,430
Higher effective foreign tax rate................... 1,840 4,210 3,200
Non-taxable additional consideration from previously
sold business..................................... -- (8,190) (1,710)
Disposition of businesses........................... (7,870) (2,400) --
Amortization in excess of tax, net.................. 2,950 1,390 (760)
Other, net.......................................... (2,230) (1,110) 3,290
------- ------- -------
Income taxes...................................... $47,040 $47,050 $75,050
======= ======= =======
</TABLE>
A provision has not been made at December 31, 1999 for U.S. or additional
foreign withholding taxes on approximately $93 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.
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:
CASH AND CASH INVESTMENTS
The carrying amount reported in the balance sheet for cash and cash
investments approximates fair value.
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 futures contracts and interest rate swap
F-25
<PAGE> 74
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 futures contracts increases in value as a
result of decreases in the underlying index and decreases in value when the
underlying index increases. The contracts are financial instruments (with
off-balance sheet market risk), as they are required to be settled in cash. The
Company's market risk is subject to the price differential between the contract
market value and contract cost. The average monthly notional amount of 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, 1999 or 1998.
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 receivable of $13 million at December
31, 1999. Exposure to credit loss occurs 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, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and cash investments.................... $ 4,490 $ 4,490 $ 29,390 $ 29,390
Notes receivable and other assets............ $ 4,180 $ 4,560 $ 5,290 $ 4,480
Long-term debt:
Bank debt.................................. $1,039,890 $1,039,890 $1,051,260 $1,051,260
4 1/2% Convertible Subordinated
Debentures.............................. $ 305,000 $ 225,700 $ 310,000 $ 251,100
Other long-term debt....................... $ 28,000 $ 27,850 $ 26,980 $ 25,580
</TABLE>
F-26
<PAGE> 75
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>
1999:
- ------------------------------------------
Net sales................................. $395,220 $399,300 $436,510 $448,660
Gross profit.............................. $103,980 $ 99,340 $113,690 $116,020
Net income................................ $22,260 $ 20,200 $ 26,110 $ 23,860
Per common share:
Basic........................... $.54 $.49 $.64 $.58
Diluted......................... $.45 $.41 $.51 $.47
Market price per common share:
High.................................... $17 1/16 $17 11/16 $17 3/4 $17
Low..................................... $10 5/8 $15 9/16 $15 1/8 $14
1998:
- ------------------------------------------
Net sales................................. $401,760 $399,500 $433,480 $400,760
Gross profit.............................. $104,960 $100,150 $117,070 $104,390
Net income................................ $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
</TABLE>
In the first quarter and second quarter of 1999, the Company recognized
non-cash charges aggregating approximately $6 million pre-tax to reflect the
other than temporary decline in value of equity affiliates of the Company.
In 1999, the Company completed the sale of its aftermarket-related and
vacuum metalizing businesses. These transactions resulted in a pre-tax gain of
approximately $26 million, of which approximately $10 million was recognized in
the first quarter 1999 and approximately $16 million in the second quarter 1999.
In the second quarter 1999, the Company recorded a non-cash pre-tax charge
of approximately $17.5 million related to impairment of certain long-lived
assets, which included its hydroforming equipment and related intellectual
property.
In the fourth quarter 1999, the Company recognized pre-tax charges
aggregating approximately $12 million, principally related to the closure of a
plant and the sale of a business.
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 a charge (approximately
$41 million pre-tax) principally related to the disposition of certain
businesses. This charge more than offset the gain related to additional
consideration received by the Company in the second quarter of 1998 resulting
from the disposition of MascoTech Stamping Technologies, Inc. in 1996.
F-27
<PAGE> 76
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, 1999
Schedules, as required for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
II. Valuation and Qualifying Accounts....................... F-29
</TABLE>
F-28
<PAGE> 77
MASCOTECH, INC.
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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:
1999........................ $3,410,000 $1,080,000 $ 20,000 $ 220,000 $4,290,000
========== ========== ========== ========== ==========
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
========== ========== ========== ========== ==========
</TABLE>
NOTES:
(A) Allowance of companies acquired, and other adjustments, net.
(B) Deductions, representing uncollectible accounts written off, less
recoveries of accounts written off in prior years.
F-29
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.i Restated Certificate of Incorporation of Masco Corporation
and amendments thereto.(5)
3.ii Bylaws of Masco Corporation, as amended.(7)
4.a.i Indenture dated as of December 1, 1982 between Masco
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee,(3) and Directors' resolutions establishing Masco
Corporation's: (i) 9% Notes Due October 1, 2001(3), (ii)
6 1/8 Notes Due September 15, 2003(7), (iii) 7 1/8%
Debentures Due August 15, 2013(7), (iv) 6.625% Debentures
Due April 15, 2018(7), (v) 5.75% Notes Due 2008(7) and (vi)
7 3/4% Debentures Due August 1, 2029. (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. (filed herewith)
4.a.iii Supplemental Indenture dated as of July 26, 1994 between
Masco Corporation and The First National Bank of Chicago.
(filed herewith)
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(3) and Amendment No. 1 dated April 30, 1997(4) and
Amendment dated as of March 30, 1998.(5)
4.c Rights Agreement dated as of December 6, 1995, between Masco
Corporation and The Bank of New York, as Rights Agent(1) and
Amendment No. 1 to Rights Agreement dated as of September
23, 1998.(6)
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; 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;
Supplemental Indenture dated as of August 5, 1994 among
MascoTech, Inc. and The First National Bank of Chicago, as
Trustee (7); Directors' resolutions establishing Masco
Industries, Inc.'s 4 1/2% Convertible Subordinated
Debentures Due 2003(7); and Form of Note. (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.(4)
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
(Arranger) and Commerzbank International S.A. (Agent).(7)
4.g DM 400,000,000 Term Loan Facility dated July 9, 1997 among
Masco GmbH, as Borrower, Masco Corporation, as Guarantor,
Commerzbank Aktiengesellschaft (Arranger) and Commerzbank
International S.A. (Agent) for the banks party thereto, and
Amendment dated as of June 12, 1998 to Credit Agreement.(7)
4.h $1,000,000,000 Amended and Restated Credit Agreement dated
as of March 20, 2000 among Masco Corporation, the banks
party thereto, Commerzbank Aktiengesellschaft and Bank of
America, N.A., as syndication agents, and Bank One, NA, as
administrative agent. (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.
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.a Assumption and Indemnification Agreement dated as of May 1,
1984 between Masco Corporation and Masco Industries, Inc.
(now known as MascoTech, Inc.).(1)
10.b Corporate Services Agreement and Annex dated as of January
1, 1987 between Masco Corporation and Masco Industries, Inc.
(now known as MascoTech, Inc.), Amendment No. 1 dated as of
October 31, 1996, and related letter agreements dated
January 22, 1998 and June 17, 1998. (all filed herewith)
10.c Corporate Opportunities Agreement dated as of May 1, 1984
between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.)(1) and Amendment No. 1 dated as of
October 31, 1996.(2)
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.(7)
10.e 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.(7)
10.f Registration Agreement dated as of March 31, 1993, between
Masco Corporation and Masco Industries, Inc. (now known as
MascoTech, Inc.).(7)
NOTE: Exhibits 10.g through 10.q constitute the management
contracts and executive compensatory plans or arrangements
in which certain of the Directors and executive officers of
the Company participate.
10.g Masco Corporation 1991 Long Term Stock Incentive Plan
(Restated July 10, 1998).(7)
10.h Masco Corporation 1988 Restricted Stock Incentive Plan
(Restated December 6, 1995).(1)
10.i Masco Corporation 1988 Stock Option Plan (Restated September
22, 1999). (filed herewith)
10.j Masco Corporation Supplemental Executive Retirement and
Disability Plan. (filed herewith)
10.k Masco Corporation 1997 Annual Incentive Compensation
Plan.(4)
10.l Masco Corporation 1997 Non-Employee Directors Stock Plan (as
amended July 10, 1998).(7)
10.m MascoTech, Inc. 1991 Long Term Stock Incentive Plan
(Restated July 15, 1998).(7)
10.n MascoTech, Inc. 1984 Restricted Stock Incentive Plan
(Restated December 6, 1995).(1)
10.o MascoTech, Inc. 1984 Stock Option Plan (Restated September
21, 1999). (filed herewith)
10.p MascoTech, Inc. 1997 Non-Employee Directors Stock Plan.(4)
10.q Description of the Masco Corporation Program for Estate,
Financial Planning and Tax Assistance.(4)
10.r 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.(3)
10.s Stock Purchase Agreement dated as of October 15, 1996
between Masco Corporation and MascoTech, Inc.(2)
10.t Registration Rights Agreement among Masco Corporation and
the Investors listed therein dated as of August 31, 1999.(8)
12 Computation of Ratio of Earnings to Fixed Charges. (filed
herewith)
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
21 List of Subsidiaries. (filed herewith)
23.a Consent of PricewaterhouseCoopers LLP relating to Masco
Corporation's Consolidated Financial Statements and
Financial Statement Schedules. (filed herewith)
23.b Consent of PricewaterhouseCoopers LLP relating to MascoTech,
Inc.'s Consolidated Financial Statements and Financial
Statement Schedule. (filed herewith)
27.a Financial Data Schedule as of and for the year ended
December 31, 1999. (filed herewith)
27.b Financial Data Schedule as of and for the year-to-date
period ended March 31, 1998, amended for transactions
accounted for as poolings of interests in the third quarter
of 1999. (filed herewith)
27.c Financial Data Schedule as of and for the year ended
December 31, 1997, restated for transactions accounted for
as poolings of interests in the third quarter of 1999.
(filed herewith)
</TABLE>
- ---------------
(1) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's
Current Report on Form 8-K dated November 13, 1996.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's
Annual Report on Form 10-K for the year ended December 31, 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, 1999.
<PAGE> 1
EXHIBIT 4.a.i.
RESOLUTIONS OF THE PRICING COMMITTEE OF
THE BOARD OF DIRECTORS
OF MASCO CORPORATION
JULY 29, 1999
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, 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 "7
3/4% Debentures Due August 1, 2029".
2. The aggregate principal amount of Securities of such series
which may be authenticated and delivered under the Indenture is limited
to Three Hundred Million Dollars ($300,000,000), 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 1, 2029.
4. The Securities of such series shall bear interest from
August 3, 1999 at the rate of 7 3/4% per annum, payable semi-annually
on February 1 and August 1 of each year commencing on February 1, 2000,
until the principal thereof is paid or made available for payment. The
January 15 or July 15 (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.
<PAGE> 2
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 July 29, 1999 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 $293,766,000 after an underwriting discount of
$2,625,000.
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), $300,000,000 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 Statement on Form S-3 (No. 33-56043), but
with such changes and insertions therein as are appropriate to conform the
-2-
<PAGE> 3
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
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
-3-
<PAGE> 4
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).
Dated: July 29, 1999
/s/ Richard A. Manoogian
------------------------
Richard A. Manoogian
/s/ Wayne B. Lyon
-----------------
Wayne B. Lyon
/s/ John A. Morgan
------------------
John A. Morgan
-4-
<PAGE> 5
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 3/4% Debenture Due August 1, 2029
REGISTERED CUSIP No. 574599AT3
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 August 1, 2029,
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 1 and August 1 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 1 or
August 1, 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 January
15 or July 15, as the case may be, and before the following February 1 or August
1, this Debenture shall bear interest from such February 1 or August 1;
provided, however, that if the Company shall default in the payment of interest
on such February 1 or August 1, then this Debenture shall bear interest from the
next preceding February 1 or August 1 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
February 1 or August 1 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 January 15 or July 15, as the case may be, next
preceding such February 1 or August 1, whether or not such January 15 or July 15
is a
<PAGE> 6
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]***
<PAGE> 7
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: August 3, 1999
Masco Corporation
By________________________
Chairman of the Board
Attest
By________________________
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
<PAGE> 8
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 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 7 3/4% Debentures Due August 1, 2029 of the Company, limited
in aggregate principal amount to $300,000,000.
In case an Event of Default with respect to the 7 3/4% Debentures Due
August 1, 2029 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,
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
<PAGE> 9
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 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.
<PAGE> 10
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]***
<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 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.
<PAGE> 1
EXHIBIT 4.a.ii
AGREEMENT OF APPOINTMENT
AND
ACCEPTANCE OF SUCCESSOR TRUSTEE
THIS AGREEMENT dated as of July 25, 1994 (the "Agreement"), is among
Masco Corporation (the "Company"), Morgan Guaranty Trust Company of New York
("Morgan") and The First National Bank of Chicago ("First Chicago").
WHEREAS, Section 6.10 of the Indenture dated as of December 1, 1982
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 6.10 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 6.11 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.
2. Pursuant to Section 6.10 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.
<PAGE> 2
3. First Chicago hereby represents that it is qualified and eligible
under Article Six 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 6.11 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 6.11 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 6.10 and 6.11 of the Indenture. Such notice
shall be in the form attached hereto as Exhibit A.
-2-
<PAGE> 3
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> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and acknowledged as of the date first written above.
MASCO CORPORATION
By:/s/ Gerald Bright
-----------------
Name: Gerald Bright
Title: Vice President
[Seal]
Attest:
/s/ Eugene A. Gargaro, Jr.
- --------------------------
Secretary
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as resigning
Trustee
By:/s/David K. Leverich
--------------------
Name: David K. Leverich
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/ Jamie Arlow
- ---------------
Trust Officer
-4-
<PAGE> 5
State of Michigan)
) ss
County of Wayne)
On the 22nd day of July, 1994, before me personally came Gerald Bright,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of Masco Corporation, 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
-----------------------
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 22nd day of July, 1994, before me personally came David K.
Leverich, 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
-----------------------
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> 6
State of Illinois)
) ss
County of Cook )
On the 22nd day of July, 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/ C. J. Bertelson
---------------------
C. J. Bertelson
Notary Public
State of Illinois
My Comm Exp.: Sept. 1, 1997
[NOTARIAL SEAL]
-6-
<PAGE> 7
EXHIBIT A
NOTICE OF RESIGNATION OF TRUSTEE
AND
APPOINTMENT OF SUCCESSOR TRUSTEE
TO THE HOLDERS OF THE FOLLOWING SECURITIES OF MASCO CORPORATION:
9% NOTES DUE APRIL 15, 1996
9% NOTES DUE OCTOBER 1, 2001
6% NOTES DUE JUNE 15, 1995
6% NOTES DUE SEPTEMBER 15, 1999
7% DEBENTURES DUE AUGUST 15, 2013
6% NOTES DUE SEPTEMBER 15, 2003
NOTICE IS HEREBY GIVEN THAT, PURSUANT TO SECTIONS 6.10 AND 6.11 OF THE
INDENTURE (THE "INDENTURE") DATED AS OF DECEMBER 1, 1982 BETWEEN MASCO
CORPORATION (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 OR 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: JULY 25, 1994
MASCO CORPORATION MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
<PAGE> 1
EXHIBIT 4.a.iii
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE, dated as of July 26, 1994, between Masco
Corporation, 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 December 1,
1982 with Morgan Guaranty Trust Company (the "Indenture");
WHEREAS, the Trustee is the successor trustee under the Indenture; and
WHEREAS, Section 9.01(e) 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 6.10 of the Indenture shall be amended by inserting the
following as a new subparagraph (e):
"(e) Notwithstanding the provisions of Section 6.12, 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 6.11."
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> 2
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture
to be executed and acknowledged as of the date first written above.
MASCO CORPORATION
By:/s/ Gerald Bright
-----------------
Name: Gerald Bright
Title: Vice President
[Seal]
Attest:
/s/ Eugene A. Gargaro, Jr.
- --------------------------
Secretary
THE FIRST NATIONAL BANK
OF CHICAGO
By:/s/ R. D. Manella
-----------------
Name: R. D. Manella
Title: Vice President
[Seal]
Attest:
/s/ Jamie Arlow
- ---------------
Trust Officer
State of Michigan)
) ss
County of Wayne)
On the 22nd day of July, 1994, before me personally came Gerald Bright,
to me known, who, being by me duly sworn, did depose and say that he is a Vice
President of Masco Corporation, 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
---------------------
Nancy S. Steinrock
Notary Public
Wayne County, Michigan
My Comm. Exp.: Nov. 9, 1994
[NOTARIAL SEAL]
-2-
<PAGE> 3
State of Illinois)
) ss
County of Cook )
On the 22nd day of July, 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/ C. J. Bertelson
---------------------------------
C. J. Bertelson
Notary Public
State of Illinois
My Comm. Exp.: Sept. 1, 1997
[NOTARIAL SEAL]
-3-
<PAGE> 1
EXHIBIT 4.d
Temporary Certificate - Exchangeable for Definitive Engraved
Certificate - When Ready for Delivery
MASCOTECH, INC.
4 1/2% Convertible Subordinated Debenture Due 2003
REGISTERED CUSIP No. 574670 AB 1
No. TR
MascoTech, Inc., 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 __________________ or registered assigns, at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, the principal sum of ____________________________ Dollars on December 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 June 15 and December 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 June 15 and
December 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 January
21, 1994, until payment of said principal sum has been made or duly provided
for. Notwithstanding the foregoing, if the date hereof is after June 1 or
December 1, as the case may be, and before the following June 15 or December 15,
this Debenture shall bear interest from such June 15 or December 15; provided,
however, that if the Company shall default in the payment of interest on such
June 15 or December 15, then this Debenture shall bear interest from the next
preceding June 15 or December 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 January 21, 1994. The interest so payable on any June 15 or
December 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 June 1 or December 1, as the case may be, next preceding such
June 15 or December 15, whether or not such June 1 or December 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.
<PAGE> 2
IN WITNESS WHEREOF, MascoTech, Inc. 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: ______________
MascoTech, Inc.
By: Richard Manoogian
Chairman of the Board
Attest: Eugene A. Gargaro, Jr.
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
2
<PAGE> 3
REVERSE OF DEBENTURES
MASCOTECH, INC.
4 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2003
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 November 1, 1986 (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 provision (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 4 1/2% Convertible Subordinated Debentures Due
2003 of the Company, limited in aggregate principal amount to $345,000,000.
Subject to the provisions of the Indenture, the holder of this
Debenture is entitled, at such holder's option, at any time on or after March
22, 1994 and prior to December 15, 2003 (except that, in case this Debenture or
any portion hereof shall be called for redemption, such right shall terminate
with respect to this Debenture or portion hereof, as the case may be, so called
for redemption at the close of business on the last business day preceding the
date fixed for redemption as provided in the Indenture, unless the Company shall
default in the payment due upon redemption thereof), to convert the principal
amount of this Debenture (or any portion hereof which is $1,000 or an integral
multiple thereof), into shares of Common Stock of the Company (calculated to the
nearest 1/100th of a share), as said shares shall be constituted at the Date of
Conversion, at the Conversion Price of $31.00 principal amount of Debentures for
each share of Common Stock, or at the adjusted Conversion Price in effect at the
Date of Conversion determined as provided in the Indenture, upon surrender of
this Debenture, together with the conversion notice hereon duly executed, to the
Company at the designated office or agency of the Company in the Borough of
Manhattan, The City of New York, accompanied (if so required by the Company) by
instruments of transfer, in form satisfactory to the Company and to the Trustee,
duly executed by the holder or by such holder's duly authorized attorney in
writing. Such surrender shall, if made during any period beginning at the close
of business on a record date and ending at the opening of business on the
interest payment date next following such record date (unless this Debenture or
the portion being converted shall have been called for redemption on a
redemption date during such period) also be accompanied by payment in New York
Clearing House funds or other funds acceptable to the Company of any amount
equal to the interest payable on such interest payment date on the principal
amount of this Debenture then being surrendered for conversion. Except as
aforesaid no adjustment is to be made on conversion for interest accrued hereon
of for dividends on shares of Common Stock issued on conversion. The Company is
not required to issue fractional shares upon any such conversion, but shall make
adjustment therefor in cash on the basis of the market value of such fractional
interest as provided in the Indenture.
3
<PAGE> 4
The indebtedness evidenced by the Debentures is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of the principal of (and premium, if any)
and interest on all Senior Indebtedness as defined in the Indenture, and this
Debenture is issued subject to such provisions and each holder of this
Debenture, by accepting the same, agrees to and shall be bound by such
provisions, and authorizes the Trustee in such holder's behalf to take such
action as may be necessary or appropriate to effectuate as between the holders
of the Debentures and the holders of Senior Indebtedness the subordination as
provided in the Indenture and appoints the Trustee such holder's
attorney-in-fact for such purpose.
In case an Event of Default with respect to the 4 1/2% Convertible
Subordinated Debentures Due 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 or premium thereon
payable in any coin or currency other than that hereinbefore provided, or impair
the right to convert the 4 1/2% Convertible Subordinated Debentures Due 2003
into Common Stock on the terms defined in the Indenture, 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, or modify any of the provisions
of the 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 principal amount of
Securities of all series to be affected, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Securities so affected then outstanding. It is also provided in the
Indenture that, with respect to certain defaults or Events of Default regarding
the Securities of any series, prior to any declaration accelerating the maturity
of such Securities, the holders of a majority in aggregate principal amount of
the Securities of such series at the time outstanding (or, in the case of
certain defaults or Events of Default, all the Securities) may on behalf of the
holders of all of the Securities of such series (or all the Securities, as the
case may be) waive any such past default or Event of Default under the Indenture
and its consequences except a default in the payment of principal of, premium,
if any, or interest, if any, on any of the Securities. Any such consent or
waiver by the holder of this 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
4
<PAGE> 5
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 integral multiple of $1,000. In the manner and
subject to the limitations provided in the Indenture, but without the payment of
any charge (except for any tax or other governmental charge imposed in
connection therewith), Debentures may be exchanged for an equal aggregate
principal amount of Debentures of other authorized denominations at the office
or agency of the Company for such exchange in the Borough of Manhattan, The City
of New York or at such other location or locations as may be provided for
pursuant to the Indenture.
The Debentures may be redeemed at the option of the Company as a whole,
or from time to time in part, on any date on or after December 22, 1996 and
prior to maturity, upon mailing a notice of such redemption not less than thirty
nor more than sixty days prior to the date fixed for redemption to the holders
of Debentures at their last registered addresses, all as provided in the
Indenture, at the following optional redemption prices (expressed in percentages
of the principal amount to be redeemed) together in each case with accrued
interest to the date fixed for redemption; provided, however, that if the date
fixed for redemption of any Debenture is an interest payment date, then the
regular semi-annual payment of interest becoming due on such date shall be
payable to the registered holder of such Debenture at the close of business on
the applicable record date.
If redeemed during the twelve-month period beginning
December 15.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1996.....................................................................103.00%
1997.....................................................................102.50%
1998.....................................................................102.00%
1999.....................................................................101.50%
2000.....................................................................101.00%
2001.....................................................................100.50%
2002.....................................................................100.00%
</TABLE>
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 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
5
<PAGE> 6
of such holder shall, to the extent of the sum or sums paid, effectually satisfy
and discharge liability for moneys payable on this Debenture.
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 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.
---------------------------------
The following abbreviations, when used in the inscription on the face
of 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.
---------------------------------
6
<PAGE> 7
I or we assign and transfer this Security to
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
----------------------------------------------------
| |
| |
----------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------------------------
and irrevocably appoint
- --------------------------------------------------------------------------------
to transfer this Security on the books of the Company. The agent may substitute
another to act for him
Dated Signed:
-------------------------------- ----------------------------
- --------------------------------------------------------------------------------
(Sign exactly as name appears on the other side of this Security)
CONVERSION NOTICE
TO MASCOTECH, INC.:
The undersigned owner of this Debenture hereby irrevocably exercises
the option to convert this Debenture into shares of Common Stock of the Company
in accordance with the terms of the indenture referred to in this Debenture, and
directs that the shares issuable and deliverable upon the conversion together
with any check in payment for fractional shares and any Debentures representing
any unconverted principal amount hereof, be issued and delivered to the
registered holder hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect hereto. Any amount
required to be paid by the undersigned on account of interest accompanies this
Debenture.
Dated:
-------------------------------- -----------------------------------
Signature
Fill in for registration of shares of Common Stock and Debentures if to be
issued otherwise than to the registered holder.
- -------------------------- Social Security or other Taxpayer Identifying Number
(Name)
- -------------------------- ----------------------------------------------------
(Address)
- ---------------------------------------------------------
Please print name and address (including zip code number)
7
<PAGE> 1
EXHIBIT 4.h
$1,000,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF
MARCH 20, 2000
AMONG
MASCO CORPORATION
THE BANKS PARTY HERETO
COMMERZBANK AKTIENGESELLSCHAFT, AS SYNDICATION AGENT
BANK OF AMERICA, N.A., AS SYNDICATION AGENT
AND
BANK ONE, NA,
AS ADMINISTRATIVE AGENT
BANK ONE CAPITAL MARKETS, INC.
LEAD ARRANGER AND SOLE BOOKRUNNER
<PAGE> 2
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 20, 2000 is among
MASCO CORPORATION and certain of its Subsidiaries as borrowers, the BANKS party
hereto as lenders, COMMERZBANK AKTIENGESELLSCHAFT and BANK OF AMERICA, N.A., as
Syndication Agents, and BANK ONE, NA, as administrative agent, and amends and
restates in its entirety that certain Credit Agreement dated as of August 6,
1999 among Masco Corporation, the banks party thereto and Bank One, NA (f/k/a/
The First National Bank of Chicago) (the "Existing Credit Agreement"). The
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"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.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Company) duly completed by such Bank.
"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
Company 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 Bank One, NA in its capacity as administrative agent for
the Banks hereunder, and its successors in such capacity.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Banks, as reduced from time to time pursuant to the terms hereof.
"Agreed Currencies" means (i) Dollars, (ii) euros, British Pounds
Sterling, German Deutschmarks, French Francs, Belgian Francs, Dutch Guilders,
Spanish Pesetas, Italian Lira and Danish Krone, and (iii) any other currency
which the Borrower requests the Agent to include as an Agreed Currency hereunder
and which is acceptable to all of the Banks. If, with respect to any Agreed
Currency, (x) currency control or other exchange regulations are imposed in the
country in which such currency is issued with the result that different types of
such currency are introduced, (y) such currency is, in the determination of the
Agent, no longer readily available or freely traded or deposits in such currency
are no longer customarily offered to banks in the London interbank market, or
(z) in the determination of the Agent, an Equivalent Amount of such currency is
not readily calculable, the Agent shall promptly notify the Banks, the Company
and any Borrower with Loans outstanding in such currency, and such currency
shall no longer be an Agreed Currency until such time as all of the Banks agree
to reinstate such currency
<PAGE> 3
as an Agreed Currency and promptly, but in any event within five Eurocurrency
Business Days of receipt of such notice from the Agent, the relevant Borrowers
shall repay all Loans in such affected currency or convert such Loans into Loans
in Dollars or another Agreed Currency, subject to the other terms set forth in
Article II. For the purposes of this definition, each of the specific currencies
referred to in clause (ii), above, shall mean and be deemed to refer to the
lawful currency of the jurisdiction referred to in connection with such
currency, e.g., "Danish Krone" means the lawful currency of Denmark.
"Agreement," when used with reference to this Agreement, means this
Amended and Restated Credit Agreement dated as of March 20, 2000, as amended
from time to time after the date hereof.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Floating Rate Loans, its Domestic Lending Office and (ii) in the
case of its Eurocurrency Loans, its Eurocurrency Lending Office.
"Applicable Margin" means with respect to any Eurocurrency Loan,
Floating Rate Loan or the facility fees payable under Section 2.07, as the case
may be at any time, the percentage which is applicable at such time as set forth
in the Pricing Schedule.
"Approximate Equivalent Amount" of any currency with respect to any
amount of Dollars shall mean the Equivalent Amount of such currency with respect
to such amount of Dollars on or as of such date, rounded up to the nearest
amount of such currency as determined by the Agent from time to time.
"Arranger" means Banc One Capital Markets, Inc.
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Bank One" means Bank One, NA (Main office Chicago), (f/k/a The First
National Bank of Chicago), a national banking association.
"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 a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrowers" means the Company and the Subsidiary Borrowers, and
"Borrower" means any of them, as the context may require.
"Borrowing" has the meaning set forth in Section 1.03.
"Commitment" means (i) with respect to any Bank listed on the
Commitment Schedule, the amount set forth opposite the name of such Bank on the
Commitment Schedule, or (ii) with respect to any Assignee, the amount of the
transferor Bank's Commitment assigned to such Assignee pursuant to Section
9.06(c), in each case as such amount may be reduced from time to time pursuant
to Section 2.08 or 2.09 or changed as a result of an assignment pursuant to
Section 9.06(c).
"Commitment Percentage" means at any date of determination, with
respect to any Bank, that percentage which the Commitment of such Bank then
constitutes of the Aggregate Commitment or, if the Commitments have expired or
been terminated, that percentage which the Commitment of such Bank constituted
of the Aggregate Commitment immediately prior to such expiration or
cancellation.
2
<PAGE> 4
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Company" means Masco Corporation, a Delaware corporation, and its
successors.
"Company's 1998 Form 10-K" means the Company's annual report on Form
10-K for the year ended December 31, 1998, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
"Company's Equity Securities" means shares of any class of the
Company's capital stock or options, warrants or other rights to acquire such
shares.
"Computation Date" is defined in Section 2.10(c).
"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 Company
reflected in such Consolidated Net Worth exceeds $250,000,000.
"Consolidated Current Assets" means at any date the consolidated
current assets of the Company and its Consolidated Subsidiaries determined as of
such date.
"Consolidated Debt" means at any date the Debt of the Company 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 Company 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 Company or a Consolidated Subsidiary.
"Consolidated Net Worth" means at any date the consolidated
shareholders' equity of the Company 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 Company 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 Company 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 Company's board of
directors who either (i) is a member of such board as of the Effective Date 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.
"Conversion/Continuation Notice" is defined in Section 2.03(e).
3
<PAGE> 5
"Cost Rate" means:
1. The cost of compliance with existing requirements of the Bank of
England and/or the Financial Services Authority (or any authority which
replaces all or any of their functions) in respect of Borrowings
denominated in British Pounds Sterling will be calculated by the Agent
in relation to each Loan on the basis of rates supplied by the Agent by
reference to the circumstances existing on the first day of each
Interest Period in respect of such Loan and, if any such Interest
Period exceeds three months, at three calendar monthly intervals from
the first day of such Interest Period during its duration in accordance
with the following formula:
AB +C(B-D) + E x 0.01 per cent per annum
---------------------
100 - (A+C)
Where:
A. is the percentage of eligible liabilities (assuming these
to be in excess of any stated minimum) which the Agent is from
time to time required to maintain as an interest free cash
ratio deposit with the Bank of England to comply with cash
ratio requirements.
B. is the percentage rate per annum equal to the Eurocurrency
Reference Rate established for such Loan without taking into
consideration the addition of the Cost Rate as specified in
such definition.
C. is the percentage of eligible liabilities which the Agent
is required from time to time to maintain as interest bearing
special deposits with the Bank of England.
D. is the percentage rate per annum payable by the Bank of
England to the Agent on interest bearing special deposits.
E. is the rate payable by the Agent to the Financial Services
Authority pursuant to the Fees Regulations (but, for this
purpose, the figure at paragraph [2.02b]/[2.03b] of the Fees
Regulations shall be deemed to be zero) and expressed in
pounds per (pound)1,000,000 of the Fee Base of the Agent.
2. For the purposes of this definition:
(a) "eligible liabilities" and "special deposits" shall bear the
meanings ascribed to them from time to time under or pursuant to the
Bank of England Act 1998 or (as appropriate) by the Bank of England;
(b) "Fees Regulations" shall mean the Banking Supervision (Fees)
Regulations 1998 or such other regulations as may be in force from time
to time in respect of the payment of fees for banking supervision; and
(c) "Fee Base" shall bear the meaning ascribed to it, and shall be
calculated in accordance with, the Fees Regulations.
3. The percentages used in A and C above shall be those required to be
maintained on the first day of the relevant period as determined in
accordance with B above.
4
<PAGE> 6
4. In application of the above formula, A, B, C and D will be included
in the formula as figures and not as percentages e.g. if A is 0.5 per
cent and B is 12 per cent, AB will be calculated as 0.5 x 12 and not as
0.5 per cent x 12 per cent.
5. Calculations will be made on the basis of a 365 day year (or, if
market practice differs, in accordance with market practice).
6. A negative result obtained by subtracting D from B shall be taken as
zero.
7. The resulting figures shall be rounded upwards, if not already such
a multiple, to the nearest whole multiple of one-thirty second of one
percent per annum.
8. Additional amounts calculated in accordance with this definition are
payable at the same time that accrued interest is payable for the
Interest Period to which they relate.
9. The determination of the Cost Rate by the Agent in relation to any
period shall, in the absence of manifest error (provided that the
determination of such Cost Rate is made on a reasonable basis), be
conclusive and binding on all of the parties hereto.
10. The Agent may from time to time, after consultation with the
Company and the Banks, determine and notify to all parties any
amendments or variations which are required to be made to the formula
set out above in order to comply with any requirements from time to
time imposed by the Bank of England or the Financial Services Authority
(or any other authority which replaces all or any of their functions)
in relation to Borrowings denominated in British Pounds Sterling
(including any requirements relating to sterling primary liquidity)
and, any such determination shall, in the absence of manifest error
(provided that such determination is made on a reasonable basis) be
conclusive and binding on all the parties hereto.
"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 (vi) 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 4.04(a) and the related footnotes thereto.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Dollar Amount" of any currency at any date shall mean (i) the amount
of such currency if such currency is Dollars or (ii) the Equivalent Amount if
such currency is any currency other than Dollars.
"Dollars" and "$" shall mean the lawful currency of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Detroit, New York or Chicago are
authorized or required by law to close.
5
<PAGE> 7
"Domestic Lending Office" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent.
"Domestic Subsidiary" means a Subsidiary which is incorporated under
the laws of the United States of America or any state thereof.
"Effective Date" has the meaning set forth in Section 3.01.
"EMU" means Economic and Monetary Union as contemplated in the Treaty
on European Union.
"Environmental Laws" means any and all federal, state and local
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
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" of any currency with respect to any amount of
Dollars at any date shall mean the equivalent in such currency of such amount of
Dollars, calculated on the basis of the arithmetical mean of the buy and sell
spot rates of exchange of the Agent for such other currency at 11:00 a.m.,
London time, on the date on or as of which such amount is to be determined.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Group" means the Company, 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 Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"euro" and/or "EUR" means the euro referred to in Council Regulation
(EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European
Union, or, if different, the then lawful single currency of the member states of
the European Union that participate in the third stage of EMU.
"Eurocurrency" means any Agreed Currency.
"Eurocurrency Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Eurocurrency Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Eurocurrency Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Eurocurrency Lending Office by notice
to the Company and the Agent.
"Eurocurrency Loan" means a Loan to be made by a Bank which is to bear
interest at the Eurocurrency Rate in accordance with the applicable Notice of
Borrowing.
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"Eurocurrency Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"Eurocurrency Payment Office" of the Agent shall mean, for each of the
Agreed Currencies, the office, branch, affiliate or correspondent bank of the
Agent specified as the "Eurocurrency Payment Office" for such currency in
Schedule 1 hereto or such other office, branch, affiliate or correspondent bank
of the Agent as it may from time to time specify to the Company, the relevant
Borrowers and each Bank as its Eurocurrency Payment Office.
"Eurocurrency Rate" means, with respect to a Eurocurrency Loan for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurocurrency
Reference Rate applicable to such Interest Period, divided by (b) one minus the
Eurocurrency Reserve Percentage, plus (ii) the Eurocurrency Margin.
"Eurocurrency Reference Rate" means, with respect to a Eurocurrency
Loan for the relevant Interest Period, the applicable British Bankers'
Association Interest Settlement Rate for deposits in the applicable Agreed
Currency appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two
Eurocurrency Business Days prior to the first day of such Interest Period (or on
the first day of such Interest Period in the case of Eurocurrency Loans
denominated in British Pounds Sterling), and having a maturity equal to such
Interest Period, provided that, (i) if Reuters Screen FRBD is not available to
the Agent for any reason, the applicable Eurocurrency Reference Rate for the
relevant Interest Period shall instead be the applicable British Bankers'
Association Interest Settlement Rate for deposits in the applicable Agreed
Currency as reported by any other generally recognized financial information
service as of 11:00 a.m. (London time) two Eurocurrency Business Days prior to
the first day of such Interest Period (or on the first day of such Interest
Period in the case of Eurocurrency Loans denominated in British Pounds
Sterling), and having a maturity equal to such Interest Period, and (ii) if no
such British Bankers' Association Interest Settlement Rate is available, the
applicable Eurocurrency Reference Rate for the relevant Interest Period shall
instead be the rate determined by the Agent to be the rate at which Bank One
offers to place deposits in the applicable Agreed Currency with first-class
banks in the London interbank market at approximately 11:00 a.m. (London time)
two Eurocurrency Business Days prior to the first day of such Interest Period
(or on the first day of such Interest Period in the case of Eurocurrency Loans
denominated in British Pounds Sterling), in the approximate amount of Bank One's
relevant Eurocurrency Loan and having a maturity equal to such Interest Period,
plus, in each case, for a Loan in Pounds Sterling, the Cost Rate.
"Eurocurrency Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Eurocurrency Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" is defined in the first paragraph of this
Agreement.
"Federal Funds Effective Rate" means, for any day, the interest rate
per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
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<PAGE> 9
such day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Effective Rate for such day shall be
such rate on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such rate
is so published on such next succeeding Domestic Business Day, the Federal Funds
Effective Rate for such day shall be the average rate quoted to Bank One from
three Federal funds brokers of recognized standing selected it on such day on
such transactions as determined by the Agent in its sole discretion.
"Fiscal Quarter" means a fiscal quarter of the Company.
"Fiscal Year" means a fiscal year of the Company.
"Floating Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the Federal Funds Effective
Rate plus 1/2% per annum for such day.
"Floating Rate Loan" means a Loan to be made by a Bank or the Swingline
Lender which is to bear interest at the Floating Rate in accordance with the
applicable Notice of Borrowing or otherwise pursuant to this Agreement.
"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- I by S&P and at least P- I by Moody's or
(iii) time deposits with, including certificates of deposit issued by, any Bank
which was a party to this Agreement on the 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 $500,000,000;
provided in each case that such investment matures within six months from the
date of acquisition thereof by the Company or a Subsidiary.
"Interest Period" means: (1) with respect to each Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter (or such longer or shorter period requested
by the Borrower and acceptable to all of the Banks), as the Borrower may elect
in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Eurocurrency Business Day shall be extended to the next
succeeding Eurocurrency Business Day unless such Eurocurrency Business
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Eurocurrency Business Day,
(b) any Interest Period which begins on the last Eurocurrency
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurocurrency Business Day of a
calendar month, and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date,
(2) with respect to each Floating Rate Borrowing, the period commencing
on the date of such Borrowing and ending 90 days thereafter or other mutually
agreeable period acceptable between Agent and the Borrower; provided that:
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<PAGE> 10
(a) any Interest Period which would otherwise end on a day
which is not a Domestic Business Day shall be extended to the next
succeeding Domestic Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Joinder Agreement" means an agreement substantially in the form
attached hereto as Exhibit E pursuant to which a Subsidiary Borrower agrees to
be bound by the terms and conditions of this Agreement.
"Lending Installation" means, with respect to a Bank or the Agent, the
office, branch, subsidiary or affiliate of such Bank or the Agent with respect
to each Agreed Currency listed on the administrative information sheets provided
to the Agent in connection herewith or otherwise selected by such Bank or the
Agent pursuant to Section 2.17.
"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 Company 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 a loan made by a Bank pursuant to Section 2.01.
"Material Debt" means Debt (other than the Loans) of the Company and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate outstanding principal amount exceeding
$25,000,000.
"Material Plan" has the meaning set forth in Section 6.01(i).
"Moody's" has the meaning set forth in the Pricing Schedule.
"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.
"National Currency Unit" means the unit of currency (other than a euro
unit) of each member state of the European Union that participates in the third
stage of EMU.
"Notes" means any promissory notes of the Borrowers, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrowers to
repay the Loans, or the Swingline Note, as the case may be, and "Note" means any
one of such promissory notes issued hereunder.
"Notice of Borrowing" is defined in Section 2.02.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.06(b).
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"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.
"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.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its Parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"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.
"Refunding Borrowing" means a Borrowing which, after application of the
proceeds thereof, results in no net increase in the aggregate outstanding
principal amount of the Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have
terminated, holding more than 50% of the aggregate unpaid principal amount of
the Loans.
"S&P" has the meaning set forth in the Pricing Schedule.
"Significant Subsidiaries" means any Subsidiary Borrower or 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" 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 Company or by the Company and one or more Subsidiaries or by
one or more Subsidiaries.
"Subsidiary Borrower" means each Wholly-Owned Subsidiary of the Company
incorporated or formed in any jurisdiction other than any State of the United
States of America that has become a party to
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this Agreement by executing and delivering to the Agent a Joinder Agreement and
satisfying each of the conditions precedent set forth therein.
"Swingline Amount" is defined in Section 2.01(b).
"Swingline Lender" means Bank One.
"Swingline Loan" means any borrowing made by the Swingline Lender
pursuant to Section 2.01(b) and, if requested by the Swingline Lender, evidenced
by the Swingline Note.
"Swingline Note" means any promissory note of the Company evidencing
the Swingline Loans, in substantially the same form as Exhibit B hereto, as
amended or modified at the time such Swingline Loan is made to the Company.
"Syndication Agent" shall mean either of the Syndication Agents named
in the first paragraph of this Agreement.
"Termination Date" means the date 364 days after the Effective Date or,
if such day is not a Eurocurrency Business Day, the next preceding Eurocurrency
Business Day.
"Treaty on European Union" means the Treaty of Rome of March 25, 1957,
as amended by the Single European Act 1986 and the Maastricht Treaty (which was
signed at Maastricht on February 7, 1992 and came into force on November 1,
1993, as amended from time to time.
"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.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article 5 to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Agent notifies the Company that the Required Banks wish to amend
Article 5 for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is
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withdrawn or such covenant is amended in a manner satisfactory to the Company
and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to a Borrower pursuant to
Article 2 on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement as "types" of Borrowings either by
reference to the pricing of the Loans comprising such Borrowing (e.g., a
"Eurocurrency Borrowing" is a Borrowing comprised of Eurocurrency Loans) or by
reference to the provisions of Article 2 under which participation therein is
determined (e.g., a "Borrowing" is a Borrowing under Section 2.01(a) in which
all Banks participate in proportion to their Commitments).
ARTICLE 2
THE CREDITS
SECTION 2.01. (a) Borrowings. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make loans to the Company or any
Subsidiary Borrower pursuant to this Section from time to time on and after the
Effective Date to but excluding the Termination Date in any Agreed Currency;
provided that (i) the aggregate principal Dollar Amount of the Loans made by
such Bank at any one time outstanding shall not exceed the amount of its
Commitment at that time, (ii) Floating Rate Loans shall only be made in Dollars,
and (iii) Loans made to Subsidiary Borrowers shall be made only in Agreed
Currencies other than Dollars. Each Borrowing under this Section shall be in an
aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000
(or the Approximate Equivalent Amounts if denominated in an Agreed Currency
other than Dollars, and except that any such Borrowing may be in the aggregate
amount available in accordance with Section 3.02(b)) and shall be made from the
several Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrowers may borrow under this Section, repay, or to the
extent permitted by Section 2.10, prepay Loans and reborrow at any time under
this Section. Amounts repaid pursuant to Section 8.02 shall not be reborrowed
except as provided therein.
(b) Swingline Loans. (i) Subject to the terms and conditions of this
Agreement, the Swingline Lender agrees to make Swingline Loans to the Company or
any Subsidiary Borrower from time to time on any Domestic Business Day (if such
Swingline Loan is denominated in Dollars) or on any Eurocurrency Business Day
(if such Swingline Loan is denominated in an Agreed Currency other than Dollars)
during the period on and after the Effective Date to but excluding the
Termination Date in any Agreed Currency in the aggregate principal Dollar Amount
not to exceed the lesser of (A) $50,000,000 (the "Swingline Amount") and (B) the
unused portion of the Aggregate Commitment as of such Business Day, provided,
however that Swingline Loans to Subsidiary Borrowers shall not be made in
Dollars. Each Swingline Loan shall be in a principal amount of $1,000,000 or any
integral multiple thereof, or if denominated in an Agreed Currency other than
Dollars, the Approximate Equivalent Amount or such other minimum amounts and
multiples as the Swingline Lender shall determine. Each Bank's Commitment shall
be deemed utilized by an amount equal to such Bank's Commitment Percentage of
each Swingline Loan for purposes of determining the amount of Loans required to
be made by such Bank. Each Swingline Loan shall bear interest at the Floating
Rate or such other rate as shall be agreed between the relevant Borrower and the
Swingline Lender at the time such Swingline Loan is made. If any Swingline Loan
made in Dollars is not repaid by the Company on the date when due, each Bank
will make available a Borrowing the proceeds of which will be used to repay the
Swingline Loan.
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(ii) The Swingline Lender may at any time in its sole and absolute
discretion require that any Swingline Loan be refunded by a Borrowing in Dollars
to the Company from the Banks, and upon written notice thereof by the Swingline
Lender to the Agent, the Banks, the relevant Borrower and the Company, the
Company shall be deemed to have requested a Borrowing in an amount equal to the
Dollar Amount of such Swingline Loan and such Borrowing shall be made to refund
such Swingline Loan. Any Swingline Loan outstanding in an Agreed Currency other
than Dollars shall, upon the giving of such notice by the Swingline Lender,
immediately and automatically be converted to and redenominated in Dollars equal
to the Equivalent Amount of each such Swingline Loan determined as of the date
of such conversion. Each Bank shall be absolutely and unconditionally obligated
to fund its Commitment Percentage of such Borrowing or, if applicable, to
purchase a participation interest in the Swingline Loans pursuant to Section
2.01(b)(iii) and such obligation shall not be affected by any circumstance,
including, without limitation, (A) any set-off, counterclaim, recoupment,
defense or other right which such Bank has or may have against the Swingline
Lender, the Agent or the Company or any of its Subsidiaries or anyone else for
any reason whatsoever (including without limitation any failure to comply with
the requirements of Section 3.02, other than the Swingline Lender making a
Swingline Loan when it had actual knowledge of the existence of a Default); (B)
the occurrence or continuance of a Default, subject to Section 2.01(b)(iii); (C)
any adverse change in the condition (financial or otherwise) of the Company or
any of its Subsidiaries; (D) any breach of this Agreement by the Company or any
Subsidiary Borrower or any other Bank; or (E) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing (including
without limitation the Company's failure to satisfy any conditions contained in
Article IV or any other provision of this Agreement, so long as the Swingline
Lender did not have any specific written notice from the Company or a Lender
that the conditions to making a Swingline Loan were not satisfied at the time
such Swingline Loan was made).
(iii) If, for any reason (including without limitation as a result of
the occurrence of a Default with respect to the Company pursuant to Sections
6.01(g) or (h)) Loans may not be made by the Banks as described in Section
2.01(b)(ii), then (A) the relevant Borrower agrees that each Swingline Loan not
paid pursuant to Section 2.01(b)(ii) shall bear interest, payable on demand by
the Swingline Lender, at the rate per annum equal to the sum of 2% plus the
Floating Rate, (B) the Borrowers agree that each Swingline Loan outstanding in
an Agreed Currency other than Dollars shall be immediately and automatically
converted to and redenominated in Dollars equal to the Equivalent Amount of such
Swingline Loan determined as of the date of such conversion, and (C) effective
on the date each such Loan would otherwise have been made, each Bank severally
agrees that it shall unconditionally and irrevocably, without regard to the
occurrence of any Default, in lieu of deemed disbursement of loans, to the
extent of such Bank's Commitment, purchase a participation interest in the
Swingline Loans by paying its Commitment Percentage thereof, provided, however,
that no Bank shall be obligated to purchase such participation in a Swingline
Loan made by the Swingline Lender when it had actual knowledge of the existence
of a Default. Each Bank will immediately transfer to the Swingline Lender, in
same day funds, the amount of its participation. Each Bank shall share based on
its Commitment Percentage in any interest which accrues thereon and in all
repayments thereof. If and to the extent that any Bank shall not have so made
the amount of such participating interest available to the Swingline Lender,
such Bank and the Company severally agree to pay to the Swingline Lender
forthwith on demand such amount together with interest thereon, for each day
from the date of demand by the Swingline Lender until the date such amount is
paid to the Swingline Lender, at (x) in the case of the Company, at the interest
rate specified above and (y) in the case of such Bank, the Federal Funds
Effective Rate for the first three days and at the interest rate specified above
thereafter.
SECTION 2.02. Notice of Borrowing. Each Borrower shall give the Agent
notice substantially in the form of Exhibit F (a "Notice of Borrowing") not
later than 10:00 A.M. (Detroit time) on (x) the date of each Floating Rate
Borrowing, (y) the third Eurocurrency Business Day before each Eurocurrency
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Borrowing in Dollars, and (z) the fourth Eurocurrency Business Day before each
Eurocurrency Borrowing in an Agreed Currency other than Dollars, specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Eurocurrency
Business Day in the case of a Eurocurrency Borrowing,
(b) the aggregate amount and Agreed Currency of such
Borrowing,
(c) whether the Loans comprising such Borrowing are to be
Floating Rate Loans or Eurocurrency Loans, and
(d) in the case of a Eurocurrency Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
The Company shall give the Swingline Lender notice of its request for
each Swingline Loan substantially in the form of Exhibit F-1 (a "Notice of
Swingline Borrowing") not later than 1:00 p.m. Detroit time on the same Business
Day such Swingline Loan in Dollars is requested to be made, and not later than
the time agreed upon by the Company and the Swingline Lender with respect to any
other Swingline Loan. The Agent will make the Swingline Loans available to the
Company at its relevant Eurocurrency Payment Office.
SECTION 2.03. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(b) Not later than 12:00 Noon (Detroit time) on the date of each
Borrowing in Dollars, and not later than 12:00 Noon (London time) on the date of
each Borrowing in an Agreed Currency other than Dollars, each Bank participating
therein shall (except as provided in subsection (c) of this Section) make
available its share of such Borrowing, in Federal or other funds immediately
available in Detroit or London, as the case may be, to the Agent at its relevant
address referred to in Section 9.01 or otherwise specified in writing by the
Agent to the Banks. Unless the Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Agent will make the funds so
received from the Banks available to the relevant Borrower at the Agent's
aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower requesting such Loan is to repay all or any part of an outstanding Loan
from such Bank, such Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available by such Bank
to the Agent as provided in subsection (b) of this Section, or remitted by such
Borrower to the Agent as provided in Section 2.11, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to
the time of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section and the Agent may, in
reliance upon such assumption, make available to the relevant Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made such share available to the Agent, such Bank and the relevant Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount
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together with interest thereon, for each day from the date such amount is made
available to such Borrower until the date such amount is repaid to the Agent, at
(i) in the case of the Borrower, a rate per annum equal to the higher of the
Federal Funds Effective Rate and the interest rate applicable thereto pursuant
to Section 2.06 and (ii) in the case of such Bank, the Federal Funds Effective
Rate. If such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Loan included in such Borrowing
for purposes of this Agreement. Nothing in this Section 2.03(d) shall relieve
such Bank or any other Bank of its obligation to make its share of each
Borrowing available to the Agent in accordance with the terms of this Agreement.
(e) Floating Rate Loans shall continue as Floating Rate Loans unless
and until such Floating Rate Loans are converted into Eurocurrency Loans
pursuant to this Section 2.03(e) or are repaid in accordance with Section 2.10.
Each Eurocurrency Loan shall continue as a Eurocurrency Loan until the end of
the then applicable Interest Period therefor, at which time:
(i) each such Eurocurrency Loan denominated in Dollars shall be
automatically converted into a Floating Rate Loan unless (x)
such Eurocurrency Loan is or was repaid in accordance with
Section 2.10 or (y) the relevant Borrower shall have given the
Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such
Eurocurrency Loan either continue as a Eurocurrency Loan for
the same or another Interest Period or be converted into a
Floating Rate Loan; and
(ii) each such Eurocurrency Loan not denominated in Dollars shall
automatically continue as a Eurocurrency Loan in the same
Agreed Currency with an Interest Period of one month unless
(x) such Eurocurrency Loan is or was repaid in accordance with
Section 2.10 or (y) the relevant Borrower shall have given the
Agent a Conversion/Continuation Notice (as defined below)
requesting that, at the end of such Interest Period, such
Eurocurrency Loan continue as a Eurocurrency Loan for the same
or another Interest Period.
Subject to the terms of Section 2.01(a), the Borrowers may elect from
time to time to convert all or any part of a Loan of any type into any other
type or types of Loans denominated in the same or any other Agreed Currency;
provided that any conversion of any Eurocurrency Loan shall be made on, and only
on, the last day of the Interest Period applicable thereto. The relevant
Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation
Notice") of each conversion or continuation of a Loan not later than 10:00 a.m.
(Detroit time) at least one Domestic Business Day, in the case of a conversion
into or continuation of a Floating Rate Loan, three Eurocurrency Business Days,
in the case of a conversion into or continuation of a Eurocurrency Loan
denominated in Dollars, or four Eurocurrency Business Days, in the case of a
conversion into or continuation of a Eurocurrency Loan denominated in an Agreed
Currency other than Dollars, prior to the date of the requested conversion or
continuation, specifying:
A. the requested date, which shall be a Domestic Business Day
or in the case of a conversion into or continuation of a Eurocurrency
Loan, a Eurocurrency Business Day, of such conversion or continuation,
and
B. the Agreed Currency, amount and type(s) of Loan(s) into
which such Loan is to be converted or continued and, in the case of a
conversion into or continuation of a Eurocurrency Loan, the duration
of the Interest Period applicable thereto.
SECTION 2.04. Noteless Agreement; Evidence of Indebtedness. (a) Each
Bank shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of each Borrower
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to such Bank resulting from each Loan made by such Bank from time to time,
including the amounts of principal and interest payable and paid to such Bank
from time to time hereunder.
(b) The Agent shall also maintain accounts in which it will record (a)
the amount of each Loan made hereunder, the type thereof and the Interest Period
with respect thereto, (b) the amount of any principal or interest due and
payable or to become due and payable from each Borrower to each Bank hereunder
and (c) the amount of any sum received by the Agent hereunder from each Borrower
and each Bank's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (a) and (b) above shall be prima facie evidence of the existence and
amounts of the Loans (including the principal and interest owing) therein
recorded; provided, however, that the failure of the Agent or any Bank to
maintain such accounts or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans (including the principal and
interest owing) in accordance with their terms.
(iv) Any Bank or the Swingline Lender may request that its Loans be
evidenced by a Note. In such event, each Borrower requested by such Bank or the
Swingline Lender shall prepare, execute and deliver to such Bank or Swingline
Lender, as the case may be, a Note payable to the order of such Bank or
Swingline Lender in substantially the form of Exhibit A in the case of any Bank
or the form of Exhibit B in the case of the Swingline Lender. Thereafter, the
Loans evidenced by such Note and interest thereon shall at all times (including
after any assignment pursuant to this Agreement) be represented by one or more
Notes payable to the order of the payee named therein or any assignee pursuant
to this Agreement, except to the extent that any such Bank or assignee
subsequently returns any such Note for cancellation and requests that such Loans
once again be evidenced as described in paragraphs (a) and (b) above.
SECTION 2.05. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.06. Interest Rates. (a) Each Floating Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the
Floating Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or overdue interest on
any Floating Rate Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the Floating Rate for
such day.
(b) Each Eurocurrency Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the Eurocurrency Rate. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of three months after
the first day thereof.
(c) Any overdue principal of or interest on any Eurocurrency Loan shall
bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to the sum of 2% plus the higher of (i) the Eurocurrency Rate
applicable to such Loan prior to its maturity and (ii) the Eurocurrency Rate
which would be applicable to a Eurocurrency Loan to the relevant Borrower
hereunder made on such date for a period of one day (or, if such amount due
remains unpaid more than three Eurocurrency Business Days, then for such other
period of time not longer than six months as the Agent may elect), (or, if the
circumstances described in Section 8.01 shall exist, at a rate per annum equal
to the sum of 2% plus the Floating Rate for such day).
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(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the relevant Borrowers
and the participating Banks by telex or cable of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error (provided that the determination of such amount or amounts is
made on a reasonable basis).
SECTION 2.07. Facility Fees and Utilization Fees. The Company shall pay
to the Agent, for the account of the Banks ratably in proportion to their
Commitments, a facility fee calculated for each day at the facility fee rate for
such day determined in accordance with the Pricing Schedule. Such facility fee
shall accrue for each day (i) from and including the Effective Date to but
excluding the Termination Date (or earlier date of termination of the
Commitments in their entirety), on the Aggregate Commitment (whether used or
unused) in effect on such day and (ii) from and including such date of
termination of the Commitments to but excluding the date the Loans shall be
repaid in their entirety, on the aggregate principal amount of the Loans
outstanding on such day. Fees accrued under this Section shall be payable
quarterly on the date fifteen days after the last day of each March, June,
September and December and upon the termination of the Commitments in their
entirety (and, if later, the date the Loans shall be repaid in their entirety).
For each day on which the aggregate principal amount of outstanding Loans (other
than Swingline Loans) exceeds 25% but does not exceed 50% of the Aggregate
Commitment, a utilization fee at the per annum rate set forth on the Pricing
Schedule will accrue on the aggregate principal amount of outstanding Loans for
the ratable benefit of the Banks. For each day on which the aggregate principal
amount of outstanding Loans (other than Swingline Loans) exceeds 50% of the
Aggregate Commitment, a utilization fee at the per annum rate set forth on the
Pricing Schedule will accrue on the aggregate principal amount of outstanding
Loans for the ratable benefit of the Banks. No utilization fee shall accrue on
the Swingline Loans. Such utilization fees shall be payable in arrears on the
date fifteen days after the last day of each March, June, September and December
until the termination of the Commitments in their entirety (and, if later, the
date the Loans shall be repaid in their entirety).
SECTION 2.08. Optional Termination or Reduction of Commitments. (a) The
Company may, upon at least three Eurocurrency Business Days' notice to the
Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at
such time, or (ii) ratably reduce from time to time by an aggregate amount of
$10,000,000 or any larger multiple of $1,000,000, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amount of the
Loans.
(b) Upon receipt of a notice of termination or reduction pursuant to
this Section, the Agent shall promptly notify each Bank of the contents thereof
and of the new amount (if any) of such Bank's Commitment and such notice shall
not thereafter be revocable by the Company.
SECTION 2.09. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date, and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
SECTION 2.10. Prepayments. (a) The Borrowers (i) may prepay any
Floating Rate Borrowing at any time without penalty on the same day or (ii) upon
at least three Eurocurrency Business Days' notice to the Agent, subject to
Section 2.12, prepay any Eurocurrency Borrowing, in whole at any time, or from
time to time in part in amounts aggregating $10,000,000 or any larger multiple
of $1,000,000 (or the Approximate Equivalent Amounts if denominated in an Agreed
Currency other than Dollars), by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the several
Banks included in such Borrowing.
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(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
(c) The Agent will determine the Dollar Amount of:
(i) each Eurocurrency Borrowing as of the date two Eurocurrency
Business Days prior to the Borrowing Date or, if applicable, date of
conversion/continuation of such Borrowing, and
(ii) all outstanding Borrowings on and as of the last Eurocurrency
Business Day of each quarter and on any other Eurocurrency Business Day elected
by the Agent in its discretion or upon instruction by the Required Banks.
Each day upon or as of which the Agent determines Dollar Amounts as described in
the preceding clauses (i) and (ii) is herein described as a "Computation Date"
with respect to each Borrowing for which a Dollar Amount is determined on or as
of such day. If at any time the Dollar Amount (calculated, with respect to those
Loans denominated in Agreed Currencies other than Dollars, as of the most recent
Computation Date with respect to each such Loan) of (A) the aggregate principal
amount of all outstanding Loans exceeds the Aggregate Commitment, or (B) the
aggregate principal amount of all outstanding Swingline Loans exceeds the
Swingline Amount, the Borrowers shall immediately repay Loans in an aggregate
principal amount sufficient to eliminate any such excess.
SECTION 2.11. General Provisions as to Payments. (a) The Borrowers
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 1:00 pm (local time) in the relevant currency on the
date when due to the Agent at its address referred to in Section 9.01 or at any
other Lending Installation of the Agent with respect to such obligation as
specified in writing by the Agent to the Borrowers. Whenever any payment of
principal of, or interest on, the Floating Rate Loans or of fees shall be due on
a day which is not a Domestic Business Day, the date for payment thereof shall
be extended to the next succeeding Domestic Business Day. Whenever any payment
of principal of, or interest on, the Eurocurrency Loans shall be due on a day
which is not a Eurocurrency Business Day, the date for payment thereof shall be
extended to the next succeeding Eurocurrency Business Day unless such
Eurocurrency Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Eurocurrency Business Day.
If the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the relevant
Borrower prior to the date on which any payment is due to the Banks hereunder
that such Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent that such Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate for the first three days and at the Floating
Rate thereafter.
(c) Each Loan shall be repaid and each payment of interest thereon
shall be paid in the currency in which such Loan was made or, where such
currency has converted to the euro, in the euro. All payments required to be
made by the Borrowers in Dollars hereunder will be made in immediately available
funds and all payments required to be made by the Borrowers in a currency other
than Dollars will be made in the required currency and in same day or such other
funds as the Agent may determine to be
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customary for the settlement of deposits in such currency at its Eurocurrency
Payment Office for such currency and shall be applied ratably by the Agent among
the Banks. Each payment delivered to the Agent for the account of any Bank shall
be delivered promptly by the Agent to such Bank in the same type of funds that
the Agent received at, (a) with respect to Floating Rate Loans and Eurocurrency
Loans denominated in Dollars, its address specified pursuant to Article 9.01 or
at any Lending Installation specified in a notice received by the Agent from
such Bank and (b) with respect to Eurocurrency Loans denominated in an Agreed
Currency other than Dollars, in the funds received from the Borrower at the
address of the Agent's Eurocurrency Payment Office for such currency. The Agent
is hereby authorized to charge any account of the relevant Borrower designated
by such Borrower as the account from which payments are to be made and
maintained with Bank One or any of its affiliates for each payment of principal,
interest and fees as it becomes due hereunder.
(d) Subject to Section 2.14, all payments of principal of and interest
on the Loans and other amounts payable by the Borrowers to any Bank hereunder
shall be made by the Borrowers without setoff, deduction or counterclaim and,
subject to the next succeeding sentence, free and clear of, and without
deduction or withholding for, or on account of, any present or future taxes,
levies, imposts, duties, fees, assessments, or other charges of whatever nature,
imposed by any governmental authority, or by any department, agency or other
political subdivision or taxing authority. Subject to Section 2.14, if any such
taxes, levies, imposts, duties, fees, assessments or other charges are imposed,
the relevant Borrower will pay such additional amounts as may be necessary so
that payment of principal of and interest on the Loans and other amounts payable
hereunder, after withholding or deduction for or on account thereof, will not be
less than any amount provided to be paid hereunder.
SECTION 2.12. Funding Losses. If any Borrower makes any payment of
principal with respect to any Eurocurrency Loan (pursuant to Section 2.10,
Article 6, Article 8 or otherwise) on any day other than the last day of the
Interest Period applicable thereto, or if any Borrower fails to borrow any
Eurocurrency Loan after notice has been given to any Bank in accordance with
Section 2.03(a) or if any Borrower fails to prepay any Eurocurrency Loan after
notice has been given to any Bank in accordance with Section 2.10(b), such
Borrower shall reimburse each Bank within 15 days after demand for any resulting
loss or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow,
provided that such Bank shall have delivered to such Borrower a certificate as
to the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error, provided that the determination of such loss or
expense is made on a reasonable basis.
SECTION 2.13. Computation of Interest and Fees. Interest on Floating
Rate Loans hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). Interest on Loans
denominated in British Pounds Sterling hereunder shall be computed on the basis
of a year of 365 days and paid for the actual number of days elapsed (including
the first day but excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.14. Withholding Tax Exemption. (a) At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Bank, each Bank that is not incorporated under
the laws of the United States of America or a state thereof agrees that it will
deliver to each of the Company and the Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 and Form W-8 or W-9 and any
additional forms necessary for claiming complete exemption from United States
withholding taxes (or any successor or substitute forms), certifying in either
case that such Bank is entitled to receive payments under this Agreement and
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the Loans without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 and a Form W-8 or W-9 and
any additional forms necessary for claiming complete exemption from United
States withholding taxes (or any successor or substitute forms) further
undertakes to deliver to each of the Company and the Agent two additional copies
of such forms (or any successor or substitute forms) on or before the date that
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company or the Agent to the extent it may lawfully do so, in
each case certifying that such Bank is entitled to receive payments under this
Agreement and the Loans without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank advises the Company and the Agent that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
(b) Each Bank which is neither a resident of the United Kingdom nor a
bank carrying on a bona fide banking business in the United Kingdom agrees to
furnish, on or before the date such Bank makes a Loan to any Borrower in the
United Kingdom or denominated in British Pounds Sterling, to the Agent and the
relevant Borrower evidence satisfactory to the Agent and such Borrower that such
Bank has filed with the United Kingdom Inland Revenue a "Claim on Behalf of a
United States Domestic Corporation to Relief from United Kingdom Income Tax on
Interest and Royalties Arising in the United Kingdom" or other appropriate form
or forms of exemption from withholding tax and received from the Inland Revenue
authority that payments to such Bank by such Borrower hereunder may be made
gross; provided that such Bank's failure to furnish such evidence shall not
relieve such Borrower of any of its obligations under this Agreement, except as
otherwise provided in this Section 2.14.
(c) For any period with respect to which a Bank has failed to provide
the Company, the Agent or the relevant Borrower with the appropriate form as
required by the foregoing subsections (unless such failure is due to a change in
treaty, law or regulation occurring after the date on which such form originally
was required to be provided), such Bank shall not be entitled to compensation
pursuant to the last sentence of Section 2.11(d).
SECTION 2.15. Application of Interest Rates and Fees. Interest and fees
shall accrue on and after the Effective Date at the rates described in Sections
2.06 and 2.07. Interest and fees (including commitment fees) for all periods
prior to the Effective Date shall be calculated and paid in accordance with the
Existing Credit Agreement.
SECTION 2.16. Judgment Currency. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due from any Borrower
hereunder in the currency expressed to be payable herein (the "specified
currency") into another currency, the parties hereto agree, to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures the Agent could
purchase the specified currency with such other currency at the Agent's main
Chicago office on the Eurocurrency Business Day preceding that on which final,
non-appealable judgment is given. The obligations of such Borrower in respect of
any sum due to any Bank or the Agent hereunder shall, notwithstanding any
judgment in a currency other than the specified currency, be discharged only to
the extent that on the Eurocurrency Business Day following receipt by such Bank
or the Agent (as the case may be) of any sum adjudged to be so due in such other
currency such Bank or the Agent (as the case may be) may in accordance with
normal, reasonable banking procedures purchase the specified currency with such
other currency. If the amount of the specified
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currency so purchased is less than the sum originally due to such Bank or the
Agent, as the case may be, in the specified currency, such Borrower agrees, to
the fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of the specified currency so
purchased exceeds (a) the sum originally due to any Bank or the Agent, as the
case may be, in the specified currency and (b) any amounts shared with other
Banks as a result of allocations of such excess as a disproportionate payment to
such Bank under Section 9.04, such Bank or the Agent, as the case may be, agrees
to remit such excess to such Borrower.
SECTION 2.17 Lending Installations. Each Bank will book its Loans at
the appropriate Lending Installation listed on the administrative information
sheets provided to the Agent in connection herewith or such other Lending
Installation designated by such Bank in accordance with the penultimate sentence
of this Section 2.17. All terms of this Agreement shall apply to any such
Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Bank for the benefit of any such Lending Installation. Each
Bank may, by written notice to the Agent and the Borrowers in accordance with
Article 9, designate replacement or additional Lending Installations through
which Loans will be made by it and for whose account Loan payments are to be
made. To the extent reasonably possible, each Bank shall designate a Lending
Installation to reduce any liability of a Borrower to such Bank under Article 8,
so long as such designation is not disadvantageous to such Bank in any material
respect.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on
the date it is signed by all parties hereto, provided the neither the Company
nor any Subsidiary Borrower may obtain funding of any Loans hereunder until the
date (the "Effective Date") which is the later of March 27, 2000 or the date on
which each of the following conditions shall have been satisfied (or waived in
accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
facsimile or other written confirmation from such party that it has executed a
counterpart hereof);
(b) receipt by the Agent of an opinion of John R. Leekley, Senior Vice
President-General Counsel of the Company, substantially in the form of Exhibit C
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(c) receipt by the Agent of a certificate of a duly authorized officer
of the Company, dated the Effective Date, certifying that (i) as of such date no
Default shall have occurred and be continuing and (ii) as of such date the
representations and warranties of the Company contained in this Agreement are
true in all material respects;
(d) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Company, the corporate authority for and the
validity of this Agreement and the Loans, and any other matters relevant hereto,
all in form and substance satisfactory to the Agent; and
(e) payment in full of all amounts outstanding under the Existing
Credit Agreement.
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SECTION 3.02. All Borrowings. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding Dollar Amount of the Loans will not exceed the Aggregate Commitment;
(c) the fact that, immediately before and after such Borrowing, (i)
in the case of a Refunding Borrowing, no Event of Default shall have occurred
and be continuing and (ii) in the case of any other Borrowing, no Default shall
have occurred and be continuing; and
(d) the fact that the representations and warranties of the Borrowers
contained in this Agreement or any Joinder Agreement (except, in the case of a
Refunding Borrowing, the representations and warranties set forth in Sections
4.04(c), 4.05, 4.06 (other than clause (i) thereof), 4.07 and 4.10) shall be
true in all material respects on and as of the date of such Borrowing. Each
Borrowing hereunder shall be deemed to be a representation and warranty by the
Borrower requesting such Borrowing on the date of such Borrowing as to the facts
specified in clauses (b), (c) and (d) of this Section.
SECTION 3.03. Consequences of Effectiveness. On the Effective Date the
Existing Credit Agreement will be amended and restated to read in full as set
forth herein and the promissory notes of the Company delivered pursuant thereto
will become void, all without further action by any of the parties thereto.
Notwithstanding such amendment and restatement of the Existing Credit Agreement,
the rights and obligations of the parties thereto with respect to the period
prior to the Effective Date will continue to be governed by the provisions
thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company and its
Domestic 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.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company'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 Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Company and the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company.
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SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of December 31, 1998 and the related consolidated statements of
income and cash flows for the Fiscal Year then ended, reported on by
PricewaterhouseCoopers LLP and set forth in the Company's 1998 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 Company and its Consolidated Subsidiaries as of such date and
the consolidated results of their operations and their cash flows for such
Fiscal Year.
(b) The unaudited condensed consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of September 30, 1999 and the related
unaudited condensed statements of consolidated income and consolidated cash
flows for the three months then ended, set forth in the Company's quarterly
report for the fiscal quarter ended September 30, 1999 as filed with the
Securities and Exchange Commission on Form 10-Q, a copy of which has been
delivered to each of the Banks, fairly present, on a basis consistent with the
financial statements referred to in subsection (a) of this Section, the
consolidated financial position of the Company and its Consolidated Subsidiaries
as of such date and their consolidated results of operations and cash flows for
such three-month period (subject to normal year-end adjustments).
(c) There has been no material adverse change since September 30, 1999
in the business or financial position of the Company and its Consolidated
Subsidiaries, considered as a whole, as reflected in the financial statements
referred to in subsection (b) of this Section.
SECTION 4.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Company threatened against or affecting, the
Company or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which, in the reasonable opinion of the
Company, is likely to have a material adverse effect on the business or
financial position of the Company and its Consolidated Subsidiaries, considered
as a whole, or which in any manner draws into question the validity of this
Agreement or the Notes.
SECTION 4.06. 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 $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 Company and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Company conducts appropriate reviews of the effect of
Environmental Laws on the business, operations and properties of the Company 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,
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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 Company 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 Company and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns of the
Company and its Subsidiaries have been examined and closed through the Fiscal
Year ended December 31, 1993. The Company 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 Company
or any Subsidiary, except such taxes, if any, as are being contested in good
faith and as to which, in the opinion of the Company, adequate reserves have
been provided. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of taxes or other governmental charges are, in
the opinion of the Company, adequate.
SECTION 4.09. Not an Investment Company. The Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.10. Compliance with Laws. The Company 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 Company is aware that the Company or the relevant Subsidiary has failed
to comply therewith or (iii) the Company 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 Company and its Consolidated
Subsidiaries, taken as a whole.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Loan or otherwise hereunder remains
unpaid:
SECTION 5.01 Information. The Company will deliver to each of the
Banks:
(a) as soon as available and in any event within 95 days after the end
of each Fiscal Year, a consolidated balance sheet of the Company 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 PricewaterhouseCoopers LLP or other
independent public accountants of nationally recognized standing, whose report
shall be without material qualification;
(b) as soon as available and in any event within 50 days after the end
of each of the first three quarters of each Fiscal Year, a condensed
consolidated balance sheet of the Company 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
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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 his 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 Company's independent public
accountants) by the chief financial officer or the chief accounting officer of
the Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Company (i) setting
forth in reasonable detail the calculations required to establish whether the
Company was in compliance with the requirements of Sections 5.02 to 5.04,
inclusive, on the date of such financial statements, (ii) stating, to the best
of his knowledge, whether any Default exists on the date of such certificate and
(iii) if any Default then exists, setting forth the details thereof and the
action which the Company is taking or proposes to take with respect thereto;
(d) within 15 days after any officer of the Company becomes aware of
the existence of any Default, unless such Default 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 Company setting forth the details of such
Default and the action which the Company is taking or proposes to take with
respect thereto;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) 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 Company
shall have filed with the Securities and Exchange Commission;
(g) 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 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 Company setting forth details as to such occurrence and action, if any,
which the Company 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 Company have obtained knowledge and have not previously reported under
this clause (g) exceeds $25,000,000,
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(h) immediately after any officer of the Company obtains knowledge of a
change or a proposed change in the rating of the Company's outstanding senior
unsecured long-term debt securities by Moody's or S&P, a certificate of the
chief financial officer or chief accounting officer of the Company setting forth
the details thereof; and
(i) from time to time such additional information regarding the
financial position or business of the Company as the Agent, at the request of
any Bank, may reasonably request.
SECTION 5.02. Minimum Consolidated Net Worth. At no time will
Consolidated Net Worth be less than Minimum Consolidated Net Worth. "Minimum
Consolidated Net Worth" means $1,700,000,000; provided that such amount shall be
adjusted at the end of each Fiscal Quarter ending after December 31, 1997, 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 clause (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 clause (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 Company'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
Company's Equity Securities shall be applied first to offset any
increase in Minimum Consolidated Net Worth that would otherwise be made
pursuant to this clause (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 5.03. Limitations on Debt. (a) The Company 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 (i) Consolidated Debt to (ii) the sum of
Consolidated Debt and Consolidated Adjusted Net Worth would exceed 53%.
(b) The Company 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
Company or one or more other Consolidated Subsidiaries) would exceed 30% of
Consolidated Net Worth.
(c) Subsections (a) and (b) above shall not prevent (i) the Company
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 Company 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 Company or a Consolidated Subsidiary. For purposes of this subsection
(c), Debt is deemed to be
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for the purpose of "Refunding" other Debt if and to the extent that (i) no later
than 5 Domestic Business Days after the refunding Debt is incurred, the Company
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, (ii) 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 (iii) such specified Debt to
be refunded is repaid within 45 days after the refunding Debt is incurred.
(d) For purposes of the limitations provided in, and computations
under, this Section, (i) 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 (i), the aggregate outstanding amount of Debt of all Consolidated
Subsidiaries (other than Debt owed to the Company or one or more other
Consolidated Subsidiaries) would be greater than 30% but less than 60% of
Consolidated Net Worth, this clause (i) 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), (ii) the disposition (other than
to a Consolidated Subsidiary or the Company) by the Company or a Subsidiary of
capital stock of any Consolidated Subsidiary which holds Debt of the Company 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 (iii) the disposition (other than to a Consolidated Subsidiary
or the Company) of Debt of the Company or any Consolidated Subsidiary by any
Consolidated Subsidiary or the Company shall be deemed the creation of such
Debt.
SECTION 5.04. Negative Pledge. Neither the Company nor any Consolidated
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on June 30, 1996 securing Debt outstanding
on June 30, 1996 in an aggregate principal amount not exceeding
$30,000,000;
(b) any Lien existing on any asset of any corporation at the
time such corporation becomes a Consolidated Subsidiary and not created
in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed
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;
(d) any Lien on any asset of any corporation existing at the
time corporation is merged or consolidated with or into the Company or
a such Consolidated Subsidiary and not created in contemplation of such
event;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Company or a Consolidated Subsidiary and not created in
contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section; provided that such Debt is
not increased and is not secured by any additional assets;
(g) any Lien in favor of the holder of Debt (or any Person 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
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enforcement thereof is effectively stayed and the claims secured
thereby are being contested in good faith by appropriate proceedings;
(h) Liens incidental to the normal conduct of its business or
the ownership of its assets which (i) do not secure Debt, (ii) do not
secure any obligation in an amount exceeding $100,000,000 and (iii) do
not in the aggregate materially detract from the value of the assets of
the Company 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 Company and its Consolidated Subsidiaries taken as a
whole; and
(i) Liens securing Debt which are not otherwise permitted by
the foregoing clauses of this Section; provided that (i) the aggregate
outstanding principal amount of Debt secured by all such Liens on
current assets shall not at any time exceed 20% of Consolidated Current
Assets and (ii) the aggregate outstanding principal amount of Debt
secured by all such Liens (including Liens referred to in clause (i) of
this proviso) shall not at any time exceed the sum of (A) 20% of
Consolidated Current Assets plus (B) 3% of Consolidated Net Worth.
SECTION 5.05. Consolidations, Mergers and Sale of Assets. (a) The
Company 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 (i) the Company shall be the continuing or
surviving corporation or (ii) the successor or acquiring corporation (if other
than the Company) 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 Required Banks, all of the obligations
of the Company under this Agreement and the Notes, including all covenants
herein and therein contained, in which case such successor or acquiring
corporation shall succeed to and be substituted for the Company with the same
effect as if it had been named herein as a party hereto.
(b) No disposition of assets, merger, consolidation or acquisition
referred to in subsection (a) of this Section shall be permitted if, immediately
after giving effect thereto, the Company would be in Default under any of the
terms or provisions of this Agreement.
SECTION 5.06. Compliance with Laws. The Company 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 (i) the necessity of compliance therewith
is contested in good faith by appropriate proceedings, (ii) no officer of the
Company is aware that the Company or any Subsidiary has failed to comply
therewith or (iii) the Company 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 the Company and its Consolidated Subsidiaries,
taken as a whole.
SECTION 5.07. Use of Proceeds. None of the proceeds of the Loans made
under this Agreement will be used in violation of any applicable law or
regulation.
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ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) any Borrower shall fail to pay when due any principal of any Loan,
or shall fail to pay within five days of the due date thereof any interest or
fees payable under this Agreement;
(b) the Company shall fail to observe or perform any covenant contained
in Sections 5.02 to 5.05, inclusive;
(c) the Company shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a) or
(b) above), or any Subsidiary Borrower shall fail to observe or perform any
covenant contained in the Joinder Agreement to which it is a party, in each case
for 30 days after written notice thereof has been given to the Company by the
Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Company in this Agreement or any amendment hereof or in any certificate,
financial statement or other document delivered pursuant to this Agreement or
made by any Borrower in any Joinder Agreement shall prove to have been incorrect
in any material respect when made or deemed to have been made; provided that, if
any representation and warranty deemed to have been made by the Company pursuant
to the last sentence of Section 3.02 as to the satisfaction of the condition of
borrowing set forth in clause (c)(i) of Section 3.02 shall have been incorrect
solely by reason of the existence of an Event of Default of which the Company
was not aware when such representation and warranty was deemed to have been made
and which was cured before or promptly after the Company became aware thereof,
then such representation and warranty shall be deemed not to have been incorrect
in any material respect;
(e) the Company or any of its Consolidated Subsidiaries shall fail to
make one or more payments in respect of Material Debt (other than Acquired Debt
in an aggregate outstanding principal amount not exceeding $50,000,000) when due
or within any applicable grace period, and such failure has not been waived;
(f) the Company or any Consolidated Subsidiary shall fail 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 Debt (other than
Acquired Debt in an aggregate outstanding principal amount not exceeding
$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) the Company or any Significant Subsidiary shall commence 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 now or hereafter in effect 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 shall consent 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
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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) an involuntary case or other proceeding shall be commenced against
the Company or any Significant Subsidiary in any United States Federal court or
other court of competent jurisdiction seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect 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 Company
or any Significant Subsidiary as debtors under the federal bankruptcy laws as
now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $ 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 $50,000,000 (collectively, a "Material Plan") shall be 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 shall institute 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 shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur 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 $50,000,000; provided that no Event of Default shall exist under this 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) a judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the Company or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of 45
days;
(k) 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 Company; or Continuing Directors shall
cease to constitute a majority of the board of directors of the Company; or
(l) any Event of Default occurs and is continuing according to the
terms of that certain Amended and Restated Credit Agreement dated as of November
14, 1996 among the Company, the Banks party thereto and Morgan Guaranty Trust
Company of New York (as amended or modified from time to time, and including any
agreements refinancing or replacing such agreement).
then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Borrowers terminate the Commitments and they shall
thereupon terminate, and (ii) if requested by Required Banks, by notice to the
Borrowers declare the Loans (together with accrued interest thereon) to be, and
the Loans shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers; provided that in the case of any of the Events
of Default specified in clause (g) or (h) above with respect to the Company or
any Significant Subsidiary, without any notice to any Borrower or any other act
by the Agent or the Banks, the Commitments shall thereupon terminate and the
Loans (together with accrued interest thereon)
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shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrowers.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Company under Section 6.01(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Bank One shall have the same rights
and powers under this Agreement as any other Bank and may exercise or refrain
from exercising the same as though it were not the Agent, and Bank One and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Company or any Subsidiary or affiliate of the Company
as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05 Liability of Agent. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable (i) to the Banks for
any action taken or not taken by such Person in connection herewith with the
consent or at the request of the Required Banks or all Banks, if applicable, or
(ii) to the Banks or any Borrower for any action taken or not taken by such
Person in the absence of such Person's own gross negligence or willful
misconduct. Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of the Borrowers; (iii) the satisfaction of
any condition specified in Article 3, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement or other writing
(which may be a bank wire, telex or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent (to the extent not reimbursed by the
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from the
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Agent's gross negligence or willful misconduct) that the Agent may suffer or
incur in connection with this Agreement or any action taken or omitted by the
Agent hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and the Borrowers. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks,
and shall have accepted such appointment, within 30 days after the retiring
Agent gives notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $250,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's and Arranger's Fee. The Company shall pay to each
of the Agent and the Arranger for their own account such fees as agreed upon
between the Company, the Agent and the Arranger and set forth in a separate fee
letter among the Agent, the Arranger and the Company.
SECTION 7.10. Agent, Syndication Agents. No Syndication Agent shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Banks as such. Without limiting the
foregoing, none of such Banks or the Agent shall have or be deemed to have a
fiduciary relationship with any Bank. Each Bank hereby makes the same
acknowledgments with respect to such Banks as it makes with respect to the Agent
in Section 7.07.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Eurocurrency
Borrowing:
(i) the Agent determines that deposits in the applicable
Agreed Currency (in the applicable amounts) are not being offered in
the relevant market for such Interest Period, or
(ii) Banks having more than 50% of the aggregate amount of the
Commitments advise the Agent that the Eurocurrency Reference Rate, as
determined by the Agent, will not adequately and fairly reflect the
cost to such Banks of funding their Eurocurrency Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, (x) the obligations of the Banks to
make, continue or convert Eurocurrency Loans in such Agreed Currency shall
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be suspended, and (y) if the Agreed Currency is Dollars, each affected Loan
shall be converted into a Floating Rate Loan on the last day of the then current
Interest Period applicable thereto. Unless the relevant Borrower notifies the
Agent at least two Domestic Business Days before the date of any such
Eurocurrency Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made
as a Floating Rate Borrowing.
SECTION 8.02. Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Eurocurrency Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for any Bank (or its Eurocurrency Lending Office) to honor its
binding legal obligation hereunder to make, maintain or fund its Eurocurrency
Loans in any Agreed Currency to any Borrower and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the other Banks and the
Borrowers, whereupon until such Bank notifies the Borrowers and the Agent that
the circumstances giving rise to such suspension no longer exist, the obligation
of such Bank to make Eurocurrency Loans in such currency to such Borrower or to
continue outstanding Loans to such Borrower as Eurocurrency Loans in such
currency shall be suspended. Before giving any notice to the Agent pursuant to
this Section, such Bank shall designate a different Eurocurrency Lending Office
if such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given with respect to a Borrower's Eurocurrency Loans denominated in
Dollars, each such Loan of such Bank then outstanding shall be converted to a
Floating Rate Loan either (a) on the last day of the then current Interest
Period applicable to such Loan if such Bank may lawfully continue to maintain
and fund such Loan as a Eurocurrency Loan in Dollars to such day or (b)
immediately if such Bank shall determine that it may not lawfully continue to
maintain and fund such loan as a Eurocurrency Loan in Dollars to such day.
Interest and principal on any such Floating Rate Loan shall be payable on the
same dates as, and on a pro rata basis with, the interest and principal payable
on the related Eurocurrency Loans of the other Banks. If such notice is given
with respect to a Borrower's Eurocurrency Loans denominated in an Agreed
Currency other than Dollars, such Borrower shall prepay such Loan (i) on the
last day of the then current Interest Period if such Bank may lawfully continue
to maintain and fund such Loan as a Eurocurrency Loan in such currency to such
day, or (ii) immediately if such Bank shall determine that it may not lawfully
continue to maintain and fund such Loan as a Eurocurrency Loan in such currency
to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the
date of this Agreement, the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Applicable Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency (a "Change in Law"):
(i) shall subject any Bank (or its Applicable Lending Office)
to any tax, duty or other charge with respect to its Eurocurrency
Loans, its Note or its obligation to make Eurocurrency Loans, or shall
change the basis of taxation of payments to any Bank (or its Applicable
Lending Office) of the principal of or interest on its Eurocurrency
Loans or any other amounts due under this Agreement in respect of its
Eurocurrency Loans or its obligation to make Eurocurrency Loans (except
for changes in the rate of tax on the overall net income of such Bank
or its Applicable Lending Office or franchise or similar taxes imposed
by the United States of America or any State or political subdivision
thereof or imposed by the jurisdiction in which such Bank's principal
executive office or Applicable Lending Office is located); or
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(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding, with
respect to any Eurocurrency Loan, any such requirement included in an
applicable Eurocurrency Reserve Percentage or Cost Rate), special
deposit, insurance assessment or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank
(or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other
condition affecting its Eurocurrency Loans, its Note or its obligation
to make Eurocurrency Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Eurocurrency Loan,
or to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the relevant Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction; provided that, such Bank shall not be
entitled to such compensation for increased costs or reductions incurred more
than 90 days prior to the date on which it actually demands (or notifies the
relevant Borrower that it will demand) such compensation, provided, further that
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 90-day period referred to above shall be extended to
include the period of retroactive effect. If any Bank demands compensation under
this subsection (a), the relevant Borrower may at any time, upon at least five
Eurocurrency Business Days' prior notice to such Bank through the Agent, prepay
in full each then outstanding affected Eurocurrency Loan of such Bank, together
with accrued interest thereon to the date of prepayment. Concurrently with
prepaying each such Eurocurrency Loan of such Bank, such Borrower shall borrow a
Floating Rate Loan (or, if such Borrower shall so elect in its notice of
prepayment, a Eurocurrency Loan of another type) in an equal principal amount
from such Bank for an Interest Period coinciding with the remaining term of the
Interest Period applicable to such Eurocurrency Loan, and such Bank shall make
such a Loan notwithstanding any provision herein to the contrary.
(b) If any Bank shall have determined that, after the date of this
Agreement, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank (or its Parent) as
a consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to the
Agent), the Company shall pay to such Bank such additional amount or amounts as
will compensate such Bank (or its Parent) for such reduction; provided that such
Bank shall not be entitled to such compensation for reductions incurred more
than 90 days prior to the date on which it actually demands (or notifies the
Company that it will demand) such compensation, provided, further that if the
Change in Law giving rise to such reductions in retroactive, then the 90-day
period referred to above shall be extended to include the period of retroactive
effect thereof.
(c) Each Bank will promptly notify the Borrowers and the Agent of any
event of which it has knowledge, occurring after the date of this Agreement,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such
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Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error, provided that the determination of such amount or amounts is
made on a reasonable basis. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 8.04. Market Disruption. Notwithstanding the satisfaction of
all conditions referred to in Article 2 and Article 3 with respect to any
Borrowing in any Agreed Currency other than Dollars, if there shall occur on or
prior to the date of such Borrowing any change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls which would in the reasonable opinion of the Agent or the
Required Banks make it impracticable for the Eurocurrency Loans comprising such
Borrowing to be denominated in the Agreed Currency specified by the relevant
Borrower, then the Agent shall forthwith give notice thereof to such Borrower
and the Banks, and such Loans shall not be denominated in such Agreed Currency,
but shall be made on such Borrowing Date in Dollars, in an aggregate principal
amount equal to the Dollar Amount of the aggregate principal amount specified in
the related Notice of Borrowing or Conversion/Continuation Notice, as the case
may be, as Floating Rate Loans, unless such Borrower notifies the Agent at least
four Eurocurrency Business Days or such shorter period of time agreed to by the
Agent before such date that (i) it elects not to borrow on such date or (ii) it
elects to borrow on such date in a different Agreed Currency, as the case may
be, in which the denomination of such Loans would in the opinion of the Agent
and the Required Banks be practicable and in an aggregate principal amount equal
to the Dollar Amount of the aggregate principal amount specified in the related
Notice of Borrowing or Conversion/Continuation Notice, as the case may be.
SECTION 8.05. Substitute Loans. If (i) the obligation of any Bank to
make Eurocurrency Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 and the Company shall, by at
least five Eurocurrency Business Days' prior notice to such Bank through the
Agent, have elected that the provisions of this Section 8.05 shall apply to such
Bank, then, unless and until such Bank notifies the Company and the Agent that
the circumstances giving rise to such suspension or demand for compensation no
longer apply, all Loans which would otherwise be made by such Bank as (or
continued as or converted to) Eurocurrency Loans shall be made instead as
Floating Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Eurocurrency Loans of the other Banks). If
such Bank notifies the Company that the circumstances giving rise to such
suspension or demand for compensation no longer exist, the principal amount of
each such Floating Rate Loan shall be converted into a Eurocurrency Loan on the
first day of the next succeeding Interest Period applicable to the related
Eurocurrency Loans of the other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank
to make Eurocurrency Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03, the Company shall have
the right, with the assistance of the Agent, to seek a mutually satisfactory
substitute bank or banks (which may be one or more of the Banks) to purchase the
Loans and Notes and assume the Commitment of such Bank.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile or similar writing) and shall be given to such party: (x) in the case
of any Borrower or the Agent, at its address or its facsimile or telex number
set forth
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on the signature pages hereof or in the relevant Joinder Agreement, (y) in the
case of any Bank, at its address or its facsimile or telex number set forth in
its Administrative Questionnaire or (z) in the case of any party, such other
address or facsimile or telex number as such party may hereafter specify for the
purpose by notice to the Agent and the Borrowers. Each such notice, request or
other communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section 9.01 and the
appropriate answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section 9.01; provided that notices to the Agent
under Article 2 or Article 8 shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note 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.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The
Company shall pay (i) all reasonable out-of-pocket expenses of the Agent and the
Arranger, including reasonable fees and disbursements of counsel for the Agent
and the Arranger, in connection with the preparation of this Agreement, any
waiver or consent hereunder or any amendment hereof or any Default hereunder and
(ii) if an Event of Default occurs, all reasonable out-of-pocket expenses
incurred by the Agent, the Arranger and each Bank, including reasonable fees and
disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. The Company shall indemnify each Bank against any transfer taxes,
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or the Notes.
(b) The Company agrees to indemnify and defend each Bank and their
respective directors, officers, agents, employees and affiliates from, and hold
each of them harmless against, any and all losses, liabilities, claims, damages
or expenses substantially relating to or arising out of (i) any Borrower's
actual or proposed use of proceeds of Loans for the purpose of acquiring equity
securities of any other Person, or (ii) a change of ownership or control of any
Borrower, including but not limited to reasonable attorney's fees and settlement
costs; provided that (x) the foregoing indemnity shall not apply to any losses,
liabilities, claims, damages or expenses that do not relate to or arise out of
this Agreement or the activities of the parties hereto in connection herewith
and (y) no Bank shall have the right to be indemnified hereunder for its own
gross negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to any Loan held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of principal and interest due
with respect to any Loan held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of any Borrower other than its
indebtedness under the Loans. Each Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Loan, whether or not acquired pursuant to the foregoing arrangements, may
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exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrowers and the Required Banks
(and, if the rights or duties of the Agent or the Swingline Lender are affected
thereby, by the Agent or the Swingline Lender, as the case may be), provided
that that no such amendment or waiver shall, unless signed by all the Banks, (i)
increase or decrease the Commitment of any Bank (except for a ratable decrease
in the Commitments of all the Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for the termination of the
Commitments, (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (v) amend the definition of Agreed
Currency, (vi) amend Article 10, or (vii) amend this Section 9.05.
(b) The Company may add Subsidiary Borrowers to this Agreement from
time to time by designating any Wholly-Owned Subsidiary incorporated or formed
in any jurisdiction other than any State of the United States of America as a
Subsidiary Borrower hereunder so long as such new Subsidiary Borrower executes
and delivers to the Agent a Joinder Agreement together with all corporate or
organizational documents and authorizing resolutions and legal opinions
reasonably requested by the Agent and the new Subsidiary Borrower executes all
other agreements and takes such other action reasonably requested by the Agent.
The Company may also remove any Subsidiary as a Subsidiary Borrower upon (i)
written notice by the Company to the Agent to such effect and (ii) repayment in
full of all outstanding Loans of such Subsidiary Borrower.
SECTION 9.06. Successors and Assigns. (a) 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 no Borrower may
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks, except as provided in Section 5.05.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrowers and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrowers and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrowers hereunder including, without limitation, the right to approve any
amendment modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause (i),
(ii) or (iii) of Section 9.05 without the consent of the Participant. The
Borrowers agree that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, but not
less than the lesser of (i) $10,000,000 and in multiples of $1,000,000 or (ii)
the remaining amount of the assigning Bank's commitment (calculated as
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at the date of such assignment) of its rights and obligations under this
Agreement and the Notes, and such Assignee shall assume such rights and
obligations, pursuant to an Assignment and Assumption Agreement in substantially
the form of Exhibit D hereto executed by such Assignee and such transferor Bank,
with (and subject to) the subscribed consent of the Company and the Agent (which
consent will not unreasonably be withheld); provided that if an Assignee is a
Bank or an affiliate of such transferor Bank, or if an Event of Default has
occurred and is continuing, no such consent of the Company shall be required.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Agent and the Company shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $3,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to the Company and the Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 2.14.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Loans and Notes, if any, to a Federal Reserve Bank.
No such assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Company's prior written consent or by
reason of the provisions of Section 8.02 or 8.03 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
(f) (i) Notwithstanding anything to the contrary contained herein, any
Lender (a "Designating Lender") may, with the approval of the Company (which
approval may be withheld in the sole discretion of the Company), grant to one or
more special purpose funding vehicles (each, an "SPV", identified as such in
writing from time to time by the Designating Lender to the Agent and the
Company, the option to provide to a Borrower all or any part of any Loan that
such Designating Lender would otherwise be obligated to make to such Borrower
pursuant to this Agreement, provided that (A) nothing herein shall constitute a
commitment by any SPV to make any Loan, (B) if any SPV elects not to exercise
such option or otherwise fails to provide all or any part of such Loan, the
Designating Lender shall be obligated to make such Loan pursuant to the terms
hereof, (C) the Designating Lender shall remain liable for any indemnity or
other payment obligation with respect to its Commitment hereunder and (D) the
Borrowers shall not incur any additional costs or expenses as a result of any
such grant by a Designated Lender to an SPV. The making of a Loan by an SPV
hereunder shall utilize the Commitment of the Designating Lender to the same
extent, and as if, such Loan were made by such Designating Lender.
(ii) As to any Loans or portion thereof made by it, each SPV shall have
all the rights that a Lender making such Loans or portion thereof would have had
under this Agreement; provided, however, that each SPV shall have granted to its
Designating Lender an irrevocable power of attorney, to deliver and receive all
communications and notices under this Agreement (and any related documents) and
to exercise on such SPV's behalf, all of such SPV's voting rights under this
Agreement. No additional Note
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shall be required to evidence the Loans or portion thereof made by an SPV; and
the related Designating Lender shall be deemed to hold its Note as agent for
such SPV to the extent of the Loans or portion thereof funded by such SPV. In
addition, any payments for the account of any SPV shall be paid to its
Designating Lender as agent for such SPV.
(iii) Each party hereto hereby agrees that no SPV shall be liable for
any indemnity or payment under this Agreement for which a Lender would otherwise
be liable. In furtherance of the foregoing, each party hereto hereby agrees
(which agreements shall survive the termination of this Agreement) that, prior
to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior indebtedness of any SPV, it will
not institute against, or join any other person in instituting against, such SPV
any bankruptcy, reorganization, arrangement insolvency or liquidation
proceedings under the laws of the United States or any State thereof.
(iv) In addition, notwithstanding anything to the contrary contained in
this 9.06(f) or otherwise in this Agreement, any SPV may, with the approval of
the Company (which approval may be withheld in the sole discretion of the
Company) (A) at any time and without paying any processing fee therefor, assign
or participate all or a portion of its interest in any Loans to the Designating
Lender or to any financial institutions providing liquidity and/or credit
support to or for the account of such SPV to support the funding or maintenance
of Loans and (B) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancements to such SPV. This
9.06(f) may not be amended without the written consent of any Designating Lender
affected thereby.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Confidentiality. Each Bank agrees that all documentation
and other information made available by the Borrowers to such Bank, 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 hereafter
becomes publicly available other than by action of any Bank, or was theretofore
known to such Bank independent of any disclosure thereto by the Borrowers) be
held in the strictest confidence by such Bank and used solely in connection with
administration of loans from time to time outstanding from such Bank to the
Borrowers; provided that (i) such Bank may disclose such documentation and other
information to its affiliates or any other bank or other institution to which
such Bank sells or proposes to sell a participation in its Loans hereunder, if
such affiliate or other bank or institution, prior to such disclosure, agrees
for the benefit of the Borrowers to comply with the provisions of this Section,
(ii) such Bank may disclose the provisions of this Agreement and the Notes and
the amounts, maturities and interest rates of its Loans to any purchaser or
potential purchaser of such Bank's interest in any Loan and (iii) such Bank may
disclose such documentation and other information to the extent required, in
such Bank's good faith judgment, to enforce its rights under this Agreement and
the Notes.
SECTION 9.09. Severalty of Obligations. The obligations of the Banks
hereunder are several. No failure by any Bank to perform its obligations
hereunder shall relieve any other Bank of its obligations hereunder, and no Bank
shall be responsible for the performance of any other Bank's obligations
hereunder or for any action taken or omitted by any other Bank hereunder.
SECTION 9.10. Michigan Law; Submission to Jurisdiction. This Agreement
and each Note shall be construed in accordance with and governed by the laws of
the State of Michigan. Each Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Eastern District
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of Michigan and of any Michigan State court sitting in Detroit for purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 9.11. Counterparts; Integration. This Agreement 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.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
ARTICLE 10
GUARANTY
As an inducement to the Banks and the Agent to enter into the
transactions contemplated by this Agreement, the Company agrees with the Banks
and the Agent as follows:
SECTION 10.01. Guarantee of Obligations. (a) The Company
hereby (i) guarantees, as principal obligor and not as surety only, to the Banks
the prompt payment of the principal of and any and all accrued and unpaid
interest (including interest which otherwise may cease to accrue by operation of
any insolvency law, rule, regulation or interpretation thereof) on the Loans and
all other obligations of the Subsidiary Borrowers to the Banks and the Agent
under this Agreement when due, whether by scheduled maturity, acceleration or
otherwise, all in accordance with the terms of this Agreement and the Notes,
including, without limitation, fees, reimbursement obligations, default
interest, indemnification payments and all reasonable costs and expenses
incurred by the Banks and the Agent in connection with enforcing any obligations
of the Subsidiary Borrowers hereunder, including without limitation the
reasonable fees and disbursements of counsel, (ii) guarantees the prompt and
punctual performance and observance of each and every term, covenant or
agreement contained in this Agreement and the Notes to be performed or observed
on the part of the Subsidiary Borrowers and (iii) agrees to make prompt payment,
on demand, of any and all reasonable costs and expenses incurred by the Banks or
the Agent in connection with enforcing the obligations of the Company hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
(all of the foregoing being collectively referred to as the "Guaranteed
Obligations").
(b) If for any reason any duty, agreement or
obligation of any Subsidiary Borrower contained in this Agreement shall not be
performed or observed by any Subsidiary Borrower as provided therein, or if any
amount payable under or in connection with this Agreement shall not be paid in
full when the same becomes due and payable, the Company undertakes to perform or
cause to be performed promptly each of such duties, agreements and obligations
and to pay forthwith each such amount to the Agent for the account of the Banks
regardless of any defense or setoff or counterclaim which any Subsidiary
Borrower may have or assert, and regardless of any other condition or
contingency.
SECTION 10.02 Nature of Guaranty. The obligations of the
Company hereunder constitute an absolute and unconditional and irrevocable
guaranty of payment and not a guaranty of collection
40
<PAGE> 42
and are wholly independent of and in addition to other rights and remedies of
the Banks and the Agent and are not contingent upon the pursuit by the Banks and
the Agent of any such rights and remedies, such pursuit being hereby waived by
the Company.
SECTION 10.03. Waivers and Other Agreements. The Company
hereby unconditionally (a) waives any requirement that the Banks or the Agent,
upon the occurrence of an Event of Default first make demand upon, or seek to
enforce remedies against any Subsidiary Borrower before demanding payment under
or seeking to enforce the obligations of the Company hereunder, (b) covenants
that the obligations of the Company hereunder will not be discharged except by
complete performance of all obligations of the Subsidiary Borrowers contained in
this Agreement and the Notes, (c) agrees that the obligations of the Company
hereunder shall remain in full force and effect without regard to, and shall not
be affected or impaired, without limitation, by any invalidity, irregularity or
unenforceability in whole or in part of this Agreement or the Notes, or any
limitation on the liability of the Subsidiary Borrowers thereunder, or any
limitation on the method or terms of payment thereunder which may or hereafter
be caused or imposed in any manner whatsoever (including, without limitation,
usury laws), (d) waives diligence, presentment and protest with respect to, and
any notice of default or dishonor in the payment of any amount at any time
payable by the Subsidiary Borrowers under or in connection with this Agreement
or the Notes, and further waives any requirement of notice of acceptance of, or
other formality relating to, the obligations of the Company hereunder and (e)
agrees that the Guaranteed Obligations shall include any amounts paid by the
Subsidiary Borrowers to the Banks or the Agent which may be required to be
returned to the Subsidiary Borrowers or to their representative or to a trustee,
custodian or receiver for any Subsidiary Borrower.
SECTION 10.04. Obligations Absolute. The obligations,
covenants, agreements and duties of the Company under this Agreement shall not
be released, affected or impaired by any of the following whether or not
undertaken with notice to or consent of the Company: (a) an assignment or
transfer, in whole or in part, of the Loans made to any Subsidiary Borrower or
of this Agreement or any Note although made without notice to or consent of the
Company, or (b) any waiver by any Bank or the Agent or by any other person, of
the performance or observance by any Subsidiary Borrower of any of the
agreements, covenants, terms or conditions contained in this Agreement or in the
Notes, or (c) any indulgence in or the extension of the time for payment by any
Subsidiary Borrower of any amounts payable under or in connection with this
Agreement or any Note, or of the time for performance by any Subsidiary Borrower
of any other obligations under or arising out of this Agreement or any Note, or
the extension or renewal thereof, or (d) the modification, amendment or waiver
(whether material or otherwise) of any duty, agreement or obligation of any
Subsidiary Borrower set forth in this Agreement or any Note (the modification,
amendment or waiver from time to time of this Agreement and the Notes being
expressly authorized without further notice to or consent of the Company), or
(e) the voluntary or involuntary liquidation, sale or other disposition of all
or substantially all of the assets of any Subsidiary Borrower or any
receivership, insolvency, bankruptcy, reorganization, or other similar
proceedings, affecting any Subsidiary Borrower or any of its assets, or (f) the
merger or consolidation of any Subsidiary Borrower or the Company with any other
person, or (g) the release of discharge of any Subsidiary Borrower or the
Company from the performance or observance of any agreement, covenant, term or
condition contained in this Agreement or any Note, by operation of law, or (h)
any other cause whether similar or dissimilar to the foregoing which would
release, affect or impair the obligations, covenants, agreements or duties of
the Company hereunder.
SECTION 10.05. No Investigation by Banks or Agent. The Company
hereby waives unconditionally any obligation which, in absence of such
provision, the Banks or the Agent might otherwise have to investigate or to
assure that there has been compliance with the law of any jurisdiction with
respect to the Guaranteed Obligations recognizing that, to save both time and
expense, the Company has requested that the Banks and the Agent not undertake
such investigation. The Company hereby expressly confirms that the obligations
of the Company hereunder shall remain in full force and effect without regard to
compliance or
41
<PAGE> 43
noncompliance with any such law and irrespective of any investigation or
knowledge of any Bank or the Agent of any such law.
SECTION 10.06. Indemnity. As a separate, additional and
continuing obligation, the Company unconditionally and irrevocably undertakes
and agrees with the Banks and the Agent that, should the Guaranteed Obligations
not be recoverable from the Company under Section 10.01 for any reason
whatsoever (including, without limitation, by reason of any provision of this
Agreement or the Notes or any other agreement or instrument executed in
connection herewith being or becoming void, unenforceable, or otherwise invalid
under any applicable law) then, notwithstanding any knowledge thereof by any
Bank or the Agent at any time, the Company as sole, original and independent
obligor, upon demand by the Agent, will make payment to the Agent for the
account of the Banks and the Agent of the Guaranteed Obligations by way of a
full indemnity in such currency and otherwise in such manner as is provided in
this Agreement and the Notes.
SECTION 10.07 Subordination, Subrogation, Reinstatement, Etc. The
Company agrees that any present or future indebtedness, obligations or
liabilities of any Subsidiary Borrower to Company shall be fully subordinate and
junior in right and priority of payment when due to any present or future
indebtedness, obligations or liabilities of the Subsidiary Borrowers to the
Banks and the Agent. The Company waives any right of subrogation to the rights
of any Bank or the Agent against any Subsidiary Borrower or any other person
obligated for payment of the Guaranteed Obligations and any right of
reimbursement or indemnity whatsoever arising or accruing out of any payment
which the Company may make pursuant to this Agreement and the Notes, and any
right of recourse to security for the debts and obligations of each Subsidiary
Borrower, unless and until the entire principal balance of and interest on the
Guaranteed Obligations shall have been paid in full, and to the extent the
Company is an "insider" as defined in Section 101(2) of the United States
Bankruptcy Code, such waiver shall be permanent and shall not be revoked or
terminated in any event, including payment in full of the principal and interest
of the Guaranteed Obligations. If at any time any payment of any Guranteed
Obligations by any Subsidiary Borrower is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of any
Subsidiary Borrower or otherwise, each of the Company's obligations hereunder
with respect to such payment shall be reinstated as though such payment had been
due but not made at such time.
42
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duty executed by their respective authorized officers as of the day and year
first above written.
MASCO CORPORATION
By: /s/ Robert B. Rosowski
Title: Vice President - Controller
and Treasurer
21001 Van Born Road
Taylor, Michigan 48180
Attention: President and Vice President
General Counsel
Telecopy Number: (313) 374-6135
43
<PAGE> 45
BANK ONE, NA, (Main office Chicago) as Agent
By: /s/ Richard Huttenlocher
Title: Senior Managing Director
Attention: Mr. Richard Huttenlocher
611 Woodward, Suite MI18074
Detroit, Michigan 48226
Telephone Number: (313) 225-2259
Telecopy Number: (313) 225-2290
44
<PAGE> 46
COMMERZBANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ John Marlatt
Title: Vice President
By: /s/ Graham A. Warning
Title: Assistant Treasurer
Attention: John Marlatt
20 Clark Street
Suite 2700
Chicago, IL 60603
Telephone Number: (312) 795-1625
Telecopy: (312) 236-2827
45
<PAGE> 47
BANK OF AMERICA, N.A.
By: /s/ Gretchen Spoo
Title: Vice President
Attention: Gretchen Spoo
231 South LaSalle Street, 9th Floor
Chicago, IL 60697
Telephone Number: (312) 828-6654
Telecopy Number: (312) 987-0303
46
<PAGE> 48
BARCLAYS BANK PLC
By: /s/ Marlene Wechselblatt
Title: Vice President
Attention: John Davey
54 Lombard St.
London EC3P 3AH
England
Telephone Number: (171) 699-2352
Telecopy Number: (171) 699-4140
Attention: Marlene Wechselblatt
222 Broadway
New York, NY 10038
Telephone Number: (212) 412-7642
Telecopy Number: (212) 412-7590
47
<PAGE> 49
COMERICA BANK
By: /s/ Nicholas G. Mester
Title: Account Officer
Attention: Nicholas Mester
500 Woodward Avenue
Detroit, MI 48226
Telephone Number: (313) 222-9168
Telecopy Number: (313) 222-3776
48
<PAGE> 50
ROYAL BANK OF CANADA
By: /s/ N. G. Millar
Title: Senior Manager
Attention: N.G. Millar
One Liberty Plaza, 4th Floor
New York, New York 10006-1404
Telephone Number: (212) 428-6363
Telecopy Number: (212) 809-7148
49
<PAGE> 51
WACHOVIA BANK N.A.
By: /s/ Kathryn Proctor
Title: Vice President
Attention: Ms. Kathryn Proctor
191 Peachtree Street NE
Atlanta, GA 30303
Telephone Number: (404) 332-4036
Telecopy Number: (404) 332-6898
50
<PAGE> 52
KEYBANK NATIONAL ASSOCIATION
By: /s/ J. T. Taylor
Title: Vice President
Attention: J.T. Taylor
127 Public Square, NE MC
OH-01-270606
Cleveland, OH 44114
Telephone Number: (216) 689-3589
Telecopy Number: (216) 689-4981
51
<PAGE> 53
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
Name of Bank Commitment
------------ ----------
Bank One, NA (Main Office Chicago) $337,500,000
Commerzbank AG New York and Grand Cayman Branches $168,750,000
Bank of America, N.A. $168,750,000
Barclays Bank, PLC $87,500,000
Comerica Bank $87,500,000
Royal Bank of Canada $50,000,000
Wachovia Bank N.A. $50,000,000
KeyBank National Association $50,000,000
--------------
Total Commitments $1,000,000,000
==============
</TABLE>
52
<PAGE> 54
PRICING SCHEDULE
PRICING SCHEDULE
The Applicable Margin shall be as determined by the matrix below (expressed as
basis points):
<TABLE>
<CAPTION>
- ------------------------ ---------------- ----------------- ---------------- ------------------ --------------------
Level I Level II Level III Level IV
Status Status Status Status Level V Status
- ------------------------ ---------------- ----------------- ---------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
Facility Fee 7.0 8.0 10.0 12.5 17.5
- ------------------------ ---------------- ----------------- ---------------- ------------------ --------------------
Eurocurrency Margin 33.0 39.5 50.0 62.5 82.5
- ------------------------ ---------------- ----------------- ---------------- ------------------ --------------------
Utilization fee >
25% but < 50% 10.0 10.0 12.5 12.5 12.5
-
- ------------------------ ---------------- ----------------- ---------------- ------------------ --------------------
Utilization fee > 20.0 20.0 25.0 25.0 25.0
50%
- ------------------------ ---------------- ----------------- ---------------- ------------------ --------------------
</TABLE>
For the purposes of this Schedule, the following terms have the following
meanings, subject to the final paragraph of this Schedule:
"Level I Status" exists at any date if, on such date, the Company's Moody's
Rating is A2 or better and the Company's S&P Rating is A or better.
"Level II Status" exists at any date if, on such date, (i) the Company has not
qualified for Level I Status and (ii) the Company's Moody's Rating is A3 or
better or the Company's S&P Rating is A- or better.
"Level III Status" exists at any date if, on such date, (i) the Company has not
qualified for Level I Status or Level II Status and (ii) the Company's Moody's
Rating is Baa1 or better or the Company's S&P Rating is BBB+ or better.
"Level IV Status" exists at any date if, on such date, (i) the Company has not
qualified for Level I Status, Level II Status or Level III Status and (ii) the
Company's Moody's Rating is Baa2 or better or the Company's S&P rating is BBB or
better.
"Level V Status" exists at any date if, on such date, the Company has not
qualified for Level I Status, Level II Status, Level III Status or Level IV
Status.
"Moody's Rating" means, at any time, the rating issued by Moody's Investors
Service, Inc. and then in effect with respect to the Company's senior unsecured
long-term debt securities without third-party credit enhancement.
"S&P Rating" means, at any time, the rating issued by Standard and Poor's Rating
Services, a division of The McGraw Hill Companies, Inc., and then in effect with
respect to the Company's senior unsecured long-term debt securities without
third-party credit enhancement.
53
<PAGE> 55
"Status" means either Level I Status, Level II Status, Level III Status, Level
IV Status or Level V Status.
The credit ratings to be utilized for purposes of this Schedule are the
ratings assigned to outstanding senior unsecured long-term debt securities of
the Company without third party credit support. Ratings assigned to any
obligation of the Company which is secured or which has the benefit of third
party credit support shall be disregarded.
The Applicable Margin shall be determined in accordance with the
foregoing table based on the Company's Status as determined from its
then-current Moody's and S&P Ratings. The credit rating in effect on any date
for the purposes of this Schedule is that in effect at the close of business on
such date. If at any time the Company has no Moody's Rating and no S&P Rating,
Level V Status shall exist. Notwithstanding the foregoing, if at any time there
exists a difference of more than one level between the Moody's Rating and the
S&P Rating, the Status shall be determined as if the higher rating were one
level above the lower of the two ratings.
54
<PAGE> 56
SCHEDULE 1
EUROCURRENCY PAYMENT OFFICES
55
<PAGE> 57
EXHIBIT A
NOTE
--------, ----
--------------
For value received, [MASCO CORPORATION, a Delaware corporation] [insert
name of Subsidiary Borrower] (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office,
the unpaid principal amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in the relevant Agreed Currency at the relevant office of
the Agent and as required under the Credit Agreement referenced below.
All Loans made by the Bank, the respective types and maturities thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding shall be endorsed by
the Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof, provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of March 20, 2000 among the Borrower, the banks party
thereto and Bank One, NA, as Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. This note shall be construed in accordance with
and governed by the laws of the State of Michigan. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof
[MASCO CORPORATION][Subsidiary Borrower]
By
-------------------------------------
Title
--------------------------------
56
<PAGE> 58
Note (cont'd)
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
- ----------------------------------------------------------------------------------------------------------------------
Amount of
Date Amount of Type of Loan Principal Maturity Notation
Loan Repaid Date Made By
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
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</TABLE>
57
<PAGE> 59
EXHIBIT B
SWINGLINE NOTE
--------, ----
--------------
For value received, MASCO CORPORATION, a Delaware corporation (the
"Borrower"), promises to pay to the order of Bank One, NA (the "Swingline
Lender"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Swingline Loan made by the Swingline Lender to the Borrower
pursuant to the Credit Agreement referred to below on the day required under the
Credit Agreement referred to below. The Borrower promises to pay interest on the
unpaid principal amount of each such Swingline Loan on the dates and at the rate
or rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in the relevant Agreed Currency at the relevant
office of the Agent and as required under the Credit Agreement referenced below.
All Swingline Loans made by the Swingline Lender, the respective types
and maturities thereof and all repayments of the principal thereof may be
recorded by the Swingline Lender and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding shall be endorsed by the Swingline Lender on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof, provided that the failure of the Swingline Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is the Swingline Note referred to in the Amended and Restated
Credit Agreement dated as of March 20, 2000 among the Borrower, the banks party
thereto and Bank One, NA, as Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. This note shall be construed in accordance with
and governed by the laws of the State of Michigan. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof
MASCO CORPORATION
By
-----------------------------------
Title
------------------------------
58
<PAGE> 60
Swingline Note (cont'd)
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
- ----------------------------------------------------------------------------------------------------------------------
Amount of
Date Amount of Type of Loan Principal Maturity Notation
Loan Repaid Date Made By
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
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- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
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- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
</TABLE>
59
<PAGE> 61
EXHIBIT C
OPINION OF
COUNSEL FOR THE COMPANY
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Bank One, NA, as Agent
- -------------
- --------, -------- -------
Dear Sirs:
I am Senior Vice President-General Counsel of Masco Corporation (the
"Company") and am familiar with the Amended and Restated Credit Agreement dated
as of March 20, 2000 (the "Credit Agreement") among the Company, and certain of
its Subsidiaries as borrowers, the Banks party thereto as lenders, Commerzbank
Aktiengesellschaft and Bank of America Securities LLC, as Syndication Agents,
and Bank One, NA, as Agent. Terms defined in the Credit Agreement are used
herein as therein defined. This opinion is being rendered to you pursuant to
Section 3.01(c) of the Credit Agreement.
I have examined originals or copies, certified or otherwise, identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its businesses substantially as now conducted.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes are within the Company's corporate powers, have been
duly authorized by all necessary corporate action of the Company, require no
action in respect of the Company by, or filing in respect of the Company 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 or by-laws of
the Company or of any agreement, judgment, injunction, order, of incorporation
in decree or other instrument known to me to be binding upon the Company or
result in the creation or imposition of any Lien on any asset of the Company or
any of its Subsidiaries under any such agreement or instrument.
3. The Credit Agreement constitutes a valid and binding agreement of
the Company and the Notes constitute valid and binding obligations of the
Company, in each case enforceable in accordance with its terms except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
1
<PAGE> 62
4. There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Company or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official which, in my opinion, is likely to have a material adverse effect on
the business or financial position of the Company and its Consolidated
Subsidiaries, considered as a whole, or which in any manner draws into question
the validity of the Credit Agreement or the Notes.
Very truly yours,
John R. Leekley
Senior Vice President-
General Counsel
2
<PAGE> 63
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of , , among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), MASCO CORPORATION (the "Company") and
Bank One, NA, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Amended and Restated Credit Agreement dated as of March 20, 2000
among the Company, and certain of its Subsidiaries as borrowers, the Banks party
thereto as lenders, Commerzbank Aktiengesellschaft and Bank of America
Securities LLC, as Syndication Agents, and Bank One, NA, as Agent (the "Credit
Agreement"),
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrowers in an aggregate principal amount at
any time outstanding not to exceed $ ;
WHEREAS, Loans made to the Borrowers by the Assignor under the Credit
Agreement in the aggregate principal amount of $ are outstanding at the
date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $ (the "Assigned Amount"),
together with a corresponding portion of its outstanding Loans, and the Assignee
proposes to accept assignment of such rights and assume the corresponding
obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Loans made by the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee, the Company and the Agent and
the payment of the amount specified in Section 3 required to be paid on the date
hereof (1) the Assignee shall, as of the date hereof, succeed to the rights and
be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
3
<PAGE> 64
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds an amount equal to $ .(1) It is
understood that facility fees accrued to the date hereof are for the account of
the Assignor and such fees accruing from and including the date hereof [in
respect of the Assigned Amount] are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
[SECTION 4. Consent of the Company and the Agent. This Agreement is
conditioned upon the consent of the Company and the Agent pursuant to Section
9.06(c) of the Credit Agreement, The execution of this Agreement by the Company
and the Agent is evidence of this consent. Pursuant to Section 9.06(c) the
Company agrees to execute and deliver or cause to be executed and delivered a
Note payable to the order of the Assignee to evidence the assignment and
assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Company, or the validity and enforceability of the obligations of the Company in
respect of the Credit Agreement or any Note. The Assignee acknowledges that it
has, independently and without reliance on the Assignor, the Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of the
business, affairs and financial condition of the Company.
SECTION 6. Governing Law . This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
SECTION 7 Counterparts. This Agreement 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.
- ------------------------------
(1) Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee. It may be preferable in
an appropriate case to specify these amounts generically or by formula
rather than as a fixed sum.
4
<PAGE> 65
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authored officers as of the date first
above written.
[ASSIGNOR]
By
----------------------------------
Title:
------------------------
[ASSIGNEE]
By
----------------------------------
Title:
------------------------
[MASCO CORPORATION]
By
----------------------------------
Title:
------------------------
BANK ONE, NA, as Agent
By
----------------------------------
Title:
------------------------
5
<PAGE> 66
EXHIBIT E
JOINDER AGREEMENT
THIS JOINDER AGREEMENT, dated as of , , is
entered into by (the "New Subsidiary Borrower") pursuant to
the Amended and Restated Credit Agreement dated as of March 20, 2000 as
amended, supplemented or otherwise modified from time to time (the "Credit
Agreement"), by and among Masco Corporation, a Delaware corporation, certain
Subsidiary Borrowers which are now or may hereafter become a party thereto
from time to time, the Banks party thereto, Commerzbank Aktiengesellschaft and
Bank of America Securities LLC, as Syndication Agents, and Bank One, NA, as
Administrative Agent (the "Agent"). Capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
WITNESSETH:
WHEREAS, the parties to this Joinder Agreement wish to
designate the New Subsidiary Borrower as a Subsidiary Borrower under the
Credit Agreement in the manner hereinafter set forth; and
WHEREAS, this Joinder Agreement is entered into pursuant to
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. The New Subsidiary Borrower hereby acknowledges that it has
received and reviewed a copy of the Credit Agreement and unconditionally
agrees to: (a) join the Credit Agreement as a Subsidiary Borrower, (b) be
bound by, and hereby ratifies and confirms, all covenants, agreements,
consents, submissions, appointments, acknowledgments and other terms and
provisions attributable to a Subsidiary Borrower in the Credit Agreement; and
(c) perform all obligations required of it as a Subsidiary Borrower by the
Credit Agreement.
2. The New Subsidiary Borrower hereby represents and warrants
that the representations and warranties with respect to it contained in, or made
or deemed made by it in, the Credit Agreement are true and correct on the date
hereof. In addition, the New Subsidiary Borrower represents and warrants:
(i) it is a corporation duly incorporated, validly existing and in
good standing under the law of its jurisdiction of
incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its businesses substantially as now
conducted.
(ii) The execution, delivery and performance by the New
Subsidiary Borrower of this Agreement, the Credit Agreement
and the Notes are within its 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 and do not contravene, or constitute
a default under, any provision of applicable law or regulation
or of the charter documents or by-laws of the New Subsidiary
Borrower or of any agreement, judgment, injunction, order,
decree or other instrument binding upon it or result in the
creation or imposition of any Lien on any asset of the New
Subsidiary Borrower.
6
<PAGE> 67
(iii) This Agreement and the Credit Agreement constitute valid and
binding agreements of the New Subsidiary Borrower and each
Note of the New Subsidiary Borrower, when executed and
delivered in accordance with the Credit Agreement, will
constitute a valid and binding obligation of the New
Subsidiary Borrower.
(iv) The New Subsidiary Borrower is not an "investment company" or
a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
3. The New Subsidiary Borrower agrees that, so long as any
Bank has any Commitment under the Credit Agreement or any amount is payable
under any Note or otherwise under the Credit Agreement, it shall:
(i) Do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence.
(ii) Not permit or suffer or exist any change in ownership of such
New Subsidiary Borrower which results in any person other than
the Company or any Subsidiary of the Company owning any of the
issued and outstanding capital stock or other equity interests
of such Subsidiary.
4. The address and jurisdiction of incorporation of the New
Subsidiary Borrower is set forth in Schedule A to this Joinder Agreement.
5. The Company agrees that its guarantee contained in Article
X of the Credit Agreement shall remain in full force and effect after giving
effect to this Joinder Agreement, including without limitation after including
the New Subsidiary Borrower as a Subsidiary Borrower under the Credit Agreement.
6. This Joinder Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Michigan.
7. This Joinder Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement.
7
<PAGE> 68
IN WITNESS WHEREOF, each of the undersigned has caused this
Joinder Agreement to be duly executed and delivered as of the day and year set
forth above.
------------------------,
as a Subsidiary Borrower
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
MASCO CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Accepted and Acknowledged:
- -------------------------
BANK ONE, NA
as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
8
<PAGE> 69
SCHEDULE A
ADMINISTRATIVE INFORMATION
9
<PAGE> 70
EXHIBIT F
NOTICE OF BORROWING
[Date]
To each Bank party to the referenced
Amended and Restated Credit Agreement
c/o Bank One, NA
as Administrative Agent for the Banks
611 Woodward Avenue
Detroit, MI 48226
Attention: (for Borrowings in Dollars)
(for Borrowings in Agreed Currencies other than Dollars)
The Borrower (as hereinafter named), hereby requests a Borrowing
pursuant to Section 2.01(a) of the Amended and Restated Credit Agreement, dated
as of March 20, 2000, as amended, supplemented or otherwise modified from time
to time (the "Credit Agreement"), by and among Masco Corporation, a Delaware
corporation, certain Subsidiary Borrowers which are now or may hereafter become
a party thereto from time to time, the Banks party thereto, Commerzbank
Aktiengesellschaft and Bank of America Securities LLC, as Syndication Agents,
and Bank One, NA, as Administrative Agent (the "Agent"). Capitalized terms used
but not defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement. Such Borrowing shall be evidenced by the Borrower's Note,
as applicable.
(i) Borrower's Name:
(ii) [The Borrowing is in Dollars in the amount of: ]
[The Borrowing is in [insert desired Agreed Currency] in the amount
of:
Existing Loan amount:
Repayment:
Continuation of Eurocurrency Loan (Interest Period ending: )
Increased amount:
Total Loan amount:
(iii) The Borrowing is to be funded on:
(iv) The Loans comprising such Borrowing shall be made as [Floating
Rate][Eurocurrency] Loans].
(v) In the case of a Eurocurrency Borrowing, the Interest Period shall
be .
as Borrower
10
<PAGE> 71
EXHIBIT F-1
NOTICE OF SWINGLINE LOAN
[Date]
Bank One, NA, as Swingline Lender
611 Woodward Avenue
Detroit, MI 48226
Attention: (for a Swingline Loan in Dollars)
(for a Swingline Loan in an Agreed Currency other than
Dollars)
The Borrower (as hereinafter named), hereby requests a Swingline Loan
pursuant to Section 2.01(b) of the Amended and Restated Credit Agreement, dated
as of March 20, 2000, as amended, supplemented or otherwise modified from time
to time (the "Credit Agreement"), by and among Masco Corporation, a Delaware
corporation, certain Subsidiary Borrowers which are now or may hereafter become
a party thereto from time to time, the Banks party thereto, Commerzbank
Aktiengesellschaft and Bank of America Securities LLC, as Syndication Agents,
and Bank One, NA, as Administrative Agent (the "Agent"). Capitalized terms used
but not defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement. Such Borrowing shall be evidenced by the Borrower's
Swingline Note.
(i) Borrower's Name:
(ii) [The Swingline Loan is in Dollars in the amount of: ]
[The Swingline Loan is in [insert desired Agreed Currency] in the
amount of: .
(iii) The Swingline Loan is to be funded on: .
(iii) In the case of a Swingline Loan in an Agreed Currency other than
Dollars, the agreed Interest Period shall be and the greed upon
interest rate shall be .
as Borrower
11
<PAGE> 1
EXHIBIT 10.b
CORPORATE SERVICES AGREEMENT
This Agreement is made as of January 1, 1987 between Masco Corporation,
a Delaware corporation ("Masco"), and Masco Industries, Inc., a Delaware
corporation ("Industries").
WHEREAS, Masco and Industries desire to amend and restate that certain
Corporate Services Agreement between them dated as of May 1, 1984 (the "1984
Corporate Services Agreement"); and
WHEREAS, Masco and Industries desire to terminate that certain
Corporate Services Agreement dated as of July 1, 1985 (the "1985 Corporate
Services Agreement") between Masco's wholly-owned subsidiary Masco Building
Products Corp., a Delaware corporation ("MBPC"), and NI Industries, Inc. a
Delaware corporation and currently an indirect wholly-owned subsidiary of
Industries ("NI"); and
WHEREAS, Industries desires that Masco provide, and Masco is willing to
provide, either directly or through its subsidiaries, certain services and
facilities on the terms and conditions hereinafter set forth; and
WHEREAS, Masco desires that Industries provide, and Industries is
willing to provide, either directly or through NI, certain facilities on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree to amend and restate the 1984 Corporate
Services Agreement and take certain other action as follows:
1. Masco shall provide to Industries and its subsidiaries corporate
support staff and administrative services of those personnel which Masco
maintains internally for its own officers, operating executives and business
operations and which Masco has heretofore provided to Industries headquarters
and businesses pursuant to the 1984 Corporate Services Agreement, such as
accounting, legal, treasury, tax, corporate development, data processing,
research and development and human resources, provided that Masco shall not be
obligated to provide any services which would be in contravention of law. Masco
shall furnish such services at the reasonable request of Industries, provided
that Masco shall not be required to disrupt the provisions of services for its
own business purposes and shall not be obligated to retain additional employees
in order to accommodate Industries requirements for services other than in the
ordinary course of business. In addition, Masco shall provide to Industries
headquarters office space and data processing equipment in Masco's corporate
office in Taylor, Michigan.
2. Industries shall provide to MBPC headquarters office space at the
corporate offices of NI in Long Beach, California, as heretofore provided
pursuant to the 1985 Corporate Services Agreement.
3. Industries will pay Masco a fee for the services and office space
provided under Section 1 hereof, irrespective of Industries or its subsidiaries'
actual use thereof, equal to eight tenths of one percent of Industries'
consolidated annual net sales (pro rated for any partial year), as shown in
Industries' annual audited financial statements, less (in consideration of the
facilities provided by Industries to MBPC pursuant to Section 2 hereof) the real
estate related costs incurred by NI to maintain headquarters office space for
MBPC in NI's Long Beach, California headquarters, including, but not limited to,
depreciation expense, maintenance, repairs and taxes related to such facility.
Such fee shall be payable monthly in arrears within 30 days of the end of each
month, based upon Industries consolidated unaudited net sales for each month,
with such timely adjustment as may be required following the preparation of such
audited financial
<PAGE> 2
statements. Industries shall be responsible for the payment of fees and expenses
for services rendered by third parties retained by Masco on behalf of Industries
and its subsidiaries. In addition, Industries shall pay for material utilized
and purchased components in research and development projects, in accordance
with Masco's customary practice. The parties recognize that Industries may, in
the future, hire certain support and administrative staff to be employed solely
by Industries and incur other expenses for equipment, services or space, and to
the extent any such support and administrative staff are employed by Industries
or such expenses are incurred, Masco shall review the resulting cost savings, if
any, to Masco in providing support staff and administrative services, equipment
and headquarters office space hereunder and if, in Masco's good faith judgment,
such a cost savings has resulted, Masco shall reflect such savings by a
corresponding reduction in the subsequent fees to be paid hereunder.
4. Additional services, facilities and other items made available by
Masco to its operating units which are not covered by the base fee will
similarly be made available to Industries except if the provision of such
services, facilities and other items would be in contravention of law. The
charges for additional services, facilities and other items shall be determined
form time to time by Masco, but Industries shall have no obligation to purchase
or use any such additional services, facilities or other times.
5. The term of this agreement shall be from the date hereof through
December 31, 1988. the term shall be extended automatically for a period of one
year each January 1 thereafter, provided that Masco may give notice of
non-renewal not less than 90 days prior to any such January 1. This Agreement
may be terminated by Industries at any time, without cause, on 90 days written
notice, provided that such termination shall not relieve Industries of its
obligations accruing hereunder through the effective date of such termination.
6. In providing services, equipment and facilities hereunder, Masco and
Industries shall each have a duty to act, and to cause their respective
employees to act, in a reasonable and prudent manner. Subject to the provisions
of the Research and Development Undertaking attached as Annex A hereto, neither
Masco or its subsidiaries, nor any officer, Director, employee or agent of Masco
or its subsidiaries, nor Industries or its subsidiaries, nor any officer,
director, employee or agent of Industries or its subsidiaries, shall be liable
for any loss incurred in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance or bad faith.
7. The selection of Masco employees to provide services hereunder shall
be determined by Masco and such employees shall be the employees of Masco. All
work performed hereunder by Masco shall be performed by Masco as an independent
contractor.
8. Masco and Industries shall take reasonable measures to keep
confidential all information concerning the other which is acquired in the
course of performing services hereunder and which is of a nature customarily
considered to be confidential by them. Research and development services
provided by Masco shall be subject to the additional provisions set forth in
Annex A hereto.
9. This Agreement shall not be assigned by Industries without the
express written consent of Masco, except for an assignment by Industries to a
successor to substantially all of its business.
10. The 1985 Corporate Services Agreement is hereby terminated.
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MASCO CORPORATION MASCO INDUSTRIES, INC.
By/s/Richard G. Mosteller By/s/Erwin H. Billig
---------------------------- -----------------------
Senior Vice President - President
Finance
The termination of the 1985 Corporate Services Agreement is accepted and agreed
to as of the day and year first above written.
NI INDUSTRIES, INC.
By/s/James Shaffer
-------------------
<PAGE> 4
ANNEX A
RESEARCH AND DEVELOPMENT UNDERTAKING
RESEARCH AND DEVELOPMENT PROGRAM
1.01 Masco shall provide to Industries such research and development
services as have heretofore been provided to the businesses Masco is
transferring to Industries. Nothing herein or in the Corporate Services
Agreement (of which this Annex is a part) shall require Masco to provide
research and development services in kind, quality or amount greater than those
customarily provided to Masco's own business units.
CONFIDENTIAL RELATIONSHIP
2.01 It is acknowledged that in furtherance of performance by Masco of
the research and development services performed under this Annex, Masco and
Industries, during the term of this Annex may be exposed to and become privy to
and will generate various confidential or secret information proprietary to the
other, which confidential information may include, but is not limited to,
information, technical information, and know-how concerning products,
developments, new product plans, equipment, drawings, specifications, models,
prototypes, ideas, designs, software, processes, methods, research, sales and
customers and information relating to the management, operation or planning of
the other, and the fact of the others interest in certain projections or
technology (collectively hereinafter referred to as "Confidential Information").
Confidential Information shall be limited to information disclosed by one party
to the other party in writing (including information confirmed in writing to be
confidential within thirty (30) days after oral or visual disclosure) and
designated as confidential, exclusive or any information which:
(1) Was in the possession of the receiving party prior to receipt
thereof;
(2) Is or becomes available to the public through no fault of the
receiving party;
(3) Is obtained by the receiving party in good faith without obligation
of non-disclosure from a third party who has a right to disclose
the same; or
(4) Is developed by the receiving party independently of receipt of
such information from the disclosing party.
2.02 Masco and Industries shall hold and maintain the Confidential
Information of the other in confidence. Masco and Industries shall not without
the written consent of the disclosing party, except as specifically provided
herein, disclose to any third party any Confidential Information of the
disclosing party prior to the tenth (10th) anniversary of the date such
Confidential Information either is generated by the research and development
services or is disclosed by the disclosing party to the receiving party.
2.03 Masco, to the extent required for the furtherance of the research
and development services for Industries contemplated by this Annex may disclose
Industries Confidential Information to any engineering or equipment
manufacturing or consulting firm that prior to such disclosure has agreed in
writing with Masco in a manner consistent with this Annex neither to
<PAGE> 5
disclose the information to any party nor use it for any purpose other than in
furtherance of the research and development services provided by Masco to
Industries.
2.04 Upon termination of the Corporate Services Agreement or the
undertakings of this Annex, Masco will deliver to Industries upon request by
Industries all Industries Confidential Information including the work product
and all documentation generated by Masco relating thereto along with all
equipment, drawings, specifications, materials, notes and any other
documentation and physical things that Masco received from Industries.
REPORTS AND FUNDING
3.01 Masco will keep Industries generally informed of the work
performed and the results achieved under the research and development services
provided by Masco to Industries. Interim reports will be provided to the
business units of Industries upon their request.
3.02 Monies for financing materials and other property utilized in the
research and development services shall be provided in accordance with the
Corporate Services Agreement of which this Annex is a part.
IV. INVENTIONS AND PATENTS
4.01 Title to each invention or improvement and to patent applications
and patents thereon, made during performance of research and development
services by Masco under the Corporate Services Agreement performed at the
specific request of Industries and directed to the design, manufacture,
installation or use of a process, machine, manufacture, or composition of
matter, or improvement thereof, for manufacture, use, or sale by Industries
(hereinafter "Industries Originated Inventions") shall reside in Industries.
4.02 Title to each invention or improvement and to patent applications
and patents thereof, made during performance of research and development
services by Masco under the Corporate Services Agreement not specifically
performed at the request of Industries, but which invention or improvement is
directed to the design, manufacture, installation or use of a process, machine,
manufacture, or composition of matter, or improvement thereof, suitable for
manufacture, use or sale by Masco in its business, or by industries in its
business, and which invention makes substantial use of Industries Confidential
Information (hereinafter "Masco Originated Inventions") shall reside in
Industries.
4.03 Masco, its subsidiaries and, upon Masco's request, its affiliates,
are hereby granted an unlimited, royalty-free, irrevocable, non-exclusive
license, but not the right to grant sub-licenses, under Masco Originated
Inventions, and patent applications and patents thereof, to manufacture, use and
sell any process, machine, manufacture or composition of matter, and
improvements thereof, incorporating, such Masco Originated Inventions, to the
extent Industries has the right to grant such a license.
<PAGE> 6
4.04 Masco and Industries hereby agree to negotiate in good faith a
license granting to Masco the right to manufacture, use and sell any process,
machine, manufacture, or composition of matter, and improvements thereof,
incorporating Industries Originated Inventions, to the extent Industries has the
right to grant such a license, which license shall be on terms and conditions in
all respects reasonable to Masco in light of Masco's close involvement in the
research and development. This agreement to negotiate in good faith a license
under Industries Originated Inventions survives any termination of the Corporate
Services Agreement and this Annex.
4.05 Nothing in this Annex shall be construed as a grant to Industries
by Masco, by implication, estoppel or otherwise, of a right to use or a license
to Industries in any Masco patent, trademark, tradename, Masco Confidential
Information or other proprietary right not specifically granted to Industries.
Title to any invention or improvement, and any patent application or patent
thereon, made using both Masco Confidential Information and Industries
Confidential Information shall reside with the party whose Confidential
Information predominates and the other party shall be granted an unlimited,
royalty-free, irrevocable, non-exclusive license to manufacture, use and sell
any process, machine, manufacture or composition of matter, and improvements
thereof, incorporating such inventions and improvements.
4.06 Notwithstanding any non-disclosure provisions of this Annex, Masco
shall, if requested by Industries or an Industries business unit, and after
notifying Industries, file and prosecute, or have filed and prosecuted, patent
applications to protect any such inventions described in sub-paragraphs 4.01 and
4.02 above, in any and all countries. The expense of monitoring the preparation,
filing and maintaining such patent applications and patents thereon by third
parties shall be borne by Masco under the Corporate Services Agreement, except
for government fees, annuities and taxes and any monies paid to third parties
(collectively hereafter "Third Party Expenses"), which Third Party Expenses
shall be paid by Industries or reimbursed to Masco by Industries. Masco will
execute, acknowledge, and deliver all lawful papers which in the opinion of
Industries counsel are necessary or desirable to vest or perfect title if
required and in accordance with sub-paragraphs 4.01 and 4.02, as directed by
Industries, its successors or assigns, including applications for divisions of
pending applications, applications for reissue of patents and specific
assignments of applications and patents, and all rights under the International
Convention for the Protection of Industrial Property. In the event Industries
decides not to file a patent application on any Masco Originated Invention, then
Masco may do so in its own name at its own expense and Industries will assist
Masco, its nominees, successors and assigns, at any time in every proper manner
and without charge to Masco, but entirely at Masco's expense, to obtain patents
on the Masco Originated Invention in any and all countries, and will execute,
acknowledge and deliver all lawful papers which in the opinion of Masco counsel
are necessary or desirable for applying and obtaining patents thereon as Masco
may desire, and the provisions of Section 4.02 with respect to such Masco owned
Masco Originated Inventions shall not be applicable thereto.
4.07 Industries agrees to assert no rights, claims or entitlements
against Masco, its suppliers, its customers, its successors, assigns, or
nominees, whether arising out of patents, trade secrets, or otherwise based on
non-substantial use by Masco of Industries Confidential Information acquired by
Masco in the performance of the research and development services or based on
the use of Industries Confidential Information in existence at the time the
Corporate Services Agreement of which this Annex is a part, is signed.
<PAGE> 7
V. INFRINGEMENT AND INDEMNIFICATION
5.01 Industries agrees to indemnify and hold Masco harmless for
damages, costs, expenses and reasonable attorney's fees against any third party
claim of patent, trademark or copyright infringement, unfair competition, or
misappropriation of proprietary, confidential or trade secret information to the
extent such claim is based solely on Industries Confidential Information or on
the specifications and other materials provided by Industries to Masco.
5.02 Masco agrees to indemnify and hold Industries harmless for
damages, costs, expenses and reasonable attorney's fees, against any third party
claim of patent, trademark or copyright infringement, unfair competition, or
misappropriation of proprietary, confidential or trade secret information to the
extent such claim is based solely on Masco's manufacture, use, or sale of a
Masco Originated Invention.
5.03 Masco and Industries agree to promptly notify each other of any
claim brought by a third party against the other that comes under either
sub-paragraph 5.01 and 5.02 and agree that Masco shall promptly undertake
reasonable efforts to obtain a discontinuance of such claim, and, if not
successful, Masco shall consult with Industries. If the third party claim
becomes the subject of a court action, the party against whom the action is
brought shall select defense counsel (in consultation with Masco if the claim is
brought against Industries), and damages, costs, expenses, and attorney's fees
will be borne as stated in sub-paragraphs 5.01 and 5.02.
5.04 Masco and Industries shall notify the other promptly following the
discovery of any infringement of any unexpired patent or pending published
patent application directed to an invention defined in sub-paragraphs 4.01 and
4.02 above by any third party. Masco shall promptly undertake reasonable efforts
to obtain a discontinuance of the aforesaid infringement, and, if not
successful, Masco shall consult with Industries. If Industries, at its option,
brings suite against such infringer, Industries shall select counsel in
consultation with Masco and Masco shall guide such infringement action and
assist Industries counsel and all costs, expenses and attorney's fees of such
action shall be borne by Industries. Masco shall have the right, at its expense,
to bring suit against any infringer of a patent directed to a Masco Originated
Invention or an Industries Originated Invention licensed by Masco when the act
of infringement by the third party competes in the marketplace with a business
line of Masco.
5.05 Masco and Industries each agree to cooperate fully with the other
and furnish any evidence in its possession bearing on the issues involved in any
court action brought against Masco or Industries described in sub-paragraphs
5.01 and 5.02 and in any infringement action brought pursuant to sub-paragraph
5.04.
5.06 Any infringement action brought pursuant to sub-paragraph 5.04
shall be either in the name of Masco, or in the name of Industries, or jointly
by Masco and Industries, as may be required by the law of the forum. For this
purpose, Masco and Industries agree to execute such legal papers necessary for
the prosecution of such action. In any such action, both Masco and Industries
shall be entitled to recoup their expenses, costs and attorney's fees from any
recoveries in such action. The excess recovery over such recoupment for
infringement of a Masco Originated
<PAGE> 8
Invention shall be divided equally between Masco and Industries. Industries
shall retain the excess recovery for infringement of an Industries Originated
Invention.
VI. TERMINATION
6.01 This Annex shall terminate simultaneously with termination of the
Corporate Services Agreement unless terminated earlier or extended by agreement
of the parties. Sub-paragraphs 2.02, 2.03, 4.01, 4.02, 4.03, 4.04, 4.06, 4.07,
5.01, 5.02, 5.03, 5.04, 5.05 and 5.06 shall survive termination of this Annex.
<PAGE> 9
AMENDMENT NO. 1 TO
CORPORATE SERVICES 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 ("Tech"), concerning that certain
Corporate Services Agreement (the "Services Agreement"), dated as of January 1,
1987, between Masco and Tech. All capitalized terms not otherwise defined in
this Amendment shall have the meanings given them in the Services Agreement.
A. Masco holds 24,824,690 shares of the Common Stock, par value $1.00
per share, of Tech (the "Tech Common Stock");
B. Concurrently herewith, Tech has, among other things, repurchased
form Masco 17,000,000 shares of the Tech Common Stock;
C. In connection therewith, Masco and Tech desire to amend certain
provisions of the Services Agreement as set forth herein.
IN CONSIDERATION of the mutual covenants and agreements contained in
this Amendment, the parties agree to amend the Services Agreement as follows:
1. All references to "Industries" are hereby revised to be references
to "Tech".
2. Paragraph 5 is hereby amended to read in its entirety as follows:
5. The term of this Agreement shall expire on September 30, 1998;
provided however that the term shall be extended automatically for a
period of one year each October 1 thereafter, subject to either
party's right to terminate this Agreement by written notice to the
other received at least 90 days prior to any such October 1.
Termination of this Agreement shall not relieve either party of its
obligations accruing hereunder through the effective date of
termination.
3. All other terms and conditions of the Services Agreement are hereby
ratified and confirmed and remain in full force and effect.
<PAGE> 10
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> 11
June 17, 1998
John R. Leekley
Senior Vice President
and General Counsel
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Dear John:
As you know, Masco Corporation and MascoTech, Inc. are both in the
process of reviewing the arrangement for corporate services that are currently
provided by Masco to MascoTech under the Corporate Services Agreement dated as
of January 1, 1987, as amended (the "Agreement"). The term of the Agreement will
be extended automatically for one year on October 1, 1998 unless written notice
of termination is given at least 90 days prior thereto.
MascoTech is prepared to waive the automatic one year extension and
permit the Agreement to continue beyond September 30, 1998 on the condition that
the Agreement may be terminated by either party at any time on or after
September 30, 1998 on [90] days' prior written notice (or such other notice
period as the parties may agree).
Please confirm that you join in this waiver, whereupon the foregoing
waiver will become binding on each of the parties.
Sincerely,
/s/Timothy Wadhams
------------------
Timothy Wadhams
Senior Vice President and
Chief Financial Officer
Confirmed:
MASCO CORPORATION
By: /s/John R. Leekley
------------------
John R. Leekley
Senior Vice President
and General Counsel
<PAGE> 12
January 22, 1998
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Gentlemen:
As you are aware, MascoTech, Inc. completed its acquisition of TriMas
Corporation on Thursday, January 22, 1998 (the "Effective Date"). This will
confirm our agreement that the Corporate Services Agreement, dated as of
December 27, 1988, between Masco Corporation ("Masco") and TriMas Corporation
(the "TriMas Corporate Services Agreement"), is terminated effective as of the
end of business on the Effective Date, except with respect to rights and
obligations of the parties thereto which have accrued as a result of services
rendered thereunder prior to the Effective Date. Furthermore, Masco agrees that
the period for which a fee is payable under the TriMas Corporate Services
Agreement will terminate on the earlier of (i) the Effective Date, or (ii) the
date immediately preceding the date that the consolidated net sales of TriMas
are included in the consolidated net sales of MascoTech, Inc. After such date,
Masco will be compensated for work performed for the TriMas companies under
Masco's Corporate Services Agreement with MascoTech (the "MascoTech Corporate
Services Agreement"). Finally, Masco agrees that, in calculating the fee payable
under the MascoTech Corporate Services Agreement, MascoTech is entitled to the
credits that were historically permitted to TriMas under the TriMas Corporate
Services Agreement of up to $250,000 per year for occupancy costs at TriMas' Ann
Arbor headquarters (consisting of rent, utilities, maintenance and property
taxes), office supplies and postage costs at TriMas' Ann Arbor headquarters and
the credit historically provided for the Norris management services that had
been discontinued by you when Masco Building Products shut down its operations.
If the foregoing is your understanding of our Agreement, please
acknowledge by signing below on the attached copy of this letter, and returning
same to the undersigned.
Very truly yours,
MASCOTECH, INC.
By/s/David B. Liner
-----------------
The foregoing is acknowledged and agreed to:
MASCO CORPORATION
By/s/John R. Leekley
------------------
<PAGE> 1
EXHIBIT 10.i
MASCO CORPORATION
1988 STOCK OPTION PLAN
(Amended and Restated September 22, 1999)
ARTICLE I. PURPOSE
The purpose of the 1988 Stock Option Plan (the "Plan") is to secure for
Masco Corporation (the "Company") and its stockholders the benefits inherent in
stock ownership by selected key employees of and consultants to the Company and
its subsidiaries and affiliated companies who in the judgment of the committee
responsible for the administration of the Plan are largely responsible for the
Company's growth and success. The Plan is designed to accomplish this purpose by
offering such employees and consultants an opportunity to purchase shares of the
Common Stock of the Company. For purposes of the Plan a "subsidiary" is any
corporation in which the Company owns, directly or indirectly, stock possessing
more than fifty percent of the total combined voting power of all classes of
stock, and an "affiliated company" is any other corporation, at least twenty
percent of the total combined voting power of all classes of stock of which is
owned by the Company or by one or more other corporations in a chain of
corporations, at least twenty percent of the stock of each of which is held by
the Company or a subsidiary or another corporation within such chain.
ARTICLE II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of
three or more of the Company's directors to be appointed by the Board of
Directors. Members of the Committee shall be "disinterested persons" as such
term is defined in Rule 16b-3(d) under the Securities Exchange Act of 1934 (the
"Exchange Act") or any rule which modifies, amends or replaces Rule 16b-3(d).
The Committee shall have authority, consistent with the Plan:
(a) to determine which key employees of and consultants to the
Company, its subsidiaries and affiliated companies shall be granted
options;
(b) to determine the time or times when options shall be
granted and the number of shares of Common Stock subject to each
option;
(c) to determine the option price of the stock subject to each
option and the method of payment of such price;
(d) to determine the time or times when each option becomes
exercisable, limitations on exercise, and the duration of the exercise
period;
(e) to prescribe the form or forms of the instruments
evidencing options granted under the Plan and of any other instruments
required under the Plan, and to change such forms from time to time;
<PAGE> 2
(f) to designate options granted to key employees of the
Company or its subsidiaries under the Plan as "incentive stock options"
("ISOs"), as such terms are defined in the Internal Revenue Code of
1986;
(g) to adopt, amend and rescind rules and regulations for the
administration of the Plan and options and for its own acts and
proceedings; and
(h) to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan.
All decisions, determinations and interpretations of the Committee
shall be conclusive and binding on all parties concerned.
ARTICLE III. PARTICIPANTS
Key employees of and consultants to the Company, its subsidiaries and
affiliated companies, including officers of the Company (who may also be
directors, but excluding members of the Committee, any person who serves only as
a director of the Company and any consultant to the Company or any of its
subsidiaries or affiliated companies who is also a director of the Company or
who is not rendering services pursuant to a written agreement with the
corporation in question), as may be selected from time to time by the Committee
in its discretion, are eligible to receive options under the Plan. The grant of
an option to an employee or consultant shall not entitle such individual to
other grants or options, nor shall such grant disqualify such individual from
further participation.
ARTICLE IV. LIMITATIONS
No options shall be granted under the Plan after December 31, 1998, but
options theretofore granted may extend beyond that date. Subject to adjustment
as provided in Article IX, the number of shares of Common Stock of the Company
which may be issued under the Plan shall not exceed 8,000,000; provided,
however, that such number of shares shall be reduced by the number of shares of
the Company's Common Stock awarded under the Company's 1988 Restricted Stock
Incentive Plan (other than shares awarded under such plan which are later
forfeited to the Company). To the extent that any option granted under the Plan
shall expire or terminate unexercised or for any reason become unexercisable,
any stock theretofore subject to such expired or terminated option shall
thereafter be available for further grants under the Plan. If an option granted
under the Plan shall be accepted for surrender pursuant to Article VIII, any
stock subject to such option shall not thereafter be available for further
grants.
Notwithstanding any provision to the contrary in the Plan, no option
may be designated an ISO unless all of the following conditions are satisfied:
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<PAGE> 3
(a) Such option must be granted on or prior to April 1, 1998,
and such option by its terms must not be exercisable after the
expiration of ten years from the date such option is granted;
(b) Either (i) the employee to whom such option is granted
does not, determined at the time such option is granted, own capital
stock representing more than ten percent of the voting power of all
classes of stock of the Company, its parent or any of its subsidiaries,
or (ii) the option price is at least 110 percent of the fair market
value, determined at the time such option is granted, of the stock
subject to such option and such option by its terms is not exercisable
more than five years from the date it is granted; and
(c) The aggregate fair market value of the Common Stock
subject to such option plus the aggregate fair market value of Common
Stock subject to ISOs previously or concurrently granted to the same
employee exercisable in the same calendar year (all determined at the
respective dates of grant of such options) must not exceed $100,000.
ARTICLE V. STOCK TO BE ISSUED
The stock as to which options may be granted is the Company's Common
Stock, $1 par value. Such stock may be authorized but unissued shares or shares
of Common Stock reacquired by the Company, including but not limited to shares
purchased on the open market. The Board of Directors and the officers of the
Company shall take any appropriate action required for such issuance.
ARTICLE VI. TERMS AND CONDITIONS OF OPTIONS
All options granted under the Plan shall be subject to the following
terms and conditions (except as otherwise provided in Article VII) and to such
other terms and conditions as the Committee shall deem appropriate.
(a) Option Price. Each option shall have such per share option price as
the Committee may determine, but not less than the fair market value of Common
Stock of the Company on the date the option is granted.
(b) Term of Options. The term of an option shall not exceed eleven
years from the date of grant. The date of grant shall be the date on which the
option is awarded by the Committee.
(c) Exercise of Options.
(i) Each option shall be made exercisable not less than six
months from the date of grant and at such time or times, whether or not
in installments, as the Committee shall prescribe at the time the
option is granted.
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<PAGE> 4
(ii) A person electing to exercise an option shall give
written notice to the Company, as may be specified by the Committee, of
exercise of the option and the number of shares of stock 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 stock elected for exercise unless otherwise
directed by the Committee.
(iii) (A) Notwithstanding any of the provisions of this Plan
or instruments evidencing options granted hereunder, in the case of a
Change in Control of the Company, each option then outstanding shall
immediately become exercisable in full. A Change in Control shall occur
if any of the events described below in subparagraphs (1), (2) or (3)
shall have occurred, unless the holder of any such option shall have
consented to the application of subparagraph (3) in lieu of
subparagraphs (1) and (2):
(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 directly or indirectly
purchases or otherwise becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) or has the right
to acquire such beneficial ownership (whether or not such
right is exercisable immediately, with the passage of time, or
subject to any condition) of voting securities representing
25% or more of the combined voting power of all outstanding
voting securities of the Company;
(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; or
(3) 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
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<PAGE> 5
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.
(B)(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 (B) (a "Payment"), would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended from time to time ("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 Article
VI(c)(iii)(B), 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 Article VI(c)(iii)(B) shall not apply to any option
that was granted to an executive officer of the Company, as determined
under the Exchange Act.
(d) Payment for Issuance of Stock. At the time of exercise of any
option granted pursuant to the Plan, payment in full shall be made for all stock
then being purchased either in cash or, at the discretion of the Committee, in
whole or in part in Common Stock of the Company valued at its then fair market
value. Notwithstanding the foregoing, the Committee may in its discretion permit
the
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<PAGE> 6
issuance of stock upon such other plan of payment as it deems reasonable,
provided that the then unpaid portion of the purchase price shall be evidenced
by a promissory note at such rate of interest and upon such other terms and
conditions as the Committee shall deem appropriate. In all cases where stock is
issued for less than present full payment of the purchase price, there shall be
placed upon the certificate or certificates representing such stock a legend
setting forth the amount paid at issuance, and the amount remaining unpaid
thereon, and stating that the stock is subject to call for the remainder and may
not be transferred by the holder until the balance due thereon shall be fully
paid.
The Committee, in its discretion and in accordance with its procedures,
may permit a participant to satisfy, in whole or in part, the income tax
withholding obligations in connection with the exercise of a non-qualified stock
option by having shares withheld from the shares to be issued upon the exercise
of the option or by delivering shares of Common Stock of the Company having a
fair market value equal to the amount needed to satisfy such obligations.
(e) Conditions to Issuance. The Company shall not be obligated to issue
any stock unless and until:
(i) if the Company's outstanding Common Stock is at the time
listed upon any stock exchange, the shares of stock to be issued have
been listed, or authorized to be added to the list upon official notice
of issuance, upon such exchange, and
(ii) in the opinion of the Company's counsel there has been
compliance with applicable law in connection with the issuance and
delivery of stock and such issuance shall have been approved by the
Company's counsel.
Without limiting the generality of the foregoing, the Company may require from
the participant such investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to comply with the
Securities Act of 1933 as then in effect, and may require that the participant
agree that any sale of the stock will be made only in such manner as shall be in
accordance with law and that the participant will notify the Company of any
intent to make any disposition of the stock whether by sale, gift or otherwise.
The participant shall take any action reasonably requested by the Company in
such connection. A participant shall have the rights of a stockholder only as
and when shares of stock have been actually issued to the participant pursuant
to the Plan.
(f) Limits on Transferability of Options. No option may be transferred
by the participant other than (i) by designation of beneficiary as provided in
subsection (j) of this Article, or (ii) by will or the laws of descent and
distribution, or (iii) 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
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<PAGE> 7
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 affiliated company, but such trust and the
participant shall be bound by all of the terms and conditions of this Plan and
any written agreement, contract or other instrument or document evidencing any
award granted under this Plan. Shares issued in the name of and delivered to
such trust shall be conclusively considered issuance and delivery to the
participant.
(g) Consideration for Option. Each person receiving an option must
agree to remain as an employee or consultant upon the terms of employment or the
consulting arrangement then existing (unless different terms are mutually agreed
upon) for at least ninety days from the date the option is granted.
(h) Termination of Employment. If the employment of or consulting
arrangement with a participant terminates for any reason (including termination
by reason of the fact that any corporation is no longer a subsidiary or
affiliated company) other than the participant's death or permanent and total
disability or, in the case of an employee, retirement on or after normal
retirement date, unless discharged for misconduct which in the opinion of the
Committee casts such discredit on the participant as to justify termination of
the option, the participant may thereafter exercise the option as provided
below. If such termination is voluntary on the part of the participant, the
option may be exercised only within ten days after the day of termination. If
such termination is involuntary on the part of the participant, the option may
be exercised within three months after the day of termination. Except as
expressly provided in the Plan or the option, whether the termination of
employment or consulting arrangement is voluntary or involuntary, options may be
exercised only if such options were exercisable at the date of such termination,
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.
Notwithstanding the preceding three sentences, the Committee may extend the time
within which or alter the terms and conditions on which the participant may
exercise an option after the termination of employment or the consulting
arrangement, and if the period within which an option may be exercised has been
extended, the Committee may terminate the unexercised portion of the option if
it shall determine that the participant has engaged in any activity detrimental
to the Company's interests. For purposes of this Article VI(h), a participant's
employment or consulting arrangement shall not be considered terminated (i) in
the case of approved sick leave or other bona fide leave of absence (not to
exceed one year unless otherwise approved by the Committee), (ii) in the case of
a transfer of employment or the consulting arrangement among the Company, its
subsidiaries and affiliated companies, or (iii) by virtue of a change of status
from employee to consultant or from consultant to employee.
(i) Retirement; Disability. If prior to the expiration date of an
option the employee shall retire on or after normal retirement date or if the
employment or consulting relationship is terminated by reason of permanent and
total disability, such option may be exercised to the extent exercisable
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<PAGE> 8
on the date of retirement or such termination, provided such option shall be
exercised within three months of the date of retirement or such termination.
Notwithstanding the foregoing, in its discretion the Committee may extend the
time within which or alter the terms and conditions on which an option held by a
retired or disabled option holder may be exercised, and if the period within
which an option may be exercised has been extended, the Committee may terminate
the unexercised portion of the option if it shall determine that the participant
has engaged in any activity detrimental to the Company's interests.
(j) Death. If a participant dies at a time when entitled to exercise an
option, then at any time or times within one year after death (or such further
period as the Committee may allow) such option may be exercised, as to all or
any of the shares which the participant was entitled to purchase immediately
prior to death (or such additional shares covered by the option as the Committee
may allow), by the person or persons designated in writing by the participant in
such form of beneficiary designation as may be approved by the Company, or
failing designation by the participant's personal representative, executor or
administrator or the person or persons to whom the option is transferred by will
or the applicable laws of descent and distribution. The Company may decline to
deliver shares to a designated beneficiary until it receives indemnity against
claims of third parties satisfactory to the Company. Except as so exercised such
option shall expire at the end of such period.
ARTICLE VII. REPLACEMENT OPTIONS
The Committee may grant options under the Plan on terms and conditions
differing from those provided for in Article VI where such options are granted
in substitution for options held by employees of or consultants to other
entities who concurrently become employees of or consultants to the Company or a
subsidiary or an affiliated company as the result of a merger, consolidation or
other reorganization of such other entity with the Company or a subsidiary or an
affiliated company, or the acquisition by the Company or a subsidiary or an
affiliated company of the business, property or stock of such other entity. The
Committee may direct that the replacement options be granted on such terms and
conditions as the Committee considers appropriate in the circumstances.
ARTICLE VIII. SURRENDER OF OPTIONS
The Committee may, in its discretion and upon such terms and conditions
as it deems appropriate, accept the surrender by a participant of a presently
exercisable right to purchase stock granted under an option and authorize
payment by the Company in consideration therefor of an amount equal to the
difference obtained by subtracting the option price of the stock from its fair
market value on the date of such surrender, such payment to be in cash or shares
of the Common Stock of the Company valued at fair market value on the date of
such surrender, or partly in such stock and partly in cash, provided that the
Committee determines such settlement is consistent with the purpose of the Plan.
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<PAGE> 9
ARTICLE IX. CHANGES IN STOCK
The Board of Directors is authorized to make such adjustments, if any,
as it shall deem appropriate in the number and kind of shares which may be
granted under the Plan, the number and kind of shares which are subject to
options then outstanding and the purchase price of shares subject to such
outstanding options, in the event of any change in capital or shares of capital
stock, any special distribution to stockholders or any extraordinary transaction
(including a merger, consolidation or dissolution) to which the Company is a
party. The determination of the Board of Directors as to such matters shall be
conclusive and binding on all persons.
ARTICLE X. EMPLOYMENT RIGHTS
The adoption of the Plan, the grant of options hereunder and the
participation by a participant in the Plan do not confer upon any employee of or
consultant to the Company or subsidiary or an affiliated company any right to
continue the employment or consulting relationship with the Company or a
subsidiary or an affiliated company, as the case may be, nor does it in any way
impair the right of the Company or a subsidiary or an affiliated company to
terminate the employment of any of its employees or the consulting arrangement
with any of its consultants at any time, with or without cause, unless a written
employment or consulting agreement provides otherwise.
ARTICLE XI. AMENDMENTS
The Board of Directors may at any time or times amend the Plan or amend
any outstanding option or options for the purpose of satisfying the requirements
of changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that except to the extent permitted
under Article IX, without the approval of the stockholders of the Company no
amendment shall increase the maximum number of shares of stock available under
the Plan, alter the class of persons eligible to receive options under the Plan,
or without the consent of the participant void or diminish options previously
granted, nor increase or accelerate the conditions required for the exercise of
the same, except that nothing herein shall limit the Company's right under
Article VI(d) to call stock, issued for deferred payment which is evidenced by a
promissory note, where the participant is in default of the obligations of such
note.
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<PAGE> 1
EXHIBIT 10.j
February 28, 1995
Dear
As you know, our company's Board of Directors has adopted a Plan
whereby supplemental retirement and other benefits, in addition to those
provided under the Company's pension and other benefit plans, will be made
available to those Company and subsidiary executives as may be designated from
time to time by the company's Chief Executive Officer. You have been previously
designated as a participant in the Plan by a letter agreement signed by you and
dated February 12, 1992. This agreement amends and replaces in its entirety your
previously signed letter agreement and describes in full your benefits pursuant
to the Plan and all of the Company's obligations to you and yours to the Company
under the Plan. These benefits as described below are contractual obligations of
the Company.
For the purposes of this Agreement, words and terms are defined as
follows:
a. "Retirement" shall mean your termination of employment with the
Company, on or after you attain age 65. Your acting as a
consultant shall not be considered employment.
b. "Average Compensation" shall mean the aggregate of your highest
three years' total annual cash compensation paid to you by the
Company, consisting of (i) base salaries and (ii) regular year-end
cash bonuses paid with respect to the years in which such salaries
are paid, divided by three.
c. If you become Disabled, "Total Compensation" shall mean your
annual base salary rate in the year in which you become Disabled
plus the regular year-end cash bonus paid to you for the year
immediately prior thereto.
d. "Surviving Spouse" shall be the person to whom you shall be
legally married (under the law of the jurisdiction of your
permanent residence) at the date of (i) your Retirement or death
after attaining age 65 (if death terminated employment with the
Company) for the purposes of paragraphs 1, 2 and 3, (ii) your
death for the purposes of paragraph 5, and (iii) your Disability
for the purposes of paragraphs 6 and 7. For the purposes of
paragraphs 10a, 10e, 10f, 10g and 10h, "Surviving Spouse" shall be
any spouse entitled to survivor's benefits.
e. "Disability" and "Disabled" shall mean your being unable to
perform your duties as a Company executive by reason of your
physical or mental condition, prior to your attaining age 65,
provided that you have been employed by the Company for two
consecutive Years or more.
f. "Company" shall mean Masco Corporation or any corporation in which
Masco Corporation or a subsidiary owns stock possessing at least
20% of the total combined voting power of all classes of stock.
<PAGE> 2
g. "Year" shall mean twelve full consecutive months, and "year" shall
mean a calendar year.
h. "Plan Limitation" for any year shall mean (x) for 1989, $300,000
multiplied by the Cost of Living Factor for 1988, and (y) for any
year subsequent to 1989, the Plan Limitation for the immediately
preceding year multiplied by the Cost of Living Factor for such
preceding year.
i. "Cost of Living Factor" for any year shall mean, except as
otherwise provided generally with respect to the Plan by the
Company's Board of Directors, the quotient (in no event to exceed
1.03 or to be less than .97) obtained by dividing the monthly
Consumer Price Index Number (as compiled in the Consumer Price
Index for Urban Consumers by the Bureau of Labor Statistics) for
the month of December in such year by the monthly Consumer Price
Index Number for the immediately preceding month of December.
j. A "Change in Control" shall be deemed to have occurred if, during
any period of twenty-four consecutive calendar months, the
individuals who at the beginning of such period constitute the
Company's Board of Directors, and any new directors whose election
by such Board or nomination for election by stockholders was
approved by a vote of at least two-thirds of the members of such
Board who were either directors on such Board at the beginning of
the period or whose election or nomination for election as
directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
1. In accordance with the Plan, upon your Retirement the Company will
pay you annually during your lifetime 60% of your Average Compensation, less:
(i) a sum equal to the annual benefit which would be payable to you upon your
Retirement if benefits payable to you under the Company funded qualified pension
plans and the defined benefit (pension) plan restoration provisions of the
Company's Retirement Benefits Restoration Plan and any similar plan were
converted to a life annuity, or if you are married when you retire, to a joint
and spouse survivor life annuity, (ii) a sum equal to the annual benefit which
would be payable to you upon Retirement if your vested accounts in the Company's
Future Service Profit Sharing Trust and the defined contribution (profit
sharing) restoration provisions of the Company's Retirement Benefits Restoration
Plan and any similar plan were converted to a life annuity, and (iii) any
retirement benefits payable to you by reason of employment by your prior
employers (excluding, however, from such deduction any portion thereof, and
earnings thereon, determined by the committee referred to in paragraph 10 to
have been contributed by you rather than your prior employers). In all cases the
amount offset pursuant to these subsections (i) and (ii) shall be determined
prior to the effect of any payments from the plans and trust referred to therein
which are authorized pursuant to a Qualified Domestic Relations Order under
ERISA.
2. Upon your death after Retirement or while employed by the Company
after attaining age 65, your Surviving Spouse shall receive for life 75% of the
annual benefit pursuant to paragraph 1 of this Agreement which was payable to
you prior to your death (or, if death terminated employment after attaining age
65, which would have been payable to you had your Retirement occurred
immediately prior to your death).
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<PAGE> 3
3. Upon your Retirement the Company will provide or purchase for you
and your spouse's benefit, or at its option reimburse you or your Surviving
Spouse for premiums paid, during your joint and several lives, such supplemental
medical insurance as the Company may deem advisable from time to time.
4. Under no circumstances (i) will any retirement benefits be paid to
you or your Surviving Spouse pursuant to this Agreement unless you were employed
by the Company or Disabled on your Retirement, or were employed by the Company
at the time of your death after attaining age 65, and (ii) will you or your
Surviving Spouse be entitled to receive retirement benefits under this Agreement
if your Retirement commences prior to your attaining age 65.
5. If while employed by the Company you die prior to your attaining
age 65 leaving a Surviving Spouse, and provided you shall have been employed by
the Company for two consecutive Years or more, your Surviving Spouse shall
receive annually for life 45% of your Average Compensation, less: (i) a sum
equal to the annual benefit which would be payable to your Surviving Spouse
under Company funded qualified pension plans and the defined benefit (pension)
plan restoration provisions of the Company's Retirement Benefits Restoration
Plan and any similar plan if such benefit were converted to a life annuity, and
(ii) a sum equal to the annual payments which would be received by your
Surviving Spouse as if your spouse were designated as the beneficiary of your
vested accounts in the Company's Future Service Profit Sharing Trust and the
defined contribution (profit sharing) restoration provisions of the Company's
Retirement Benefits Restoration Plan and any similar plan and such accounts were
converted to a life annuity. In all cases the amount offset pursuant to these
subsections (i) and (ii) shall be determined prior to the effect of any payments
from the plans and trust referred to therein which are authorized pursuant to a
Qualified Domestic Relations Order under ERISA. No death benefits are payable
except to your Surviving Spouse.
6. If you shall have been employed by the Company for two Years or
more and while employed by the Company you become Disabled prior to your
attaining age 65, until the earlier of your death, termination of Disability or
attaining age 65 the Company will pay you an annual benefit equal to 60% of your
Total Compensation less any benefits payable to you pursuant to long-term
disability insurance or other plans the cost of which is paid by the Company. If
your Disability continues until you attain age 65, you shall be considered
retired and you shall receive retirement benefits pursuant to paragraph 1 above,
based upon your Average Compensation as of the date it is determined you became
Disabled.
7. If you die leaving a Surviving Spouse while receiving Disability
benefits pursuant to paragraph 6 of this Agreement, notwithstanding paragraph 4
you will be deemed to have retired on your death and your Surviving Spouse shall
receive for life 75% of the annual benefit which would have been payable to you
if you had retired on the date of your death and your benefit determined
pursuant to paragraph 1, based upon your Average Compensation as of your
becoming Disabled.
8. Notwithstanding any of the provisions of this Agreement, the
maximum retirement, disability and death benefits payable to you and your spouse
pursuant to this Agreement for any year shall in no event exceed the higher of
(A) $500,000 less those sums to be deducted from benefits pursuant to clauses
(i), (ii) and (iii) of paragraph 1, clauses (i) and (ii) of paragraph 5, or
3
<PAGE> 4
under paragraph 6, whichever is applicable, or (B) the Plan Limitation for the
year in which such benefits were first paid, less the aggregate annual benefit
with respect to the Company's Retirement Benefits Restoration Plan (and any
future non-qualified retirement plan) to be deducted (x) under clauses (i) and
(ii) of paragraph 1, (y) under paragraph 5 should you die while employed prior
to attaining age 65 or (z) under paragraph 6 should you become disabled prior to
attaining age 65.
9. If you are eligible to receive benefits hereunder, unless
otherwise specifically agreed by the Company in writing, you will not be able to
receive benefits under any other Company sponsored non-qualified retirement
plans other than the Company's Retirement Benefits Restoration Plan.
10. We also agree upon the following:
a. The Compensation Committee of the company's Board of Directors, or
any other committee however titled which shall be vested with
authority with respect to the compensation of the company's
officers and executives, shall have the exclusive authority to
make all determinations which may be necessary in connection with
this Agreement including the date of and whether you are
Disabled, the amount of annual benefits payable to you by reason
of employment by other employers, the interpretation of this
Agreement, and all other matters or disputes arising under this
Agreement. The determinations and findings of the Compensation
Committee or such other committee of the company's Board of
Directors shall be conclusive and binding, without appeal, upon
both of us.
b. You will not during your employment or Disability, and after
Retirement or the termination of your employment, for any reason
disclose or make use of for your own or another person's benefit
under any circumstances any of the Company's Proprietary
Information. Proprietary Information shall include trade secrets,
secret processes, information concerning products, developments,
manufacturing techniques, new product or marketing plans,
inventions, research and development information or results,
sales, pricing and financial data, information relating to the
management, operations or planning of the Company and any other
information treated as confidential or proprietary.
c. If your employment by the Company shall terminate for any reason
whatsoever prior to your Retirement other than by reason of your
death or Disability, for a period of two years after the
termination of your employment, and if your employment shall be
terminated by reason of Retirement or any Disability during such
time as you shall receive retirement or disability benefits
pursuant to this Agreement, you agree that you will not directly
or indirectly engage in any business activities, whether as a
consultant, advisor or otherwise, in which the Company is engaged
in any geographic area in which the products or services of the
Company have been sold, distributed or provided during the five
year period prior to the date of termination of employment or
Retirement.
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<PAGE> 5
In addition to the foregoing and provided no "Change in Control"
has occurred, if while you are receiving retirement or other
benefits pursuant to this Agreement, in the judgment of the
committee you directly or indirectly engage in activity or act in
a manner which can be considered adverse to the interest of the
Company or any of its direct or indirect subsidiaries or
affiliated companies, the committee may terminate your rights to
any further benefits hereunder.
d. Except as may be provided to the contrary in a duly authorized
written agreement between yourself and the Company you acknowledge
that the Company has made no commitments to you of any kind with
respect to the continuation of your employment, which we expressly
agree is an employment at will, and you or the Company shall have
the unrestricted right to terminate your employment with or
without cause, at any time in your or its discretion.
e. At the Company's request, expressed through a Company officer, you
agree to provide such information with respect to matters which
may arise in connection with this Agreement as may be deemed
necessary by the Company or the Compensation or other committee,
including for example only and not in limitation, information
concerning benefits payable to you from third parties, and you
further agree to submit to such medical examinations by duly
licensed physicians as may be requested by the Company or such
committee from time to time. You also agree to direct third
parties to provide such information, and your Surviving Spouse's
cooperation in providing such information is a condition to the
receipt of survivor's benefits under this Agreement.
f. To the extent permitted by law, no interest in this Agreement or
benefits payable to you or to your Surviving Spouse shall be
subject to anticipation, or to pledge, assignment, sale or
transfer in any manner nor shall you or your Surviving Spouse have
the power in any manner to charge or encumber such interest or
benefits, nor shall such interest or benefits be liable or subject
in any manner for the liabilities of you or your Surviving
Spouse's debts, contracts, torts or other engagements of any kind.
g. No person other than you and your Surviving Spouse shall have any
rights or property interest of any kind whatsoever pursuant to
this Agreement, and neither you nor your Surviving Spouse shall
have any rights hereunder other than those expressly provided in
this Agreement. Upon the death of you and your Surviving Spouse no
further benefits of whatsoever kind or nature shall accrue or be
payable pursuant to this Agreement.
h. All benefits payable pursuant to this Agreement shall be paid in
installments of one-twelfth of the annual benefit, or at such
shorter intervals as may be deemed advisable by the Company in its
discretion, upon receipt of your or your Surviving Spouse's
written application, or by the applicant's personal representative
in the event of disability.
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<PAGE> 6
i. All benefits under this Agreement shall be payable from the
Company's general assets, which assets are subject to the claims
of general creditors, and are not set aside for your or your
Surviving Spouse's benefit.
j. This Agreement shall be governed by the laws of the State of
Michigan.
11. We have agreed that the determinations of the committee described
in paragraph 10a shall be conclusive as provided in such paragraph, but if for
any reason a claim is asserted which subverts the provisions of paragraph 10a,
we agree that, except for causes of action which may arise under paragraph 10b
and the first paragraph of paragraph 10c, arbitration shall be the sole and
exclusive remedy to resolve all disputes, claims or controversies which could be
the subject of litigation (hereafter referred to as "dispute") involving or
arising out of this Agreement. It is our mutual intention that the arbitration
award will be final and binding and that a judgment on the award may be entered
in any court of competent jurisdiction and enforcement may be had according to
its terms.
The arbitrator shall be chosen in accordance with the commercial
arbitration rules of the American Arbitration Association and the expenses of
the arbitration shall be borne equally by the parties to the dispute. The place
of the arbitration shall be the principal offices of the American Arbitration
Association in the metropolitan Detroit area. The arbitrator's sole authority
shall be to apply the clauses of this Agreement.
We agree that the provisions of this paragraph 11, and the decision of the
arbitrator with respect to any dispute, with only the exception provided in this
paragraph 11, shall be the sole and exclusive remedy for any alleged cause of
action in any manner based upon or arising out of this Agreement. Subject to the
foregoing exception, we acknowledge that since arbitration is the exclusive
remedy, neither of us or any party claiming under this Agreement has the right
to resort to any federal, state or local court or administrative agency
concerning any matters dealt with by this Agreement and that the decision of the
arbitrator shall be a complete defense to any action or proceeding instituted in
any tribunal or agency with respect to any dispute. The arbitration provisions
contained in this paragraph shall survive the termination or expiration of this
Agreement, and shall be binding on our respective successors, personal
representatives and any other party asserting a claim based upon this Agreement.
We further agree that any demand for arbitration must be made within
one year of the time any claim accrues which you or any person claiming
hereunder may have against the Company; unless demand is made within such period
it is forever barred.
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<PAGE> 7
We are pleased to be able to make this supplemental plan available to
you. Please examine the terms of this Agreement carefully and at your earliest
convenience indicate your assent to all of its terms and conditions by signing
and dating where provided below and returning a signed copy to me.
Sincerely,
MASCO CORPORATION
By/s/Richard A. Manoogian
-----------------------
Richard A. Manoogian
Chief Executive Officer
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DATE:
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7
<PAGE> 1
EXHIBIT 10.o
MASCOTECH, INC.
1984 STOCK OPTION PLAN
(Amended and Restated September 21, 1999)
ARTICLE I. PURPOSE
The purpose of the 1984 Stock Option Plan (the "Plan") is to secure for
MascoTech, Inc. (the "Company") and its stockholders the benefits inherent in
stock ownership by selected key employees of and consultants to the Company and
its subsidiaries and affiliated companies who in the judgment of the committee
responsible for the administration of the Plan are largely responsible for the
Company's growth and success. The Plan is designed to accomplish this purpose by
offering such employees and consultants an opportunity to purchase shares of the
Common Stock of the Company. For purposes of the Plan a "subsidiary" is any
corporation in which the Company owns, directly or indirectly, stock possessing
more than fifty percent of the total combined voting power of all classes of
stock. For purposes of Articles III and VII of the Plan, an "affiliated company"
is any other corporation (and its subsidiaries) in which the Company or its
subsidiaries own stock possessing at least twenty percent of the total combined
voting power of all classes of stock, and for all other purposes of the Plan, an
"affiliated company" is any other corporation, at least twenty percent of the
total combined voting power of all classes of stock of which is owned by the
Company or by one or more other corporations in a chain of corporations, at
least twenty percent of the stock of each of which is held by the Company or a
subsidiary or another corporation within such chain.
ARTICLE II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee")
consisting of three or more of the Company's directors to be appointed by the
Board of Directors. No director shall become or remain a member of the Committee
unless at the time of his exercise of any discretionary function as a Committee
member such director is not eligible, and has not at any time within one year
prior to the exercise of such discretion been eligible for selection as a person
to whom stock may be allocated or to whom stock options or stock appreciation
rights may be granted pursuant to the Plan or any other plan of the Company or
any of its affiliates entitling the participants therein to acquire stock, stock
options or stock appreciation rights of the Company or any of its affiliates.
The Committee shall have authority, consistent with the Plan:
(a) to determine which key employees of and consultants to the
Company, its subsidiaries and affiliated companies shall be granted
options;
(b) to determine the time or times when options shall be
granted and the number of shares of Common Stock to be subject to each
option;
(c) to determine the option price of the stock subject to each
option and the method of payment of such price;
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<PAGE> 2
(d) to determine the time or times when each option becomes
exercisable, limitations on exercise, and the duration of the exercise
period;
(e) to prescribe the form or forms of the instruments
evidencing any options granted under the Plan and of any other
instruments required under the Plan, and to change such forms from time
to time;
(f) to designate options granted to key employees of the
Company or its "subsidiaries" under the Plan as "incentive stock
options" ("ISOs"), as such terms are defined under the Internal Revenue
Code;
(g) to adopt, amend and rescind rules and regulations for the
administration of the Plan and the options and for its own acts and
proceedings; and
(h) to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan.
All decisions, determinations and interpretations of the Committee
shall be binding on all parties concerned.
ARTICLE III. PARTICIPANTS
Key employees of and consultants to the Company, its subsidiaries or
affiliated companies, including officers of the Company who are also employees
(who may also be directors, but excluding members of the Committee, any person
who serves only as a director or a non-employee officer of the Company and any
consultant to the Company or any of its subsidiaries or affiliated companies who
is not rendering services pursuant to a written agreement with the corporation
in question), as may be selected from time to time by the Committee in its
discretion, are eligible to receive options under the Plan. The grant of an
option to an employee or consultant shall not entitle such individual to other
grants or options, nor shall such grant disqualify such individual from further
participation.
ARTICLE IV. LIMITATIONS
No options shall be granted under the Plan after December 31, 1999, but
options theretofore granted may extend beyond that date. Subject to adjustment
as provided in Article IX, the number of shares of Common Stock of the Company
which may be issued under the Plan shall not exceed in the aggregate 8,160,000
shares; provided, however, that such total amount shall be reduced by the
aggregate number of shares of the Company's Common Stock awarded under the
Company's 1984 Restricted Stock Incentive Plan since the original adoption
thereof (other than shares forfeited to the Company which are thereby available
for further awards under Paragraph 2 of such Plan). To the extent that any
option granted under the Plan shall expire or terminate unexercised or for any
reason become unexercisable as to any stock subject thereto, such stock shall
thereafter be available for further grants under the Plan, within the limit
specified above. If an option granted under the Plan
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<PAGE> 3
shall be accepted for surrender pursuant to Article VIII, any stock covered by
options so accepted shall not thereafter be available for the granting of other
options under the Plan.
Notwithstanding any provision to the contrary in the Plan, no option
may be designated an ISO unless all of the following conditions are satisfied
with respect to such option:
(a) Such option must be granted on or prior to May 1, 1994,
and such option by its terms is not exercisable after the expiration of
ten years from the date such option is granted;
(b) Either (i) the employee to whom such option is granted
does not, determined at the time such option is granted, own capital
stock representing more than ten percent of the voting power of all
classes of stock of the Company, its parent or any of its subsidiaries,
or (ii) the option price is at least 110 percent of the fair market
value, determined at the time such option is granted, of the stock
subject to such option and such option by its terms is not exercisable
more than five years from the date it is granted;
(c) Such option by its terms is not exercisable while there is
outstanding an ISO which was granted to the same employee at an earlier
time. For purposes of this clause (c), an ISO which has not been
exercised in full shall be deemed to be outstanding, notwithstanding
any cancellation or termination thereof, until the expiration of the
period during which it could have been exercised under its original
terms; and
(d) The aggregate fair market value of the Common Stock
subject to such option plus the aggregate fair market value of Common
Stock subject to ISOs previously or concurrently granted to the same
employee in the same calendar year (all determined at the respective
dates of grant of such options) must not exceed $100,000 (the "Basic
Amount") plus the sum of the "Carry-Over Amounts" for each of the three
calendar years immediately preceding the year in which such option is
granted. The "Carry-Over Amount", as used in this clause (d) for any
calendar year, shall mean (i) fifty percent of the amount by which
$100,000 exceeds the fair market value, determined at the time of
grant, of Common Stock subject to ISOs which were granted during such
calendar year to the employee for whom the Carry-Over Amount is being
determined, or (ii) $50,000 in the case such employee has not in such
calendar year been granted any ISO. No amount shall be included in a
Carry-Over Amount for any year to the extent such amount was
theretofore necessarily included as a Carry-Over Amount to permit the
qualification of an ISO under this clause (d), and Carry-Over Amounts
shall only be utilized to permit the qualification of an ISO under this
clause (d) in the order in which they first arose and then only if the
Basic Amount has not theretofore been utilized to permit such
qualification.
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<PAGE> 4
ARTICLE V. STOCK TO BE ISSUED
The stock as to which options may be granted is the Company's Common
Stock, $1 par value. Such Stock may be authorized but unissued shares or shares
of Common Stock reacquired by the Company, including but not limited to shares
purchased on the open market. The Board of Directors and the officers of the
Company shall take any appropriate action required for such issuance.
ARTICLE VI. TERMS AND CONDITIONS OF OPTIONS
All options granted under the Plan shall be subject to the following
terms and conditions (except as otherwise provided in Article VII) and to such
other terms and condition as the Committee shall deem appropriate.
(a) Option Price. Each option granted hereunder shall have such per
share option price as the Committee may determine, but not less than the fair
market value of Common Stock of the Company on the date the option is granted.
(b) Terms of Options. The term of an option shall not exceed eleven
years from the date of grant. The date of grant shall be the date on which the
option is awarded by the Committee.
(c) Exercise of Options.
(i) Each option shall be made exercisable not less than six
months from the date of grant and at such time or times, whether or not
in installments, as the Committee shall prescribe at the time the
option is granted.
(ii) A person electing to exercise an option shall give
written notice to the Company, as may be specified by the Committee, of
exercise of the option and of the number of shares of stock elected for
exercise, such notice to be accompanied by such instruments or
documents as may be required by the Committee, and such person shall at
the time of such exercise tender the purchase price of the stock
elected for exercise unless otherwise directed by the Committee.
(iii) (A) Notwithstanding any of the provisions of this Plan
or instruments evidencing options heretofore or hereafter granted
hereunder, in the case of a Change in Control of the Company, each
Option then outstanding shall immediately become exercisable in full. A
Change in Control shall occur if any of the events described below in
subparagraphs (1), (2) or (3) shall have occurred, unless the holder of
any such option shall have consented to the application of subparagraph
(3) in lieu of subparagraphs (1) and (2):
(1) any "person" or "group of persons" as such terms
are used in Section 13(d) and 14(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") other than pursuant to a
transaction or agreement previously approved by the Board
directly or indirectly purchases or otherwise becomes the
"beneficial owner" (as defined
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<PAGE> 5
in Rule 13d-3 under the Exchange Act) or has the right to
acquire such beneficial ownership (whether or not such right
is exercisable immediately, with the passage of time, or
subject to any condition), of voting securities representing
25% or more of the combined voting power of all outstanding
voting securities of (A) the Company or (B) of Masco
Corporation, a Delaware corporation ("Masco");
(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 either 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; or
(3) 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.
(B)(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 (B) (a "Payment"), would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended from time to time (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),
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<PAGE> 6
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 Article
VI(c)(iii)(B), 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 Article VI(c)(iii)(B) shall not apply to any option
that was granted to an executive officer of the Company, as determined
under the Exchange Act.
(d) Payment for Issuance of Stock. Upon and at the time of exercise of
any option granted pursuant to the Plan, payment in full shall be made for all
such stock then being purchased either in cash or, at the discretion of the
Committee, in whole or in part in Common Stock of the Company valued at its then
fair market value. Notwithstanding the foregoing, the Committee may in its
discretion permit the issuance of stock upon such other plan of payment as it
deems reasonable, provided that the then unpaid portion of the purchase price
shall be evidenced by a promissory note at such rate of interest and upon such
other terms and conditions as the Committee shall deem appropriate. In all cases
where stock is issued for less than present full payment of the purchase price,
there shall be placed upon the certificate or certificates representing such
stock a legend setting forth the amount paid at issuance, and the amount
remaining unpaid thereon, and stating that the stock is subject to call for the
remainder and may not be transferred by the holder until the balance due thereon
shall be fully paid.
The Committee, in its discretion and in accordance with the procedures
established by the Committee, may permit a participant to satisfy, in whole or
in part, the applicable income tax withholding obligations in connection with
the exercise of a non-qualified stock option under the Plan by having withheld
from the shares to be issued upon the exercise of the option or by delivering
from shares of Common Stock of the Company owned by the participant such number
of shares having a fair market value equal to the amount needed to satisfy such
obligations.
-6-
<PAGE> 7
(e) Conditions to Issuance. The Company shall not be obligated to
issue any stock unless and until:
(i) in the event of the Company's outstanding Common Stock is
at the time listed upon any stock exchange, the shares of stock to be issued
have been listed, or authorized to be added to the list upon official notice of
issuance, upon such exchange, and
(ii) in the opinion of the Company's counsel there has been
compliance with applicable law in connection with the issuance and
delivery of stock and such issuance shall have been approved by the
Company's counsel.
Without limiting the generality of the foregoing, the Company may require from
the participant such investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to comply with the
Securities Act of 1933 as then in effect, and may require that the participant
agree that any sale of the stock will be made only in such manner as shall be in
accordance with law and that the participant will notify the Company of any
intent to make any disposition of the stock whether by sale, gift or otherwise.
The participant shall take any action reasonably requested by the Company in
such connection. A participant shall have the rights of a stockholder only as
and when shares of stock have been actually issued to the participant pursuant
to the Plan.
(f) Limits on Transferability of Options. No option may be transferred
by the participant other than (i) by designation of beneficiary as provided in
subsection (j) of this Article, or (ii) by will or the laws of descent and
distribution, or (iii) 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 affiliated company, but such trust and the participant shall be
bound by all of the terms and conditions of this Plan and any written agreement,
contract or other instrument or document evidencing any award granted under this
Plan. Shares issued in the name of and delivered to such trust shall be
conclusively considered issuance and delivery to the participant.
(g) Consideration for Option. Each person receiving an option must
agree to remain as an employee or consultant upon the terms of employment or the
consulting arrangement then existing (unless different terms are mutually agreed
upon) for at least one year from the date of the granting
-7-
<PAGE> 8
of the option, subject to the right of the Company, its subsidiary or affiliated
company to terminate the participant's employment or consulting arrangement at
any time.
(h) Termination of Employment. If the employment of or consulting
arrangement with a participant terminates for any reason (including termination
by reason of the fact that such corporation is no longer a subsidiary of
affiliated company) other than the participant's death or permanent and total
disability or, in the case of an employee, retirement on or after normal
retirement date, unless discharged for misconduct which in the opinion of the
Committee casts such discredit on the participant as to justify termination of
the option, the participant may thereafter exercise the option as provided
below. If such termination is voluntary on the part of the participant, the
option may be exercised only within ten days after the date of termination
unless a longer period is permitted by the Committee in its discretion. If such
termination is involuntary on the part of the participant, the option may be
exercised within three months after the day of termination. Except as expressly
provided in the Plan, in no event may a participant whose employment or
consulting agreement has been terminated voluntarily or involuntarily exercise
an option at a time when the option would not have been exercisable had the
employment or consulting arrangement continued. Notwithstanding the foregoing,
the Committee may by the express terms of the grant of the option extend the
aforesaid periods of time within which the participant may exercise an option
after the termination of employment or the consulting arrangement. For purposes
of this Article VI(h), a participant's employment or consulting arrangement
shall not be considered terminated (i) in the case of sick leave or other bona
fide leave of absence (not to exceed one year unless otherwise approved by the
Committee), (ii) in the case of a transfer of employment or the consulting
arrangement among the Company, its subsidiaries and affiliated companies, or
(iii) by virtue of a change of status from employee to consultant or from
consultant to employee. Unless otherwise expressly provided in the Plan or the
grant of the option, an option may be exercised only to the extent exercisable
on the date of termination of employment or of the consulting arrangement by
reason of death, permanent and total disability, retirement or otherwise.
(i) Retirement; Disability. If prior to the expiration date of an
option the employee shall retire on or after normal retirement date or if the
employment or consulting relationship is terminated by reason of permanent and
total disability, such option may be exercised to the extent exercisable on the
date of retirement or such termination, provided such option shall be exercised
within three months of the date of retirement or such termination.
Notwithstanding the foregoing, in its discretion the Committee may permit the
exercise of an option held by a retired or disabled option holder upon other
terms and conditions as it deems advisable under the circumstances, and if the
period within which an option may be exercised has been extended the Committee
may terminate all unexercised options if it shall determine that the participant
has engaged in any activity detrimental to the Company's interests.
(j) Death. If a participant dies at a time when entitled to exercise an
option, then at any time or times within one year after death (or such further
period as the Committee may allow) such option may be exercised, as to all or
any of the shares which the participant was entitled to purchase immediately
prior to death (unless the Committee shall have provided in the instrument
evidencing such option that all shares covered by the option are subject to
purchase upon death), by the person or persons designated in writing by the
participant in such form of beneficiary designation as may
-8-
<PAGE> 9
be approved by the Company, or failing designation by the participant's personal
representative, executor or administrator or the person or persons to whom the
option is transferred by will or the applicable laws of descent and
distribution. The Company may decline to deliver shares to a designated
beneficiary until it receives indemnity against claims of third parties
satisfactory to the Company. Except as so exercised such option shall expire at
the end of such period.
ARTICLE VII. REPLACEMENT OPTIONS
The Committee may grant options under the Plan on terms differing from
those provided for in Article VI where such options are granted in substitution
for options held by employees of or consultants who have written agreement to
render services to other entities who concurrently become employees of or
consultants to the Company or a subsidiary or an affiliated company as the
result of a merger, consolidation or other reorganization of such other entity
with the Company or a subsidiary or an affiliated company, or the acquisition by
the Company or a subsidiary or an affiliated company of the business, property
or stock of such other entity. The Committee may direct that the substitute
options be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
ARTICLE VIII. SURRENDER OF OPTIONS
The Committee may, in its discretion and under such terms and
conditions as it deems appropriate, accept the surrender by a participant of a
presently exercisable right to purchase stock granted under an option and
authorize payment by the Company in consideration therefor of an amount equal to
the difference obtained by subtracting the option price of the stock from its
fair market value on the date of such surrender, such payment to be in cash or
shares of the Common Stock of the Company valued at fair market value on the
date of such surrender, or partly in such stock and partly in cash, provided
that the Committee determines such settlement is consistent with the purpose of
the Plan.
ARTICLE IX. CHANGES IN STOCK
The Board of Directors is authorized to make such adjustments, if any,
as it shall deem appropriate in the number and kind of shares which may be
granted under the Plan, the number and kind of shares which are subject to
options then outstanding and the purchase price of shares subject to such
outstanding options, in the event of any change in capital or shares of capital
stock, any special distribution to stockholders or any extraordinary transaction
(including a merger, consolidation or dissolution) to which the Company is a
party. The determination of the Board of Directors as to such matters shall be
binding on all persons.
ARTICLE X. EMPLOYMENT RIGHTS
The adoption of the Plan does not confer upon any employee of or
consultant to the Company or a subsidiary or an affiliated company any right to
continue the employment or consulting relationship with the Company or a
subsidiary or an affiliated company, as the case may be, nor does it in any way
impair the right of the Company or a subsidiary or an affiliated company
-9-
<PAGE> 10
to terminate the employment of any of its employees or the consulting
arrangement with any of its consultants at any time.
ARTICLE XI. AMENDMENTS
The Committee may at any time discontinue granting options under the
Plan. The Board of Directors may at any time or times amend the Plan or amend
any outstanding option or options for the purpose of satisfying the requirements
of any changes in applicable laws or regulations or for any other purpose which
may at the time be permitted by law, provided that except to the extent
permitted under Article IX, without the approval of the stockholders of the
Company no such amendment shall increase the maximum number of shares of stock
available under the Plan, or alter the class of persons eligible to receive
options under the Plan, or without the consent of the participant void or
diminish options previously granted, nor increase or accelerate the conditions
and actions required for the exercise of the same, except that nothing herein
shall limit the Company's right to call stock, issued for deferred payment which
is evidenced by promissory note where the participant is in default of the
obligations on such note.
-10-
<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
--------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EARNINGS BEFORE INCOME TAXES AND FIXED
CHARGES:
Income from continuing operations
before income taxes............... $ 904,100 $ 905,500 $733,800 $575,600 $396,600
Deduct/add equity in undistributed
(earnings) loss of
fifty-percent-or-less-owned
companies......................... (18,720) (24,070) (19,470) (12,310) (17,770)
Add interest on indebtedness, net.... 121,520 115,700 94,780 78,790 78,350
Add amortization of debt expense..... 1,350 2,130 2,310 1,400 1,930
Add estimated interest factor for
rentals........................... 16,080 11,430 9,270 7,120 5,870
---------- ---------- -------- -------- --------
Earnings before income taxes and
fixed charges..................... $1,024,330 $1,010,690 $820,690 $650,600 $464,980
========== ========== ======== ======== ========
FIXED CHARGES:
Interest on indebtedness............. $ 129,860 $ 119,750 $ 97,910 $ 81,250 $ 81,410
Amortization of debt expense......... 1,350 2,130 2,310 1,400 1,930
Estimated interest factor for
rentals........................... 16,080 11,430 9,270 7,120 5,870
---------- ---------- -------- -------- --------
$ 147,290 $ 133,310 $109,490 $ 89,770 $ 89,210
========== ========== ======== ======== ========
Ratio of earnings to fixed charges... 7.0 7.6 7.5 7.2 5.2
========== ========== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 21
MASCO CORPORATION
(A DELAWARE CORPORATION)
Subsidiaries as of January 31, 2000*
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
Alsons Corporation Michigan
American Metal Products Company Delaware
A.M.P. Industrial Mexicana S.A. de C.V. (97%) Mexico
American Shower & Bath Corporation Michigan
API Acquisition Corp. Delaware
Aqua Glass Corporation Tennessee
Tombigbee Transport Corporation Tennessee
Arrow Fastener Co., Inc. New Jersey
Baldwin Hardware Corporation Pennsylvania
Baldwin Decorative Coatings, Inc. Delaware
Baldwin Hardware Service Corp. Delaware
Behr Holdings Corporation Delaware
Behr Process Corporation California
Behr Paint Corp. California
Behr International Corporation U.S. Virgin Islands
Behr Process Canada, Ltd. Alberta, Canada
SBP, Inc. California
Color.Axis, a Corporation California
Behr Paint's It!, Inc. California
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
Cary Corporation Delaware
Cobra Products, Inc. Delaware
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
1
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
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, 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
H & H Tube & Manufacturing Company Michigan
Jarry Realty, Inc. Florida
KraftMaid Cabinetry, Inc. Ohio
KraftMaid Trucking, Inc. Ohio
KraftMaid Distribution Centers, Inc. Delaware
Landex, Inc. Michigan
Landex of Wisconsin, Inc. Wisconsin
Liberty Hardware Mfg. Corp. Florida
The Marvel Group, Inc. Delaware
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
Weiser Thailand Thailand
Masco Capital Corporation Delaware
Masco Holdings Limited Delaware
Masco Chile Limited (99%) Chile
Masco Corporation of Indiana Indiana
Delta Faucet Company of Tennessee Delaware
Delta Faucet of Oklahoma, Inc. Delaware
Delta Faucet Services (Korea) Korea
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
2
<PAGE> 3
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
Delta Faucet Services (Singapore) Singapore
Delta Faucet Services (Thailand) Thailand
Delta International Services, Inc. Delaware
Hydrotech, Inc. Michigan
Masco Canada Limited Ontario
3072002 Canada Limited Canada
Masco Europe, Inc. Delaware
Masco Corporation Europe S.a.r.l. Luxembourg
CSS Europe S.A. Belgium
Masco Europe S.a.r.l. Luxembourg
Masco Europe Iberica S.L. Spain
GMU S.A. Spain
Grumal S.L. Spain
Perfima S.A. Spain
Lagunzzialle S.A. Spain
Seitu S.A. Spain
Pevac S.A. Spain
Pemec S.A. Spain
XEY Corporacion Empresarial S.L. Spain
Comercial XEU S.A. Spain
Lindhogar S.A. Spain
Decox S.A. Spain
Cobade S.A. Spain
Valcode S.A. Spain
Burcosa S.A. Spain
Masco B.V. Netherlands
Turad B.V. Netherlands
Bridgebros Lease B.V. Netherlands
Brugman Radiatorenfabriek B.V. Netherlands
Brugman Polska Sp Zoo Poland
Brugman SARL France
Brugman GmbH Germany
Northor AS Denmark
Brugman Industries SpZoo Poland
Damixa A/S Denmark
KS Beheer B.V. Netherlands
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
3
<PAGE> 4
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
Damixa Nederland B.V. Netherlands
Damixa AB Sweden
N.V. Damixa S.A. Belgium
Damixa Armaturen GmbH Germany
Damixa SARL France
Rubinetterie Mariani S.P.A. (49%) Italy
Masco Corporation Limited United Kingdom
Avocet Hardware PLC United Kingdom
Avocet Architectural Products Ltd United Kingdom
Avocet Hardware (Taiwan) Ltd. Taiwan
Bond It Ltd. United Kingdom
Colin & Sons (Locks) Ltd. United Kingdom
WMS PVC Hardware Ltd. United Kingdom
Berglen Group Limited United Kingdom
A&J Gummers Limited United Kingdom
Heritage Bathrooms PLC United Kingdom
Bristol Bathrooms Co. Ltd. United Kingdom
Heritage Bathrooms Distribution United Kingdom
Ltd. Bristol
Heritage J. Ceramics Ltd. United Kingdom
Brighouse
Heritage Acrylic Ltd. United Kingdom
Heritage Bathroom Furniture Ltd. United Kingdom
H. J. Ceramics Ltd. United Kingdom
Heritage D Ceramics Ltd. United Kingdom
Kiloheat Limited United Kingdom
Moore Group Limited United Kingdom
Moores 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
Weiser (U.K.) Ltd. United Kingdom
Masco GmbH Germany
Alfred Reinecke GmbH & Co. KG Germany
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
4
<PAGE> 5
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
Alma Kuechen Aloys Meyer GmbH & Co. Germany
KG
Dusakabin - Wien Austria Austria
E. Missel GmbH & Co. Germany
Gebhardt Flaektteknik Aktiebolag Sweden
H. Breuer GmbH & Co. Germany
Gebhardt Ventilatoren GmbH & Co. Germany
Gebhardt Singapore Pte Ltd Singapore
Gebhardt Ventilatoren A/S Denmark
Gebhart Ventiladores, 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 Turkey
Ticaret AS
Jung Pumpen GesmbH Austria
Jung Pumpen GmbH&Co. Germany
Jung Pumpen SARL France
Jung Pumpen Ltd. United Kingdom
Masco Mobiliario S.L. Spain
Reser SL Spain
SKS Stakusit-Bautechnik Beteiligungs Germany
GmbH
SKS Stakusit Bautechnik GmbH Germany
SKS Stakusit-Stahl-Kunststoff Germany
GmbH
Bauelemente Bertram GmbH Germany
RH Balcon Germany
SKS Stakusit Polska Sp. Poland
2.0.0.
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
5
<PAGE> 6
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
SKS Stakusit Austria GmbH Austria
SKS France SARL France
SKS Stakusit Turkey Turkey
SKS Stausit Moscow Russia
Vasco N.V. Belgium
Imperial Towel Rails Ltd. United Kingdom
Masco International Services Belgium
B.V.B.A.
Superia Radiatoren, N.V. Belgium
Dura B.V. Netherlands
Vasco GmbH Denmark
Vasco Ltd. UK Great Britain
Vasco B.V. Netherlands
Vasco Ges.m.b.H. Austria
Vasco BC S.C. France
Vasco sp z.o.o. Poland
Masco Belgium N.V. Belgium
Thermic N.V. Belgium
LTV Transport N.V. Belgium
Rubinetterie Mariani S.P.A. (51%) Italy
Weiser Inc. Canada
Masco de Puerto Rico, Inc. Puerto Rico
Masco International Sales, Inc. Barbados
Masco International, Inc. Delaware
Masco Japan Ltd. Delaware
Masco Philippines Inc. Philippines
Masco of Russia Russia
Masco Services, Inc. Delaware
Mascomex S.A. de C.V. Mexico
Melard Manufacturing Corp. Delaware
Merillat Industries, Inc. Michigan
Merillat Corporation Delaware
Merillat Transportation Company Delaware
Mill's Pride, Inc. Connecticut
Premier Vanity Tops L.L.C. Ohio
Mill's Pride LLC Ohio
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
6
<PAGE> 7
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
Mill's Pride Limited Partnership Ohio
CTI Services Limited Partnership Nevada
Mill's Pride Pennsylvania, LLC Ohio
United Kitchens PLC (75%) United Kingdom
Store Support, Inc. Florida
Mill's Pride Premier, Inc. Ohio
Mill's Pride Chile Limitada Chile
Mirolin Industries Corporation Ontario
Morgantown Plastics Company Delaware
Outlet Corp. Delaware
Peerless Faucet Sales Corporation Delaware
Quality Awning & Construction Co. Michigan
Inrecon, L.L.C. Michigan
CRL Acquisition Corp. Canada
The Cromwell Financial Group Ltd. British Columbia
Cromwell Restoration Ltd. British Columbia
Inrecon West, Inc. Michigan
Inrecon Puerto Rico, L.L.C. Michigan
Peck Jones/Inrecon #2 Michigan
RDJ Limited Bahamas
Arrow Fastener (U.K.) Ltd. United Kingdom
Jardel Distributors, Inc. Canada
StarMark, Inc. South Dakota
SMI Retail Corp. Delaware
SMI Transportion, Inc. Delaware
StarMark of Virginia, Inc. Virginia
Thematic Advertising Productions, Inc. New Jersey
Texwood Industries, Inc. Delaware
Quality Cabinets Inc. Texas
Quality Doors Inc. Texas
Tvilum-Scanbirk A/S Denmark
Tvilum-Scanbirk GmbH Germany
Tvilum-Scanbirk Inc. Illinois
Vapor Technologies, Inc. Delaware
Watkins Manufacturing Corporation California
Hot Spring Spas New Zealand (50%) New Zealand
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
7
<PAGE> 8
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
<S> <C>
W/C Technology Corporation Delaware
Zenith Products Corporation Delaware
</TABLE>
- ------------------------------------
* Directly owned subsidiaries appear at the left hand margin, first tier and
second tier subsidiaries are indicated by single and double indentation,
respectively, and are listed under the names of their respective parent
companies. Unless otherwise indicated, all subsidiaries are wholly owned.
Certain of these companies may also use trade names or other assumed names in
the conduct of their business.
8
<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 16, 2000, on our audits of the
consolidated financial statements and financial statement schedule of Masco
Corporation and subsidiaries as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999, 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 27, 2000
<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 25, 2000, on our audits of the
consolidated financial statements and financial statement schedule of MascoTech,
Inc. and subsidiaries as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999, 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 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S DECEMBER 31, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 230,780
<SECURITIES> 0
<RECEIVABLES> 1,002,630<F1>
<ALLOWANCES> 0
<INVENTORY> 769,870
<CURRENT-ASSETS> 2,109,780
<PP&E> 1,624,360<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,634,920
<CURRENT-LIABILITIES> 846,430
<BONDS> 2,431,270
0
0
<COMMON> 443,510
<OTHER-SE> 2,692,990
<TOTAL-LIABILITY-AND-EQUITY> 6,634,920
<SALES> 6,307,000
<TOTAL-REVENUES> 6,307,000
<CGS> 3,995,530
<TOTAL-COSTS> 3,995,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,420
<INCOME-PRETAX> 904,100
<INCOME-TAX> 334,500
<INCOME-CONTINUING> 569,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 569,600
<EPS-BASIC> 1.31
<EPS-DILUTED> 1.28
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE HAS BEEN AMENDED IN ACCORDANCE WITH REGULATION S-K, ITEM 601
(C)(2)(III), TO INCLUDE THE EFFECT OF TRANSACTIONS ACCOUNTED FOR AS
POOLINGS OF INTERESTS DURING THE THIRD QUARTER OF 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 175,710
<SECURITIES> 0
<RECEIVABLES> 792,020<F1>
<ALLOWANCES> 0
<INVENTORY> 636,160
<CURRENT-ASSETS> 1,732,790
<PP&E> 1,251,360<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,811,510
<CURRENT-LIABILITIES> 719,880
<BONDS> 1,426,590
0
0
<COMMON> 221,820
<OTHER-SE> 2,252,020
<TOTAL-LIABILITY-AND-EQUITY> 4,811,510
<SALES> 1,246,000
<TOTAL-REVENUES> 1,246,000
<CGS> 784,400
<TOTAL-COSTS> 784,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,000
<INCOME-PRETAX> 217,200
<INCOME-TAX> 86,800
<INCOME-CONTINUING> 130,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,400
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.29
<FN>
<F1>Recievables and property and equipment are presented net of allowances
for doubtful accounts and accumulated depreciation and amortization,
respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE HAS BEEN RESTATED IN ACCORDANCE WITH REGULATION S-K, ITEM
601 (C)(2)(III), TO INCLUDE THE EFFECT OF TRANSACTIONS ACCOUNTED FOR AS
POOLINGS OF INTERESTS DURING THE THIRD QUARTER OF 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 450,710
<SECURITIES> 0
<RECEIVABLES> 633,700<F1>
<ALLOWANCES> 0
<INVENTORY> 589,470
<CURRENT-ASSETS> 1,794,150
<PP&E> 1,196,930<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,696,600
<CURRENT-LIABILITIES> 744,460
<BONDS> 1,553,950
0
0
<COMMON> 217,540
<OTHER-SE> 2,007,280
<TOTAL-LIABILITY-AND-EQUITY> 4,696,600
<SALES> 4,508,000
<TOTAL-REVENUES> 4,508,000
<CGS> 2,825,610
<TOTAL-COSTS> 2,825,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,280
<INCOME-PRETAX> 733,800
<INCOME-TAX> 289,700
<INCOME-CONTINUING> 444,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 444,100
<EPS-BASIC> 1.05
<EPS-DILUTED> 1.02
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization,
respectively.
</FN>
</TABLE>
