-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WYq9DVFa7yIW86DHMMtaKHMDDS8y+v6TFz0A2VzD3SH8C6I8bkFwozsob2As2M62 YwXjfMDT0siEy8vn+SGZGQ== 0000950136-01-000582.txt : 20010409 0000950136-01-000582.hdr.sgml : 20010409 ACCESSION NUMBER: 0000950136-01-000582 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METALDYNE CORP CENTRAL INDEX KEY: 0000745448 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382513957 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12068 FILM NUMBER: 1588399 BUSINESS ADDRESS: STREET 1: 21001 VAN BORN RD CITY: TAYLOR STATE: MI ZIP: 48180 BUSINESS PHONE: 3132747405 MAIL ADDRESS: STREET 1: 21001 VAN BORN ROAD CITY: TAYLOR STATE: MI ZIP: 48180 FORMER COMPANY: FORMER CONFORMED NAME: MASCOTECH INC DATE OF NAME CHANGE: 19930629 FORMER COMPANY: FORMER CONFORMED NAME: MASCO INDUSTRIES INC DATE OF NAME CHANGE: 19930629 10-K 1 0001.txt FORM 10-K 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, 2000 COMMISSION FILE NUMBER 1-12068 METALDYNE CORPORATION (FORMERLY KNOWN AS MASCOTECH, INC.) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-2513957 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 47603 Halyard Drive, Plymouth, Michigan 48170-2429 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 734-207-6200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ---------------------------------------------------- -------------------------------- Common Stock, $1.00 par Value None 4 1/2% Convertible Subordinated Debentures Due 2003 New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] There is currently no public market for the Registrant's Common Stock. Number of shares outstanding of the Registrant's Common Stock at March 15, 2001: 41,425,674 shares of Common Stock, par value $1.00 per share Portions of the Registrant's definitive Proxy Statement to be filed for its 2001 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. TABLE OF CONTENTS
ITEM PAGE - -------- ----------------------------------------------------------------------------- -------- PART I 1. Business...................................................................... 1 2. Properties.................................................................... 7 3. Legal Proceedings............................................................. 8 4. Submission of Matters to a Vote of Security Holders........................... 8 4A. Supplementary Item. Executive Officers of Registrant.......................... 9 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters ........ 10 6. Selected Financial Data....................................................... 12 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................... 13 7A. Quantitative and Qualitative Disclosures about Market Risk.................... 20 8. Financial Statements and Supplementary Data................................... 21 9. Changes in and Disagreements with Accountants and Financial Disclosure ....... 47 PART III 10. Directors and Executive Officers of the Registrant............................ 47 11. Executive Compensation........................................................ 47 12. Security Ownership of Certain Beneficial Owners and Management ............... 47 13. Certain Relationships and Related Transactions................................ 47 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............. 47 Signatures.................................................................... 51 FINANCIAL STATEMENT SCHEDULES Metaldyne Corporation Financial Statement Schedules........................... F-1
PART I ITEM 1. BUSINESS. Metaldyne Corporation (the "Company or "we) is a leading global diversified industrial manufacturer of highly engineered products for transportation, industrial and consumer markets. Our products include metal-formed and precision-engineered components and modular systems used in vehicle engine, transmission and driveline applications, specialty fasteners, towing systems, packaging and sealing products and other industrial products. We serve a broad range of over 150 automotive and industrial customers, including Amoco, Bayer, BMW, Boeing, Dana, DaimlerChrysler, Dow Chemical, Ford, Visteon, General Motors, Delphi, Honda, John Deere, Johns Manville, New Venture Gear, TRW, U-Haul and Wal-Mart. We operate through two business groups -our Metal Forming Group, which accounts for approximately two-thirds of our sales, and our Diversified Industrial Product Group, which accounts for the remaining one-third of our sales. In November 2000, we were acquired by an investor group led by Heartland Industrial Partners, L.P. ("Heartland") and Credit Suisse First Boston ("CSFB") in a recapitalization transaction. Heartland is a private equity fund established to "buy, build and grow" industrial companies in sectors with attractive consolidation opportunities. We believe the recapitalization and Heartland's investment in us will allow us to aggressively pursue internal growth opportunities and strategic acquisitions and to increase the scale and profitability of our businesses. In our Metal Forming Group, an important trend in our markets is that of automotive original equipment manufacturers, or OEMs, seeking to outsource their metal component design, engineering, fabrication and assembly functions. As a leading supplier of highly engineered metal parts with strong machining, assembly and module capabilities, we believe we are positioned to provide an integrated, full service solution to the engine, transmission and driveline components and module needs of our customers. We plan to add capabilities, through internal investment and select acquisitions, in additional metals and processes (such as ductile iron, aluminum and magnesium) to enhance our full service offering We intend to also grow our diversified industrial products businesses through internal investment and acquisitions of businesses that share key characteristics with our existing diversified businesses. We believe our diversified businesses share highly focused product strategies based on proprietary capabilities, strong market share positions and high operating margins. OUR BUSINESS GROUPS We operate through two business groups -- Metal Forming and Diversified Industrial Products. Both groups have businesses with leading market shares, state-of-the-art technologies and superior product quality. METAL FORMING GROUP. Our Metal Forming Group manufactures a broad range of engineered metal products used in automotive and industrial applications and combines capabilities in engineering, design, machining and assembly. The Metal Forming Group's sales are primarily to light vehicle OEMs and component assemblers, but also include other customers in the aerospace, heavy truck, construction, general industrial and consumer markets. The Metal Forming Group's products include cold, warm and hot forged products, forged and conventional powdered metal products and tubular fabricated products used in engine, transmission and drivetrain components, assemblies and sub-assemblies. In addition, the Metal Forming Group manufactures specialty fasteners, compressed gas cylinders and other metal-formed products used in a variety of industrial applications The Metal Forming group has the leading North American market share in several of its key products, including hot forgings, powder metal connecting rods, and forged shafts and is the second largest independent "machining and assembly" supplier. We have added strong capabilities in machining and sub-assembly and light metals through the acquisition of Simpson Industries, Inc. ("Simpson") in December 2000 and a strategic relationship with Global Metal Technologies, Inc. ("GMTI"), which was acquired by Heartland in January 2001. As a result of the Simpson acquisition, we add world class machining and assembly capabilities and can offer OEM customers an integrated solution for their needs by combining design, engineering, metal forming, 1 machining and sub-assembly capabilities. Through our strategic relationship with GMTI, which is a leading provider of precision aluminum die castings, we have added forming capabilities in aluminum, which is experiencing strong growth due to its lightweight characteristics. The Simpson acquisition and the GMTI relationship will provide us with opportunities to reduce costs in certain sales, marketing, administration and overhead functions and to improve operational efficiency. DIVERSIFIED INDUSTRIAL PRODUCT GROUP. Our Diversified Industrial Products Group manufactures towing and related accessories as well as a broad range of products used in industrial applications. The Diversified Industrial Product Group's towing and accessories products include trailer hitches, hitch mounted accessories, jacks, couplers and winches, roof racks and related electrical products. These products are sold to customers such as Wal-Mart, K-Mart and U-Haul. Specialty industrial products include closures and dispensing products, gaskets, insulation products and precision cutting tools for a wide variety of customers in the chemical, refining, container, construction and other industries. Key customers include Dow, BASF, Bayer, Pepsi, Sherwin Williams, Exxon Mobil, Lyondell, Chevron. OUR BUSINESS STRATEGIES Our goal in the Metal Forming Group is to become the leading supplier of high quality, low cost metal formed components, assemblies and modules to the global transportation industry. As a result of the competitive pressures on automotive manufacturers to improve quality and reduce costs, time to market, overhead and inventory, several trends have emerged which are important to our strategy, including: (i) the desire of OEM's and certain Tier 1 suppliers to outsource the design and manufacture of metal parts in engine, transmission and driveline applications, (ii) increasing demand for fully-integrated modular assemblies, and (iii) the globalization and consolidation of the supply base. Our strategy to capitalize on these trends includes the following elements: o CAPITALIZE ON FULL-SERVICE, INTEGRATED SUPPLY OPPORTUNITIES. We intend to leverage our strengths in forged steel and powder metal components by adding metal capabilities in ductile iron foundry, aluminum foundry and aluminum and magnesium die casting. By offering a full complement of metal solutions we believe we will be able to offer OEMs "one-stop" shopping to optimize weight, cost, stress, durability, fatigue resistance and other metal component attributes. With the largest North American market shares in certain engineered forging and powder metal application, and the second largest non-captive machining and assembly capability, we believe we have a competitive advantage in becoming a fully integrated supplier. Our capabilities in engineering, design, machining and assembly, position us to capture a greater share of the "value chain" and deliver customers finished sub-assemblies and modules rather than independent parts. Recently we have had opportunities to pursue new business opportunities utilizing our integrated capabilities to supply a larger percentage of the value added content of certain applications which could result in significant increases in content per vehicle on related programs. o INVEST IN ENGINEERING, DESIGN AND INFORMATION TECHNOLOGY. We plan to continue investing in technology and design capability to support our products. We believe that in order to effectively develop total metal component and assembly solutions it is necessary to integrate research, development, and design elements with product fabrication, machining, finishing and assembly. We believe that our larger scale and broader product line relative to several of our competitors will enable us to more efficiently invest in information technology and develop a significant competitive advantage. In addition, we plan to implement advanced information technology systems to enable us to reduce overhead and administrative expenses. o PURSUE GLOBAL EXPANSION OPPORTUNITIES. Global expansion is an important component of our growth strategy. A significant portion of the global market for engineered metal parts is outside of North America. Further, as OEM's continue to consolidate their supply base, they are looking for global suppliers that can provide seamless product delivery across geographic production regions. We believe our size, strong market shares in North America and customer relationships uniquely position us to capitalize on this trend. 2 o CAPTURE BENEFITS FROM ECONOMIES OF SCALE AND OPERATING SYNERGIES. As we grow our businesses, we will seek to improve our sourcing costs for key commodity inputs, such as primary and secondary scrap, hot bar and rod and other key raw material components for our Metal Forming Group. In addition, as a larger company we will be able to spread our engineering and product development costs over a larger sales base. Furthermore, acquisitions and strategic relationships typically present opportunities for cost reductions through operational efficiency. Through the Simpson acquisition and the GMTI relationship, we have already developed customer-based marketing teams, identified overhead that can be shared and targeted opportunities for restructuring and coordination of design, engineering, administrative and raw material purchasing functions. Our strategy in the Diversified Industrial Group is to aggressively pursue internal growth opportunities and selected strategic acquisitions to create a significant portfolio of industrial businesses that share common and complementary characteristics, including proprietary technologies, market leadership in niche industrial markets, strong brand names, high operating margins, strong free cash flow generation and above average growth opportunities. Several businesses have significant growth opportunities related to new product development and expansion into new markets. In addition, we believe there are significant opportunities to reduce overhead and administrative costs across these businesses though the use of information technology and shared services. We also believe we can reduce operating costs by combining and rationalizing certain operations. RECENT DEVELOPMENTS THE RECAPITALIZATION. On November 28, 2000, we completed a recapitalization transaction which resulted in an investor group led by Heartland and CSFB acquiring control of our company. Pursuant to the recapitalization, our publicly traded common stock was converted into the right to receive $16.90 in cash plus additional cash amounts, if any, based upon the net proceeds from any future disposition of the stock of Saturn Electronics & Engineering Inc. owned by us. Only holders of our common stock at the time of the recapitalization will be entitled to proceeds from any disposition of our Saturn stock. Investors in the common stock offered hereby will not be entitled to receive any Saturn proceeds. In connection with the recapitalization, certain of our stockholders, primarily Masco Corporation and Richard A. Manoogian and the related Richard and Jane Manoogian Foundation, agreed to roll over a portion of their investment in us and consequently remain as stockholders in Metaldyne. The recapitalization, the repayment of certain of our existing indebtedness and the payment of fees and expenses in connection with the recapitalization was financed through approximately (1) $435 million in equity financing provided by Heartland and its affiliates, investment funds associated with CSFB, and other equity co-investors, (2) $123.8 million of proceeds from the sale of certain equity investments owned by us, (3) $1,016 million from borrowings under our credit facility and (4) $118.5 million of proceeds from the sale of accounts receivable pursuant to a new accounts receivable facility. SIMPSON ACQUISITION. On December 15, 2000, we acquired Simpson for total consideration of approximately $365 million, including fees and expenses and the assumption of indebtedness. Simpson is a designer and manufacturer of precision-engineered automotive components and modular systems for passenger and sport utility vehicles, light-and heavy-duty trucks and diesel engines. We believe that Simpson will further enhance our vertical integration in the metal forming industry. The acquisition of Simpson, the repayment of certain indebtedness of Simpson and the payment of fees and expenses in connection with the acquisition of Simpson was funded with approximately (1) $126 million in additional common equity financing provided by Heartland and other equity co-investors, (2) $203 million from borrowings under our credit facility ($200 million in term loans and $3 million in revolving credit borrowings) and (3) $36 million from the sale of accounts receivable pursuant to our accounts receivable facility. Subsequent to the acquisition of Simpson we repaid approximately $50.0 million of term loans with the proceeds from certain sale-leaseback transactions. STRATEGIC RELATIONSHIP WITH GLOBAL METALS TECHNOLOGIES, INC. In January 2001, Heartland acquired GMTI, a leading supplier of aluminum die cast components to the automotive industry. We intend to explore a range of opportunities for realizing benefits from our affiliation with GMTI, including a possible 3 merger of GMTI into our operations in the future. The timing and terms of any such transaction are uncertain and we reserve the right not to pursue it. To achieve the strategic value of our affiliation with GMTI, we entered into a strategic services agreement with GMTI. Under this agreement, we and GMTI provide one another with extensive support and services at cost and are coordinating raw material and energy purchases. Our arrangements also include joint sales and marketing programs and initiatives. OPERATING SEGMENTS The following table sets forth for the three years ended December 31, the net sales and operating profit for our operating segments, (includes Simpson Industries in the Metal Forming Group from date of acquisition, December 15, 2000).
NET SALES(1) (IN THOUSANDS) --------------------------------------- 2000 1999 1998 ------------ ------------ ----------- METAL FORMING GROUP Specialty Metal Formed Products ........ $ 831,000 $ 817,000 $ 760,000 Specialty Fasteners..................... 215,000 241,000 226,000 DIVERSIFIED INDUSTRIAL PRODUCT GROUP Towing Systems.......................... 276,000 260,000 238,000 Specialty Packaging and Sealing Products............................... 220,000 216,000 223,000 Specialty Industrial Products........... 108,000 107,000 110,000 Companies Sold or Held for Sale ........ -- 39,000 115,000 ------------ ------------ ----------- $1,650,000 $1,680,000 $1,672,000 ============ ============ ===========
OPERATING PROFIT(2)(3) --------------------------------------- 2000 1999 1998 ------------ ------------ ----------- METAL FORMING GROUP Specialty Metal Formed Products ........ $110,000 $112,000 $106,000 Specialty Fasteners..................... 21,000 35,000 38,000 DIVERSIFIED INDUSTRIAL PRODUCT GROUP Towing Systems.......................... 33,000 37,000 34,000 Specialty Packaging and Sealing Products............................... 39,000 41,000 46,000 Specialty Industrial Products........... 6,000 14,000 16,000 Companies Sold or Held for Sale ........ -- 4,000 12,000 ------------ ------------ ----------- $209,000 $243,000 $252,000 ============ ============ ===========
- ------------ (1) The 1998 net sales amounts include TriMas Corporation sales occurring before the acquisition of TriMas on January 22, 1998. These sales amounted to approximately $36 million. (2) Amounts are before General Corporate Expense. (3) The 1998 operating profit amounts include TriMas operating profit occurring before the acquisition date of January 22, 1998. This operating profit amounted to approximately $5 million. OUR PRODUCTS Our product lines within our two primary operating groups, Metal Forming Group and Diversified Industrial Product Group, are described below. METAL FORMING GROUP Specialty Metal Formed Products. We manufacture specialty metal formed products for engine and drivetrain applications, including semi-finished transmission shafts, drive gears, engine connecting rods, wheel spindles and front wheel drive components. Our metal formed products are manufactured using 4 various process technologies, including cold, warm and hot forming, powder metalworking, value-added machining and tubular steel fabricating. We believe that our metal forming technologies provide cost-competitive, high-performance, quality components required to meet the increasing demands of the automotive and truck transportation markets. Machining and Assembly. With the acquisition of Simpson, the Metal Forming Group now designs and manufactures precision-engineered automotive components and modular systems for passenger and sport utility vehicles, light-and heavy-duty trucks and diesel engines. We also design and manufacture torsional crankshaft dampers, which reduce and eliminate engine and drivetrain noise and vibration. We produce integrated front engine cover subassemblies that combine items such as the oil and water pumps, providing OEMs with a simplified process by which to attach the water and oil pumps to the front engine cover subsystem and lower assembly costs. Modular engine products include oil pumps, front engine modular assemblies and water pumps, all of which impact engine durability, reliability and life expectancy. We also produce wheel spindles, steering knuckles and hub assemblies, all of which are key components affecting the smoothness of a driver's ride and the handling and safety of an automobile. We distribute and sell our machining and assembly products principally to OEMs in North America and Europe through our own sales force. Specialty Fasteners and Other Metal Forming. Our specialty fasteners products include standard-and custom-designed ferrous, nonferrous and special alloy fasteners for the building construction, farm implement, medium-and heavy-duty truck, appliance, aerospace, electronics and other industries. We also provide metal treating services for manufacturers of fasteners and similar products. Specialty fasteners are sold through our own sales personnel and independent sales representatives to both distributors and manufacturers in these industries. DIVERSIFIED INDUSTRIAL PRODUCT GROUP Towing Systems. We manufacture towing and trailering system products, including vehicle hitches, trailer jacks, winches, couplers and related accessories for the passenger car, light truck, recreational vehicle, trailer, marine, agricultural and industrial markets. Towing systems products are sold to independent installers, distributors, manufacturers and retailers by our sales organization and independent sales representatives. Specialty Packaging and Sealing Products. We manufacture specialty packaging and sealing products, including industrial and consumer container closures and dispensing products primarily for the chemical, agricultural, refining, food, petrochemical and health care industries; and specialty industrial gaskets for refining, petrochemical and other industrial applications. Sales of specialty packaging and sealing products are made by our own sales staff primarily to container manufacturers, industrial gas producers, refineries and independent distributors. Specialty Industrial Products. Our specialty industrial products include flame-retardant facings and jacketings used in conjunction with fiberglass insulation for commercial, industrial and residential construction applications, pressure-sensitive specialty tape products and a variety of specialty precision tools such as center drills, cutters, end mills and gauges. These products are marketed to manufacturers and distributors by our sales personnel and independent sales representatives. CUSTOMERS In 2000, approximately 44 percent of our sales were direct to original equipment manufacturers. Sales to various divisions and subsidiaries of New Venture Gear, Inc. accounted for approximately 11 percent of our net sales. Except for these sales, no material portion of our business is dependent upon any one customer, although we are subject to those risks inherent in having a focus on automotive products generally. MATERIALS AND SUPPLY ARRANGEMENTS In general, raw materials required by us have been obtainable from various sources and in the quantities desired. 5 COMPETITION The major domestic and foreign markets for our products are highly competitive. Competition is based primarily on price, product engineering, performance, technology, quality and overall customer service, with the relative importance of such factors varying among products. Our global competitors include a large number of other well-established independent manufacturers as well as certain customers who have their own internal manufacturing and assembly capabilities. Although a number of companies of varying size compete with us, no single competitor is in substantial competition with us with respect to more than a few of our product lines and services. EMPLOYEES AND LABOR RELATIONS As of December 31, 2000, we employed approximately 11,600 people, of which approximately 27 percent were unionized (principally United Auto Workers). Approximately 20 percent of our employees were located outside the U.S. Employee relations have generally been satisfactory. A strike lasting from July 1997 to June 1998 involved approximately 140 employees at the Fraser, Michigan plant and was related to a planned significant reduction in headcount, resulting from our desire to further automate our production process. The strike was settled, resulting in the anticipated headcount reduction and automation. SEASONALITY; BACKLOG Sales by our Towing Systems segment are generally stronger in the first and second quarters, as distributors and retailers acquire product for the spring selling season; no other operating segment experiences significant seasonal fluctuation in its business. We do not consider backlog orders to be a material factor in our operating segments. ENVIRONMENTAL MATTERS Our operations are subject to federal, state, local and foreign laws and regulations pertaining to pollution and protection of the environment governing among other things, emissions to air, discharge to waters and the generation, handling, storage, treatment and disposal of waste and other materials, and remediation of contaminated sites. Several of our subsidiaries were named as potentially responsible parties in several sites requiring clean-up based on the disposal of wastes they generated. We have entered into consent decrees relating to two sites in California along with the many other co-defendants in these matters. We have incurred expenses for all these sites over a number of years, a portion of which has been covered by insurance. In addition to the foregoing, our businesses have incurred expenses to clean up company-owned or leased property. Such expenditures in the past have not had a material adverse effect on our consolidated financial position, results of operations or cash-flow. We believe that our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. The operation of automotive parts manufacturing plants entails risks in these areas, however, and there can be no assurance that we will not incur material costs or liabilities in the future. In addition, potentially significant expenditures could be required in order to comply with evolving environmental and health and safety laws, regulations or requirements that may be adopted or imposed in the future. PATENTS AND TRADEMARKS We hold a number of patents, patent applications, licenses, trademarks and trade names. We consider our patents, patent applications, licenses, trademarks and trade names to be valuable, but do not believe that there is any reasonable likelihood of a loss of such rights that would have a material adverse effect on our operating segments or on our present business as a whole. INTERNATIONAL OPERATIONS We have operations located in Australia, Brazil, Canada, Czech Republic, England, France, Germany, Italy, Mexico and Spain. Products manufactured by us outside of the United States include 6 forged and machined parts products for automotive customers, powder metal connecting rods, constant-velocity joints, specialty packaging and sealing products and towing systems products. Our foreign operations are subject to political, monetary, economic and other risks attendant generally to international businesses. These risks generally vary from country to country. ITEM 2. PROPERTIES. Our principal manufacturing facilities range in size from approximately 10,000 square feet to 420,000 square feet, substantially all of which are owned by us, and many of which are subject to liens under our credit facility. Our executive offices are located in Plymouth, Michigan. Our buildings, machinery and equipment have been generally well maintained, are in good operating condition and are adequate for current production requirements. The following list sets forth the location of our principal manufacturing facilities and identifies the principal operating segment utilizing such facilities.
California......... Commerce(4) Illinois........... Wheeling(4) and Wood Dale(4) Indiana............ Auburn(5), Bluffton(1), Elkhart(2)(2), Fort Wayne(1), Frankfort(4), Freemont(1), Goshen(2), North Vernon(1) and Peru(2) Louisiana.......... Baton Rouge(5) Massachusetts...... Plymouth(3) Michigan........... Canton(2), Detroit(1)(4), Farmington Hills(1), Fraser(1), Green Oak Township(1), Hamburg(1), Litchfield(1), Livonia(4), Middleville(1), Plymouth(1), Royal Oak(1), Troy(1), Warren(1)(3)(3) New Jersey......... Edison(3) and Netcong(3) North Carolina..... Greenville(1) Ohio............... Canal Fulton(1), Edon(1), Lakewood(4), Minerva(1), Newburgh Heights(4), Port Clinton(1) and Troy(1) Oklahoma........... Tulsa(3) Pennsylvania....... Ridgway(1) and St. Marys(1) Tennessee.......... Memphis(1) Texas.............. Houston(5) and Longview(5) Wisconsin.......... Mosinee(2) and West Bend(2) Australia.......... Hampton Park, Victoria(2), Rhodes, New South Wales(2) and Wakerley, Queensland(2) Brazil............. Cumbica-Guarulhos(1) and Sao Paulo(1) Canada............. Fort Erie(5), Oakville(2), Sarnia(5) and Thamesville(1), Ontario Czech Republic..... Oslavany(1) England............ Halifax(1), Leicester(5) and Wolverhampton(1) France............. Lyon(1) Germany............ Neunkirchen(5), Nurnberg(1) and Zell am Harmersbach(1) Italy.............. Poggio Rusco(1) and Valmadrera(5) Mexico............. Iztapalapa(1), Mexico City(5) and Ramos Arispe(1) Spain.............. Almusaffes(1) and Barcelona(1)
Operating segments in the preceding table are identified as follows: (1) Specialty Metal Formed Products, (2) Towing Systems, (3) Specialty Industrial Products, (4) Specialty Fasteners and (5) Specialty Packaging and Sealing Products. Multiple footnotes to the same municipality denote separate facilities in that location. 7 ITEM 3. LEGAL PROCEEDINGS Five purported stockholder class action lawsuits have been filed against us, each of our directors and Masco Corporation, in the Delaware Court of Chancery on behalf of our unaffiliated stockholders, in connection with the recapitalization. The lawsuits, although not identical, allege, among other things, that (1) the directors breached their fiduciary duties to our stockholders through an unfair process of negotiating the recapitalization agreement and unfair and inadequate consideration and (2) Heartland and the continuing stockholders unfairly possessed nonpublic information when negotiating the recapitalization agreement. The lawsuits further allege that these actions by us prevented or could prevent our stockholders from realizing the full and fair value of their stock. On November 3, 2000, the parties to these lawsuits entered into a Memorandum of Understanding concerning the terms of a proposed settlement of these lawsuits. In connection with a proposed settlement, (a) we and Riverside Company L.L.C. agreed to amend the recapitalization agreement to provide, among other things, for a possible increase in the amount payable to our stockholders from the proceeds of the disposition of Saturn stock, (b) the special committee of the Board of Directors agreed that, as the members of the adjustment committee (charged with the responsibility to dispose of the Saturn stock) after the recapitalization merger, they will continue to have fiduciary duties, as directors of the Delaware corporation, to our stockholders entitled to receive any proceeds of the sale of the Saturn stock, (c) the special committee agreed that the plaintiffs' counsel will from time to time receive reports from the advisors to the adjustment committee regarding such sale, and (d) MascoTech provided plaintiffs' counsel with an opportunity to review and comment upon the disclosure provided to MascoTech stockholders in the proxy statement that was mailed to our stockholders on or about October 26, 2000. The proposed settlement is subject to approval by the Delaware Court of Chancery. A civil suit was filed in the United States District Court for the Central District of California in April, 1983 by the United States of America and the State of California against over 30 defendants, including a subsidiary of ours, for alleged release into the environment of hazardous waste disposed of at the Stringfellow Disposal Site in California. The plaintiffs have requested, among other things, that the defendants clean up the contamination at that site. A consent decree has been entered into by the plaintiffs and the defendants, including us, providing that the consenting parties perform partial remediation at the site. Another civil suit was filed in the United States District Court for the Central District of California in December 1988 by the United States of America and the State of California against more than 180 defendants, including us, for alleged release into the environment of hazardous waste disposed of at the Operating Industries, Inc. site in California. This site served for many years as a depository for municipal and industrial waste. The plaintiffs have requested, among other things, that the defendants clean up the contamination at that site. Consent decrees have been entered into by the plaintiffs and a group of the defendants, including us, providing that the consenting parties perform certain remedial work at the site and reimburse the plaintiffs for certain past costs incurred by the plaintiffs at the site. Based upon our present knowledge and subject to future legal and factual developments, we do not believe that any of this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flow. We are subject to other claims and litigation in the ordinary course of our business, but do not believe that any such claim or litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flow. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At a Special Meeting held on November 28, 2000, the Company's shareholders approved the merger of MascoTech Harbor Inc., a wholly owned subsidiary of the Company with and into the Company for the purpose of effecting a repeal of a provision in the Company's certificate of incorporation that required a 95 percent stockholder vote to approve business combinations involving interested stockholders. This merger was approved by a vote of 34,944,912 shares in favor, 202,894 votes against and 147,925 shares abstaining. Following the approval of this merger, the Company's stockholders voted, also on Novem- 8 ber 28, 2000, to approve the merger of an affiliate of Heartland Industrial Partners, L.P. with the Company resulting in a change of control of the Company. The recapitalization merger was approved by a vote of 34,938,771 shares in favor, with 192,914 shares against and 164,046 shares abstaining. ITEM 4A. SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF REGISTRANT (PURSUANT TO INSTRUCTION 3 TO ITEM 401(b) OF REGULATION S-K). The following table sets forth certain information regarding our executive officers.
NAME AGE POSITIONS OFFICER SINCE - -------------------- ----- ---------------------------------------------------- --------------- Timothy D. Leuliette 51 President and Chief Executive Officer of Metaldyne 2001 Corporation, President and Chief Executive Officer of Metal Forming Group and Director Grant H. Beard 40 President and Chief Executive Officer of Diversified 2001 Industrial Group David B. Liner 45 Vice President and General Counsel and Assistant 1997 Secretary Roy Parrott 60 Group President of Business Operations 2001 Leroy H. Runk 61 Group President of Forming Technologies 2001 James F. Tompkins 45 Vice President and Treasurer 1998 Timothy Wadhams 52 Executive Vice President, Finance and Administration 1984 and Chief Financial Officer
- ------------ TIMOTHY D. LEULIETTE. Mr. Leuliette was elected as one of our directors in connection with the recapitalization and currently serves as our President and Chief Executive Officer and the President and Chief Executive Officer, Metal Forming Group. He is the former Vice Chairman of Detroit Diesel Corporation and has spent 27 years in management of manufacturing and services businesses and in the investment of private capital. Mr. Leuliette joined the Penske Corporation as President and Chief Operating Officer in 1996 to address operational and strategic issues. From 1991 to 1996, Mr. Leuliette served as President & Chief Executive Officer of ITT Automotive. He also serves on a number of corporate and charitable boards, including serving as a Chairman of The Federal Reserve of Chicago, Detroit Branch. Mr. Leuliette is a Senior Managing Director and one of the co-founders of Heartland Industrial Partners. GRANT H. BEARD. Mr. Beard was appointed President of our Diversified Industrial Group in February 2001. From September 2000 to February 2001, Mr. Beard was president and Chief Executive Officer of HealthMedia and remains its chairman of the board. From June 1997 to September 2000, he was President of the Preferred Technical Group of Dana Corporation, a manufacturer of tubular fluid routing products sold to vehicle manufacturers. He has also served as Vice President of Sales, Marketing and Corporate Development for Echlin, Inc., before the acquisition of Echlin by Dana in late 1998. Mr. Beard has experience at three private equity/merchant banking groups (Bain Capital, Anderson Group and Oxford Investment Group) where he was actively involved in corporate development, strategy and operations management. DAVID B. LINER. Mr. Liner has served as our Vice President and General Counsel since September 1998. He joined MascoTech in February 1997 as Vice President and Corporate Counsel. Previously he was employed by Masco Corporation as Associate Corporate Counsel from December 1987. ROY PARROTT. Mr. Parrott was recently named Group President of Business Operations of Metaldyne. Prior to this, he was an officer and director of Simpson Industries. Mr. Parrott joined Simpson in 1989 and served as both President and a director and then in 1994, he was named chief executive officer. Mr. Parrott is also currently a director of the Lear Corporation and of Oakland University Meadowbrook and serves on the advisory board of Michigan State's College of Natural Science. 9 LEROY H. RUNK. Mr. Runk joined Metaldyne, then MascoTech, in 1993 as Group President of the Forming Technologies Group and was designated a Group President of MascoTech in 1998. He holds the same title for what is now Metaldyne. Prior to joining MascoTech, Mr. Runk was President and Chief Operating Officer of Harvard Industries, an automotive parts supplier. JAMES F. TOMPKINS. Mr. Tompkins was appointed a vice president in February 2001 and continues to serve as our Treasurer, which he has done since May 1998. He previously served as our Assistant Treasurer from August 1988 to May 1998. TIMOTHY WADHAMS. Mr. Wadhams has served as our Executive Vice President--Finance and Administration and Chief Financial Officer since September 1998. He previously served as our Senior Vice President and Chief Financial Officer from February 1998 until September 1998 and as Vice President--Controller and Treasurer from June 1990 until February 1998. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. No trading market for the Company's common stock exists. The following table sets forth common stock dividends declared for periods indicated:
DIVIDENDS 1999 DECLARED - ---- ----------- First Quarter $ 07 Second Quarter .07 Third Quarter .08 Fourth Quarter .08 ----------- $.30 ===========
DIVIDENDS 2000 DECLARED - ---- ----------- First Quarter $.08 Second Quarter .08 Third Quarter .08 Fourth Quarter (through November 28) -- ----------- $.24 ===========
The Company does not currently pay dividends on the common stock and it is the current policy to retain earnings to repay debt and finance the Company's operations and acquisition strategies. In addition, the Company's credit facility restricts the payment of dividends on common stock. See the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Position and Liquidity," included in Item 7 of this Report and the Note to the Company's Consolidated Financial Statements captioned "Long-Term Debt," included in Item 8 of this Report. On March 15, 2001, there were approximately 600 holders of record of the Company's Common Stock. NONE OF OUR SECURITIES WHICH WERE NOT REGISTERED UNDER THE ACT HAVE BEEN ISSUED OR SOLD BY US WITHIN THE PAST THREE YEARS EXCEPT AS FOLLOWS: 1. On August 6, 1998, we issued 1,006,974 shares of common stock plus cash consideration to K-Tech Mfg., Inc. shareholders in exchange for all of their outstanding common stock, pursuant to an agreement and plan of reorganization, by and among us, K-Tech Mfg., Inc. and all of the K-Tech Mfg., Inc. shareholders. In accordance with this agreement, as amended, we issued 464,785 shares of common stock on December 1, 2000 to the former K-Tech stockholders. 10 2. On November 28, 2000, we issued a total of 25,752,376 shares of common stock to Heartland Industrial Partners, L.P., its affiliates and other equity co-investors, at a price per share of $16.90 for a total value of approximately $435 million, pursuant to the recapitalization agreement. 3. On December 15, 2000, we issued 7,455,619 shares of common stock to Heartland Industrial Partners, L.P., its affiliates and other co-investors, at a price per share of $16.90 in connection with the Simpson acquisition. The issuance of the securities described above were exempt from registration under the Securities Act in reliance on Section 4(2) of such Securities Act as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in such transactions. All recipients had adequate access to information about us at the time of their investment decision. 11 ITEM 6. SELECTED FINANCIAL DATA. The following table sets forth summary consolidated financial information of the Company, for the years and dates indicated:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ Net sales.................. $1,650,160 $1,679,690 $1,635,500 $ 922,130 $1,281,220 From continuing operations before accounting change: Income................... $ 56,020 $ 92,430 $ 97,470 $ 115,240 $ 39,920 Earnings per share....... $ 1.21 $ 1.84 $ 1.83 $ 2.12 $ .50 Dividends declared per common share.............. $ .24 $ .30 $ .20 $ .28 $ .18 At December 31: Total assets............. $2,363,490 $2,101,270 $2,090,540 $1,144,680 $1,202,840 Long-term debt........... $1,485,940 $1,372,890 $1,388,240 $ 592,000 $ 752,400
Results in 2000 include approximately $48 million of compensation expense charges for severance costs and accelerated vesting of stock awards and stock options related to the recapitalization of the Company. Results in 2000 include a net pre-tax gain of approximately $28 million related to the sale of the Company's equity investments, excluding Saturn Electronics & Engineering, Inc. Results in 2000 include a pre-tax gain of approximately $13 million related to interest rate swap agreements that were terminated in June 2000. Results in 1999 include the completion of the sale of the Company's aftermarket-related and vacuum metalizing businesses which resulted in a pre-tax gain of approximately $26 million. Results in 1999 include 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. Results in 1999 include pre-tax charges aggregating approximately $18 million, principally related to the closure of a plant, the sale of a business and the decline in value of equity affiliates. Results in 1998 include sales and operating profits from TriMas Corporation, which was purchased in January 1998. Results for 1998 include a pre-tax charge related to the disposition of certain businesses aggregating approximately $41 million. In addition, the Company recorded a pre-tax gain of approximately $25 million related to the receipt of additional consideration based on the operating performance of the Company's stamping businesses sold in 1996. Also, the Company recognized a gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax related to the disposition of the Company's Technical Services Group in 1997. Results for 1997 include pre-tax gains approximating $83 million principally related to the sale by the Company of its common stock holdings of an equity affiliate, gains from the Company's marketable securities portfolio and income resulting from equity transactions by affiliates. These gains were partially offset by costs and expenses of approximately $24 million pre-tax related to plant closure costs, the Company's share of special charges recorded by equity affiliates, write-off of deferred charges and employee termination and other expenses. Results for 1996 include an after-tax charge of approximately $26 million related to the sale of MascoTech Stamping Technologies, Inc. ("MSTI"). Income from continuing operations before accounting change attributable to common stock was $56.0 million, $92.4 million, $97.5 million, $109.0 million and $27.0 million after preferred stock dividends in 2000, 1999, 1998, 1997 and 1996, respectively. Earnings per common share, from continuing operations before accounting change, are presented on a diluted basis. Basic earnings per common share, from continuing operations before accounting change, were $1.38, $2.25, $2.23, $2.70 and $.54 in 2000, 1999, 1998, 1997 and 1996, respectively. 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. COMPANY OVERVIEW The Company is a leading global diversified industrial manufacturer of highly engineered products for the transportation, industrial and consumer markets with pro forma 2000 sales of $2.2 billion. We operate through two business groups -- Metal Forming, which accounts for approximately two-thirds of our sales, and Diversified Industrial Products, which accounts for the remaining one-third of our sales. Products include metal formed and precision-engineered components and modular systems used in vehicle engine, transmission and drivetrain applications, specialty fasteners, towing systems, packaging and sealing products and other industrial products. The Company serves a broad range of over 150 automotive and industrial customers, including Amoco, Bayer, BMW, Boeing, Dana, DaimlerChrysler, Dow Chemical, Ford, Visteon, General Motors, Delphi, Honda, John Deere, Johns Manville, New Venture Gear, TRW, U-Haul and Wal-Mart. RECENT DEVELOPMENTS In January 2001, the Company changed its name to Metaldyne Corporation from MascoTech, Inc. On November 28, 2000, we were recapitalized in accordance with the terms of a recapitalization agreement as a result of which each issued and outstanding share of our publicly traded common stock at the time of the recapitalization was converted into the right to receive $16.90 in cash plus additional cash amounts, if any, based upon the net proceeds from any future disposition of the stock of Saturn Electronics & Engineering Inc. owned by us. In connection with the recapitalization, Masco Corporation, Richard A. Manoogian and certain of our other stockholders agreed to roll over a portion of their investment in us and consequently remain as stockholders. The recapitalization, the repayment of certain of our existing indebtedness and the payment of fees and expenses in connection with the recapitalization was financed through approximately (1) $435 million in equity financing provided by Heartland Industrial Partners, L.P. and its affiliates as well as other equity co-investors, (2) $123.8 million of proceeds from the sale of certain minority owned equity investments owned by us described below, (3) $1,016 million from borrowings under our credit facility and (4) $118.5 million with proceeds from the sale of accounts receivable pursuant to a new accounts receivable facility, which replaced a similar facility entered into in the second quarter of 2000. In connection with the recapitalization, we disposed of our minority interests in each of the following companies for approximately $123.8 million in aggregate: Advanced Accessories Systems, LLC, Delco Remy International, Inc., Innovative Coating Technologies, Inc., MSX International, Inc., Qualitor, Inc., Titan International, Inc., and Tower Automotive, Inc. ACQUISITION OF BUSINESSES On December 15, 2000, we acquired Simpson Industries, Inc. for total consideration of $365 million, including fees and expenses and the assumption of indebtedness. The acquisition of Simpson, the repayment of certain indebtedness of Simpson and the payment of fees and expenses in connection with the acquisition of Simpson was funded with approximately (1) $126 million in additional common equity financing provided by Heartland and other equity co-investors, (2) $203 million from borrowings under our credit facility ($200 million in term loans and $3 million in revolving credit borrowings) and (3) $36 million from the sale of accounts receivable pursuant to our accounts receivable facility. We subsequently paid down approximately $50 million in term loans incurred in connection with the Simpson acquisition with the proceeds from sale/leaseback transactions. Simpson is a designer and manufacturer of precision-engineered automotive components and modular systems for passenger and sport utility vehicles, light-and heavy-duty trucks and diesel engines. For the years ended December 31, 2000 and 1999, respectively, Simpson had net sales of approximately $515 million and $533 million, respectively, and operating profit of approximately $35.7 million and $38.9 million, respectively. 13 During 1999, the Company acquired Windfall Products, Inc., a manufacturer of transportation-related components that utilizes powder metal technology, significantly expanding the Company's powder metal manufacturing capabilities. In January 1998, the Company completed the acquisition of TriMas Corporation ("TriMas"), by purchasing all of the outstanding shares of TriMas not already owned by the Company (approximately 63 percent) for approximately $920 million. DISPOSITION OF BUSINESSES In mid-1998, the Company adopted a plan to sell certain aftermarket-related businesses and its vacuum metalizing operation and recorded a pre-tax loss of approximately $41 million. In early 1999, the Company completed the sale of these businesses for total proceeds aggregating approximately $105 million, consisting of cash of $90 million, a note receivable of $6 million and retained equity interests in the ongoing businesses which were subsequently sold in 2000. The Company recognized a pre-tax gain of approximately $26 million related to the disposition of these businesses. The businesses sold contributed net sales of $39 million and $115 million in 1999 and 1998, respectively, and operating profit of $4 million and $12 million in 1999 and 1998, respectively, to the Company's consolidated results. In 1999, the Company adopted a plan to sell its specialty tubing business, resulting 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 business exceeding book carrying values. This business, which had annual sales of approximately $14 million, was sold in January 2000 for proceeds of approximately $6 million. EBITDA (EARNINGS BEFORE INTEREST TAXES DEPRECIATION AND AMORTIZATION): The Company will use EBITDA in 2001 as an indicator of our operating performance and as a measure of our cash generating capabilities. The Company believes that adjusted EBITDA for the year 2000, which did not include the results of Simpson, was approximately $310 million before charges related to the sale of businesses and the recapitalization, costs associated with launching certain new products and the opening of a new manufacturing facility, costs from closing certain manufacturing facilities, costs associated with a flood, certain other non-recurring charges, and an adjustment relating to anticipated cost savings. EBITDA does not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Further, EBITDA, as we calculate it, may not be comparable to calculations of similarly titled measures by other companies. GENERAL FINANCIAL ANALYSIS 2000 VERSUS 1999 Sales decreased approximately two percent in 2000 from 1999. Sales in 2000 as compared to 1999 were negatively impacted by dispositions, a plant closure, foreign currency fluctuations and a decline in general economic conditions in late 2000 which adversely impacted demand for certain of the Company's products. These factors more than offset incremental sales from acquisitions. Net income in 2000 was $56 million. In addition to the decline in sales, operating performance was negatively impacted by costs and expenses related to the previously announced closure of a manufacturing facility, the launch of certain new products and the opening of a new manufacturing facility. The Company was adversely impacted by a flood at a manufacturing facility in the Company's specialty insulation business. These costs and expenses were offset by the positive outcome of certain issues related to businesses previously disposed and the corresponding adjustment of certain expense accruals. In addition, results were negatively impacted by reduced equity affiliate income reflecting losses and restructuring charges at two of the Company's affiliates. This reduction in affiliate income was offset by insurance proceeds and reduced interest expense, which reflects the benefit of interest rate swap agreements that 14 were terminated in June 2000. As a result of the recapitalization, results in 2000 include net gains of approximately $28 million related to the disposition of certain equity affiliates and income of approximately $13 million related to interest rate swap agreements that were terminated. This income was offset by compensation expense charges of approximately $48 million related to severance costs and the accelerated vesting of stock awards and stock options. Net income in 1999 was $92.4 million. Results in 1999 include a net gain of $14.4 million pre-tax related to the sale of the aftermarket-related and vacuum metalizing businesses partially offset by charges related to the disposition of certain other operations and a plant closure. In addition, 1999 results include charges of approximately $17.5 million pre-tax related to the impairment of certain long-lived assets, which include the Company's hydroforming equipment and related intellectual property. Other income and expense was negatively impacted by pre-tax charges aggregating approximately $5.2 million (net of $1 million of nonrecurring income) which were principally related to equity affiliate investments. Excluding these gains and the charges, net income in 1999 would have been approximately $89 million. Sales for the Company's Specialty Metal Formed Products and Towing Systems, aided by acquisitions, increased two and six percent, respectively, as compared with 1999. Excluding the impact of acquisitions and dispositions, Specialty Metal Formed Products sales would have decreased seven percent while sales of Towing Systems would have approximated 1999 levels. Sales for Specialty Fasteners decreased 11 percent as a result of the phase out of certain products related to a plant closure and reduced demand for fastener applications for heavy truck and off road markets. Specialty Packaging and Sealing Product sales increased two percent as a result of improved sales of specialty gaskets and related products. Sales of Specialty Industrial Products increased two percent. Operating margins, excluding unusual gains and charges, approximated 11.1 percent and 13.0 percent for the years ended December 31, 2000 and 1999, respectively. Margins were negatively impacted by sales declines for certain products and start-up costs related to the launch of new products and new manufacturing facilities. Operating margins in 2000 for all of the Company's segments declined as compared to 1999. Specialty Metal Formed Products margins declined from 13.7 percent to 13.2 percent principally as a result of launch costs for new products and the opening of a new manufacturing facility. Operating margins for Specialty Fasteners declined from 14.5 percent in 1999 to 9.8 percent in 2000 primarily as a result of reduced sales and the cost of a plant closure. Towing Systems margins declined to 12.0 percent in 2000 from 14.2 percent in 1999 as a result of costs incurred to rationalize logistics and distribution systems and by operating inefficiencies. Specialty Packaging and Sealing Product margins were down slightly from 1999. Margins for Specialty Industrial Products declined from 13.1 percent in 1999 to 5.6 percent in 2000 principally as a result of a flood that impacted the Company's specialty insulation business. The unusual relationship in 1999 between income before taxes and income taxes relates to the unusual gains and charges discussed above. Excluding the impact of the unusual gains and charges, the effective tax rate for 1999 would have been approximately 40 percent. Other income (expense), net in 2000 was expense of $44 million as compared with $76 million of expense in 1999. Results for 2000 include net gains of approximately $40 million related to the disposition of certain equity affiliates and income recognized from interest rate swap agreements that were terminated. In addition, 2000 was impacted by higher interest expense and reduced earnings from equity affiliates. Results for 1999 include pre-tax charges principally related to equity affiliate investments aggregating approximately $5 million, net of $1 million of nonrecurring income. 1999 VERSUS 1998 Sales increased approximately three percent in 1999 from 1998. Sales, excluding the impact of the sale of the aftermarket-related and vacuum metalizing businesses, aided by acquisitions, would have increased approximately eight percent in 1999 over 1998. Net income in 1999 was $92.4 million or $1.84 per common share. Results in 1999 include a net gain of $14.4 million pre-tax related to the sale of the aftermarket-related and vacuum metalizing businesses partially offset by charges related to the disposition of certain other operations and a plant closure. In 15 addition, 1999 results include charges of approximately $17.5 million pre-tax related to impairment of certain long-lived assets, which include the Company's hydroforming equipment and related intellectual property. Other income and expense was negatively impacted by pre-tax charges aggregating approximately $5 million (net of $1 million of nonrecurring income) which were principally related to equity affiliate investments. Excluding these gains and the charges, net income in 1999 would have been approximately $89 million or $1.78 per common share. Net income in 1998 was $97.5 million or $1.83 per common share. Results in 1998 include a charge related to the disposition of certain businesses aggregating approximately $41 million pre-tax. In addition, the Company recorded a pre-tax gain of approximately $25 million related to the receipt of additional consideration based on the operating performance of the Company's stamping businesses which were sold in 1996. Results in 1998 also benefited from a gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax related to the disposition of the Company's Technical Services Group in 1997 and gains from the Company's marketable securities portfolio. Excluding these gains and the charge, net income in 1998 would have been approximately $89 million or $1.68 per common share. The following information is presented on a pro forma basis as though TriMas was acquired on January 1, 1998 and excludes the unusual pre-tax income and charges mentioned above. Sales for the Company's Specialty Metal Formed Products, aided by acquisitions, increased approximately eight percent in 1999 as compared to 1998. Towing Systems sales increased approximately nine percent. Sales of Specialty Fasteners, aided by acquisitions, increased approximately seven percent. Sales of Specialty Packaging and Sealing Products declined approximately three percent as a 15 percent increase in sales of closures and dispensing systems was offset by a 25 percent decline in sales of compressed gas cylinders principally as a result of market conditions and an 11 percent decline in sales of specialty gaskets and related products principally as a result of reduced activity in the oil and gas industry. Sales of Specialty Industrial Products declined approximately three percent from 1998 levels. Operating margins approximated 13.0 percent and 13.5 percent for the years ended December 31, 1999 and 1998, respectively. Margins were negatively impacted by sales declines for certain products and start-up costs related to the launch of new products and new manufacturing facilities. Operating margins in 1999 for the Company's Specialty Metal Formed Products and Towing Systems approximated 1998 levels. Operating margins for Specialty Fasteners declined from 16.8 percent in 1998 to 14.5 percent in 1999 principally due to reduced sales for aerospace, agricultural, off-highway and certain other fastener applications. Operating margins for Specialty Packaging and Sealing Products declined from 20.6 percent in 1998 to 19.0 percent in 1999 due to sales declines resulting from decreased demand for compressed gas cylinders and specialty gaskets as a result of depressed market conditions. Specialty Industrial Products profit margins were down slightly in 1999 versus 1998. The unusual relationship between income before taxes and income taxes relates to the unusual gains and charges discussed above. Excluding the impact of the unusual gains and charges for the full year 1999 would result in an effective tax rate of approximately 40 percent. Other income (expense), net in 1999 was expense of $76 million as compared with $62 million of expense in 1998. Results for 1999 include pre-tax charges principally related to equity affiliate investments aggregating approximately $5 million, net of $1 million of nonrecurring income. Results for 1998 benefited from a gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax related to the disposition of the Company's Technical Services Group in 1997 and gains of approximately $3 million pre-tax from the Company's marketable securities portfolio. PROFIT MARGINS Operating profit margins, excluding unusual gains and charges in 2000, 1999 and 1998, were approximately 11.1 percent in 2000, 13.0 percent in 1999 and 13.6 percent in 1998. Operating profit margin in 2000 was negatively impacted by decreased sales for certain products and by higher than expected costs associated with capacity expansions, launches of new product and process capabilities and other growth initiatives. 16 CASH FLOWS Net cash flows from operating activities increased to approximately $300 million in 2000 from approximately $153 million in 1999. In 2000, net cash from operating activities included approximately $151 million from the securitization of accounts receivable. INVENTORIES The Company's investment in inventories for its businesses increased to approximately $199 million at December 31, 2000 as compared with $184 million in 1999. The increase is principally the result of the acquisition of Simpson. LIQUIDITY AND CAPITAL RESOURCES In connection with the recapitalization, the Company and its subsidiaries entered into a new credit facility. The credit facility includes a $300 million revolving credit facility, a tranche A $500 million term loan facility, a tranche B $500 million term loan facility and a tranche C $200 million term loan facility. To complete the recapitalization and the Simpson acquisition, the Company utilized all of the tranche A, tranche B and tranche C term loans and approximately $19 million of the revolving credit facility commitments. The revolving credit balances fluctuate daily based upon the Company's working capital and other ordinary course needs and the credit facility is only available to a limited extent to fund future acquisitions. The Company's other important source of liquidity is the new $225 million accounts receivable financing arrangement, under which the Company has the ability to sell eligible accounts receivable to a third party multi-seller receivables funding company. In connection with the recapitalization and the Simpson acquisition, the Company utilized $151 million of the accounts receivable financing arrangement. The new credit facility and accounts receivable arrangement replaced the Company's prior credit facility and accounts receivable financing. In addition, the Company entered into two sale/leaseback financings in December 2000 relating to certain equipment of Simpson and the Simpson headquarters building to yield gross proceeds to the Company of approximately $50 million. These proceeds were used to reduce the $200 million tranche C term loan facility to $150 million. In addition to the credit facility and the accounts receivable financing, the Company had approximately $29.1 million of other indebtedness outstanding as of December 31, 2000. The Company also has a commitment from Masco Corporation, one of our shareholders, to purchase up to $100 million of a new issue of Company subordinated debt, subject to limited conditions, on or prior to October 31, 2003. The credit facility regulates how the Company draws upon this commitment, as described below. Debt includes $305 million principal amount of 4-1/2% convertible subordinated debentures which mature in December 2003. As a result of the recapitalization, these convertible subordinated debentures became convertible into the cash merger consideration payable to common stockholders in the recapitalization and, based upon the conversion price, are not expected to be converted absent a material adverse development. The credit facility imposes significant restrictions upon the use of the revolving credit facility that are designed to ensure that the Company has the necessary liquidity to repay the convertible subordinated debentures. The Company must maintain restricted cash either in escrow from the proceeds of other subordinated debt financings or equity financings or in the form of availability under the revolving credit facility and accounts receivable financing in increasing amounts up to $205 million at specified dates until the maturity of the convertible subordinated debentures. These amounts are reduced to the extent that convertible subordinated debentures are repaid from subordinated debt or equity proceeds prior to maturity. In addition, the Company is obligated by the credit facility to utilize the $100 million subordinated loan commitment from Masco to satisfy the Company's obligations in respect of the convertible subordinated debentures, upon maturity, conversion or otherwise, to the extent that the Company has not raised other subordinated debt or equity. By reason of the foregoing, the Company does not expect to be able to utilize the full revolving credit facility commitments, absent being able to raise additional junior financings. 17 The amortization of the Company's bank term indebtedness following the recapitalization and the Simpson acquisition is as follows (in millions):
2001 ..................... $ 33 2002 ..................... 53 2003 ..................... 73 2004 ..................... 83 2005 ..................... 83 2006 ..................... 93 2007 ..................... 272 2008 ..................... 387 2009 ..................... 73
In addition to the bank term debt amortization, the Company's $305 million of convertible subordinated debentures mature in 2003 and the Company has approximately $29 million of other debt maturing at various dates. The Company has other cash commitments not relating to debt as well. Immediately following the recapitalization, the Company made restricted stock awards to certain employees of approximately 3.7 million shares of Company common stock. Under the terms of the recapitalization agreement, 25 percent of those shares became free of restriction, or vested upon the closing of the recapitalization and one quarter of the approximately 3.7 million shares will vest on each January 14 of 2002, 2003 and 2004. Holders of restricted stock are entitled to elect cash in lieu of 40 percent of their restricted stock which vested at closing and 100 percent of their restricted stock on each of the other dates with the shares valued at the initial $16.90 recapitalization consideration, together with cash accruing at approximately 6 percent per annum; to the extent that cash is not elected, additional common stock valued at $16.90 per share is issuable in lieu of the 6 percent accretion. Assuming restricted stock award holders elect to receive the maximum cash, the Company estimates such cash obligations will aggregate approximately $57 million. Assuming restricted stock award holders elect to receive 100 percent in shares, the Company would issue approximately 3.7 million shares. The Company also has outstanding $36.1 million in liquidation value of preferred stock in respect of which the Company is required to pay cash dividends initially at a rate of 13 percent per annum and to effect a mandatory redemption in December 2012. In November 2000, the Company entered into an agreement to sell, on an ongoing basis, the trade accounts receivable of certain business operations to a bankruptcy-remote, special purpose subsidiary, or MTSPC, wholly owned by the Company. MTSPC has sold and, subject to certain conditions, may from time to time sell, an undivided fractional ownership interest in the pool of domestic receivables, up to approximately $225 million, to a third party multi-seller receivables funding company, or conduit. Upon sale to the conduit, MTSPC holds a subordinated retained interest in the receivables. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold receivables. The Company services, administers and collects the receivables on behalf of MTSPC and the conduit. The proceeds of sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser's financing costs. Approximately $118.5 million of the proceeds of the facility were used in order to consummate the recapitalization and $36.3 million were used to consummate the Simpson acquisition. As a result of the recapitalization and the Simpson acquisition, the Company is highly leveraged and has significantly increased interest expense relative to historical levels. The Company will need to dedicate significant portions of cash flow to debt service obligations. In addition, the Company expects that capital expenditure requirements in 2001 will be approximately $133 million, of which approximately $22 million are expected to be maintenance-related. The Company may incur material amounts of additional debt and further burden cash flow in pursuit of acquisition strategies. Capital expenditures in 2000 were approximately $107 million. The Company believes that its liquidity and capital resources, including anticipated cash flow from operations, will be sufficient to meet debt service, capital expenditure and other short-term and long-term obligations and needs, but the Company is subject to unforeseeable events 18 and the risk that it will not be successful in implementing its business strategies. The Company will also seek to extend the average maturities of debt through the issuance of long-term debt securities to the extent market conditions permit us to increase our financial flexibility and ability to pursue our business strategies. OTHER MATTERS YEAR 2000 The Company did not experience any significant disruptions to its operating systems or lose any revenues as a result of the date change to year 2000. The cost of Year 2000 compliance for the Company approximated $12 million, including: replacement costs of $7 million which are normal and recurring; upgrades of $2 million which are normal and recurring; repair/programming costs of $2 million; and other costs of $1 million, which are not material to the Company's consolidated results of operations, financial position or cash flow. The majority of the replacement and upgrade costs would have been incurred by the Company over time as part of its regular information system replacement process. FORWARD-LOOKING STATEMENTS This discussion and other sections of this report contain statements reflecting the Company's views about its future performance and constitute "forward-looking statements." These views involve risks and uncertainties that are difficult to predict and may cause the Company's actual results to differ significantly from the results discussed in such forward-looking statements. Readers should consider that various factors may affect our ability to attain the projected performance, including: o Leverage; Ability to Service Debt -- We may not be able to manage our business as we might otherwise do so due to our high degree of leverage. o Liquidity and Capital Resources -- If we are unable to raise junior capital, our liquidity and business strategies will be adversely impacted. o Challenges of Acquisition Strategy -- We may not be able to identify attractive acquisition candidates, successfully integrate our acquired operations or realize the intended benefits of our acquisitions. o Substantial Capital Expenditure Requirements -- If we are unable to meet future capital requirements, our business will be adversely affected. o Substantial Restrictions and Covenants -- Restrictions in our credit facility limit our ability to take certain actions. o Dependence on Automotive Industry and Industry Cyclicality -- The industries in which we operate are dependent upon the economy and are cyclical. o Dependence on Third-Party Suppliers and Manufacturers -- The loss of a substantial number of our suppliers could affect our financial health. o Our Industries Are Highly Competitive -- Recent trends among our customers will increase competitive pressures in our businesses. o Dependence on Key Personnel and Relationships -- We depend on the services of other key individuals and relationships, the loss of which would materially harm us. o Labor Relations -- A portion of our workforce is unionized. o Labor Stoppages Affecting OEMs -- Slowdowns, strikes or similar actions could have a material adverse effect on our results of operations. o International Sales -- A growing portion of our revenue may be derived from international sources, which presents separate uncertainty for us. 19 o Product Liability -- Our businesses expose us to product liability risks that could materially and adversely impact us. o Environmental Matters -- We have been and may be subject in the future to potential exposure to environmental liabilities. o Government Regulation -- Fastener Quality Act. o Control by Principal Stockholder -- We are controlled by Heartland, whose interests in our business may be different than yours. o Terms of Shareholders Agreement -- Provisions of the shareholders agreement impose significant operating and financial restrictions on our business. All statements, other than statements of historical fact included in this annual report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this annual report, the words "will," "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this annual report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this annual report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. In the normal course of business, we are exposed to market risk associated with fluctuations in foreign exchange rates. We are also subject to interest risk as it relates to long-term debt. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General Financial Analysis" for details about our primary market risks, and the objectives and strategies used to manage these risks. Also see "Long-Term Debt" in the financial statement notes for additional information. 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Metaldyne 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 Metaldyne Corporation and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 14(a)(2)(i) present 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 schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, 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 our opinion. PRICEWATERHOUSECOOPERS LLP Detroit, Michigan March 16, 2001 21 METALDYNE CORPORATION CONSOLIDATED BALANCE SHEET DECEMBER 31, 2000 AND 1999
ASSETS 2000 1999 -------------- -------------- Current assets: Cash and cash investments.................................. $ 26,320,000 $ 4,490,000 Receivables ............................................... 121,160,000 218,960,000 Inventories ............................................... 199,490,000 183,600,000 Deferred and refundable income taxes ...................... 38,010,000 46,750,000 Prepaid expenses and other assets ......................... 48,540,000 16,320,000 -------------- -------------- Total current assets ..................................... 433,520,000 470,120,000 Equity and other investments in affiliates ................. 27,760,000 110,730,000 Property and equipment, net ................................ 901,300,000 722,680,000 Excess of cost over net assets of acquired companies ...... 906,990,000 759,330,000 Deferred financing and other assets ........................ 93,920,000 38,410,000 -------------- -------------- Total assets ............................................. $2,363,490,000 $2,101,270,000 ============== ============== LIABILITIES and SHAREHOLDERS' EQUITY Current liabilities: Accounts payable .......................................... $ 155,020,000 $ 107,720,000 Accrued liabilities ....................................... 146,640,000 113,910,000 Current maturities, long-term debt ........................ 46,350,000 6,770,000 -------------- -------------- Total current liabilities ................................ 348,010,000 228,400,000 Subordinated debentures .................................... 305,000,000 305,000,000 Other long-term debt ....................................... 1,180,940,000 1,067,890,000 Deferred income taxes ...................................... 124,680,000 100,680,000 Other long-term liabilities ................................ 108,920,000 98,920,000 -------------- -------------- Total liabilities ........................................ 2,067,550,000 1,800,890,000 -------------- -------------- Redeemable preferred stock, 361,001 shares outstanding .... 33,370,000 -- Redeemable restricted common stock.......................... 43,420,000 -- Less: Restricted stock awards .............................. (33,820,000) -- -------------- -------------- Total redeemable stock ................................... 42,970,000 -- -------------- -------------- Shareholders' equity: Preferred stock (non-redeemable), $1 par: Authorized: 25 million; Outstanding: None......................................... -- -- Common stock, $1 par: Authorized: 250 million; Outstanding: 38.7 million and 44.6 million ............... 38,670,000 44,640,000 Paid-in capital ........................................... -- -- Retained earnings.......................................... 254,690,000 324,290,000 Accumulated other comprehensive loss....................... (40,390,000) (24,870,000) Less: Restricted stock awards.............................. -- (43,680,000) -------------- -------------- Total shareholders' equity................................ 252,970,000 300,380,000 -------------- -------------- Total liabilities, redeemable stock and shareholders' equity................................................... $2,363,490,000 $2,101,270,000 ============== ==============
The accompanying notes are an integral part of the consolidated financial statements. 22 METALDYNE CORPORATION CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 --------------- --------------- --------------- Net sales........................................ $ 1,650,160,000 $ 1,679,690,000 $ 1,635,500,000 Cost of sales.................................... (1,247,500,000) (1,246,660,000) (1,208,930,000) --------------- --------------- --------------- Gross profit.................................... 402,660,000 433,030,000 426,570,000 Selling, general and administrative expenses .... (219,120,000) (214,530,000) (204,180,000) Gains (charge) on disposition of businesses, net............................................. 680,000 14,440,000 (15,580,000) Charges related to the recapitalization ........ (47,660,000) -- -- Charge for asset impairment ..................... -- (17,510,000) -- --------------- --------------- --------------- Operating profit ............................... 136,560,000 215,430,000 206,810,000 --------------- --------------- --------------- Other income (expense), net: Interest expense ............................... (91,590,000) (83,630,000) (83,840,000) Equity and other income from affiliates ....... 9,810,000 13,230,000 10,150,000 Gain (charge) from disposition of, or changes in, investments in equity affiliates .......... 27,520,000 (3,150,000) 7,000,000 Income related to the termination of interest rate swap agreements .......................... 12,940,000 -- -- Other, net ..................................... (2,520,000) (2,410,000) 4,400,000 --------------- --------------- --------------- (43,840,000) (75,960,000) (62,290,000) --------------- --------------- --------------- Income before income taxes ..................... 92,720,000 139,470,000 144,520,000 Income taxes .................................... 36,700,000 47,040,000 47,050,000 --------------- --------------- --------------- Net income ..................................... 56,020,000 92,430,000 97,470,000 Preferred stock dividends ...................... 390,000 -- -- --------------- --------------- --------------- Earnings attributable to common stock ......... $ 55,630,000 $ 92,430,000 $ 97,470,000 =============== =============== ===============
BASIC DILUTED BASIC DILUTED BASIC DILUTED ------- ------- ------- ------- ------- ------- Earnings per common share: Earnings attributable to common stock........... $1.38 $1.21 $2.25 $1.84 $2.23 $1.83 ======= ======= ======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 23 METALDYNE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 --------------- --------------- --------------- CASH FROM (USED FOR): OPERATING ACTIVITIES: Net income .................................... $ 56,020,000 $ 92,430,000 $ 97,470,000 Adjustments to reconcile net income to net cash provided by operating activities: (Gains) charge on disposition of businesses, net ......................................... (680,000) (14,440,000) 15,580,000 (Gains) charges from disposition or other changes in investments in equity affiliates (27,520,000) 6,270,000 (7,000,000) Gain on interest swap settlement ............. (15,820,000) -- -- Charge for asset impairment .................. -- 17,510,000 -- Depreciation and amortization ................ 106,460,000 83,300,000 83,640,000 Equity earnings, net of dividends ............ (5,590,000) (10,100,000) (6,080,000) Deferred income taxes ........................ 24,020,000 9,560,000 (110,000) Decrease in marketable securities, net ...... -- -- 45,970,000 Proceeds from accounts receivable sale ...... 150,500,000 -- -- Decrease (increase) in receivables ........... 26,810,000 (3,500,000) (6,700,000) Decrease (increase) in inventories ........... 6,910,000 400,000 (19,640,000) (Increase) decrease in prepaid expenses and other current assets ........... (3,570,000) (14,390,000) 1,240,000 Decrease in accounts payable and accrued liabilities ................................. (13,570,000) (5,150,000) (6,060,000) Other, net ................................... (9,550,000) (9,260,000) 2,290,000 --------------- --------------- --------------- Net cash from operating activities ......... 294,420,000 152,630,000 200,600,000 --------------- --------------- --------------- FINANCING ACTIVITIES: Increase in debt .............................. 1,251,430,000 28,540,000 1,162,670,000 Payment of debt ............................... (1,090,430,000) (40,150,000) (410,660,000) Retirement of Company Common Stock ............ (626,850,000) (19,530,000) (63,550,000) Payment of dividends .......................... (10,740,000) (13,470,000) (12,240,000) Issuance of Company Common Stock .............. 561,220,000 -- -- Debt issue fees ............................... (41,470,000) -- -- Proceeds from swap termination ................ 15,820,000 -- -- Other, net .................................... (4,360,000) (5,490,000) (13,480,000) --------------- --------------- --------------- Net cash (used for) from financing activities.................................. 54,620,000 (50,100,000) 662,740,000 --------------- --------------- --------------- INVESTING ACTIVITIES: Cash received from sale of businesses, net ... 3,200,000 92,620,000 25,020,000 Acquisition of businesses, net of cash acquired ..................................... (386,260,000) (88,550,000) (879,370,000) Capital expenditures .......................... (106,740,000) (135,740,000) (106,300,000) Receipt of cash from notes receivable ........ 1,260,000 2,180,000 4,880,000 Proceeds from redemptions of debt by affiliates ................................... -- -- 80,500,000 Proceeds from sale of equity investments ..... 123,920,000 -- -- Proceeds from sale and sale/leaseback of fixed assets ....................................... 51,090,000 10,320,000 15,190,000 Other, net .................................... (13,680,000) (8,260,000) (14,980,000) --------------- --------------- --------------- Net cash (used for) investing activities ... (327,210,000) (127,430,000) (875,060,000) --------------- --------------- --------------- CASH AND CASH INVESTMENTS: Increase (decrease) for the year .............. 21,830,000 (24,900,000) (11,720,000) At January 1 .................................. 4,490,000 29,390,000 41,110,000 --------------- --------------- --------------- At December 31 .............................. $ 26,320,000 $ 4,490,000 $ 29,390,000 =============== =============== ===============
The accompanying notes are an integral part of the consolidated financial statements. 24 METALDYNE CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN OTHER COMPREHENSIVE INCOME THOUSANDS) --------------------------- FOREIGN CURRENCY MINIMUM RESTRICTED TOTAL PREFERRED COMMON PAID-IN RETAINED TRANSLATION PENSION STOCK SHAREHOLDERS' STOCK STOCK CAPITAL EARNINGS AND OTHER LIABILITY AWARDS EQUITY --------- -------- --------- --------- ---------------- --------- ---------- ------------- Balances, January 1, 1998...... $-- $ 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 Comprehensive income: Net income................... 56,020 56,020 Foreign currency translation. (10,620) (10,620) Minimum pension liability (net of tax, $(2,800))...... (4,900) (4,900) ------------- Total comprehensive income.. 40,500 Common stock dividends........ (10,740) (10,740) Preferred stock dividends..... (390) (390) Exercise of stock options..... 150 650 800 Retirement of shares.......... (40,360) (544,060) (114,490) 43,680 (655,230) Issuance of shares............ 34,240 543,410 577,650 --------- -------- --------- --------- ---------------- --------- ---------- ------------- Balances, December 31, 2000.... -- $ 38,670 $ -- $ 254,690 $(25,490) $(14,900) $ -- $ 252,970 ========= ======== ========= ========= ================ ========= ========== =============
The accompanying notes are an integral part of the consolidated financial statements. 25 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RECAPITALIZATION: On November 28, 2000, a recapitalization of the Company was consummated in accordance with the terms of a recapitalization agreement as a result of which each issued and outstanding share of the Company's publicly traded common stock at the time of the recapitalization was converted into the right to receive $16.90 in cash (approximately $585 million in the aggregate) plus additional cash amounts, if any, based upon the net proceeds from any future disposition of the stock of Saturn Electronics & Engineering, Inc. ("Saturn") owned by the Company. In connection with the recapitalization, Masco Corporation, Richard A. Manoogian and certain of the Company's other stockholders agreed to roll over a portion of their investment in the Company and consequently remain as stockholders. As a result of the recapitalization, the Company is controlled by Heartland Industrial Partners L.P. ("Heartland") and its co-investors. In accordance with generally accepted accounting principles, the recapitalization resulted in no adjustment of assets or liabilities and the payment for shares of common stock was treated as a treasury stock transaction. The recapitalization, the repayment of certain of the Company's existing indebtedness and the payment of fees and expenses in connection with the recapitalization was financed through approximately (1) $435 million in equity financing provided by Heartland and other equity co-investors, (2) $124 million of proceeds from the sale of certain equity investments owned by the Company, (3) $1,016 million from borrowings under the Company's new credit facility and (4) $119 million of proceeds from the sale of accounts receivable pursuant to a new accounts receivable facility, which replaced a similar but smaller facility entered into in the second quarter of 2000. In conjunction with the recapitalization, the Company incurred approximately $48 million of compensation expense related to severance costs and accelerated vesting of stock awards and options. These costs are classified as "Charges related to the recapitalization." The recapitalization was completed by a merger of the Company with Riverside Acquisition Corporation, with the Company being the surviving entity. At the same time, substantially all of the assets of the Company were contributed to a new wholly owned subsidiary entity, Metalync Company, LLC (now known as Metaldyne Company, LLC) ("LLC"), including operating assets and stock in subsidiaries. In addition, the LLC assumed the obligation to pay the principal and interest on the 4-1/2% debentures due in 2003, although the Company remains responsible. In connection with the recapitalization, Heartland, Credit Suisse First Boston Equity Partners, L.P., Masco Corporation, Richard A. Manoogian, their various affiliates and certain other stockholders of the Company, entered into a Shareholders' Agreement regarding their ownership of the Company's common stock. Owners of an aggregate of approximately 90 percent of the Company's outstanding common stock are party to the Shareholders' Agreement which imposes certain restrictions on, and rights with respect to the transfer of, Company Common Stock. The Agreement also entitles the shareholders to certain rights regarding corporate governance of the Company. 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. Effective January 23, 2001, the Company changed its name to Metaldyne Corporation from MascoTech, Inc. 26 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company has a corporate services agreement with Masco Corporation, which at December 31, 2000 owned approximately six 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 $2.9 million, net in 2000, $6.4 million in 1999 and $8.7 million in 1998. The Company and Masco have agreed that Masco will continue to provide certain services, on a reduced basis and for significantly lower fees, through 2002. During 2000, in connection with the recapitalization agreement and the acquisition of Simpson, the Company incurred financing and other fees (principally merger and acquisition related) of $24 million to Heartland. In addition, the Company entered into a monitoring agreement with Heartland for an annual fee of $4 million plus additional fees for financings and acquisitions under certain circumstances. 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 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. At December 31, 2000, the Company had no marketable security holdings or derivative financial instruments. Receivables. Receivables are presented net of allowances for doubtful accounts of approximately $5.4 million and $4.3 million at December 31, 2000 and 1999, respectively. The Company conducts 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 benefited, not exceeding 40 years. At each balance sheet date, management assesses whether there has been a permanent impairment of the excess of cost over net assets of acquired companies by comparing anticipated undiscounted future cash flows from operating activities with the carrying amount of the excess of cost over net assets of acquired companies. The factors considered by 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, 2000. 27 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) At December 31, 2000 and 1999, accumulated amortization of the excess of cost over net assets of acquired companies and patents was $93.8 million and $68.5 million, respectively. Amortization expense was $47.6 million (which includes $14.5 million of amortization expense related to the accelerated vesting of stock awards), $28.4 million and $31.8 million in 2000, 1999 and 1998, respectively. Shipping and Handling Fees and Costs. Shipping and handling fees are included in the selling, general and administrative expenses category in the Consolidated Statement of Income. Shipping and handling expense was $21.7 million, $21.0 million and $21.1 million in 2000, 1999 and 1998, respectively. New Accounting Pronouncements and Reclassifications. Financial Accounting Standards Board ("FASB") SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and 138, 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. The effective adoption date of these pronouncements is January 1, 2001. The Company entered into interest rate derivatives in 2001 to satisfy requirements under its bank facilities. The Company does not expect the initial adoption of these pronouncements to have a significant impact on the financial statements. In October 2000, FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -a Replacement of FASB Statement No. 125." SFAS No. 140 revised the standards for accounting and disclosures for securitizations and other transfers of financial assets, but it has carried over most of Statement 125's provisions without reconsideration. The Company is currently evaluating the impact SFAS No. 140 will have on its financial statements, if any. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin Number 101, "Revenue Recognition in Financial Statements" (SAB 101), effective in the fourth quarter of 2000. The adoption of SAB 101 did not have an impact on the Company's financial statements. The FASB Emerging Issues Task Force reached consensus on Issue 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements." Issue 99-5 addresses the capitalization of pre-production design and development tooling costs under long-term supply arrangements. This guidance is effective for costs incurred after December 31, 1999. The Company has determined that this issue did not have a significant impact on the Company's financial statements. 28 METALDYNE CORPORATION 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:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2000 1999 1998 --------- ---------- ---------- Weighted average number of shares outstanding ... 40,170 41,110 43,630 ========= ========== ========== Net income....................................... $56,020 $ 92,430 $ 97,470 Less: Preferred stock dividends.................. 390 -- -- --------- ---------- ---------- Earnings used for basic earnings per share computation................................... $55,630 $ 92,430 $ 97,470 ========= ========== ========== Basic earnings per share...................... $ 1.38 $ 2.25 $ 2.23 ========= ========== ========== Total shares used for basic earnings per share computation..................................... 40,170 41,110 43,630 Dilutive securities: Stock options................................... 340 530 1,060 Convertible debentures.......................... 8,950 9,840 10,000 Contingently issuable shares.................... 3,650 3,720 3,830 --------- ---------- ---------- Total shares used for diluted earnings per share computation............................. 53,110 55,200 58,520 ========= ========== ========== Earnings used for basic earnings per share computation..................................... $55,630 $ 92,430 $ 97,470 Add back of debenture interest................... 8,510 9,310 9,530 --------- ---------- ---------- Earnings used for diluted earnings per share computation................................... $64,140 $101,740 $107,000 ========= ========== ========== Diluted earnings per share.................... $ 1.21 $ 1.84 $ 1.83 ========= ========== ==========
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 2000, the issuance of approximately $8 million of Company common stock as additional consideration related to a 1998 acquisition; the issuance of $36.1 liquidation value preferred stock in exchange for Company common stock; the acquisition of Simpson for cash and the assumption of approximately $215 million of liabilities; and in 1999, the assumption of approximately $10 million of liabilities in an acquisition; and 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. Income taxes paid were $18 million, $54 million and $38 million in 2000, 1999 and 1998, respectively. Interest paid was $93 million, $79 million and $79 million in 2000, 1999 and 1998, respectively. ACQUISITIONS: On December 15, 2000, the Company acquired Simpson Industries, Inc. for total consideration of $365 million, including fees and expenses and the assumption of indebtedness. The results for 2000 include 29 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Simpson sales and operating results since the date of acquisition. The acquisition was accounted for as a purchase with excess purchase price over the estimated fair value of net assets acquired of approximately $150 million amortized over 40 years. The purchase price allocations are preliminary, and as such are estimates. Such allocations could change upon the completion of asset valuations, which are on-going as of the date of this filing. Simpson is a designer and manufacturer of precision-engineered automotive components and modular systems for passenger and sport utility vehicles, light-and heavy-duty trucks and diesel engines. For the years ended December 31, 2000 and 1999, Simpson had approximate net sales of $515 million and $533 million, respectively, and approximate operating profit of $35.7 million and $38.9 million, respectively. Had the Simpson acquisition occurred effective January 1, 2000 (1999), the following unaudited pro forma consolidated net sales, operating profit and net income for the years ended December 31, 2000 (1999) would have been approximately $2.2 billion ($2.2 billion), $169 million ($252 million) and $46 million ($102 million), respectively. The unaudited pro forma data does not purport to be indicative of the results which would actually have been reported if the transaction had occurred on such date. During 1999, the Company acquired Windfall Products, Inc., a manufacturer of transportation-related components that utilizes powder metal technology, significantly expanding the Company's powder metal manufacturing capabilities. In January 1998, the Company completed the acquisition of TriMas Corporation ("TriMas"), by purchasing all of the outstanding shares of TriMas not already owned by the Company (approximately 63 percent) for approximately $920 million. 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. In January 1998, the Company received $48 million of cash from MSX International, Inc. in payment of subordinated debentures and other amounts due MascoTech, resulting in a realized gain in the first quarter 1998 of $7 million. 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 which were subsequently sold in 2000. These transactions resulted in a 1999 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. 30 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, 2000 were approximately $12 million, payments and adjustments to accrued estimates approximated $5 million and the ending accrual was approximately $7 million. ACCOUNTS RECEIVABLE SECURITIZATION: During June 2000, the Company entered into an agreement to sell, on an ongoing basis, approximately $50 million of trade accounts receivable of certain business operations to a wholly owned, bankruptcy-remote, special purpose subsidiary ("MTSPC") of the Company. The June 2000 accounts receivable facility was replaced in November 2000 with a similar facility which allows the Company to sell the trade accounts receivable of substantially all domestic business operations to MTSPC. MTSPC has sold and, subject to certain conditions, may from time to time sell, an undivided fractional ownership interest in the pool of receivables up to approximately $225 million to a third party multi-seller receivables funding company, or conduit. Upon sale to the conduit, MTSPC holds a subordinated retained interest in the receivables. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold receivables. The Company services, administers and collects the receivables on behalf of MTSPC and the conduit. The net proceeds of sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser's financing costs amounting to a total of $4.2 million in 2000 and is included in other expense in the income statement. At December 31, 2000 a total of approximately $151 million of receivables were sold and the Company retained a subordinated interest of approximately $17 million, which was included in the receivables balance. The retained subordinated interest is discounted at a rate that approximates fair value given the short-term nature of the receivables balance. INVENTORIES:
(IN THOUSANDS) AT DECEMBER 31 --------------------- 2000 1999 ---------- --------- Finished goods.............................. $ 90,790 $ 86,240 Work in process............................. 46,390 45,940 Raw material................................ 62,310 51,420 ---------- --------- $199,490 $183,600 ========== =========
EQUITY AND OTHER INVESTMENTS IN AFFILIATES: On November 28, 2000, the Company sold all of its equity investments, except Saturn, for approximately $124 million resulting in a net pre-tax gain of approximately $28 million. The Company has a 36 percent common equity ownership in Saturn, a manufacturer of electromechanical and electronic automotive components. The Company's carrying value in the common stock of Saturn exceeded its equity in the underlying net book value by approximately $9 million at December 31, 2000. This excess is being amortized over 40 years. Although no disposition of the stock of Saturn was made prior to the recapitalization, holders of common stock on the date of the recapitalization will be entitled to certain net proceeds, if any, from any subsequent disposition of Saturn. The amount which will be paid to such former stockholders will equal the proceeds in excess of $18.0 million and less than or equal to $40.0 million, any proceeds in excess of $55.7 million and less than or equal to $56.7 million as well as 60 percent of any proceeds in excess of $56.7 million. Any other proceeds will be retained by the Company. 31 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The carrying amount of investments in affiliates at December 31, 2000 and 1999 was $27.8 million and $110.7 million, respectively. Approximate combined condensed financial data of the Company's equity affiliates (including TriMas through the date of acquisition in early 1998, and through the date of sale of all the equity investments except Saturn in November 2000) accounted for under the equity method, are as follows:
(IN THOUSANDS) AT DECEMBER 31 -------------------------- 2000 1999 ----------- ------------- Current assets........................................ $ 131,320 $ 1,180,990 Current liabilities................................... (66,800) (708,150) ----------- ------------- Working capital...................................... 64,520 472,840 Property and equipment, net........................... 62,950 632,530 Excess of cost over net assets of acquired companies and other assets..................................... 64,590 499,040 Long-term debt........................................ (107,840) (1,087,650) Deferred income taxes and other long-term liabilities.......................................... (22,460) (70,250) ----------- ------------- Shareholders' equity................................ $ 61,760 $ 446,510 =========== =============
(IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 ---------------------------------------- 2000 1999 1998 ------------ ------------ ------------ Net sales ........................................... $3,090,800 $3,304,610 $2,764,860 ============ ============ ============ Operating profit ..................................... $ 186,680 $ 177,220 $ 125,730 ============ ============ ============ Earnings attributable to common stock ................ $ 33,220 $ 41,070 $ 32,480 ============ ============ ============
Equity and other income from affiliates consists of the following:
(IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 ---------------------------------------- 2000 1999 1998 ------------ ------------ ------------ The Company's equity in affiliates' earnings available for common shareholders.................... $5,790 $10,300 $ 7,340 Interest and dividend income.......................... 4,020 2,930 2,810 ------------ ------------ ------------ Equity and other income from affiliates............... $9,810 $13,230 $10,150 ============ ============ ============
PROPERTY AND EQUIPMENT, NET:
(IN THOUSANDS) AT DECEMBER 31 ------------------------ 2000 1999 ----------- ----------- Cost: Land and land improvements .......................... $ 33,150 $ 30,650 Buildings ........................................... 220,750 184,170 Machinery and equipment ............................. 1,013,960 830,400 ----------- ----------- 1,267,860 1,045,220 Less: Accumulated depreciation ....................... 366,560 322,540 ----------- ----------- $ 901,300 $ 722,680 =========== ===========
32 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Depreciation expense totaled $59 million, $55 million and $52 million in 2000, 1999 and 1998, respectively. ACCRUED LIABILITIES:
(IN THOUSANDS) AT DECEMBER 31 -------------------------- 2000 1999 ------------ ------------ Insurance............................... $ 27,210 $ 24,130 Severance and stock option accrual ..... 19,850 -- Salaries, wages and commissions......... 15,500 8,800 Vacation, holiday and bonus............. 15,610 18,550 Income taxes............................ 7,040 3,940 Interest................................ 3,440 5,250 Property, payroll and other taxes ...... 9,690 5,380 Pension................................. 16,530 20,850 Other................................... 31,770 27,010 ------------ ------------ $146,640 $113,910 ============ ============
LONG-TERM DEBT:
(IN THOUSANDS) AT DECEMBER 31 -------------------------- 2000 1999 ------------ ------------ 4 1/2% Convertible Subordinated Debentures, due 2003............................... $ 305,000 $ 305,000 Bank revolving credit agreement......... 48,000 606,000 Bank term loans......................... 1,150,190 383,000 Other................................... 29,100 85,660 ------------ ------------ 1,532,290 1,379,660 Less: Current portion of long-term debt................................... 46,350 6,770 ------------ ------------ Long-term debt.......................... $1,485,940 $1,372,890 ============ ============
In connection with the recapitalization in late 2000 (see "Recapitalization" note), the Company entered into a new $1.5 billion credit facility, which replaced our prior credit facility. The new facility includes a $300 million revolving credit facility due in 2007, a tranche A $500 million term loan facility, a tranche B $500 million term loan facility and a tranche C $200 million term loan facility of which $50 million was repaid from the proceeds of the sale/leaseback of certain assets. The amortization of the term loans is as follows: 2001 -- $33 million; 2002 -- $53 million; 2003 -- $73 million; 2004 -- $83 million; 2005 -- $83 million; 2006 -- $93 million; 2007 -- $272 million; 2008 -- $387 million; and 2009 -- $73 million. Other debt includes borrowings by the Company's subsidiaries denominated in foreign currencies. At December 31, 2000, there was approximately $170 million unused and available under the revolving credit agreement. The interest rates applicable to the revolver and term loans are principally at alternative floating rates which approximated ten percent at December 31, 2000. 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 six percent before the addition 33 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) of the borrowing margin in the underlying bank agreement. These swap agreements expired or were terminated in June 2000 and the Company received proceeds of approximately $16 million. The cash proceeds were used for the reduction of long-term debt. The Company recognized a pre-tax gain of approximately $12.9 million in November 2000 related to the disposition of the swap agreements. The credit facility is secured by substantially all domestic assets (except for the investment in Saturn and the subordinated retained interest of securitized receivables) and by a portion of the stock of foreign operations. The bank debt is an obligation of subsidiaries of the Company. The bank debt includes limitations on the distribution of funds from the LLC, the principal subsidiary to the Company. These include limitations on the ability of the Company to redeem the restricted stock awards (see Stock Options and Awards footnote) if the result of such redemption would give rise to a default under the credit agreement. The new credit facility contains other negative and affirmative covenants and requirements affecting the Company and its subsidiaries, including restrictions on debt, liens, mergers, investments, acquisitions and capital expenditures, asset dispositions, sale/leaseback transactions, the ability to pay common stock dividends and transactions with affiliates. The new credit facility also requires the Company and its subsidiaries to meet certain financial covenants and ratios to be computed quarterly commencing on December 31, 2000. The credit facility presently requires the Company to maintain $70 million available under the revolving credit facility and accounts receivable facility in order to have funds available to make payments when necessary for the convertible subordinated debentures. This required availability increases to $205 million in 2003 when the convertible subordinated debentures mature. Masco Corporation has agreed to purchase from the Company, at the Company's option, up to $100 million of a new issue of Metaldyne long-term subordinated debt, subject to certain conditions, on or prior to October 31, 2003. However, the credit agreement significantly restricts the Company's right to require Masco Corporation to purchase such long-term subordinated debt until such time as the convertible subordinated debt matures or is repaid from subordinated debt or equity proceeds prior to maturity. The 4-1/2% convertible debentures due 2003 were formerly convertible into an aggregate approximate 9.8 million shares of Company common stock. The effect of the recapitalization is that the holders of these debentures may convert the bonds into the amount of consideration received per share by the common shareholders of the Company in the recapitalization, $16.90 per share plus the right to receive certain proceeds from the sale of Saturn, if any. As a result, the debenture holders have the right to convert at any time for approximately $166 million in cash and the right to receive future consideration upon the sale of Saturn. Alternatively, holders of the debentures may retain the debentures until maturity, but are no longer entitled to convert them into common shares of the Company. These debentures are classified as long-term because the Company has the ability and intent to refinance on a long-term basis any amounts that might be required to be paid to debenture holders in the next year. The Company's revolving credit agreement has $70 million available for the payment of amounts demanded by debenture holders, which together with the right of the Company to require Masco Corporation to purchase $100 million of long-term subordinated debt, results in available funds of $170 million. The $170 million is sufficient to satisfy the maximum amount that would be required if all debenture holders elect to convert their bonds into the $16.90 per share recapitalization cash consideration. The maturities of debt as at December 31, 2000 during the next five years are as follows (in millions): 2001 -- $46; 2002 -- $55; 2003 -- $380; 2004 -- $84; and 2005 -- $84 34 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMMITMENTS AND CONTINGENCIES: The Company leases certain equipment and plant facilities under noncancellable operating leases. Rental expense for the Company totaled approximately $8.7 million, $8.2 million and $9.2 million during 2000, 1999 and 1998, respectively. In December 2000, the Company completed sale/leaseback financings relating to certain equipment of Simpson and the Simpson headquarters building to yield gross proceeds to the Company of approximately $50 million. These proceeds were used to pay down the $200 million tranche C term loan facility. Due to the sales/leaseback financings, the Company has significantly increased its commitment to future lease payments. Minimum payments for operating leases having initial or remaining noncancellable lease terms in excess of one year at December 31, 2000 are summarized below:
YEAR ENDING DECEMBER 31: (IN THOUSANDS) - -------------------------------------------- -------------- 2001........................................ $ 14,100 2002........................................ 12,300 2003........................................ 11,030 2004........................................ 10,390 2005........................................ 9,530 Thereafter ................................. 42,900 -------------- Total ...................................... $100,250 ==============
REDEEMABLE PREFERRED STOCK: The Company issued $36.1 million in liquidation value ($33 million estimated fair value for accounting purposes) of Series A preferred stock par value $1 and authorized 370,000 shares to Masco Corporation. The Company will accrete from the carrying value to the liquidation value ratably over the twelve-year period. The preferred stock is mandatorily redeemable on December 31, 2012. Series A preferred stockholders are entitled to receive, when, as and if declared by the Company's board of directors, cumulative quarterly cash dividends at a rate of 13 percent per annum for periods ending on or prior to December 31, 2005 and 15 percent per annum for periods after December 31, 2005 plus 2 percent per annum for any period for which there are any accrued and unpaid dividends ("Recapitalization" footnote). SHAREHOLDERS' EQUITY: The Company repurchased and retired approximately 1.3 million shares of its common stock in 1999 and 3.6 million shares of its common stock in 1998, pursuant to Board of Directors' authorized repurchase programs. On the basis of amounts paid (declared), cash dividends per common share were $.24 ($.24) in 2000, $.30 ($.30) in 1999 and $.26 ($.20) in 1998. 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, 2000, outstanding stock-based incentives are in the form of restricted long-term stock awards. Pursuant to the Plan, the Company granted long-term stock awards, net, for 401,000, 622,000 and 908,000 shares of Company Common Stock during 2000 (prior to the recapitalization), 1999 and 1998, respectively, to key employees of the Company. The weighted average fair value per share of long-term stock awards granted during 2000, 1999 and 1998 on the date of grant was $13, $14 and $19, respectively. 35 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Compensation expense for the vesting of long-term stock awards was approximately $21.0 million, $4.7 million and $5.2 million in 2000, 1999 and 1998, respectively. Prior to the recapitalization merger, the unamortized value of unvested stock awards were generally amortized over a ten-year vesting period and were recorded in the financial statements as a deduction from shareholders' equity. As part of the recapitalization, the Company cancelled outstanding stock awards and made new restricted stock awards to certain employees of approximately 3.7 million shares of Company Common Stock. Under the terms of the recapitalization agreement, those shares become free of restriction, or vest, as to one-quarter upon the closing of the recapitalization merger and one-quarter in each of January 2002, 2003 and 2004. Holders of restricted stock were entitled to elect cash in lieu of 40 percent of their respective stock which vested at the closing of the recapitalization merger. On each of the subsequent vesting dates, holders of restricted stock may elect to receive all of the installment in common shares, 40 percent in cash and 60 percent in common shares, or 100 percent of the installment in cash. The number of shares to be received will increase by six percent per annum and any cash to be received will increase by six percent per annum from the $16.90 per share recapitalization consideration. As a result of the ability of the holder to elect a partial or full cash option, the restricted shares have been classified as redeemable restricted common stock. There were 2,751,374 restricted shares outstanding at December 31, 2000. As part of the recapitalization, holders of options with an exercise price below the merger consideration were entitled to cash equal to the difference between such merger consideration and the exercise price for such options. A payment for this excess was made in January 2001 totaling approximately $14 million. This liability was recognized in 2000 and is included in expense as a "Charge related to the recapitalization" and in other accrued liabilities. In addition, $14 million was held in an escrow account and is included in "Prepaid expense and other assets." Holders of options with the exercise price below the merger consideration and former holders of restricted stock will also be entitled to additional cash amounts from the proceeds of the disposition of Saturn stock, if any, in accordance with the recapitalization agreement. Options with an exercise price exceeding the merger consideration were cancelled. 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, 2000 is presented below.
(SHARES IN THOUSANDS) 2000 1999 1998 --------- ------- --------- Option shares outstanding, January 1 ............ 3,880 3,950 3,770 Weighted average exercise price ................ $14 $14 $10 Option shares granted ........................... 30 180 1,480 Weighted average exercise price ................ $12 $14 $19 Option shares exercised ......................... (150) (140) (1,160) Weighted average exercise price ................ $5 $5 $10 Option shares cancelled due to forfeitures ..... (10) (110) (140) Weighted average exercise price ................ $11 $18 $15 Option shares cancelled due to recapitalization (3,750) -- -- Option shares outstanding, December 31 ......... -- 3,880 3,950 Weighted average exercise price ................ -- $14 $14 Weighted average remaining option term (in years) ........................................ -- 5.9 6.6 Option shares exercisable, December 31 ......... -- 1,200 750 Weighted average exercise price ................ -- $9 $9
36 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) A combined total of approximately 7.2 million shares and 3.5 million shares in 2000 and 1999, respectively, and 3.8 million shares in 1998 of Company Common Stock were available for the granting of options and incentive awards under the above plans. The increase in available options and stock awards from 1999 to 2000 is the result of the cancellation of options as a result of the recapitalization. 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 and $6.30 in 1999 and 1998, 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 in both 1999 and 1998. 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:
1999 1998 ------- ------- Risk-free interest rate ...................... 5.1% 5.5% Dividend yield ............................... 1.9% 1.3% Volatility factor ............................ 26.2% 28.8% Expected option life (in years) .............. 5.5 5.5
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 $18 million in 2000, $21 million in 1999 and $15 million in 1998. Net periodic pension cost for the Company's defined-benefit pension plans includes the following components for the three years ended December 31, 2000:
(IN THOUSANDS) 2000 1999 1998 --------- --------- ---------- Service cost ................................ $ 6,460 $ 7,590 $ 6,470 Interest cost ............................... 13,250 12,640 11,380 Expected return on assets ................... (9,450) (9,670) (11,430) Amortization of transition obligation (asset) .................................... 110 130 (170) Amortizaton of prior-service cost ........... 680 650 750 Amortization of net loss .................... 780 1,440 670 --------- --------- ---------- Net periodic pension cost ................... $11,830 $12,780 $ 7,670 ========= ========= ==========
Major assumptions used in accounting for the Company's defined-benefit pension plans are as follows:
2000 1999 1998 ------- ------- ------- Discount rate for obligations .................. 7.75% 7.75% 6.75% Rate of increase in compensation levels ....... 4.00% 5.00% 5.00% Expected long-term rate of return on plan assets ........................................ 9.00% 9.00% 11.00%
37 METALDYNE CORPORATION 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, 2000, and the funded status as of December 31, 2000 and 1999:
(IN THOUSANDS) 2000 1999 ------------ ------------ CHANGES IN PROJECTED BENEFIT OBLIGATIONS Benefit obligations at January 1 ..................... $(173,770) $(184,030) Acquisitions ........................................ (48,800) -- Service cost ........................................ (5,800) (7,130) Interest cost ....................................... (13,240) (12,640) Plan amendments ..................................... (450) (1,460) Actuarial gain (loss) ............................... (2,080) 22,830 Benefit payments .................................... 7,660 8,660 Change in foreign currency .......................... 280 -- ------------ ------------ Projected benefit obligations at December 31 ........ $(236,200) $(173,770) ============ ============ CHANGES IN PLAN ASSETS Fair value of plan assets at January 1 ............... $ 101,260 $ 110,760 Acquisitions ........................................ 45,240 -- Actual return on plan assets ........................ (1,370) (12,110) Contributions ....................................... 13,820 11,520 Benefit payments .................................... (7,470) (8,480) Expenses/Other ...................................... (710) (430) ------------ ------------ Fair value of plan assets at December 31 ............. $ 150,770 $ 101,260 ============ ============ FUNDED STATUS Plan assets less than projected benefits at December 31 .................................................. $ (85,430) $ (72,510) Unamortized transition obligation ................... 80 270 Unamortized prior-service cost ...................... 7,140 7,500 Unamortized net loss ................................ 41,490 29,340 ------------ ------------ Net liability recognized at December 31 .............. $ (36,720) $ (35,400) ============ ============
The following provides the amounts related to the plans at December 31, 2000 and 1999:
(IN THOUSANDS) 2000 1999 ------------ ------------ Accrued benefit liability ............................ $(66,760) $(56,650) Intangible asset ..................................... 15,140 11,250 Accumulated other comprehensive income ............... 14,900 10,000 ------------ ------------ Net liability recognized ........................... $(36,720) $(35,400) ============ ============
38 METALDYNE CORPORATION 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, 2000, 1999 and 1998:
(IN THOUSANDS) 2000 1999 1998 -------- -------- ------- Service cost ........................... $ 300 $ 400 $ 300 Interest cost .......................... 1,400 1,200 1,200 Net amortization ....................... 500 500 (100) -------- -------- ------- Net periodic postretirement benefit cost .................................. $2,200 $2,100 $1,400 ======== ======== =======
The following provides a reconciliation of the changes in the postretirement benefit plans' benefit obligations for each of the two years ended December 31, 2000 and the status as of December 31, 2000 and 1999:
(IN THOUSANDS) 2000 1999 ----------- ----------- CHANGES IN BENEFIT OBLIGATIONS Benefit obligations at January 1 ............ $(18,200) $(18,900) Acquisitions ............................... (13,300) -- Service cost ............................... (300) (400) Interest cost .............................. (1,400) (1,200) Employee contributions ..................... (100) (100) Actuarial gain (loss) ...................... (2,600) 1,000 Benefit payments ........................... 1,400 1,300 Curtailment ................................ -- 100 ----------- ----------- Benefit obligations at December 31 .......... $(34,500) $(18,200) =========== =========== STATUS Benefit obligations at December 31 .......... $(34,500) $(18,200) Unamortized transition obligation .......... 7,600 8,400 Unrecognized prior-service cost ............ 400 400 Unrecognized net gain ...................... (3,700) (6,700) ----------- ----------- Net liability at December 31 ................ $(30,200) $(16,100) =========== ===========
The discount rate used in determining the accumulated postretirement benefit obligation was 7.75 percent in 2000 and 1999. The assumed health care cost trend rate in 2000 was nine percent, decreasing to an ultimate rate in the year 2008 of five percent. If the assumed medical cost trend rates were increased by one percent, the accumulated postretirement benefit obligations would increase by $2.9 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 $2.1 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost would decrease by $.1 million. 39 METALDYNE CORPORATION 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. SPECIALTY FASTENERS -- Cold formed fasteners and related metallurgical processing. TOWING SYSTEMS -- Vehicle hitches, jacks, winches, couplers and related towing accessories. SPECIALTY PACKAGING AND SEALING PRODUCTS -- Principally industrial container closures 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 $176 million, $197 million and $184 million in 2000, 1999 and 1998, respectively. The Company's export sales approximated $131 million, $143 million and $142 million in 2000, 1999 and 1998, respectively. Net assets for 2000 reflect the sale of accounts receivable principally in the metalforming group through the securitization program. 40 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Intersegment transactions represent principally transactions occurring in the ordinary course of business. (IN THOUSANDS)
SPECIALTY COMPANIES SPECIALTY PACKAGING SPECIALTY SOLD METAL FORMED SPECIALTY TOWING AND SEALING INDUSTRIAL OR HELD 2000 PRODUCTS FASTENERS SYSTEMS PRODUCTS PRODUCTS FOR SALE TOTAL - --------------------------- -------------- ----------- ----------- ------------- ------------ ----------- ------------ Revenue from external customers ................. $822,000 $215,000 $276,000 $220,000 $108,000 $ -- $1,641,000 Intersegment revenue ...... 10,000 2,000 9,000 -- 1,000 -- 22,000 Depreciation and amortization .............. 39,000 13,000 12,000 15,000 6,000 -- 85,000 Segment operating profit ... 109,000 21,000 33,000 39,000 6,000 -- 208,000 Segment net assets ......... 561,000 310,000 277,000 356,000 122,000 -- 1,626,000 Capital expenditures ....... 75,000 5,000 9,000 9,000 2,000 -- 100,000 1999 - --------------------------- Revenue from external customers ................. $817,000 $241,000 $260,000 $216,000 $107,000 $ 39,000 $1,680,000 Intersegment revenue ....... 9,000 4,000 8,000 -- 1,000 1,000 23,000 Depreciation and amortization .............. 35,000 12,000 10,000 13,000 5,000 2,000 77,000 Segment operating profit ... 112,000 35,000 37,000 41,000 14,000 4,000 243,000 Segment net assets ......... 602,000 329,000 289,000 422,000 140,000 -- 1,782,000 Capital expenditures ....... 87,000 12,000 9,000 19,000 7,000 -- 134,000 1998 - --------------------------- Revenue from external customers ................. $760,000 $226,000 $238,000 $223,000 $110,000 $115,000 $1,672,000 Intersegment revenue ....... 5,000 3,000 6,000 -- 1,000 3,000 18,000 Depreciation and amortization .............. 34,000 10,000 9,000 11,000 5,000 6,000 75,000 Segment operating profit ... 106,000 38,000 34,000 46,000 16,000 12,000 252,000 Segment net assets ......... 494,000 328,000 281,000 423,000 140,000 102,000 1,768,000 Capital expenditures ....... 63,000 14,000 8,000 16,000 4,000 3,000 108,000
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. (IN THOUSANDS)
2000 1999 1998 ------------------------ ------------------------- ------------------------- SALES NET ASSETS SALES NET ASSETS SALES NET ASSETS ---------- ------------ ----------- ------------ ----------- ------------ Europe ..................... $164,000 $163,000 $165,000 $182,000 $149,000 $171,000 Australia .................. 23,000 15,000 23,000 14,000 18,000 10,000 Other North America ........ 24,000 56,000 12,000 18,000 16,000 12,000 ---------- ------------ ----------- ------------ ----------- ------------ Total foreign ............. $211,000 $234,000 $200,000 $214,000 $183,000 $193,000 ========== ============ =========== ============ =========== ============
41 METALDYNE CORPORATION 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: (IN THOUSANDS)
REVENUE FROM EXTERNAL CUSTOMERS 2000 1999 1998 - ---------------------------------------------- ------------ ------------ ------------ Revenue from external customers for reportable segments ......................... $1,641,000 $1,680,000 $1,672,000 TriMas sales prior to acquisition ............. -- -- (36,000) Simpson Industries ........................... 9,000 -- -- ------------ ------------ ------------ Total net sales ............................ $1,650,000 $1,680,000 $1,636,000 ============ ============ ============
(IN THOUSANDS)
OPERATING PROFIT 2000 1999 1998 - ---------------------------------------------- ----------- ----------- ----------- Total operating profit for reportable segments ..................................... $208,000 $243,000 $252,000 General corporate expense ..................... (25,000) (24,000) (24,000) Gain (loss) on disposition of businesses, net 1,000 14,000 (16,000) Charges related to the recapitalization ...... (48,000) -- -- Charge for asset impairment ................... -- (18,000) -- TriMas operating profit prior to acquisition . -- -- (5,000) Simpson Industries ............................ 1,000 -- -- ----------- ----------- ----------- Total operating profit ...................... $137,000 $215,000 $207,000 =========== =========== ===========
(IN THOUSANDS)
NET ASSETS AT DECEMBER 31 2000 1999 1998 - ---------------------------------------------- ------------ ------------ ------------ Total net operating assets for reportable segments ..................................... $1,626,000 $1,782,000 $1,768,000 Simpson Industries ............................ 124,000 -- -- Corporate net assets .......................... 265,000 91,000 72,000 ------------ ------------ ------------ Total net assets ............................ $2,015,000 $1,873,000 $1,840,000 ============ ============ ============
The Company acquired Simpson Industries, Inc. on December 15, 2000. December 31 balance sheet data for 2000 includes Simpson and income statement data includes Simpson activity for the period December 15, 2000 through December 31, 2000. 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 2000 were capital expenditures of $3 million. OTHER SIGNIFICANT ITEMS (IN THOUSANDS)
DEPRECIATION AND AMORTIZATION 2000 1999 1998 - ---------------------------------------------- ---------- ---------- ---------- Segment totals ............................... $ 85,000 $77,000 $75,000 Adjustments .................................. 20,000 6,000 9,000 Simpson Industries ........................... 1,000 -- -- ---------- ---------- ---------- Consolidated totals ........................ $106,000 $83,000 $84,000 ========== ========== ==========
42 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The preceding adjustments to depreciation and amortization are principally the result of compensation expense related to stock award amortization and prepaid debenture expense amortization. OTHER INCOME (EXPENSE), NET: (IN THOUSANDS)
2000 1999 1998 ----------- ----------- --------- Other, net: Interest income ................. $ 1,540 $ 2,170 $ 4,180 Net realized and unrealized gains from marketable securities .................... -- -- 3,330 Other, net ....................... (4,060) (4,580) (3,110) ----------- ----------- --------- $ (2,520) $ (2,410) $ 4,400 =========== =========== =========
INCOME TAXES: (IN THOUSANDS)
2000 1999 1998 ---------- ----------- ----------- Income before income taxes: Domestic ....................... $64,970 $123,610 $115,630 Foreign ........................ 27,750 15,860 28,890 ---------- ----------- ----------- $92,720 $139,470 $144,520 ========== =========== =========== Provision for income taxes: Currently payable: Federal ....................... $ (10) $ 26,810 $ 28,210 State and local ................ 3,700 5,450 3,950 Foreign ....................... 8,990 5,220 15,000 Deferred: Federal ....................... 22,950 7,390 590 Foreign ....................... 1,070 2,170 (700) ---------- ----------- ----------- Income taxes ................... $36,700 $ 47,040 $ 47,050 ========== =========== ===========
The components of deferred taxes at December 31, 2000 and 1999 are as follows: (IN THOUSANDS)
2000 1999 ----------- --------- Deferred tax assets: Inventories ............................................... $ 1,370 $ 2,920 Accrued liabilities and other long-term liabilities ...... 50,960 47,880 Expected capital loss benefit from disposition of businesses................................................ -- 8,900 Alternative minimum tax.................................... 430 -- ----------- --------- 52,760 59,700 =========== ========= Deferred tax liabilities: Property and equipment .................................... 140,700 111,680 Other, including equity investments in affiliates ........ 24,060 26,710 ----------- --------- 164,760 138,390 ----------- --------- Net deferred tax liability ................................. $112,000 $ 78,690 =========== =========
43 METALDYNE CORPORATION 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:
(IN THOUSANDS) 2000 1999 1998 --------- --------- --------- U.S. federal statutory rate ....................... 35% 35% 35% --------- --------- --------- Tax at U.S. federal statutory rate ................ $32,450 $48,810 $50,580 State and local taxes, net of federal tax benefit 2,410 3,540 2,570 Higher effective foreign tax rate ................. 2,550 1,840 4,210 Change in German tax rate ......................... (2,200) -- -- Non-taxable additional consideration from previously sold business ......................... -- -- (8,190) Disposition of businesses ......................... (960) (7,870) (2,400) Amortization in excess of tax, net ................ 5,110 2,950 1,390 Other, net ........................................ (2,660) (2,230) (1,110) --------- --------- --------- Income taxes ..................................... $36,700 $47,040 $47,050 ========= ========= =========
A provision has not been made at December 31, 2000 for U.S. or additional foreign withholding taxes on approximately $137.5 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. ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND OTHER ASSETS Fair values of financial instruments included in accounts receivable, 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 applicable to 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 interest rate swap agreements, are intended to reduce the market risk associated with the Company's floating rate debt. 44 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 six percent before the addition of the borrowing margin in the underlying bank agreement. The fair value of the swap agreements, $13 million at December 31, 1999, was not recognized in the consolidated financial statements since they are accounted for as hedges of the floating rate exposure. These swap agreements expired or were terminated in June 2000 at a gain, and the Company received proceeds of approximately $15.8 million. The cash proceeds were used for the reduction of long-term debt. The Company recognized a pre-tax gain of approximately $13 million in November 2000 related to the interest rate swap agreements as a result of the repayment of the related debt due to the recapitalization. The carrying amounts and fair values of the Company's financial instruments at December 31, 2000 and 1999 are as follows:
(IN THOUSANDS) 2000 1999 -------------------------- -------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------------ ------------ ------------ ------------ Cash and cash investments ...................... $ 26,320 $ 26,320 $ 4,490 $ 4,490 Accounts receivable, notes receivable and other assets ........................................ $ 122,770 $ 122,640 $ 223,140 $ 223,520 Long-term debt: Bank debt ..................................... $1,165,190 $1,165,190 $1,039,890 $1,039,890 4 1/2% Convertible Subordinated Debentures ... $ 305,000 $ 178,430 $ 305,000 $ 225,700 Other long-term debt .......................... $ 15,750 $ 15,660 $ 28,000 $ 27,850
INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA (UNAUDITED):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) FOR THE QUARTERS ENDED --------------------------------------------------------------- DECEMBER SEPTEMBER JUNE MARCH 31ST 30TH 30TH 31ST --------------- ------------- ------------- ------------- 2000: - ---- Net sales .................... $ 354,680 $ 393,770 $ 442,310 $ 459,400 Gross profit ................. $ 73,770 $ 95,410 $ 114,080 $ 119,400 Net income (loss) ............ $ (13,840) $ 17,860 $ 26,180 $ 25,820 Per common share: Basic .................. $(.38) $ .44 $ .64 $ .63 Diluted ................ $(.38) $ .37 $ .51 $ .51 Market price per common share: High ...................... $17 1/8(a) $16 5/8 $14 7/16 $14 9/16 Low ....................... $15 3/16(a) $10 1/2 $10 13/16 $11 3/8 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
(a) As a result of the recapitalization on November 28, 2000, the Company's stock no longer has a public market. Prices are based upon public market transactions through November 28, 2000. 45 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) In the fourth quarter 2000, the Company incurred approximately $48 million of compensation expense related to severance costs and accelerated vesting of stock awards and stock options related to the recapitalization of the Company. In the fourth quarter 2000, the Company recognized a net pre-tax gain of approximately $28 million related to the sale of the Company's equity investments, excluding Saturn. In the fourth quarter 2000, the Company recognized a pre-tax gain of approximately $13 million related to the interest rate swap agreements that terminated in June 2000 due to the repayment of the related debt. 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. The 2000 income (loss) per common share amounts for the quarters do not total to the full year amounts due to the purchase and retirement of shares throughout the year. 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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 2001 Annual Meeting of Stockholders, to be filed on or before April 29, 2001, 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 2001 Annual Meeting of Stockholders, to be filed on or before April 29, 2001, 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 2001 Annual Meeting of Stockholders, to be filed on or before April 29, 2001, 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 2001 Annual Meeting of Stockholders, to be filed on or before April 29, 2001, and such information is incorporated herein by reference. 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, 2000 and 1999, and for the years ended December 31, 2000, 1999 and 1998, 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 (2) Financial Statement Schedules. Financial Statement Schedules of the Company appended hereto, as required for the years ended December 31, 2000, 1999 and1998, consists of the following: Condensed Financial Information of Parent Company Only Valuation and Qualifying Accounts 47 (3) Exhibits.
EXHIBIT NUMBER DESCRIPTION - ----------- --------------------------------------------------------------------------------------------- 2.1 Recapitalization Agreement dated as of August 1, 2000 between MascoTech, Inc. (now known as Metaldyne Corporation) and Riverside Company LLC, as amended.(7) Amendment No. 1 to the Recapitalization Agreement, dated October 23, 2000(7) and Amendment No. 2 to the Recapitalization Agreement, dated November 28, 2000.(7) 3.1 Restated Certificate of Incorporation of MascoTech, Inc. 3.2 Bylaws of Metaldyne Corporation, as amended.(7) 4.1 Indenture dated as of November 1, 1986 between Masco Industries, Inc. (now known as Metaldyne Corporation) 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., (now known as Metaldyne Corporation) Morgan Guaranty Trust Company of New York and The First National Bank of Chicago; Supplemental Indenture dated as of August 5, 1994, between MascoTech, Inc. (now known as Metaldyne Corporation) and The First National Bank of Chicago, as Trustee; Directors' resolutions establishing the Company's 4-1/2% Convertible Subordinated Debentures Due 2003; (3) and Form of Note.(4) 4.2 Supplemental Indenture No. 2 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as Metaldyne Corporation) and Morgan Guaranty Trust Company of New York.(7) 4.3 Supplemental Indenture No. 3 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as Metaldyne Corporation) and Morgan Guaranty Trust Company of New York.(7) 4.4 Shareholders Agreement by and among MascoTech, Inc. (now known as Metaldyne Corporation), Masco Corporation, Richard Manoogian, certain of their respective affiliates and other co-investors a party thereto, dated as of November 28, 2000.(7) 10.1 Credit Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known as Metaldyne Corporation), Metalync Company LLC (now known as Metaldyne Company LLC), the subsidiary term borrowers party thereto, the foreign subsidiary borrowers party thereto, the lenders party thereto and Chase Manhattan Bank, as administrative agent.(7) 10.2 Subordinated Loan Agreement dated as of November 28, 2000 between MascoTech, Inc. (now known as Metaldyne Corporation) and Masco Corporation.(7) 10.3 Assumption and Indemnification Agreement dated as of May 1, 1984 between Masco Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation). 10.4 Receivables Purchase Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known as Metaldyne Corporation) the Sellers named therein and MTSPC, Inc. as Purchaser.(7). 10.5 Receivables Transfer Agreement dated as of November 28, 2000 by and among MTSPC, Inc., MascoTech, Inc. (now known as Metaldyne Corporation), The Chase Manhattan Bank, and the other parties named therein.(7). 10.6 Amendment No. 1 to Receivables Transfer Agreement dated as of December 15, 2000 to the Receivables Transfer Agreement. 10.7 Master Lease Agreement dated as of December 21, 2000 between General Electric Capital Corporation and Simpson Industries, Inc. 48 EXHIBIT NUMBER DESCRIPTION - ----------- --------------------------------------------------------------------------------------------- 10.8 Change of Control Agreement with William T. Anderson, dated September 21, 2000.(6) 10.9 Change of Control Agreement with David B. Liner, dated September 21, 2000.(6) 10.10 Change of Control Agreement with Leroy H. Runk, dated September 21, 2000.(6) 10.11 Change of Control Agreement with James F. Tompkins, dated September 21, 2000.(6) 10.12 Release and Consulting Agreement with Frank Hennessey, dated November 22, 2000.(6) 10.13 Employment, Release and Consulting Agreement with Lee M. Gardner, dated November 22, 2000. 10.14 Employment, Release and Consulting Agreement with Timothy Wadhams, dated November 22, 2000. 10.15 MascoTech, Inc. (now known as Metaldyne Corporation) 1991 Long Term Stock Incentive Plan (Restated July 15, 1998)(3). 10.16 MascoTech, Inc. (now known as Metaldyne Corporation) Supplemental Executive Retirement and Disability Plan (4). 10.17 Description of the MascoTech, Inc. (now known as Metaldyne Corporation) program for Estate, Financial Planning and Tax Assistance(2). 10.18 Corporate Services Agreement and Annex dated as of January 1, 1987 between Masco Industries, Inc. (now known as Metaldyne Corporation) and Masco Corporation, Amendment No. 1 dated as of October 31, 1996 and related letter agreements dated January 22, 1998 and June 17, 1998.(4)Amendment No. 2 to the Corporate Services Agreement dated November 28, 2000.(7) 10.19 Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation) and Amendment No. 1 dated as of October 31, 1996(1). Amendment No. 2 to the Corporate Opportunities Agreement dated November 28, 2000.(7) 10.20 Strategic Cooperation Agreement dated as of January 23, 2001 among Metalync Company LLC (now known as Metaldyne Company LLC), Metaldyne Corporation and Global Metal Technologies, Inc. 12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 21.1 Subsidiaries of Metaldyne Corporation. 23.1 Consent of PricewaterhouseCoopers LLP.
- ------------ (1) Incorporated by reference to the Exhibits filed with MascoTech ,Inc.'s (now known as Metaldyne Corporation) Current Report on Form 8-K filed November 14, 1996. (2) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Annual Report on Form 10-K for the year ended December 31, 1997. (3) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Annual Report on Form 10-K for the year ended December 31, 1998. (4) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Annual Report on form 10-K for the year ended December 31, 1999. (5) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Current Report on Form 8-K filed August 7, 2000. 49 (6) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Quarterly Report on Form 10-Q for the period ended September 30, 2000. (7) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Registration Statement on Form S-1 filed December 27, 2000. THE COMPANY WILL FURNISH ANY OF ITS STOCKHOLDERS A COPY OF ANY OF THE ABOVE EXHIBITS NOT INCLUDED HEREIN UPON THE WRITTEN REQUEST OF SUCH STOCKHOLDER AND THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES INCURRED BY THE COMPANY IN FURNISHING SUCH COPY OR COPIES. (b) REPORTS ON FORM 8-K. (1) A Current Report on Form 8-K dated November 28, 2000 reporting under Item 1, "Change of Control of Registrant," the merger of an affiliate of Heartland Industrial Partners, L.P. with and into the Registrant. (2) A Current Report on Form 8-K dated December 15, 2000 reporting under Item 5, "Other Events," the merger of a subsidiary of the Company with Simpson Industries, Inc. (3) A Current Report on Form 8-K/A dated December 27, 2000 reporting under Item 2, "Acquisition or Disposition of Assets," the acquisition of Simpson Industries, Inc. by the Company and indicating under Item 7, "Financial Statements and Exhibits," that the financial statements required by Item 7(a) and the pro forma financial information required by Item 7(b) would be filed by amendment to the Form 8-K/A no later than 60 days after December 15, 2000. 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. METALDYNE CORPORATION By: /s/ Timothy Wadhams ----------------------------------------- TIMOTHY WADHAMS Executive Vice President--Finance and Administration (Chief Accounting Officer and authorized signatory) March 30, 2001 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.
SIGNATURE TITLE DATE - ---------------------------- ----------------------------------------- ------------------ /s/ Timothy D. Leuliette Chief Executive Officer and Director March 30, 2001 - ----------------------------- (Principal Executive Officer) Timothy D. Leuliette /s/ Timothy Wadhams Executive Vice President--Finance and March 30, 2001 - ----------------------------- Administration (Chief Accounting Timothy Wadhams Officer) /s/ J. Michael Losh Chairman of the Board of Directors March 30, 2001 - ----------------------------- J. Michael Losh /s/ Gary M. Banks Director March 30, 2001 - ----------------------------- Gary M. Banks /s/ Marshall A. Cohen Director March 30, 2001 - ----------------------------- Marshal A. Cohen /s/ Lee M. Gardner Director March 30, 2001 - ----------------------------- Lee M. Gardner /s/ Cynthia L Hess Director March 30, 2001 - ----------------------------- Cynthia L. Hess /s/ Perry J. Lewis Director March 30, 2001 - ----------------------------- Perry J. Lewis /s/ Richard A. Manoogian Director March 30, 2001 - ----------------------------- Richard A. Manoogian 51 SIGNATURE TITLE DATE - ---------------------------- ----------------------------------------- ------------------ /s/ David I. Margolis Director March 30, 2001 - ----------------------------- David I. Margolis /s/ Thomas Stallkamp Director March 30, 2001 - ----------------------------- Thomas Stallkamp /s/ David A. Stockman Director March 30, 2001 - ----------------------------- David A. Stockman /s/ Daniel P. Tredwell Director March 30, 2001 - ----------------------------- Daniel P. Tredwell /s/ Samuel Valenti, III Director March 30, 2001 - ----------------------------- Samuel Valenti, III
52 METALDYNE CORPORATION 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, 2000 Schedules, as required for the years ended December 31, 2000, 1999 and 1998
PAGE -------- I.Condensed Financial Information of Parent Company only .... F-2 II.Valuation and Qualifying Accounts......................... F-3
F-1 METALDYNE CORPORATION SCHEDULE I. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY CONDENSED BALANCE SHEET DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
Assets Equity and other investments in Saturn Electronics & Engineering, Inc $ 27,760 Equity and other investments in Metaldyne Company, LLC................ 268,180 ---------- $295,940 ========== Liabilities and Shareholders' Equity* Total redeemable stock................................................ $ 42,970 Shareholders' Equity.................................................. 252,970 ---------- $295,940 ==========
- ------------ * Excludes $305 million of 4-1/2% debentures due in 2003, assumed by Metaldyne Company, LLC, although the Company remains responsible. CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
Equity and other income from affiliates .............................. $ 9,810 Gain from disposition of investments in equity affiliates ........... 27,520 Equity in undistributed income from Metaldyne Company, LLC ........... 18,690 ---------- Net income .......................................................... 56,020 Redeemable preferred stock dividends ................................. 390 ---------- Earnings attributable to common stock................................ $55,630 ==========
CONDENSED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
Operating activities: Net income............................................................ $ 56,020 (Gains) from disposition of investments in equity affiliates ......... (27,520) Equity earnings, net of dividends..................................... (5,590) Less undistributed income of subsidiaries and partially owned affiliates........................................................... (18,690) ---------- Net cash provided by operating activities ........................... 4,220 ---------- Financing activities: Payment of dividends................................................. (10,740) Retirement of Company Common Stock................................... (626,850) Issuance of Company Common Stock..................................... 561,220 ---------- Net cash used by financing activities............................... (76,370) ---------- Investing Activities: Investment in Metaldyne Company, LLC................................. (51,770) Proceeds from sale of equity investments............................. 123,920 ---------- Net cash provided by investing activities............................ $ 72,150 ========== Cash and cash increase (decrease) for the year........................ -- At January 1.......................................................... -- ---------- At December 31....................................................... $ -- ==========
F-2 METALDYNE CORPORATION SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
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) Allowance for doubtful accounts, deducted from accounts receivable in the balance sheet: 2000 ................... $4,290,000 $2,440,000 $ 10,000 $1,320,000 $5,420,000 ============ ============== ============ ============ =============== 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 ============ ============== ============ ============ ===============
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-3 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ----------- ---------------------------------------------------------------------------------------- 2.1 Recapitalization Agreement dated as of August 1, 2000 between MascoTech, Inc. (now known as Metaldyne Corporation) and Riverside Company LLC, as amended.(7) Amendment No. 1 to the Recapitalization Agreement, dated October 23, 2000 (7) and Amendment No. 2 to the Recapitalization Agreement, dated November 28, 2000.(7) 3.1 Restated Certificate of Incorporation of MascoTech, Inc. 3.2 Bylaws of Metaldyne Corporation, as amended.(7) 4.1 Indenture dated as of November 1, 1986 between Masco Industries, Inc. (now known as Metaldyne Corporation) 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., (now known as Metaldyne Corporation) Morgan Guaranty Trust Company of New York and The First National Bank of Chicago; Supplemental Indenture dated as of August 5, 1994, between MascoTech, Inc. (now known as Metaldyne Corporation) and The First National Bank of Chicago, as Trustee; Directors' resolutions establishing the Company's 4-1/2% Convertible Subordinated Debentures Due 2003; (3) and Form of Note.(4) 4.2 Supplemental Indenture No. 2 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as Metaldyne Corporation) and Morgan Guaranty Trust Company of New York.(7) 4.3 Supplemental Indenture No. 3 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as Metaldyne Corporation) and Morgan Guaranty Trust Company of New York.(7) 4.4 Shareholders Agreement by and among MascoTech, Inc. (now known as Metaldyne Corporation), Masco Corporation, Richard Manoogian, certain of their respective affiliates and other co-investors a party thereto, dated as of November 28, 2000.(7) 10.1 Credit Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known as Metaldyne Corporation), Metalync Company LLC (now known as Metaldyne Company LLC), the subsidiary term borrowers party thereto, the foreign subsidiary borrowers party thereto, the lenders party thereto and Chase Manhattan Bank, as administrative agent.(7) 10.2 Subordinated Loan Agreement dated as of November 28, 2000 between MascoTech, Inc. (now known as Metaldyne Corporation) and Masco Corporation.(7) 10.3 Assumption and Indemnification Agreement dated as of May 1, 1984 between Masco Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation). 10.4 Receivables Purchase Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known as Metaldyne Corporation) the Sellers named therein and MTSPC, Inc. as Purchaser.(7) 10.5 Receivables Transfer Agreement dated as of November 28, 2000 by and among MTSPC, Inc., MascoTech, Inc. (now known as Metaldyne Corporation), The Chase Manhattan Bank, and the other parties named therein.(7) 10.6 Amendment No. 1 to Receivables Transfer Agreement dated as of December 15, 2000 to the Receivables Transfer Agreement. 10.7 Master Lease Agreement dated as of December 21, 2000 between General Electric Capital Corporation and Simpson Industries, Inc. 10.8 Change of Control Agreement with William T. Anderson, dated September 21, 2000.(6) 10.9 Change of Control Agreement with David B. Liner, dated September 21, 2000.(6) 10.10 Change of Control Agreement with Leroy H. Runk, dated September 21, 2000.(6) EXHIBIT NUMBER DESCRIPTION - ----------- ---------------------------------------------------------------------------------------- 10.11 Change of Control Agreement with James F. Tompkins, dated September 21, 2000.(6) 10.12 Release and Consulting Agreement with Frank Hennessey, dated November 22, 2000. 10.13 Employment, Release and Consulting Agreement with Lee M. Gardner, dated November 22, 2000. 10.14 Employment, Release and Consulting Agreement with Timothy Wadhams, dated November 22, 2000. 10.15 MascoTech, Inc. (now known as Metaldyne Corporation) 1991 Long Term Stock Incentive Plan (Restated July 15, 1998)(3) 10.16 MascoTech, Inc. (now known as Metaldyne Corporation) Supplemental Executive Retirement and Disability Plan (4) 10.17 Description of the MascoTech, Inc. (now known as Metaldyne Corporation) program for Estate, Financial Planning and Tax Assistance(2) 10.18 Corporate Services Agreement and Annex dated as of January 1, 1987 between Masco Industries, Inc. (now known as Metaldyne Corporation) and Masco Corporation, Amendment No. 1 dated as of October 31, 1996 and related letter agreements dated January 22, 1998 and June 17, 1998.(4)Amendment No. 2 to the Corporate Services Agreement dated November 28, 2000.(7) 10.19 Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation) and Amendment No. 1 dated as of October 31, 1996(1). Amendment No. 2 to the Corporate Opportunities Agreement dated November 28, 2000.(7) 10.20 Strategic Cooperation Agreement dated as of January 23, 2001 among Metalync Company LLC (now known as Metaldyne Company LLC), Metaldyne Corporation and Global Metal Technologies, Inc. 12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 21.1 Subsidiaries of Metaldyne Corporation. 23.1 Consent of PricewaterhouseCoopers LLP.
- ------------ (1) Incorporated by reference to the Exhibits filed with MascoTech ,Inc.'s (now known as Metaldyne Corporation) Current Report on Form 8-K filed November 14, 1996. (2) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Annual Report on Form 10-K for the year ended December 31, 1997. (3) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Annual Report on Form 10-K for the year ended December 31, 1998. (4) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Annual Report on form 10-K for the year ended December 31, 1999. (5) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Current Report on Form 8-K filed August 7, 2000. (6) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Quarterly Report on Form 10-Q for the period ended September 30, 2000. (7) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s (now known as Metaldyne Corporation) Registration Statement on Form S-1 filed December 27, 2000. EX-3.1 2 0002.txt RESTATED CERTIFICATE OF INCORPORATION Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF MASCOTECH, INC. * * * * * MASCOTECH, INC., a corporation organized and existing under the Laws of the State of Delaware (the "Company"), hereby certifies as follows: FIRST: The name of the Company is MascoTech, Inc. The name under which the Company was originally incorporated is "Masco Industries, Inc." and the date of filing its original Certificate of Incorporation with the Secretary of State was March 15, 1984. SECOND: This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. THIRD: The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full: 1. The name of the corporation is: MascoTech, Inc. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purpose to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock the corporation shall have authority to issue is two hundred seventy-five million (275,000,000) shares. Two hundred fifty million (250,000,000) of such shares shall consist of common shares, par value one dollar ($1.00) per share, and twenty-five million (25,000,000) of such shares shall consist of preferred shares, par value one dollar ($1.00) per share. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof are as follows: A. Each share of common stock shall be equal in all respects to all other shares of such stock, and each share of outstanding common stock is entitled to one vote. B. Each share of preferred stock shall have or not have voting rights as determined by the Board of Directors prior to issuance. Dividends on all outstanding shares of preferred stock must be declared and paid, or set aside for payment, before any dividendscan be declared and paid, or set aside for payment, on the shares of common stock with respect to the same dividend period. In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of the preferred stock shall be entitled, before any assets of the Company shall be distributed among or paid over to the holders of the common stock, to an amount per share to be determined before issuance by the Board of Directors, together with a sum of money equivalent to the amount of any dividends declared thereon and remaining unpaid at the date of such liquidation, dissolution or winding up of the Company. After the making of such payments to the holders of the preferred stock, the remaining assets of the Company shall be distributed among the holders of the common stock alone, according to the number of shares held by each. If, upon such liquidation, dissolution or winding up, the assets of the Company distributable as aforesaid among the holders of the preferred stock shall be insufficient to permit the payment to them of said amount, the entire assets shall be distributed ratably among the holders of the preferred stock. The Board of Directors shall have authority to divide the shares of preferred stock into series and fix, from time to time before issuance, the number of shares to be included in any series and the designation, relative rights, preferences and limitations of all shares of such series. The authority of the Board of Directors with respect to each series shall include the determination of any or all of the following, and the shares of each series may vary from the shares of any other in the following respects: (a) the number of shares constituting such series and the designation thereof to distinguish the shares of such series from the shares of all other series; (b) the rate of dividend, cumulative or noncumulative, and the extent of further participation in dividend distribution, if any; (c) the prices at which issued (at not less than par) and the terms and conditions upon which the shares may be redeemable by the Company; (d) sinking fund provisions for the redemption or purchase of shares; (e) the voting rights; and (f) the terms and conditions upon which the shares are convertible into other classes of stock of the Company, if such shares are to be convertible. C. No holder of any class of stock issued by this Company shall be entitled to pre-emptive rights. D. The number of authorized shares of each class of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote, voting together as a single class. 5. (a) The business and affairs of the Company shall be managed by or under the direction of a Board of Directors consisting of not less than five nor more than twelve directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the 1988 Annual Meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding Annual Meeting of stockholders beginning in 1989, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement or removal from office. Except as otherwise required by law, any vacancy on the Board of Directors that results from an increase in the number of directors shall be filled only by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall serve for the remaining term of his predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock or any other class of stock issued by the Company shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Designation with respect to such stock, such directors so elected shall not be divided into classes pursuant to this Article 5, and the number of such directors shall not be counted in determining the maximum number of directors permitted under the foregoing provisions of this Article 5, in each case unless expressly provided by such terms. (b) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote in the election of directors. Any stockholder entitled to vote in the election of directors, however, may nominate one or more persons for election as director only if written notice of such stockholder's intent to make such nomination or nominations has been given either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an Annual Meeting of stockholders, 45 days in advance of the date on which the Company's proxy statement was released to stockholders in connection with the previous year's Annual Meeting of stockholders and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the day on which notice of such meeting is first given to stockholders. Each such notice shall include: (A) the name and address of the stockholder who intends to make the nomination or nominations and of the person or persons to be nominated; (B) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations is or are to be made by the stockholder; (D) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission if the nominee had been nominated by the Board of Directors; and (E) the written consent of each nominee to serve as a director of the Company if elected. The chairman of any meeting of stockholders may refuse to acknowledge the nomination of any person if not made in compliance with the foregoing procedure. (c) Notwithstanding any other provision of this Certificate of Incorporation or the by-laws (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the by-laws), and in addition to any affirmative vote required by law, the affirmative vote of the holders of at least 80% of the voting power of the outstanding capital stock of the Company entitled to vote, voting together as a single class, shall be required to amend, adopt in this Certificate of Incorporation or in the by-laws any provision inconsistent with, or repeal this Article 5. 6. Any action required or permitted to be taken by the stockholders of the Company must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by any such holders. Except as otherwise required by law, special meetings of stockholders of the Company may be called only by the Chairman of the Board, the President or a majority of the Board of Directors, subject to the rights of holders of any one or more classes or series of preferred stock or any other class of stock issued by the Company which shall have the right, voting separately by class or series, to elect directors. Notwithstanding any other provision of this Certificate of Incorporation or the by-laws (and notwithstanding that a lesser percentage may be specified by law, this Certificate of Incorporation or the by-laws), and in addition to any affirmative vote required by law, the affirmative vote of the holders of at least 80% of the voting power of the outstanding capital stock of the Company entitled to vote, voting together as single class, shall be required to amend, adopt in this Certificate of Incorporation or in the by-laws any provision inconsistent with, or repeal this Article 6. 7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: To make, alter or repeal the by-laws of the Company. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Company. To set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, to sell, lease or exchange all of the property and assets of the Company, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as its Board of Directors shall deem expedient and for the best interests of the Company. 8. The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. 9. Whenever a compromise or arrangement is proposed between the Company and its creditors or any class of them and/or between the Company and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Company or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Company under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, agree to any compromise or arrangement and to any reorganization of the Company as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Company, as the case may be, and also on the Company. 10. Meetings of stockholders may be held outside the State of Delaware, if the bylaws so provide. The books of the Company may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Company. Elections of Directors need not be by ballot unless the bylaws of the Company shall so provide. 11. The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 12. A. The affirmative vote of the holders of 95% of all shares of stock of the Company entitled to vote in elections of directors, considered for the purposes of this Article 12 as one class, shall be required for the adoption or authorization of a business combination (as hereinafter defined) with any other entity (as hereinafter defined) if, as of the record date for the determination of stockholders entitled to notice thereof and to vote thereon, such other entity is the beneficial owner, directly or indirectly, of 30% or more of the outstanding shares of stock of the Company entitled to vote in elections of directors considered for the purposes of this Article 12 as one class; provided that such 95% voting requirement shall not be applicable if: (a) The cash, or fair market value of other consideration, to be received per share by common stockholders of the Company in such business combination bears the same or a greater percentage relationship to the market price of the Company's common stock immediately prior to the announcement of such business combination as the highest per share price (including brokerage commissions and soliciting dealers' fees) which such other entity has theretofore paid for any of the shares of the Company's common stock already owned by it bears to the market price of the common stock of the Company immediately prior to the commencement of acquisition of the Company's common stock by such other entity; (b) The cash, or fair market value of other consideration, to be received per share by common stockholders of the Company in such business combination: (i) is not less than the highest per share price (including brokerage commissions and soliciting dealers' fees) paid by such other entity in acquiring any of its holdings of the Company's common stock, and (ii) is not less than the earnings per share of common stock of the Company for the four full consecutive fiscal quarters immediately preceding the record date for solicitation of votes on such business combination, multiplied by the then price/earnings multiple (if any) of such other entity as customarily computed and reported in the financial community; (c) After such other entity has acquired a 30% interest and prior to the consummation of such business combination: (i) such other entity shall have taken steps to ensure that the Company's Board of Directors included at all times representation by continuing director(s) (as hereinafter defined) proportionate to the stockholdings of the Company's public common stockholders not affiliated with such other entity (with a continuing director to occupy any resulting fractional board position); (ii) there shall have been no reduction in the rate of dividends payable on the Company's common stock except as necessary to insure that a quarterly dividend payment does not exceed 5% of the net income of the Company for the four full consecutive fiscal quarters immediately preceding the declaration date of such dividend, or except as may have been approved by a unanimous vote of the directors; (iii) such other entity shall not have acquired any newly issued shares of stock, directly or indirectly, from the Company (except upon conversion of convertible securities acquired by it prior to obtaining a 30% interest or as a result of a pro rata stock dividend or stock split); and (iv) such other entity shall not have acquired any additional shares of the Company's outstanding common stock or securities convertible into common stock except as a part of the transaction which results in such other entity acquiring its 30% interest; (d) Such other entity shall not have (i) received the benefit, directly or indirectly (except proportionately as a stockholder) of any loans, advances, guarantees, pledges or other financial assistance or tax credits of or provided by the Company, or (ii) made any major change in the Company's business or equity capital structure without the unanimous approval of the directors, in either case prior to the consummation of such business combination (e) A proxy statement responsive to the requirements of the United States securities laws shall be mailed to all common stockholders of the Company for the purpose of soliciting stockholder approval of such business combination and shall contain on its first page thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the business combination which the continuing directors, or any of them, may choose to state and, if deemed advisable by a majority of the continuing directors, an opinion of a reputable investment banking firm as to the fairness (or not) of the terms of such business combination, from the point of view of the remaining public stockholders of the Company (such investment banking firm to be selected by a majority of the continuing directors and to be paid a reasonable fee for their services by the Company upon receipt of such opinion). The provisions of this Article 12 shall also apply to a business combination with any other entity which at any time has been the beneficial owner, directly or indirectly, of 30% or more the outstanding shares of stock of the Company entitled to vote in elections of directors considered for the purposes of this Article 12 as one class, notwithstanding the fact that such other entity has reduced its shareholdings below 30% if, as of the record date for the determination of stockholders entitled to notice of and to vote on the business combination, such other entity is an "affiliate" of the Company (as hereinafter defined). B. As used in this Article 12, (a) the term "other entity" shall include any corporation, person or other entity and any other entity with which it or its "affiliate" or "associate" (as defined below) has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of stock of the Company, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on March 31, 1984, together with the successors and assigns of such persons in any transaction or series of transactions not involving a public offering of the Company's stock within the meaning of the Securities Act of 1933; provided, however, that an "other entity" shall not in any event include any entity owning 30% or more of the outstanding shares of stock of the Company entitled to vote in the elections of directors considered for purposes of this Article 12 as one class at the time of the adoption of this Article 12, any subsidiary of such entity, or any corporation succeeding to the business of such entity if (i) such business as conducted immediately prior to such succession is, immediately after such succession, the sole business of such successor, and (ii) the stockholders of the corporation conducting such business immediately prior to such succession are, immediately after such succession, the sole stockholders of the successor corporation or of a corporation owning all of the capital stock of such successor corporation; (b) an other entity shall be deemed to be the beneficial owner of any shares of stock of the Company which the other entity (as defined above) has the right to acquire pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise; (c) the outstanding shares of any class of stock of the Company shall include shares deemed owned through application of clause; (b) above but shall not include any other shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise; (d) the term "business combination" shall include any merger or consolidation of the Company with or into any other entity, or the sale or lease of all or any substantial part of the assets of the Company to, or any sale or lease to the Company or any subsidiary thereof in exchange for securities of the Company of any assets (except assets having an aggregate fair market value of less than $5,000,000) of, any other entity; (e) the term "continuing director" shall mean a person who was a member of the Board of Directors of the Company elected by stockholders prior to the time that such other entity acquired in excess of 10% of the stock of the Company entitled to vote in the election of directors, or a person recommended to succeed a continuing director by a majority of continuing directors; and (f) for the purposes of subparagraphs A(a) and (b) of this Article 12 the term "other consideration to be received" shall mean, in addition to other consideration received, if any, capital stock of the Company retained by its existing public stockholders in the event of a business combination with such other entity in which the Company is the surviving corporation; and (g) the exclusion of an entity from constituting an "other entity" under subparagraph B(a) of this Article 12 shall only continue to be effective if such entity does not thereafter decrease such ownership percentage to less than 30% (other than through the Company's issuance of its capital stock) and subsequently reacquire such a 30% interest and provided that, upon any such decrease and subsequent reacquisition, such entity shall be deemed for purposes of this Article 12 to have first become an "other entity" and to first have acquired capital stock of the Company on the date of such reacquisition. C. A majority of the continuing directors shall have the power and duty to determine for the purposes of this Article 12 on the basis of information known to them whether (a) such other entity beneficially owns 30% or more of the outstanding shares of stock of the Company entitled to vote in elections of directors; (b) an other entity is an "affiliate" or "associate" (as defined above) of another; (c) an other entity has an agreement, arrangement or understanding with another; or (d) the assets being acquired by the Company, or any subsidiary thereof, have an aggregate fair market value of less than $5,000,000. D. No amendment to the Certificate of Incorporation of the Company shall amend or repeal any of the provisions of this Article 12, unless the amendment effecting such amendment or repeal shall receive the affirmative vote of the holders of 95% of all shares of stock of the corporation entitled to vote in elections of directors, considered for the purposes of this Article 12 as one class; provided that this paragraph D shall not apply to, and such 95% vote shall not be required for, any amendment or repeal unanimously recommended to the stockholders by the Board of Directors of the Company if all of such directors are persons who would be eligible to serve as "continuing directors" within the meaning of paragraph B of this Article 12. E. Nothing contained in this Article 12 shall be construed to relieve any other entity from any fiduciary obligation imposed by law. 13. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director's duty of loyalty to the Company or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further limitation or elimination of the liability of directors, then the liability of a director of the Company, in addition to the limitation on liability provided herein, shall be limited to the fullest extent permitted by the Delaware General Corporation Law, as amended. Any repeal or modification of this Article 13 shall not increase the liability of any director of the Company for any act or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification. 14. A. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer or employee of the Company, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or employee or in any other capacity while serving as a director, officer, or employee, shall be indemnified and held harmless by the Company to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the company to provide prior to such amendment), against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of such person's heirs, executors and administrators. The Company shall indemnify a director, officer or employee in connection with an action, suit or proceeding (other than an action, suit or proceeding to enforce indemnification rights provided for herein or elsewhere) initiated by such Director, officer or employee only if such action, suit or proceeding was authorized by the Board of Directors. The right to indemnification conferred in this Paragraph A shall be a contract right and shall include the right to be paid by the Company the expenses incurred in defending any action, suit or proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in such person's capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person) in advance of the final disposition of an action, suit or proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified for such expenses under this Article 14 or otherwise. B. The Company may, to the extent authorized from time to time by the Board of Directors, provide indemnification and the advancement of expenses, to any agent of the Company and to any person who is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, to such extent and to such effect as the Board of Directors shall determine to be appropriate and permitted by applicable law, as the same exists or may hereafter be amended. C. The rights to indemnification and to the advancement of expenses conferred in this Article 14 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation or bylaws of the Company, agreement, vote of stockholders or disinterested directors or otherwise. FOURTH: This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of Delaware. IN WITNESS WHEREOF, said MASCOTECH, INC. has caused this Certificate to be signed by Richard A. Manoogian, its Chairman of the Board, this 22nd day of September, 1998. MASCOTECH, INC. By /s/Richard A. Manoogian ------------------------------- Richard A. Manoogian Chairman of the Board STATE OF MICHIGAN ) ) ss COUNTY OF WAYNE ) I, Maxine Crandall, a notary public, do hereby certify that on this 22nd day of September, 1998, personally appeared before me Richard A. Manoogian, who, being by me first duly sworn, declared that he is the Chairman of the Board that he signed the foregoing document as the act and deed of said corporation, and that the statements therein contained are true. /s/Maxine E. Crandall ---------------------------------- Notary Public Wayne County, Michigan My commission expires October 19, 2000 CERTIFICATE OF MERGER OF MASCOTECH HARBOR INC. A DELAWARE CORPORATION WITH AND INTO MASCOTECH, INC. A DELAWARE CORPORATION ---------------- PURSUANT TO SECTION 251 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ---------------- The undersigned corporation, organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and the state of incorporation of each of the constituent corporations of the merger is as follows: NAME STATE OF INCORPORATION MascoTech Harbor Inc. Delaware MascoTech, Inc. Delaware SECOND: That an Agreement of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of section 251 of the General Corporation Law of the State of Delaware. THIRD: That the name of the surviving corporation of the merger is MascoTech, Inc. FOURTH: That the Restated Certificate of Incorporation of the surviving corporation shall be changed in its entirety as set forth in Exhibit A to this certificate of merger. FIFTH: That the executed Agreement of Merger is on file at the principal place of business of the surviving corporation, the address of which is 21001 Van Born Road, Taylor, Michigan 48180. SIXTH: That a copy of the Agreement of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. SEVENTH: That this Certificate of Merger shall be effective at the time of filing with the Secretary of State of the State of Delaware. Dated: November 28, 2000 MASCOTECH, INC. By: /s/David B. Liner ---------------------------------- Name: David B. Liner Title: Vice President and General Counsel 1 EXHIBIT A RESTATED CERTIFICATE OF INCORPORATIONOFMASCOTECH, INC. * * * * * 1. The name of the corporation is: MASCOTECH, INC. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purpose to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock the corporation shall have authority to issue is two hundred seventy-five million (275,000,000) shares. Two hundred fifty million (250,000,000) of such shares shall consist of common shares, par value one dollar ($1.00) per share, and twenty-five million (25,000,000) of such shares shall consist of preferred shares, par value one dollar ($1.00) per share. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof are as follows: A. Each share of common stock shall be equal in all respects to all other shares of such stock, and each share of outstanding common stock is entitled to one vote. B. Each share of preferred stock shall have voting rights as set forth below and as otherwise determined by the Board of Directors prior to issuance. Dividends on all outstanding shares of preferred stock must be declared and paid, or set aside for payment, before any dividends can be declared and paid, or set aside for payment, on the shares of common stock with respect to the same dividend period. In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of the preferred stock shall be entitled, before any assets of the Company shall be distributed among or paid over to the holders of the common stock, to an amount per share to be determined before issuance by the Board of Directors, together with a sum of money equivalent to the amount of any dividends declared thereon and remaining unpaid at the date of such liquidation, dissolution or winding up of the Company. After the making of such payments to the holders of the preferred stock, the remaining assets of the Company shall be distributed among the holders of the common stock alone, according to the number of shares held by each. If, upon such liquidation, dissolution or winding up, the assets of the Company distributable as aforesaid among the holders of the preferred stock shall be insufficient to permit the payment to them of said amount, the entire assets shall be distributed ratably among the holders of the preferred stock. The Board of Directors shall have authority to divide the shares of preferred stock into series and fix, from time to time before issuance, the number of shares to be included in any series and the designation, relative rights, preferences and limitations of all shares of such series. The authority of the Board of Directors with respect to each series shall include the determination of any or all of the following, and the shares of each series may vary from the shares of any other in the following respects: (a) the number of shares constituting such series and the designation thereof to distinguish the shares of such series from the shares of all other series; (b) the rate of dividend, cumulative or noncumulative, and the extent of further participation in dividend distribution, if any; (c) the prices at which issued (at not less than par) and the terms and conditions upon which the shares may be redeemable by the Company; (d) sinking fund provisions for the redemption or purchase of shares; (e) the voting rights; and (f) the terms and conditions upon which the shares are convertible into other classes of stock of the Company, if such shares are to be convertible. C. Terms of Class A Convertible Preferred Stock. 1. DESIGNATION. Seven million (7,000,000) shares of Preferred Stock, par value one dollar ($1.00) per share, shall be designated "Class A Convertible Preferred Stock." The Class A Convertible Preferred Stock shall have the following rights, terms and privileges set forth in subsections (2) through (5) below. 2. DIVIDENDS ON CLASS A CONVERTIBLE PREFERRED STOCK. The holders of Class A Convertible Preferred Stock shall be entitled to receive, when and as declared on Class A Convertible Preferred Stock by the Board of Directors of the Company from funds legally available therefor, cash dividends equal to the amount paid as a dividend to holders of common stock of the Company, per annum on each outstanding share of Class A Convertible Preferred Stock. Such dividends shall be payable only when, as and if declared by the Board of Directors of the Company. No 3 dividends may be paid or declared on or with respect to any other series of preferred stock or on or with respect to the Company's common stock prior to the declaration and payment of a dividend on or with respect to the Class A Convertible Preferred Stock; provided, however, that dividends may be paid or declared on or with respect to the Class B Convertible Preferred Stock. Dividends shall be non-cumulative. 3. LIQUIDATION RIGHTS. (a) Treatment at Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Class A Convertible Preferred Stock shall be entitled to receive $1.00 per share per each share of Class A Convertible Stock, plus an amount equal to all accrued but unpaid dividends on Class A Convertible Preferred Stock, if any, to the date fixed for the payment in liquidation, dissolution or winding up, before any distribution shall be made to the holders of any other junior securities, including common stock. If the assets of the Company are insufficient to permit the payment of the full preferential amounts payable to the holders of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock, then the assets available for the distribution to holders of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock shall be distributed ratably to the holders of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock in proportion to the full preferential amounts payable on their respective shares of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock upon liquidation, dissolution or winding up of the Company. After payment of the aforesaid full liquidation preference to holders of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock, the holder of each outstanding share of other capital stock of the Company shall be entitled to receive any remaining assets of the Company available for distribution to stockholders of the Company pursuant to its terms. (b) Treatment of Merger, Consolidation and Sales of Assets. A consolidation or merger of the Company, or a sale of all or substantially all of the assets of the Company shall not be deemed a liquidation, dissolution or winding up of the Company within the meaning of this Section 3. (c) Distributions Other Than Cash. Whenever the distribution provided for in this Section 3, or any portion thereof, shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Company. 4. VOTING RIGHTS. (a) General. Each holder of a share of Class A Convertible Preferred Stock shall be entitled to one vote for such share of Class A Convertible Preferred Stock. The holders of Class A Convertible 4 Preferred Stock shall vote together with the holders of Class B Convertible Preferred Stock and common stock as a single class. (b) Designated Voting Rights. So long as any shares of the Class A Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative, vote or consent of holders holding a majority of all of the outstanding shares of Class A Convertible Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, (i) authorize any class of stock that is senior to the Class A Convertible Preferred (provided, however, that the authorization and issuance of the Series A Convertible Preferred Stock contemplated by the Recapitalization Agreement (as defined below) shall be permitted); (ii) authorize any class of stock that is pari passu to the Class A Convertible Preferred Stock (provided, however, that the authorization and issuance of the Class B Convertible Preferred Stock shall be permitted); or (iii) amend this Certificate of Incorporation so as to affect the specified rights, preferences, privileges or voting rights of the Class A Convertible Preferred Stock or to authorize the issuance of any additional shares of Class A Convertible Preferred Stock. 5. CONVERSION. (a) The Class A Convertible Preferred Stock will be convertible at the option of the holder, into shares of common stock at any time, unless previously redeemed or repurchased, at a conversion rate of one share of common stock per one share of Class A Convertible Preferred Stock. (b) The right of conversion attaching to shares of the Class A Convertible Preferred Stock may be exercised by the holder thereof by delivering the Class A Convertible Preferred Stock to be converted to the Company or a designated agent of the Company, accompanied by a duly signed and completed notice of conversion, if requested by the Company, in form reasonably satisfactory to the Company. The conversion date will be the date on which the Class A Convertible Preferred Stock and the duly signed and completed notice of conversion, if any, are so delivered. As promptly as practicable on or after the conversion date, the Company will issue and deliver or will cause to be delivered a certificate or certificates for the number of full shares of common stock issuable upon conversion. Such certificate or certificates will be delivered by the Company or its designated agent to the appropriate holder by mailing certificates evidencing the additional shares to the holders at their respective addresses set forth in the register of holders maintained by the Company or its designated agent. All shares of common stock issuable upon conversion of the Class A Convertible Preferred Stock will be fully paid and nonassessable and will rank pari passu with the other shares of common stock outstanding from time to time. No payment or adjustment will be made for dividends or distributions with respect to shares of common 5 stock issued upon conversion of Class A Convertible Preferred Stock. Holders of common stock issued upon conversion will not be entitled to receive any dividends payable to holders of common stock as of any record time before the close of business on the conversion date. (c) In the event the transactions contemplated by the Recapitalization Agreement (the "Recapitalization Agreement") dated August 1, 2000 between the Company and Riverside Company LLC are not consummated, the Company shall, at its option, promptly exchange the Class A Convertible Preferred Stock for an equal number of shares of the Company's common stock. Shares of Class A Convertible Preferred Stock which have been issued and exchanged shall be canceled and retired and shall not be reissued as shares of Class A Convertible Preferred Stock and, following any required filing with the Delaware Secretary of State, such shares shall resume the status of authorized but unissued shares of preferred stock. D. Terms of Class B Convertible Preferred Stock. 1. DESIGNATION. Three million five hundred thousand (3,500,000) shares of preferred stock, par value one dollar ($1.00) per share, shall be designated "Class B Convertible Preferred Stock." The Class B Convertible Preferred Stock shall have the following rights, terms and privileges set forth in subsections (2) through (5) below. 2. DIVIDENDS ON CLASS B CONVERTIBLE PREFERRED STOCK. The holders of Class B Convertible Preferred Stock shall be entitled to receive, when and as declared on Class B Convertible Preferred Stock by the Board of Directors of the Company from funds legally available therefor, cash dividends equal to the amount paid as a dividend to holders of common stock of the Company, per annum on each outstanding share of Class B Convertible Preferred Stock. Such dividends shall be payable only when, as and if declared by the Board of Directors of the Company. No dividends may be paid or declared on or with respect to any other series of preferred stock or on or with respect to the Company's common stock prior to the declaration and payment of a dividend on or with respect to the Class B Convertible Preferred Stock; provided, however, that dividends may be paid or declared on or with respect to the Class A Convertible Preferred Stock. Dividends shall be non-cumulative. 3. LIQUIDATION RIGHTS. (a) Treatment at Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Class B Convertible Preferred Stock shall be entitled to receive $1.00 per share per each share of Class B Convertible Stock, plus an amount equal to all accrued but unpaid dividends on Class B Convertible Preferred Stock, if any, 6 to the date fixed for the payment in liquidation, dissolution or winding up, before any distribution shall be made to the holders of any other junior securities, including common stock. If the assets of the Company are insufficient to permit the payment of the full preferential amounts payable to the holders of Class B Convertible Preferred Stock and Class A Convertible Preferred Stock, then the assets available for the distribution to holders of Class B Convertible Preferred Stock and Class A Convertible Preferred Stock shall be distributed ratably to the holders of Class B Convertible Preferred Stock and Class A Convertible Preferred Stock in proportion to the full preferential amounts payable on their respective shares of Class B Convertible Preferred Stock and Class A Convertible Preferred Stock upon liquidation, dissolution or winding up of the Corporation. After payment of the aforesaid full liquidation preference to holders of Class B Convertible Preferred Stock and Class A Convertible Preferred Stock, the holder of each outstanding share of other capital stock of the Company shall be entitled to receive any remaining assets of the Company available for distribution to stockholders of the Company pursuant to its terms. (b) Treatment of Merger, Consolidation and Sales of Assets. A consolidation or merger of the Company, or a sale of all or substantially all of the assets of the Company shall not be deemed a liquidation, dissolution or winding up of the Company within the meaning of this Section 3. (c) Distributions Other Than Cash. Whenever the distribution provided for in this Section 3, or any portion thereof, shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Company. 4. VOTING RIGHTS. (a) General. Each holder of a share of Class B Convertible Preferred Stock shall be entitled to one vote for such share of Class B Convertible Preferred Stock. The holders of Class B Convertible Preferred Stock shall vote together with the holders of Class A Convertible Preferred Stock and common stock as a single class. (b) Designated Voting Rights. So long as any shares of the Class B Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative, vote or consent of holders holding a majority of all of the outstanding shares of Class B Convertible Preferred Stock, voting or consenting, as the case may be, as one class, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting, (i) authorize any class of stock that is senior to the Class B Convertible Preferred (provided, however, that the authorization and issuance of the Series A Preferred Stock contemplated by the Recapitalization Agreement shall be permitted); (ii) authorize any class of stock that is pari passu to the Class B 7 Convertible Preferred Stock (provided, however, that the authorization and issuance of the Class A Convertible Preferred Stock shall be permitted); or (iii) amend this Certificate of Incorporation so as to affect the specified rights, preferences, privileges or voting rights of the Class B Convertible Preferred Stock or to authorize the issuance of any additional shares of Class B Convertible Preferred Stock. 5. CONVERSION. (a) The Class B Convertible Preferred Stock will be convertible at the option of the holder, into shares of common stock at any time, unless previously redeemed or repurchased, at a conversion rate of one share of common stock per one share of Class B Convertible Preferred Stock. (b) The right of conversion attaching to shares of the Class B Convertible Preferred Stock may be exercised by the holder thereof by delivering the Class B Convertible Preferred Stock to be converted to the Company or a designated agent of the Company, accompanied by a duly signed and completed notice of conversion, if requested by the Company, in form reasonably satisfactory to the Company. The conversion date will be the date on which the Class B Convertible Preferred Stock and the duly signed and completed notice of conversion, if any, are so delivered. As promptly as practicable on or after the conversion date, the Company will issue and deliver or will cause to be delivered a certificate or certificates for the number of full shares of Common Stock issuable upon conversion. Such certificate or certificates will be delivered by the Company or its designated agent to the appropriate holder by mailing certificates evidencing the additional shares to the holders at their respective addresses set forth in the register of holders maintained by the Company or its designated agent. All shares of common stock issuable upon conversion of the Class B Convertible Preferred Stock will be fully paid and nonassessable and will rank pari passu with the other shares of common stock outstanding from time to time. No payment or adjustment will be made for dividends or distributions with respect to shares of common stock issued upon conversion of Class B Convertible Preferred Stock. Holders of common stock issued upon conversion will not be entitled to receive any dividends payable to holders of common stock as of any record time before the close of business on the conversion date. (c) In the event the transactions contemplated by the Recapitalization Agreement are not consummated, the Company shall, at its option, promptly exchange the Class B Convertible Preferred Stock for an equal number of shares of the Company's common stock. Shares of Class B Convertible Preferred Stock which have been issued and exchanged shall be canceled and retired and shall not be reissued as shares of Class B Convertible Preferred Stock and, following any required filing with the Delaware Secretary 8 of State, such shares shall resume the status of authorized but unissued shares of preferred stock. E. No holder of any class of stock issued by this Company shall be entitled to pre-emptive rights. F. The number of authorized shares of each class of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote, voting together as a single class. 5. (a) The business and affairs of the Company shall be managed by or under the direction of a Board of Directors consisting of not less than five nor more than twelve directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the 1988 Annual Meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding Annual Meeting of stockholders beginning in 1989, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement or removal from office. Except as otherwise required by law, any vacancy on the Board of Directors that results from an increase in the number of directors shall be filled only by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall serve for the remaining term of his predecessor. 1. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock or any other class of stock issued by the Company shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Designation with respect to such stock, such directors so elected shall not be divided into classes pursuant to this Article 5, and the number of such directors shall not be counted in determining the maximum number of directors permitted under the foregoing provisions of this Article 5, in each case unless expressly provided by such terms. 9 (b) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote in the election of directors. Any stockholder entitled to vote in the election of directors, however, may nominate one or more persons for election as director only if written notice of such stockholder's intent to make such nomination or nominations has been given either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an Annual Meeting of stockholders, 45 days in advance of the date on which the Company's proxy statement was released to stockholders in connection with the previous year's Annual Meeting of stockholders and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the day on which notice of such meeting is first given to stockholders. Each such notice shall include: (A) the name and address of the stockholder who intends to make the nomination or nominations and of the person or persons to be nominated; (B) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations is or are to be made by the stockholder; (D) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission if the nominee had been nominated by the Board of Directors; and (E) the written consent of each nominee to serve as a director of the Company if elected. The chairman of any meeting of stockholders may refuse to acknowledge the nomination of any person if not made in compliance with the foregoing procedure. (c) Notwithstanding any other provision of this Certificate of Incorporation or the by-laws (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the by-laws), and in addition to any affirmative vote required by law, the affirmative vote of the holders of at least 80% of the voting power of the outstanding capital stock of the Company entitled to vote, voting together as a single class, shall be required to amend, adopt in this Certificate of Incorporation or in the by-laws any provision inconsistent with, or repeal this Article 5. 6. Any action required or permitted to be taken by the stockholders of the Company must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by any such holders. Except as otherwise required by law, special meetings of stockholders of the Company may be called only by the Chairman of the Board, the President or a majority of the Board of Directors, subject to the rights of holders of any one or more classes or series of preferred stock or any other class of stock issued by the Company which shall have the right, voting separately by class or series, to elect directors. Notwithstanding any other provision of this Certificate of Incorporation or the by-laws (and notwithstanding that a lesser percentage may be specified by law, this Certificate of Incorporation or the by-laws), and in addition to any affirmative vote required by law, the affirmative vote of the holders of at least 80% of the voting power of the outstanding capital 10 stock of the Company entitled to vote, voting together as single class, shall be required to amend, adopt in this Certificate of Incorporation or in the by-laws any provision inconsistent with, or repeal this Article 6. 7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: To make, alter or repeal the by-laws of the Company. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Company. To set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, to sell, lease or exchange all of the property and assets of the Company, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as its Board of Directors shall deem expedient and for the best interests of the Company. 8. The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. 9. Whenever a compromise or arrangement is proposed between the Company and its creditors or any class of them and/or between the Company and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Company or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Company under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, agree to any compromise or arrangement and to any reorganization of the Company as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Company, as the case may be, and also on the Company. 10. Meetings of stockholders may be held outside the State of Delaware, if the by-laws so provide. The books of the Company may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Company. Elections of Directors need not be by ballot unless the by-laws of the Company shall so provide. 11 11. The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 12. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director's duty of loyalty to the Company or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further limitation or elimination of the liability of directors, then the liability of a director of the Company, in addition to the limitation on liability provided herein, shall be limited to the fullest extent permitted by the Delaware General Corporation Law, as amended. Any repeal or modification of this Article 12 shall not increase the liability of any director of the Company for any act or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification. 12 13. A. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer or employee of the Company, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or employee or in any other capacity while serving as a director, officer, or employee, shall be indemnified and held harmless by the Company to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including, without limitation attorneys' fees, judgments, fines and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of such person's heirs, executors and administrators. The Company shall indemnify a director, officer or employee in connection with an action, suit or proceeding (other than an action, suit or proceeding to enforce indemnification rights provided for herein or elsewhere) initiated by such director, officer or employee only if such action, suit or proceeding was authorized by the Board of Directors. The right to indemnification conferred in this Paragraph A shall be a contract right and shall include the right to be paid by the Company the expenses incurred in defending any action, suit or proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in such person's capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person) in advance of the final disposition of an action, suit or proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified for such expenses under this Article 13 or otherwise. B. The Company may, to the extent authorized from time to time by the Board of Directors, provide indemnification and the advancement of expenses, to any agent of the Company and to any person who is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, to such extent and to such effect as the Board of Directors shall determine to be appropriate and permitted by applicable law, as the same exists or may hereafter be amended. C. The rights to indemnification and to the advancement of expenses conferred in this Article 13 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation or by-laws of the Company, agreement, vote of stockholders or disinterested directors or otherwise. CERTIFICATE OF MERGER OF RIVERSIDE ACQUISITION CORPORATION A DELAWARE CORPORATION WITH AND INTO MASCOTECH, INC. A DELAWARE CORPORATION ------------------- PURSUANT TO SECTION 251 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ------------------- The undersigned corporation, organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the name and the state of incorporation of each of the constituent corporations of the merger is as follows: - ----------------------------------- ------------------------------------------- NAME STATE OF INCORPORATION MascoTech, Inc. Delaware Riverside Acquisition Corporation Delaware SECOND: That a Recapitalization Agreement (which contains an agreement of merger) between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the General Corporation Law of the State of Delaware. THIRD: That the name of the surviving corporation of the merger is MascoTech, Inc. FOURTH: That the Restated Certificate of Incorporation of the surviving Delaware Corporation shall be changed in its entirety as set forth in Exhibit A to this certificate of merger. FIFTH: That the executed Recapitalization Agreement is on file at the principal place of business of the surviving corporation, the address of which is 21001 Van Born Road, Taylor, Michigan 48180. SIXTH: That a copy of the Recapitalization Agreement will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. SEVENTH: That this Certificate of Merger shall be effective at the time of filing with the Secretary of State of the State of Delaware. Dated: November 28, 2000 MASCOTECH, INC. By: /s/David B. Liner ------------------------------- Name: David B. Liner Title: Vice President and General Counsel 17 EXHIBIT A RESTATED CERTIFICATE OF INCORPORATION OF MASCOTECH, INC. * * * * * 1. The name of the corporation is: MascoTech, Inc. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purpose to be conducted or promoted is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law"). 4. The total number of shares of stock the corporation shall have authority to issue is two hundred seventy-five million (275,000,000) shares. Two hundred fifty million (250,000,000) of such shares shall consist of common shares, par value one dollar ($1.00) per share, and twenty-five million (25,000,000) of such shares shall consist of preferred shares, par value one dollar ($1.00) per share. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof are as follows: A. Each share of common stock shall be equal in all respects to all other shares of such stock, and each share of outstanding common stock is entitled to one vote. B. Each share of preferred stock shall have voting rights as set forth below and otherwise as determined by the Board of Directors prior to issuance. The Board of Directors shall have authority to divide the shares of preferred stock into series and fix, from time to time before issuance, the number of shares to be included in any series and the designation, relative participating, optional or other rights, powers, preferences, qualifications, restrictions and limitations of all shares of such series. The authority of the Board of Directors with respect to each series shall include, without limitation, the determination of any or all of the following, and the shares of each series may vary from the shares of any other in the following respects: (a) the number of shares constituting such series and the designation thereof to distinguish the shares of such series from the shares of any other series; (b) the rate of dividend, cumulative or 1 noncumulative, and the extent of further participation in dividend distribution, if any; (c) the terms and conditions upon which the shares may be redeemable by the Company; (d) sinking fund provisions for the redemption or purchase of shares, if any; (e) the voting rights; and (f) the terms and conditions upon which the shares are convertible into other classes of stock of the Company, if such shares are to be convertible. C. Terms of Series A Preferred Stock. (1) DESIGNATION. Three hundred seventy thousand (370,000) shares of Preferred Stock, par value one dollar ($1.00) per share, shall be designated "Series A Preferred Stock." The Series A Preferred Stock shall have the following rights, terms and privileges set forth in subsections (2) through (10) below. (2) DIVIDENDS ON SERIES A PREFERRED STOCK. (a) The holders of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Company's Board of Directors, out of the funds of the Company legally available therefor pursuant to the Delaware General Corporation Law (the "Legally Available Funds"), cumulative dividends on each share of Series A Preferred Stock for each Quarterly Dividend Period (as hereinafter defined) equal to the Liquidation Preference (as hereinafter defined) of each such share multiplied by a rate (with respect to the Series A Preferred Stock, the "Quarterly Dividend Rate") equal to (1) 13% per annum for periods ending on or prior to December 31, 2005 and (2) 15% per annum for periods thereafter, plus, in either case, 2% per annum for any period for which there are any accrued and unpaid dividends. Such dividends shall be cumulative from the date of original issue of such shares. Accrued and unpaid dividends on the Series A Preferred Stock shall accrue additional dividends in respect thereof (with respect to the Series A Preferred Stock, the "Additional Dividends"), compounded quarterly, at the Quarterly Dividend Rate then applicable to the Series A Preferred Stock. Each such dividend shall be paid to the holders of record of shares of Series A Preferred Stock as they appear on the stock register of the Company on such record date as shall be fixed by the Board of Directors of the Company or a duly authorized committee thereof, which date shall be not more than 30 days nor less than 10 days preceding the dividend payment date relating thereto. (b) If dividends (including Additional Dividends) are not paid in full or declared in full and sums are not set apart for the payment thereof upon the Series A Preferred Stock and any other Parity Securities (as hereinafter defined), all dividends declared upon shares of Series A Preferred Stock and any other Parity Securities shall be declared pro rata so that in all cases the amount of dividends declared per share on the Series A Preferred Stock and such other Parity Security shall bear to each other the same ratio that accumulated dividends per share, including dividends accrued or in arrears, if any, on the shares of Series A Preferred Stock and such other Parity Security shall bear to each other; 2 provided that no dividends shall be declared on any Parity Security if the Series A Preferred Stock is in arrearage unless the number of Quarterly Dividend Periods for which the Series A Preferred Stock is in arrears does not exceed the number of quarterly periods for which such Parity Security is in arrearage immediately prior to the making of the such pro rata dividends. (c) Dividends (including Additional Dividends) payable on the Series A Preferred Stock for any period less than a full Quarterly Dividend Period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which payable. (d) "Quarterly Dividend Period" means, with respect to the Series A Preferred Stock, the period from January 1 through the next March 31, from April 1 through the next June 30, from July 1 through the next September 30, or from October 1 through the next December 31, as the case may be; provided that the first Quarterly Dividend Period shall mean the period commencing the day shares of Series A Preferred Stock are originally issued and ending on March 31, 2001. (e) "Business Day" means, with respect to the Series A Preferred Stock, any day other than a Saturday, a Sunday or any day on which banking institutions in the State of New York or the New York Stock Exchange is closed. (3) REDEMPTION OF SERIES A PREFERRED STOCK. (a) Mandatory Redemption. The Company shall redeem, out of Legally Available Funds, on December 31, 2012 all then outstanding shares of Series A Preferred tock at a redemption price of 100% of the Liquidation Preference (as hereinafter defined). Immediately prior to authorizing or making any such redemption with respect to the Series A Preferred Stock, the Company, by resolution of its Board of Directors shall, to the extent of any Legally Available Funds, declare a dividend on the Series A Preferred Stock payable on the redemption date in an amount equal to any accrued and unpaid dividends (including Additional Dividends) on the Series A Preferred Stock as of such date and, if the Company does not have sufficient Legally Available Funds to declare and pay all dividends (including Additional Dividends) accrued at the time of such redemption, any remaining accrued and unpaid dividends (including Additional Dividends) shall be added to the redemption price. If the Company shall fail to discharge its obligation to redeem all of the outstanding shares of Series A Preferred Stock required to be redeemed pursuant to this subsection (3) (the "Series A Mandatory Redemption Obligation"), the Series A Mandatory Redemption Obligation shall be discharged as soon as the Company is able to discharge such Series A Mandatory Redemption 3 Obligation and the Voting Period set forth in subsection (7) will apply in accordance with its terms, without otherwise affecting the Company's obligations hereunder. (b) Optional Redemption. The Series A Preferred Stock shall be redeemable, in whole or in part, out of Legally Available Funds, at the option of the Company by resolution of its Board of Directors, at a redemption price of 101% of the Liquidation Preference (as hereinafter defined) at any time after December 31, 2005, upon giving notice as provided in paragraph (c) below; provided that, notwithstanding the foregoing, the Company may exercise the foregoing redemption right on or prior to December 31, 2005 using the net proceeds from any issuance of shares of capital stock of the Company. Immediately prior to authorizing or making any such redemption with respect to the Series A Preferred Stock, the Company by resolution of its Board of Directors shall, to the extent of any Legally Available Funds, declare a dividend on the Series A Preferred Stock payable on the redemption date in an amount equal to any accrued and unpaid dividends (including Additional Dividends) on the Series A Preferred Stock as of such date and if the Company does not have sufficient Legally Available Funds to declare and pay all dividends (including Additional Dividends) accrued at the time of such redemption, any remaining accrued and unpaid dividends (including Additional Dividends) shall be added to the redemption price. Notwithstanding the provisions of this paragraph (b) or of subsection (9), unless the full cumulative dividends (including Additional Dividends) on all outstanding shares of Series A Preferred Stock shall have been paid or contemporaneously are declared and paid for all past dividend periods, none of the shares of Series A Preferred Stock shall be redeemed unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed. (c) Notice of Redemption. At least 30 days but not more than 60 days prior to the date fixed for the redemption of shares of the Series A Preferred Stock pursuant to paragraph (a) or (b) above, a written notice shall be mailed to each holder of record of shares of Series A Preferred Stock to be redeemed in a postage prepaid envelope addressed to such holder at his post office address as shown on the records of the Company, notifying such holder of the election of the Company to redeem such shares, stating the date fixed for redemption thereof (hereinafter referred to as the redemption date) and calling upon such holder to surrender to the Company on the redemption date at the place designated in such notice his certificate or certificates representing the number of shares specified in such notice of redemption. On or after the redemption date each holder of shares of Series A Preferred Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Company at the place designated in such notice and thereupon the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate 4 shall be canceled. In case less than all the shares represented by such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the redemption date (unless default shall be made by the Company in payment of the redemption price) all dividends on the shares of Series A Preferred Stock designated for redemption in such notice shall cease to accrue and all rights of the holders thereof as stockholders of the Company, except the right to receive the redemption price thereof (including an amount equal to all accrued and unpaid dividends up to the redemption date) upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the books of the Company and such shares shall not be deemed to be outstanding for any purpose whatsoever. At its election, the Company prior to the redemption date may deposit the redemption price (including an amount equal to all accrued and unpaid dividends up to the redemption date) of the shares of Series A Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company in the Borough of Manhattan, City and State of New York, in which case such notice to holders of the Series A Preferred Stock to be redeemed shall state the date of such deposit, shall specify the office of such bank or trust company as the place of payment of the redemption price and shall call upon such holders to surrender the certificates representing such shares at such price on or after the date fixed in such redemption notice (which shall not be later than the redemption date) against payment of the redemption price (including all accrued and unpaid dividends up to the redemption date). From and after the making of such deposit, the shares of Series A Preferred Stock so designated for redemption shall not be deemed to be outstanding for any purpose whatsoever and the rights of the holders of such shares shall be limited to the right to receive the redemption price of such shares (including all accrued and unpaid dividends up to the redemption date), without interest, upon surrender of the certificates representing the same to the Company at said office of such bank or trust company. Any interest accrued on such funds shall be paid to the Company from time to time. Any moneys so deposited which shall remain unclaimed by the holders of such Series A Preferred Stock at the end of six months after the redemption date shall be returned by such bank or trust company to the Company, after which the holders of the Series A Preferred Stock shall have no further interest in such moneys, except as unsecured claimants of the Company. (d) Reissuances. Shares of Series A Preferred Stock which have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged, shall be cancelled and retired and shall not be reissued as shares of Series A Preferred Stock and, following any required filing with the Delaware Secretary of State, such shares shall resume the status of authorized but unissued shares of preferred stock. 5 (e) Selection of Shares to be Redeemed. If less than all of the shares of Series A Preferred Stock are to be redeemed, the Board of Directors of the Company shall allocate the total liquidation preference to be redeemed pro rata. (4) CHANGE IN CONTROL. (a) If a Change in Control (as hereinafter defined) shall occur at any time, then each holder of Series A Preferred Stock shall have the right to require that the Company purchase such holder's Series A Preferred Stock, in whole or in part, out of Legally Available Funds at a cash purchase price (a "Change in Control Payment") in an amount equal to 101% of the Liquidation Preference, plus accrued and unpaid dividends, if any, to the date of purchase, pursuant to the offer described below (the "Change in Control Offer") and the other procedures set forth herein. (b) Within the time period specified in subsection (4)(d) below, the Company will mail a notice to each holder of Series A Preferred Stock, with the following information: (i) a Change in Control Offer is being made pursuant to this subsection (4) and that all Series A Preferred Stock properly tendered pursuant to such Change in Control Offer will be accepted for payment; (ii) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed, except as may be otherwise required by applicable law (the "Change in Control Payment Date"); (iii) any Series A Preferred Stock not properly tendered will remain outstanding and continue to accrue dividends; (iv) unless the Company defaults in making the Change in Control Payment, all Series A Preferred Stock accepted for payment pursuant to the Change in Control Offer will cease to accumulate dividends on the Change in Control Payment Date; (v) holders of Series A Preferred Stock electing to have any shares of Series A Preferred Stock purchased pursuant to a Change in Control Offer will be required to surrender such shares, properly endorsed for transfer, to the transfer agent for the Series A Preferred Stock at the address specified in the notice prior to the close of business on the third Business Day preceding the Change in Control Payment Date; (vi) holders of Series A Preferred Stock will be entitled to withdraw their tendered shares of Series A Preferred Stock and their election to require the Company to purchase such shares, provided that the transfer agent receives, not later than the close of business on the last day of the offer period, a telegram, telex, facsimile transmission or letter setting forth the name of the holder of Series A Preferred Stock, the number of shares of Series A Preferred Stock tendered for purchase, and a statement that such holder is withdrawing his tendered shares of Series A Preferred Stock and his election to have such shares of Series A Preferred Stock purchased; and (vii) that holders whose shares of Series A Preferred Stock are being purchased only in part will be issued new shares of Series A Preferred Stock equal in number to the unpurchased portion of the shares of Series A Preferred Stock surrendered. 6 (c) On the Change in Control Payment Date, the Company shall, to the extent permitted by law, (i) accept for payment all shares of Series A Preferred Stock properly tendered pursuant to the Change in Control Offer, (ii) deposit with the transfer agent for the Series A Preferred Stock an amount in cash equal to the aggregate Change in Control Payment in respect of all shares of Series A Preferred Stock so tendered and (iii) deliver, or cause to be delivered, to such transfer agent for cancellation the shares of Series A Preferred Stock so accepted. The Company shall promptly mail, or cause to be mailed, to each holder of Series A Preferred Stock the Change in Control Payment for such Series A Preferred Stock, and new shares of Series A Preferred Stock equal in aggregate liquidation preference to any unpurchased portion of Series A Preferred Stock surrendered, if any. The Company shall publicly announce the results of the Change in Control Offer on or as soon as practicable after the Change in Control Payment Date. The Company may act as transfer agent for the Series A Preferred Stock. (d) The Company shall mail the notice referred to in subsection (4)(b) above not later than 60 days after learning of a Change in Control specified in clause (e)(1) or (2) below or not more than 60 days after an occurrence specified in clause (e)(3) or (4) (except to the extent the occurrence referred to in clause (e)(4) would otherwise have occurred under clause (e)(1) or (2) below) (such 60th day being the "Notice Trigger Date"). Prior to making a Change in Control Offer, but in any event not later than the Notice Trigger Date, the Company covenants to (i) repay in full all indebtedness under agreements containing change of control puts or defaults (and terminate all commitments thereunder) or offer to repay in full all such indebtedness (and terminate all commitments) and to repay the indebtedness owed to (and terminate the commitments of) each creditor which has accepted such offer or (ii) obtain the requisite consents in respect of such indebtedness to permit the purchase of the Series A Preferred Stock. The Company will first comply with the covenant in the preceding sentence before it will be required to repurchase Series A Preferred Stock pursuant to the provisions described below; provided that the Company's failure to comply with the covenant described in the preceding sentence shall give rise to a Voting Period under subsection (7) below, without otherwise affecting the Company's obligations hereunder. (e) The occurrence of any of the following events will constitute a "Change in Control": 7 (1) if Heartland Industrial Partners, L.P. and its Affiliates (collectively "Heartland") (i) cease to directly or indirectly beneficially own 40% or more of the number of shares of common stock of the Company received by them in the merger (appropriately adjusted for stock splits, combinations, subdivisions, stock dividends and similar events) provided for under the Recapitalization Agreement dated as of August 1, 2000 between the Company and Riverside Company LLC (the "Recapitalization Agreement") (after taking account of any commitments or agreements in principle existing prior to such merger for Heartland to sell some of its shares of common stock of the Company following such merger) or (ii) do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company or (iii) cease to, directly or indirectly, beneficially own 30% or more of the outstanding shares of the Company's common stock, provided that this clause (iii) shall only be operative as long as Masco Corporation or its controlled affiliates own a majority of the then outstanding shares of Series A Preferred Stock; provided that the foregoing subclause (ii) and (iii) will not be operative after any underwritten public offering of common stock of the Company; (2) any person or group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act") other than Heartland (an "other entity") shall attain beneficial ownership, within the meaning of Rule 13d-3 adopted under the 1934 Act, of capital stock representing a majority of the voting power for the election of the Directors of the Company; (3) the Company, directly or indirectly, consolidates or merges with any other entity or sells or leases it properties and assets substantially as an entirety to any other entity, provided that this clause shall not apply to a transaction if, immediately following such transaction, no person or group, within the meaning of Section 13(d)(3) of the 1934 Act, other than Heartland, beneficially owns capital stock representing a majority of the voting power for the election of Directors of the Company; and (4) any event constituting a "change of control" in the Company's Senior Credit Facilities. As used herein, "Senior Credit Facilities" means the Credit Agreement, to be dated as of the date of the Merger (as defined under the Recapitalization Agreement dated August 1, 2000 between the Company and Riverside Company LLC), among The Chase Manhattan Bank, Chase Securities Inc., the Company and certain of its subsidiaries and the other lenders and financial institutions party thereto 8 from time to time, as the same may be amended, modified, waived, refinanced or replaced from time to time (whether under a new credit agreement or otherwise). (5) QUALIFYING EQUITY. In the event of an Equity Offering Triggering Event (as hereinafter defined), each holder of Series A Preferred Stock shall have the right to require that the Company purchase each such holder's Series A Preferred Stock, in whole or in part, out of Legally Available Funds at a cash purchase price (a "Qualifying Equity Payment") in an amount equal to 101% of the Series A Liquidation Preference, plus accumulated and unpaid dividends, if any, to the date of purchase, but only to the extent of the Excess Proceeds (as hereinafter defined) received by the Company in the case of an Equity Offering Triggering Event referred to in clause (x) of the definition thereof or out of the net proceeds received by the Company from any Subsequent Offering (the "Subsequent Offering Proceeds"), in the case of an Equity Offering Triggering Event referred to in clause (y) of the definition thereof, pursuant to the offer described below (the "Qualifying Equity Proceeds Offer") and the other procedures set forth herein. As used herein, "Equity Offering Triggering Event" means either (x) one or more underwritten public offerings of common stock of the Company for gross proceeds to the Company of $200.0 million or more and to the extent that there are net proceeds to the Company in excess of amounts required to finance any proposed or contemplated Acquisition (as hereinafter defined) as determined in good faith by the Board of Directors (such determination of the Board of Directors of the Company shall be conclusive), whether or not publicly announced, or refinance, refund or replace any debt or preferred stock, incurred, issued or assumed in connection with any Acquisition ("Excess Proceeds") (the first or more recent of such offerings being referred to as a "Qualifying Equity Offering") or (y) the occurrence of (i) an underwritten initial public offering of common stock of the Company and (ii) the occurrence of any subsequent underwritten primary public offering of common stock of the Company (a "Subsequent Offering"), provided that the aggregate proceeds to the Company from such offerings under this clause (y) is $400.0 million or more (the "Gross Proceeds Condition") (such Subsequent Offering is also referred to as a "Qualifying Equity Offering" to the extent the Gross Proceeds Condition is satisfied). Once a Qualifying Equity Proceeds Offer is made with respect to any and all outstanding shares of Series A Preferred Stock, no further Qualifying Equity Proceeds Offer need be made. Within 30 days following any Qualifying Equity Offering, the Company will mail a notice to each holder of Series A Preferred Stock with the following information: (i) A Qualifying Equity Proceeds Offer is being made pursuant to this subsection (5), and that all Series A Preferred Stock properly tendered pursuant to such Qualifying Equity Proceeds Offer will be accepted for payment on a pro rata basis (or as nearly a pro rata basis as practicable) to the extent of the 9 Excess Proceeds or Subsequent Offering Proceeds, as the case may be; (ii) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed, except as may be otherwise required by applicable law (the "Qualifying Equity Payment Date"); (iii) any Series A Preferred Stock not properly tendered will remain outstanding and continue to accumulate dividends; (iv) unless the Company defaults in the payment of the Qualifying Equity Payment, all Series A Preferred Stock accepted for payment pursuant to the Qualifying Equity Proceeds Offer will cease to accumulate dividends on the Qualifying Equity Payment Date; (v) holders of Series A Preferred Stock electing to have any shares of Series A Preferred Stock purchased pursuant to a Qualifying Equity Proceeds Offer will be required to surrender such shares, properly endorsed for transfer, to the transfer agent for the Series A Preferred Stock at the address specified in the notice prior to the close of business on the third Business Day preceding the Qualifying Equity Payment Date; (vi) holders of Series A Preferred Stock will be entitled to withdraw their tendered shares of Series A Preferred Stock and their election to require the Company to purchase such shares; provided that the transfer agent receives, not later than the close of business on the last day of the offer period, a telegram, telex, facsimile transmission or letter setting forth the name of the holder of the Series A Preferred Stock, the aggregate liquidation preference of Series A Preferred Stock tendered for purchase, and a statement that such holder is withdrawing his tendered shares of Series A Preferred Stock and his election to have such shares of Series A Preferred Stock purchased; and (vii) that holders whose shares of Series A Preferred Stock are being purchased only in part will be issued new shares of Series A Preferred Stock equal in number to the unpurchased portion of the shares of Series A Preferred Stock surrendered, which unpurchased portion must be in whole shares. On the Qualifying Equity Payment Date, the Company shall, to the extent permitted by law, (i) accept for payment all shares of Series A Preferred Stock properly tendered pursuant to the Qualifying Equity Proceeds Offer on a pro rata basis (or as nearly a pro rata basis as practicable) to the extent of any Excess Proceeds or Subsequent Offering Proceeds, as the case may be, (ii) deposit with the transfer agent for the Series A Preferred Stock an amount in cash equal to the aggregate Qualifying Equity Payment in respect of all shares of Series A Preferred Stock so tendered and (iii) deliver, or cause to be delivered, to such transfer agent for cancellation the shares of Series A Preferred Stock so accepted. The Company shall promptly mail, or cause to be mailed, to each holder of Series A Preferred Stock the Qualifying Equity Payment for such Series A Preferred Stock, and new shares of Series A Preferred Stock equal in number to any unpurchased portion of Series A Preferred Stock surrendered, if any. The Company shall publicly announce the results of the Qualifying Equity Offer on or as soon as practicable after the Qualifying Equity Payment Date. The Company may act as transfer agent for the Series A Preferred Stock. 10 (6) PRIORITY OF SERIES A PREFERRED STOCK IN EVENT OF LIQUIDATION OR DISSOLUTION. In the event of any liquidation, dissolution, or winding up of the affairs of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series A Preferred Stock shall be entitled to receive, out of the remaining net assets of the Company, the amount of one hundred dollars ($100.00) in cash for each share of Series A Preferred Stock (the "Liquidation Preference"), plus an amount equal to all dividends (including Additional Dividends) accrued and unpaid on each such share up to the date fixed for distribution, before any distribution shall be made to the holders of the Common Stock of the Company or any other stock ranking (as to any such distribution) junior to the Series A Preferred Stock. In the event of any involuntary or voluntary liquidation, dissolution or winding up of the affairs of the Company, the Company by resolution of its Board of Directors shall, to the extent of any Legally Available Funds, declare a dividend on the Series A Preferred Stock payable before any distribution is made to any holder of any series of preferred stock or common stock or any other stock of the Company ranking junior to the Series A Preferred Stock as to liquidation, dissolution or winding up, in an amount equal to any accrued and unpaid dividends (including Additional Dividends) on the Series A Preferred Stock as of such date and if the Company does not have sufficient Legally Available Funds to declare and pay all dividends (including Additional Dividends) accrued at the time of such liquidation, any remaining accrued and unpaid dividends (including Additional Dividends) shall be added to the price to be received by the holders of the Series A Preferred Stock for such Series A Preferred Stock. If, upon any liquidation, dissolution or winding up of the Company, the assets distributable among the holders of any Parity Securities shall be insufficient to permit the payment in full to the holders of all such series of Preferred Stock of all preferential amounts payable to all such holders, then subject to Section 2(b), the entire assets of the Company thus distributable shall be distributed ratably among the holders of all Parity Securities in proportion to the respective amounts that would be payable per share if such assets were sufficient to permit payment in full. Except as otherwise provided in this subsection (6), holders of Series A Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Company. For the purposes of this subsection (6), neither the voluntary sale, lease, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property or assets of the Company, nor the consolidation or merger of the Company with one or more other corporations, shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, unless such voluntary sale, lease, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the Company. 11 (7) VOTING RIGHTS. (a) The holders of the Series A Preferred Stock shall not, except as required by law or as otherwise set forth herein, have any right or power to vote on any question or in any proceeding or to be represented at, or to receive notice of, any meeting of the Company's stockholders. On any matters on which the holders of the Series A Preferred Stock shall be entitled to vote, they shall be entitled to one vote for each share held. (b) In case at any time (i) the equivalent of six or more full quarterly dividends on the Series A Preferred Stock out of any eight consecutive Quarterly Dividend Periods shall be in arrears or (ii) the Company shall have failed to make a mandatory redemption of shares of Series A Preferred Stock as set forth in subsection (3)(a), or (iii) the Company shall have failed to comply with the provisions in subsection (4) or (5) in any material respect, then during the period (the "Voting Period") commencing with such time and ending with the time when (i) all arrears in dividends on the Series A Preferred Stock shall have been paid or (ii) the Company shall have redeemed all shares of the Series A Preferred Stock as set forth in subsection (3)(a), or (iii) the Company shall have purchased any shares of Series A Preferred Stock validly tendered for purchase under the provisions of subsection (4) or (5), in each case as applicable, the remedy for such matters, without otherwise affecting the Company's obligations, shall be that the number of members of the Board of Directors shall automatically be increased by one and the holders of a majority of the outstanding shares of Series A Preferred Stock represented in person or by proxy at any meeting of the stockholders of the Company held for the election of directors during the Voting Period shall be entitled, as a class, to the exclusion of the holders of all other classes or series of capital stock of the Company, to elect one director of the Company to fill the directorship so created. The remaining directors shall be elected by the other class or classes of stock entitled to vote therefor, at each meeting of stockholders held for the purpose of electing directors. (c) At any time when the voting rights set forth in subsection (7)(b) with respect to the election of directors shall have vested in the holders of Series A Preferred Stock and if such right shall not already have been initially exercised, a proper officer of the Company shall, upon the written request of any holder of record of Series A Preferred Stock then outstanding, addressed to the Secretary of the Company, call a special meeting of holders of Series A Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Company or, if none, at a place designated by the Secretary of the Company. If such meeting shall not be called by the proper officers of the Company within 30 days after the personal service of such written request upon the Secretary of the Company, or within 30 days after mailing the same within the United States, by registered mail, addressed to the Secretary of 12 the Company at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of 25% of the shares of Series A Preferred Stock then outstanding may designate in writing a holder of Series A Preferred Stock to call such meeting at the expense of the Company, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided in this subsection (7)(c). Any holder of Series A Preferred Stock which would be entitled to vote at such meeting shall have access to the stock ledger books of the Company for the purpose of causing a meeting of the stockholders to be called pursuant to the provisions of this subsection (7)(c). Notwithstanding the other provisions of this subsection (7)(c), however, no such special meeting shall be called during a period within 60 days immediately preceding the date fixed for the next annual meeting of stockholders. (d) At any meeting held for the purpose of electing directors at which the holders of Series A Preferred Stock shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of at least one-third of the then outstanding shares of Series A Preferred Stock shall be required and be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of Series A Preferred Stock shall not prevent the election of directors other than those to be elected by the holders of stock of such class and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of Series A Preferred Stock and (ii) in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time without notice (except as required by law) other than announcement at the meeting, until a quorum shall be present. (e) Any director who shall have been elected by holders of Series A Preferred Stock may be removed at any time during a Voting Period, either for or without cause, by and only by the affirmative vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock given at a special meeting of such stockholders called for such purpose, and any vacancy thereby created may be filled during such Voting Period by the holders of Series A Preferred Stock present in person or represented by proxy at such meeting. Any director elected by holders of Series A Preferred Stock who dies, resigns or otherwise ceases to be a director shall be replaced by the affirmative vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock at a special meeting of stockholders called for that purpose. At the end of the Voting Period, the holders of Series A Preferred Stock shall be automatically 13 divested of all voting power vested in them under this subsection 7(e) but subject always to the subsequent vesting hereunder of voting power in the holders of Series A Preferred Stock if any subsequent event would again trigger a new Voting Period under subsection 7(b). The term of all directors elected pursuant to the provisions of this subsection 7(e) shall in all events expire at the end of the Voting Period and upon such expiration the number of directors constituting the Board of Directors shall, without further action, be reduced by one director, subject always to the increase of the number of directors pursuant to subsection 7(b) hereof in case of the future right of the holders of Series A Preferred Stock to elect directors as provided herein. (8) CONVERSION OF SERIES A PREFERRED STOCK. The Series A Preferred Stock shall not be convertible (9) LIMITATIONS. Except as expressly permitted by this subsection (9), the Company shall not and shall not permit any of its Subsidiaries to (1) declare, pay or set apart for payment any dividend or make any distribution on, or directly or indirectly purchase, redeem or discharge any mandatory redemption, sinking fund or other similar obligation in respect of any other stock of the Company ranking on a parity with the Series A Preferred Stock as to dividends or liquidation rights (collectively, "Parity Securities"), or in respect of any warrants, rights or options exercisable for or convertible into any such Parity Securities or (2) declare, pay or set apart for payment any dividend or make any distributions on, or, directly or indirectly, purchase, redeem or satisfy any such mandatory redemption, sinking fund or other similar obligation in respect of any stock of the Company ranking junior to the Series A Preferred Stock as to dividends or liquidation rights (collectively, "Junior Securities"), or in respect of any warrants, rights or options exercisable for or convertible into any Junior Securities; provided, however, that (1) with respect to dividends and distributions, payments may be made or amounts set aside for payment of dividends on Parity Securities if either (x) it is made in accordance with subsection (2)(b) hereof or (y) prior to or concurrently with such payment or setting apart for payment, all accrued and unpaid dividends on shares of the Series A Preferred Stock not paid on the dates provided for in subsection (2) hereof (including Additional Dividends) shall have been or shall be paid and no Voting Period shall be in effect; (2) with respect to any purchase, redemption or retirement of Parity Securities, shares of Series A Preferred Stock shall be redeemed so that the number of shares of Series A Preferred Stock and Parity Securities so purchased or redeemed shall bear to each other the same ratio that the Liquidation Preference and the liquidation preference of such Parity Securities shall bear to each other; (3) dividends and distributions may be made or set aside for payment in respect of any Junior Securities if (A) the Company is not in arrears in the payment of dividends with respect to the Series A Preferred Stock, (B) no Voting Period is in effect and (C) the aggregate amount of such dividends and distributions made or set aside for payment after the 14 original issuance of the Series A Preferred Stock does not exceed the aggregate net cash proceeds received and the fair market value (as determined in good faith by the Board of Directors of the Company) of property received after the issuance date of the Series A Preferred Stock by the Company from the issuance or sale of Junior Stock or warrants, options or rights to purchase Junior Stock or from capital contributions in respect of Junior Stock, provided that the requirements of this clause (C) need only be met for so long as $10,000,000 or more in aggregate Liquidation Preference of Series A Preferred Stock is outstanding (unless the outstanding amount has been reduced to less than $10,000,000 by reason of an optional redemption under subsection (3)(b)). Notwithstanding the foregoing, the need to comply with the foregoing clause (C) will terminate in the event that, on or prior to the Trigger Date, the Company or a third party shall have offered to purchase (a "Terminating Tender") all then outstanding shares of Series A Preferred Stock at a price equal to the liquidation preference thereof, together with accrued and unpaid dividends thereon, and purchases any shares of Series A Preferred Stock validly tendered in the Terminating Tender, whether or not all holders shall so tender their shares for purchase. A Terminating Tender shall remain open for a minimum of 20 business days. In addition, notwithstanding the foregoing, the Company will be permitted to (1) pay dividends and distributions in respect of capital stock in the form of Junior Stock and dividends and distributions in respect of Parity Stock in the form of Parity Stock; (2) pay dividends or make other distributions in respect of any capital stock if at the time of declaration of such dividend or distribution the Company could have made such payment in compliance with this subsection (9); (3) exchange or replace Junior Stock with other Junior Stock or Parity Stock with Parity Stock or Junior Stock; (4) make payments to redeem, repurchase or acquire for value Junior Stock or Parity Stock or options in respect thereof, in each case in connection with any repurchase, cash settlement, put or call provisions under employee stock option, management subscription, retained share or stock purchase agreements or other agreements to compensate employees, including in respect of restricted stock awards, as contemplated by the Recapitalization Agreement; and (5) redeem, purchase or acquire Junior Stock upon a change in control or an equity issuance following or at the time of satisfaction or waiver of the provisions contained in subsection (4) or (5) and in any indebtedness of the Surviving Company. (a) So long as any shares of the Series A Preferred Stock are outstanding and unless the vote or consent of the holders of a greater number of shares shall then be required by law, except as otherwise provided in this Certificate of Incorporation, the Company shall not amend this Certificate of Incorporation without the approval, by vote or written consent, by the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock if such amendment would amend any of the rights, preferences, privileges of or limitations provided for herein for the benefit of any shares of Series A Preferred Stock so as to affect such holders adversely. Without limiting the generality of 15 the preceding sentence, the Company will not amend this Certificate of Incorporation without the approval by the holders of at least a majority of the then outstanding shares of Series A Preferred Stock if such amendment would: (i) change the relative seniority rights of the holders of Series A Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the Company, or create any other class or series of capital stock entitled to (a) seniority as to liquidation preferences or dividend, repurchase or redemption rights, or (b) parity as to liquidation preferences or dividend, repurchase or redemption rights, in each case in relation to the holders of the Series A Preferred Stock; (ii) reduce the amount payable to the holders of Series A Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding up of the Company, or change the relative seniority of the liquidation preference of the holders of Series A Preferred Stock to the rights upon liquidation of the holders of other capital stock of the Company, or change the dividend or redemption rights of the holders of Series A Preferred Stock; (iii) cancel or modify the rights of the holders of the Series A Preferred Stock provided for in this subsection (9) or in subsection (3) through (7); (iv) increase or decrease (other than by redemption or purchase and any subsequent filing in connection therewith) the authorized number of shares of Series A Preferred Stock; or (v) subject to the following paragraph, allow for the issuance of a Parity Security. Notwithstanding the foregoing provisions, the designation or authorization of any Parity Security shall be permitted without a separate class vote of the Series A Preferred Stock for the authorization of such equity security, if such equity security is issued in connection with (1) an investment by the Company or any Subsidiary of the Company in any other person pursuant to which such person shall become a Subsidiary of the Company or any Subsidiary of the Company, or shall be merged with or into the Company or any Subsidiary of the Company, or (2) the acquisition by the Company or any Subsidiary of the Company of the assets of any person which constitute all or substantially all of the assets of such person or comprises any division or line of business of such person or any other properties or assets of such person acquired outside of the ordinary course of business (either of subclauses (1) and (2) an "Acquisition"); provided that, in each case, such issuance is to a person or persons having a direct or indirect beneficial interest in the person or assets so acquired by the Company or any Subsidiary 16 of the Company; and provided, further, that the Company shall not issue any Parity Security if the Company is in arrears in the payment of dividends with respect to the Series A Preferred Stock. (b) So long as any shares of the Series A Preferred Stock are outstanding the Company shall not allow any Subsidiary of the Company to issue any preferred stock (other than to Company or a Subsidiary of the Company). Notwithstanding the foregoing, a Subsidiary of the Company will be permitted to issue preferred stock in connection with an Acquisition so long as such issuance is to a person having a direct or indirect beneficial interest in the person or assets so acquired by the Company or any Subsidiary of the Company if such preferred stock is issued solely by the acquired entity or solely by a Subsidiary of the Company substantially all of whose assets are then comprised of the assets so acquired. (c) So long as any shares of the Series A Preferred Stock are outstanding and unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of a majority of all of the outstanding shares of Series A Preferred Stock (given in person or by proxy, either by written consent pursuant to the Delaware General Corporation Law or by a vote at a special meeting of stockholders called for such purpose or at any annual meeting of stockholders, with the holders of Series A Preferred Stock voting as a class and with each share of Series A Preferred Stock having one vote) shall be required prior to the sale, lease or conveyance of all or substantially all of the Company's assets or the merger or consolidation of the Company with or into any other entity if as a result of such transaction the Series A Preferred Stock would be cashed out for less than 100% (or, if the transaction would constitute a Change in Control, 101%) of its Liquidation Preference plus any accrued and unpaid dividends (including Additional Dividends), or as a result of which the Series A Preferred Stock would continue in existence (either as stock in the Company or in the surviving company in a merger or in any parent company of the Company or such surviving corporation) but with an adverse alteration in its specified designations, rights, preferences or privileges. (d) Nothing herein contained shall be construed so as to require a class vote or the consent of the holders of the outstanding shares of Series A Preferred Stock (i) in connection with any increase in the total number of authorized shares of Common Stock, or (ii) in connection with the authorization or increase of any class or series of Junior Securities. The limitations stated above shall not apply if, at or prior to the time when the distribution, payment, purchase, redemption, discharge, conversion, exchange, amendment, alteration, repeal, issuance, sale, lease, conveyance, merger or consolidation is to occur, as the case may be, provision is made for the redemption or reacquisition of all shares of Series A Preferred Stock at the time 17 outstanding. Nothing herein contained shall in any way limit the right and power, subject to the limitations set forth herein, of the Company to issue the presently authorized but unissued shares of its capital stock, or bonds, notes, mortgages, debentures, and other obligations, and to incur indebtedness to banks and to other lenders. (10) RANKING OF SERIES A PREFERRED STOCK. With regard to rights to receive dividends, mandatory redemption payments and distributions upon liquidation, dissolution or winding up of the Company, the Series A Preferred Stock shall rank prior to all other capital stock, of the Company outstanding at the time of issuance of the Series A Preferred Stock. As contemplated by subsection (9), Series A Preferred Stock shall be subject to the creation of Junior Securities and, pursuant to the voting requirements of subsection (9), Parity Securities and Senior Securities. D. Except as set forth in any contractual agreements between the Company and a shareholder of the Company, no holder of any class of stock issued by this Company shall be entitled to pre-emptive rights. E. The number of authorized shares of each class of stock may be increased or decreased by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote, voting together as a single class. 5. (a) The business and affairs of the Company shall be managed by or under the direction of a Board of Directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement or removal from office. Except as otherwise required by law, any vacancy on the Board of Directors that results from an increase in the number of directors shall be filled only by a majority of the Board of Directors then in office, provided that any other vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, even if less than a quorum is present, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall serve for the remaining term of his predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock or any other class of stock issued by the Company shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of such preferred stock with respect to such stock and such directors so elected shall not be divided into classes pursuant to this Article 5. 18 (b) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote in the election of directors. 6. Except as otherwise required by law, special meetings of stockholders of the Company may be called at any time for any purpose or purposes by the Board of Directors or by the President, and shall be called by the President or Secretary upon the request of a majority of the Directors or upon the written request of the holders of at least a majority of all outstanding shares entitled to vote on the action proposed to be taken. Special meetings shall be held at such place within or without the State of Delaware and at such hour as may be designated in the notice of such meeting and the business transacted shall be confined to the object stated in the notice of the meeting. 7. In furtherance and not in limitation of the powers conferred by the Delaware General Corporation Law, the Board of Directors is expressly authorized: To make, alter or repeal the by-laws of the Company; To authorize and cause to be executed mortgages and liens upon the real and personal property of the Company; To set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. 8. Whenever a compromise or arrangement is proposed between the Company and its creditors or any class of them and/or between the Company and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Company or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Company under the provisions of Section 291 of Title 8 of the Delaware General Corporation Law or on application of trustees in dissolution or of any receiver or receivers appointed for the Company under the provisions of 279 of Title 8 of the Delaware General Corporation Law, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, agree to any compromise or arrangement and to any reorganization of the Company as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Company, as the case may be, and also on the Company. 19 9. Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Company may be kept (subject to any provision contained in the Delaware General Corporation Law) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Company. Elections of Directors need not be by ballot unless the bylaws of the Company shall so provide. 10. The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the Delaware General Corporation Law, and all rights and powers conferred upon stockholders, directors and officers, if any, herein are granted subject to this reservation. 11. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty by such director as a director, except for liability (a) for any breach of the director's duty of loyalty to the Company or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation law, or (d) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law hereafter is amended to authorize the further limitation or elimination of the personal liability of directors, then the liability of a director of the Company, in addition to the limitation on liability provided herein, shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of this Article 11 shall not increase the liability of any director of the Company for any act or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification. 12. A. Each person who was or is a party or is threatened to be made a party to, or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or employee or in any other capacity while serving as a director, officer, or employee, shall be indemnified and held harmless by the Company to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer or 20 employee and shall inure to the benefit of such person's heirs, executors and administrators. The Company shall indemnify a director or officer in connection with an action, suit or proceeding (other than an action, suit or proceeding to enforce indemnification rights provided for herein or elsewhere) initiated by such Director or officer only if such action, suit or proceeding was authorized by the Board of Directors. The right to indemnification conferred in this Paragraph A shall be a contract right and shall include the right to be paid by the Company the expenses incurred in defending any action, suit or proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in such person's capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person) in advance of the final disposition of an action, suit or proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified for such expenses under this Article 12 or otherwise. B. The Company may, to the extent authorized from time to time by the Board of Directors, provide indemnification and the advancement of expenses, to any employee or agent of the Company and to any person who is or was serving at the request of the Company as an employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, to such extent and to such effect as the Board of Directors shall determine to be appropriate and permitted by applicable law, as the same exists or may hereafter be amended. C. The rights to indemnification and to the advancement of expenses conferred in this Article 12 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation or bylaws of the Company, agreement, vote of stockholders or disinterested directors or otherwise. D. Neither the amendment nor repeal of this Article 12, nor the adoption of any provision of this Certificate of Incorporation or the bylaws of the Company, nor, to the fullest extent permitted by applicable law, any modification of law, shall eliminate or reduce the effect of this Article 12 in respect to any acts or omissions occurring prior to such amendment or repeal or such adoption of an inconsistent provision. 13. The Company shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another Company, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of the Delaware General Corporation Law. CERTIFICATE OF OWNERSHIP AND MERGER MERGING METALDYNE SUBSIDIARY INC. WITH AND INTO MASCOTECH, INC. - -------------------------------------------------------------------------------- Pursuant to Section 253 of the General Corporation of Law of the State of Delaware - -------------------------------------------------------------------------------- MascoTech, Inc., a Delaware corporation (the "Company"), does hereby certify to the following facts relating to the merger (the "Merger") of Metaldyne Subsidiary Inc., a Delaware corporation (the "Subsidiary"), with and into the Company, with the Company remaining as the surviving corporation: FIRST: The Company is incorporated pursuant to the General Corporation Law of the State of Delaware (the "DGCL"). The Subsidiary is incorporated pursuant to the DGCL. SECOND: The Company owns all of the outstanding shares of each class of capital stock of the Subsidiary. THIRD: The Board of Directors of the Company, by the following resolutions duly adopted on January 19, 2001, determined to merge the Subsidiary with and into the Company pursuant to Section 253 of the DGCL: WHEREAS, the Company owns all of the outstanding shares of capital stock Metaldyne Subsidiary Inc., a newly formed Delaware corporation (the "Subsidiary"); WHEREAS, the Directors of the Company deem it advisable that the Subsidiary be merged with and into the Company, pursuant to Section 253 of the DGCL; -2- NOW, THEREFORE, IT IS RESOLVED, that the Subsidiary be merged with and into the Company, with the Company as the surviving corporation (the "Merger"); and further RESOLVED, that the name of the Company shall be changed in the Merger to Metaldyne Corporation, so that, from and after the Merger. Article 1 of the Company's Amended and Restated Certificate of Incorporation shall read as follows: "The name of the corporation shall be Metaldyne Corporation"; and further RESOLVED, that by virtue of the Merger and without any action on the part of the holder thereof, each then outstanding share of common stock of the Company shall remain unchanged and continue to remain outstanding as one share of common stock of the Company, held by the person who was the holder of such share of common stock of the Company immediately prior to the Merger; and further RESOLVED, that by virtue of the Merger and without any action on the part of the holder thereof, each then outstanding share of common stock of the Subsidiary shall be canceled and no consideration shall be issued in respect thereof; and further RESOLVED, that any officer of the Company be and each of them hereby is, authorized and directed to make, execute and acknowledge, in the name of the Company, a certificate of ownership and merger for the purpose of effecting the Merger and to file the same in the office of the Secretary of State of the State of Delaware; and further RESOLVED, that any officer of the Company be, and each of them hereby is, authorized, empowered and directed to execute such other documents and take such other actions as any one or more of them shall deem necessary, appropriate or advisable to carry out the intent and -3- purpose of the foregoing resolutions, including, without limitation, executing such instrument, filing such documents and taking such other action as required under the Company's financing documents or as required by law or any governmental or regulatory body; and further RESOLVED, that all actions taken and expenses incurred by any officer heretofore in furtherance of any actions authorized by any of the foregoing resolutions hereby are expressly ratified, confirmed, adopted and approved. FOURTH: The Company shall be the surviving corporation of the Merger and the name of the surviving corporation shall be Metaldyne Corporation. -4- In WITNESS WHEREOF, the Company has caused this Certificate of Ownership and Merger to be executed by its duly authorized officer this 23rd day of January, 2001. MASCOTECH, INC. By: /s/David B. Liner ---------------------------------------- Name: David B. Liner Office: Vice President & General Counsel EX-10.3 3 0003.txt ASSUMPTION AND INDEMNIFICATION AGREEMENT ASSUMPTION AND INDEMNIFICATION AGREEMENT THIS AGREEMENT is made as of May 1, 1984 between Masco Corporation, a Delaware corporation ("Masco") and Masco Industries, Inc., a Delaware corporation ("Industries"), pursuant to that certain Masco Corporation Corporate Restructuring Plan, dated as of May 1, 1984 (the "Plan"). WHEREAS, pursuant to the Plan, Masco has transferred to Industries certain assets, and Industries is required to assume the liabilities pertaining thereto. NOW, THEREFORE, in consideration of such transfer and for other good and valuable consideration, the parties agree as follows: 1. Industries hereby agrees to assume, pay, perform, satisfy and discharge, when due, all of the obligations, liabilities and commitments of Masco and any of its subsidiaries arising out of or relating to any of the "Industries Assets" (as defined in the Plan) or any subsidiary directly or indirectly owned by a corporation included within the Industries Assets, as a result of any event, transaction, state of facts or occurrence existing or occurring on or prior to the "Transfer Date" (as defined in the Plan), whether such obligation, liability or commitment is known or unknown or fixed or contingent, and whether or not accrued or otherwise in existence at the Transfer Date. The obligations, liabilities and commitments assumed hereby include, without limitation, those: (i) Of Masco or any of its subsidiaries arising out of or relating to the operation of the businesses included within the Industries Assets, including all accounts payable incurred by Masco or any of its subsidiaries in respect of such businesses and all Federal income taxes on income earned by such businesses through April 30, 1984; (ii) Of Masco or any of its subsidiaries to their respective former employees who become Industries' or its subsidiaries' employees as of the Transfer Date, including liabilities for accrued salaries and payroll deductions, obligations to employees under collective bargaining agreements and obligations under vacation, pension and other retirement, health, life insurance and benefit plans and under applicable workers' and unemployment compensation laws; (iii) Of Masco or any of its subsidiaries existing with respect to contracts (including leases) arising out of or relating to the operation of the Industries Assets or any subsidiary directly or indirectly owned by a corporation included within the Industries Assets, to which Masco or any of its subsidiaries is a party and which Masco or any of its subsidiaries is assigning to Industries as of the Transfer Date; (iv) Of Masco or any of its subsidiaries or their respective officers, Directors or employees consisting of claims and litigation including product liability, warranty and other claims of whatever nature, whether or not pending, threatened or otherwise in existence as of the Transfer Date arising out of or relating to any of the Industries Assets or any subsidiary directly or indirectly owned by a corporation included within the Industries Assets; and (v) Of Industries and its subsidiaries reflected in the pro forma balance sheet of Industries as at March 31, 1984 a copy of which is attached as Exhibit 1.03(iii) to the Plan subject to such changes, if any, as have occurred subsequent to such date in the ordinary course of business (and including accrued interest of Industries on the Subordinated Debentures, as defined in the Plan, from January 1, 1984 to the Transfer Date notwithstanding the fact that such liability did not exist prior thereto). 2. Notwithstanding the provisions of Section I hereof, the following obligations, liabilities and commitments of Masco and its subsidiaries arising out of or relating to the Industries Assets or subsidiaries directly or indirectly owned by a corporation included within the Industries Assets are not being assumed by Industries but shall remain with Masco: (i) Those under the Masco 1971 and 1975 Stock Option Plans, the Masco Restricted Stock Incentive Plan and the Masco Restricted Stock (Industries) Incentive Plan (excluding unamortized cost of non-vested shares issued pursuant to either of these incentive plans which, pursuant to the Plan, is to be transferred to Industries), provided, however, that for purposes of Section 422A of the Internal Revenue Code, Industries hereby assumes the outstanding incentive stock options issued under the Masco 1975 Stock Option Plan which are held by employees of Masco or its subsidiaries who become solely employees of Industries or its subsidiaries as of the Transfer Date, which assumption shall be satisfied by delivering Masco shares received from Masco upon such a stock option exercise to the person exercising such option, and remitting option proceeds received therefor to Masco; (ii) Those under the Masco Corporation Salaried Employees' Pension Plan to persons who, as of the Transfer Date, are retired former employees of businesses included within the Industries Assets; and (iii) Those owing by Masco to the former stockholders of Arrow Specialty Company and Arrow Oil Tools, Inc. for the purchase by Masco of such corporations. 3. From and after the Transfer Date the Industries Assets shall be deemed operated for the benefit of Industries and its subsidiaries and, accordingly, all liabilities, obligations and commitments of Masco or any of its subsidiaries arising out of or relating to the Industries Assets after the Transfer Date shall be the sole responsibility of Industries and its subsidiaries. 4. Industries shall indemnify, defend and hold harmless Masco and its subsidiaries, and their respective officers, Directors, employees and shareholders from, against and with respect to any claim, liability, obligation, loss, damage, assessment, judgment, cost and expense (including, without limitation, reasonable attorney's fees and costs and expenses reasonably incurred in investigating, preparing, defending against or prosecuting any litigation or claim, action, suit, proceeding or demand), of any kind or character, arising out of or in any manner incident, relating or attributable to any actual or alleged failure of Industries to pay, perform, satisfy and discharge, when due, the obligations, liabilities and commitments of Masco and its subsidiaries assumed by Industries hereunder. 5. Masco shall give Industries prompt notice of any claim for which indemnification may be sought hereunder. Except for claims relating to income taxes, Industries shall at its own expense assume the defense of such claims with counsel of its choice; provided, however, that Industries shall not be entitled to settle any claim without the prior consent of Masco if at the time Masco then owns 20 percent or more of Industries Common Stock (as defined in the Plan), which consent shall not be unreasonably withheld. Masco shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at Masco's expense. If Masco shall have reasonably concluded that there may be defenses available to it which are not available to Industries, Industries shall not have the right to assert such different or additional defenses on behalf of Masco and the fees and expenses of Masco's own counsel shall be borne by Industries. 6. Masco shall have the right to control the defense of any claim relating to income taxes for which indemnification may be sought hereunder (whether pending on the Transfer Date or asserted thereafter), provided that Masco shall keep Industries apprised on the status thereof Masco shall not be entitled to settle any such action without the prior consent of Industries, which consent shall not be unreasonably withheld. If any such income tax claim results in a determination that an amount previously deducted by Masco was not an allowable deduction at the time, but would be at a later time an allowable deduction by Industries, Industries shall be obligated to indemnify Masco for the entire amount of additional income tax liability related thereto plus interest assessed thereon against Masco and such indemnification shall not be diminished in any way on account of any reserves for income taxes established on the books of Masco. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. MASCO CORPORATION MASCO INDUSTRIES, INC. By /s/ Wayne B. Lyon By /s/ Richard A. Manoogian ------------------ ------------------------ Executive Vice President President EX-10.6 4 0004.txt AMENDMENT NO. 1 TO RECEIVABLES TRANSFER AGREEMENT Execution Copy AMENDMENT No. 1 dated as of December 15, 2000 (this "Amendment"), to the Receivables Transfer Agreement referred to below among MTSPC, INC.,(the "Transferor"), MASCOTECH, INC. (the "Parent"), individually, as Collection Agent and as Guarantor, PARK AVENUE RECEIVABLES CORPORATION ("PARCO"), and EIFFEL FUNDING, LLC ("Eiffel") (collectively, the "CP Conduit Purchasers"), THE CHASE MANHATTAN BANK, as Committed Purchaser and Funding Agent for PARCO ("Chase"), CDC FINANCIAL PRODUCTS INC., as Committed Purchaser and Funding Agent for Eiffel ("CDC") (collectively, the "Committed Purchasers"), and THE CHASE MANHATTAN BANK, as Administrative Agent. A. The Transferor, the Collection Agent, the Guarantor, PARCO, Chase and the Administrative Agent have entered into a Receivables Transfer Agreement dated as of November 28, 2000 (the "Receivables Transfer Agreement"). B. The Transferor has asked to amend certain terms of the Receivables Transfer Agreement and to add Eiffel as a CP Conduit Purchaser and CDC as the Committed Purchaser and Funding Agent for Eiffel, and the Transferor, the Collection Agent, the Guarantor, PARCO and Chase are willing, on the terms and subject to the conditions set forth below, to amend the Receivables Transfer Agreement as provided herein. C. In connection with the addition of Simpson Industries, Inc. ("Simpson") as a Seller party to the Receivables Purchase Agreement, the Transferor has requested an increase in the Facility Limit from $175,000,000 to $225,000,000 and an increase in the Aggregate Commitment from $178,500,000 to $229,500,000. D. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Receivables Transfer Agreement. 2 Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Schedule A of the Receivables Transfer Agreement. (a) The definition of "CP Conduit Purchaser's Termination Event" with respect to Eiffel shall mean: "Any Program Support Provider of Eiffel has given notice that an event of termination or event of default has occurred and is continuing under its agreement with Eiffel." (b) The proviso at the end of the definition of "CP Rate" is hereby amended to read in its entirety as follows: "provided, that to the extent that such CP Tranche is funded by a specific issuance of such Pooled Funding CP Conduit Purchaser's Commercial Paper, the "CP Rate" may, in such Pooled Funding CP Conduit Purchaser's sole discretion, equal the rate or weighted average of the rates applicable to such issuance." (c) The definition of "Net Receivables Balance" is hereby amended to read in its entirety as follows: "Net Receivables Balance" shall mean, at any time, the aggregate Outstanding Balance of the Eligible Receivables at such time, as reduced by the aggregate amount for all Designated Obligors by which the Outstanding Balance of all Eligible Receivables of each Designated Obligor exceeds the product of the Concentration Factor for such Designated Obligor multiplied by the Outstanding Balance of all Eligible Receivables. SECTION 2. Amendments to Schedule B of the Receivables Transfer Agreement. Schedule B of the Receivables Transfer Agreement is hereby amended to read in its entirety as set forth in Schedule B attached to this Amendment. Schedule B is hereby amended to add Eiffel as a CP Conduit Purchaser and CDC as the Committed Purchaser and Funding Agent for Eiffel. From and after the Effective Date (as hereinafter defined) the "CP Conduit Funding Limit" of each CP Conduit Purchaser and the "Commitment" of 3 each Committed Purchaser shall be as specified on Schedule B attached hereto. Eiffel hereby agrees to become a CP Conduit Purchaser and CDC hereby agrees to become the Committed Purchaser and Funding Agent for Eiffel. SECTION 3. Further Amendments to the Receivables Transfer Agreement. (a) Amendment to Section 2.03. Section 2.03 of the Receivables Transfer Agreement is hereby amended by adding the following new subsection (e) at the end of such Section: "(e) Transfer of Transferred Interest to Certain Program Support Providers. If any Pooled Funding CP Conduit Purchaser assigns, participates or otherwise transfers any portion of the Transferred Interest to a Program Support Provider who is not a Committed Purchaser, such portion of the Transferred Interest shall be treated as a Eurodollar Tranche unless the applicable Tranche Rate would, without regard to this Section 2.03(e), be calculated by reference to the Base Rate." (b) Amendment to Section 10.06. Section 10.06 of the Receivables Transfer Agreement is hereby amended by adding the following sentence at the end of Section 10.06(a): "Each CP Conduit Purchaser may assign, participate, grant security interests in or otherwise transfer all or any portion of the Transferred Interest to any Program Support Provider with respect to such CP Conduit Purchaser without prior notice to or consent from any other party or any other condition or restriction of any kind." SECTION 4. Representations and Warranties. Each of the Transferor and the Parent, individually, as Collection Agent and as Guarantor, hereby represents and warrants to the Administrative Agent, the Funding Agents, the CP Conduit Purchasers and the Committed Purchasers, on and as of the date hereof, and after giving effect to this Amendment, that: (a) This Amendment has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms. 4 (b) The representations and warranties set forth in Article III of the Receivables Transfer Agreement are true and correct in all material respects on and as of the date hereof with the same effect as though made on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date. (c) No Termination Event or Potential Termination Event has occurred and is continuing. SECTION 5. Effectiveness. This Amendment shall become effective on the first date (the "Effective Date") on which each of the following conditions shall have been satisfied: (a) the Administrative Agent shall have received duly executed counterparts of this Amendment signed by the Transferor, the Parent, the Collection Agent, the Guarantor, PARCO, Eiffel, Chase, CDC and the Administrative Agent; (b) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by an authorized officer of the Transferor, confirming the representations and warranties set forth in paragraphs (b) and (c) of Section 4; (c) The Administrative Agent shall have received an opinion of counsel to the Transferor and the Parent addressed to the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents, to the effect set forth in Section 4(a); and (d) All the conditions precedent to the addition of Simpson as a Seller specified in Section 7.02 of the Receivables Purchase Agreement shall have been satisfied. SECTION 6. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. SECTION 7. Expenses. The Transferor shall pay all out-of-pocket fees and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including the fees, disbursements and other charges of Cravath, Swaine & Moore, counsel for the Administrative Agent. 5 SECTION 8. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which, when taken together, shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by fax shall be as effective as delivery of a manually executed counterpart of this Amendment. SECTION 9. Headings. Section headings used herein are for convenience of reference only, are not part of this Amendment and are not to affect the construction of, or to be taken into consideration in interpreting, this Amendment. SECTION 10. Effect of Amendment. Except as specifically amended or modified hereby, the Receivables Transfer Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereinafter", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Receivables Transfer Agreement as amended hereby. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. MTSPC, INC., as Transferor by /s/ David B. Liner ------------------------------- Name: David B. Liner Title: Secretary MASCOTECH, INC., individually, as Collection Agent and as Guarantor by /s/ David B. Liner -------------------------------- Name: David B. Liner Title: Vice President PARK AVENUE RECEIVABLES CORPORATION, as CP Conduit Purchaser by /s/ Kevin P. Burns -------------------------------- Name: Kevin P. Burns Title: Vice President THE CHASE MANHATTAN BANK, as Committed Purchaser for Park Avenue Receivables Corporation, by /s/ Bradley S. Schwartz -------------------------------- Name: Bradley S. Schwartz Title: Managing Director THE CHASE MANHATTAN BANK, as Funding Agent for Park Avenue Receivables Corporation, by /s/ Lara Graff -------------------------------- Name: Lara Graff Title: Vice President THE CHASE MANHATTAN BANK, as Administrative Agent, by /s/ Lara Graff -------------------------------- Name: Lara Graff Title: Vice President EIFFEL FUNDING LLC, as CP Conduit Purchaser by Global Securitization Services, LLC, its Manager by /s/ Bernard J. Angelo -------------------------------- Name: Bernard J. Angelo Title: Vice President CDC FINANCIAL PRODUCTS INC., as Committed Purchaser for Eiffel Funding, LLC by /s/ N. Mumford -------------------------------- Name: N. Mumford Title: Managing Director by /s/ Ramine Rouhani -------------------------------- Name: Ramine Rouhani Title: Managing Director CDC FINANCIAL PRODUCTS, INC., as Funding Agent for Eiffel Funding, LLC by /s/ N. Mumford -------------------------------- Name: N. Mumford Title: Managing Director by /s/ Ramine Rouhani -------------------------------- Name: Ramine Rouhani Title: Managing Director SCHEDULE B Schedule of CP Conduit Purchasers, Committed Purchasers and Funding Agents CP CONDUIT PURCHASERS: - -------------------------------------------------------------------------------- NAME & ADDRESS FOR NOTICES CP CONDUIT FUNDING LIMIT - -------------------------------------------------------------------------------- Park Avenue Receivables Corporation $150,000,000 c/o Global Securitization Services, LLC 114 West 47th Street, Suite 1715 New York, NY 10036 Attention: President Telephone: (212) 302-5151 Fax: (212) 302-8767 - -------------------------------------------------------------------------------- Eiffel Funding, LLC $75,000,000 c/o Global Securitization Services, LLC 115 West 47th Street Suite 1715 New York, New York 10036 Attn: Andrew Stidd Telephone: (212) 302-8330 Fax: (212) 302-8767 - -------------------------------------------------------------------------------- Total Facility Limit: $225,000,000 - --------------------- COMMITTED PURCHASERS: - -------------------------------------------------------------------------------- NAME & ADDRESS FOR NOTICES COMMITMENT - -------------------------------------------------------------------------------- The Chase Manhattan Bank, as Committed Purchaser for $153,000,000 Park Avenue Receivables Corporation 450 West 33rd Street, 15th Floor New York, NY 10011 Attention: Lara Graff CMFS-PARCO Telephone: (212) 946-3748 Fax: (212) 946-8098 - -------------------------------------------------------------------------------- CDC Financial Products, Inc. as Committed Purchaser $76,500,000 for Eiffel Funding, LLC 9 West 57th Street New York, New York 10019 Attention: Michael Sista Telephone: (212) 891-6121 Fax: (212) 891-3335 - -------------------------------------------------------------------------------- Total Aggregate Commitment: $229,500,000 - -------------------------- FUNDING AGENTS: - -------------------------------------------------------------------------------- NAME & ADDRESS FOR NOTICES - -------------------------------------------------------------------------------- The Chase Manhattan Bank, as Funding Agent for Park Avenue Receivables Corporation 450 West 33rd Street, 15th Floor New York, NY 10011 Attention: Lara Graff CMFS-PARCO Telephone: (212) 946-3748 Fax: (212) 946-8098 - -------------------------------------------------------------------------------- CDC Financial Products, Inc. as Funding Agent for Eiffel Funding, LLC 9 West 57th Street New York, New York 10019 Attention: Michael Sista Telephone: (212) 891-6121 Fax: (212) 891-3335 - -------------------------------------------------------------------------------- EX-10.7 5 0005.txt MASTER LEASE AGREEMENT ================================================================================ MASTER LEASE AGREEMENT dated as of December 21, 2000 between GENERAL ELECTRIC CAPITAL CORPORATION, as Lessor, and SIMPSON INDUSTRIES, INC., as Lessee ================================================================================ TABLE OF CONTENTS PAGE 1. LEASING..............................................................1 2. TERM, RENT AND PAYMENT...............................................2 3. EARLY TERMINATION....................................................3 4. TAXES................................................................5 5. REPORTS..............................................................5 6. DELIVERY, USE AND OPERATION..........................................6 7. MAINTENANCE..........................................................9 8. CASUALTY OCCURRENCE..................................................9 9. LOSS OR DAMAGE.......................................................9 10. INSURANCE...........................................................10 11. RETURN OF EQUIPMENT.................................................12 12. DEFAULT; REMEDIES...................................................14 13. ASSIGNMENT..........................................................16 14. NET LEASE; NO SET-OFF, ETC..........................................16 15. INDEMNIFICATION.....................................................17 16. DISCLAIMER..........................................................18 17. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE.................19 18. INTENT; TITLE.......................................................21 19. PURCHASE AND RENEWAL OPTIONS........................................22 20. MISCELLANEOUS.......................................................22 21. CHOICE OF LAW; JURISDICTION.........................................24 22. CHATTEL PAPER.......................................................25 23. DEFINITIONS.........................................................25 EXHIBIT NO. 1 - EQUIPMENT SCHEDULE ANNEX A - DESCRIPTION OF EQUIPMENT ANNEX B - BILL OF SALE ANNEX C - CERTIFICATE OF ACCEPTANCE ANNEX D - STIPULATED LOSS VALUE TABLE ANNEX E - ESTOPPEL/WAIVER AGREEMENT -i- MASTER LEASE AGREEMENT THIS MASTER LEASE AGREEMENT, dated as of December 21, 2000 ("Agreement"), between GENERAL ELECTRIC CAPITAL CORPORATION with an office at 401 Merritt Seven, Second Floor, Norwalk, Connecticut 06856 (hereinafter called, together with its successors and assigns, if any, "Lessor"), and SIMPSON INDUSTRIES, INC., a Michigan corporation with its mailing address and chief place of business at 47603 Halyard Drive, Plymouth, Michigan 48170-2429 (hereinafter called "Lessee"). WITNESSETH: 1. LEASING (a) This Agreement shall be effective from and after the date of execution hereof. Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the Equipment described in Annex A to any schedule executed pursuant hereto in substantially the form attached hereto as Exhibit No. 1 (collectively, the "Schedule"). Terms defined in a Schedule and not otherwise defined herein shall have the meanings ascribed to them in such Schedule. Certain definitions are provided in Section 23 hereof. (b) The obligation of Lessor to purchase the Equipment from Lessee and to lease the same to Lessee shall be subject to satisfaction of the following conditions, on or prior to the Basic Term Commencement Date: (i) Receipt by Lessor of the following documents in form and substance satisfactory to Lessor: (1) a Schedule relating to the Equipment then to be leased hereunder, (2) a Bill of Sale, in the form of Annex B to the applicable Schedule, in favor of Lessor, (3) the Guaranty, duly executed by Guarantor in favor of Lessor, and (4) an Estoppel/Waiver Agreement in the form of Annex E to the applicable Schedule, executed by each landlord and/or mortgagee, if any, with respect to each Equipment Location (as specified in the applicable Schedule); (ii) Evidence of insurance which complies with the requirements of Section 10 hereof; (iii) An appraisal in form and substance, and by an appraiser, satisfactory to Lessor, with respect to the Equipment to be acquired from Lessee then to be leased hereunder; (iv) A certificate dated such date signed by the Secretary of Lessee confirming (x) that attached thereto is (1) a long form good standing certificate dated as of the most recent practical date prior to such Base Term Commencement Date issued by the Secretary of State of Michigan attesting to the good standing of Lessee in its jurisdiction of incorporation, (2) a true and correct copy of the charter and by-laws (together with amendments thereto if applicable) of Lessee as in effect at all times immediately prior to the date of the resolutions referred to in clause (3) through to such Base Term Commencement Date and (3) resolutions of the board of directors of Lessee authorizing the execution, delivery and performance of the Documents by Lessee, (y) that (1) the resolutions referred to in clause (3) above were duly adopted, are in full force and effect on such Base Term Commencement Date and have not been amended, modified, revoked or rescinded prior to such date and (2) all conditions for the effective application of such resolutions to the transactions contemplated by this Lease have been satisfied, and (z) the incumbency and signature of each officer executing any Document on behalf of Lessee; (v) No Default and no event, which with the lapse of time or the giving of notice, shall constitute a Default, shall have occurred and be continuing, no Casualty Occurrence shall have occurred and the representations and warranties of Lessee herein are true and correct of as of such Base Term Commencement Date, and Lessor shall have received a certificate dated such date signed by a Responsible Officer of Lessee to such effect; (vi) Uniform Commercial Code financing statements, naming Lessee as debtor and Lessor as secured party, shall have been filed in all jurisdictions where it is necessary and desirable in the reasonable opinion of Lessor to so file so as to perfect and protect Lessor's interest in the Equipment; (vii) The chattel paper counterpart of this Agreement and each Lease Supplement shall have been delivered to Lessor; (viii) No material adverse change shall have occurred in the financial condition of Lessee and its subsidiaries, taken as a whole, and MascoTech and its subsidiaries, taken as a whole, from that previously disclosed to Lessor; and (ix) Such opinions, certificates, lien releases, consents, notices and other documents as Lessor may reasonably request. Simultaneously with the execution of the Bill of Sale, Lessee shall also execute a Certificate of Acceptance, in the form of Annex C to the applicable Schedule, covering all of the Equipment described in the Bill of Sale. Upon execution by Lessee of any Certificate of Acceptance, the Equipment described thereon shall be deemed to have been delivered to, and irrevocably accepted by, Lessee for lease hereunder. 2. TERM, RENT AND PAYMENT (a) The Rent payable hereunder and Lessee's right to use the Equipment shall commence on the date of execution by Lessee of the Certificate of Acceptance for such Equipment ("Basic Term Commencement Date"). The term of this Agreement (the "Term") shall be the period specified in the applicable Schedule. If any Term is extended, the word "Term" -2- shall be deemed to refer to all extended terms, and all provisions of this Agreement shall apply during any extended terms, except as otherwise may be specifically provided in writing. (b) Rent shall be paid to Lessor by wire transfer of immediately available funds to: Bankers Trust New York, New York, New York 10006, Account No. 50-202-962, ABA No. 021-001-033, or to such other account as Lessor may direct in writing; and shall be effective upon receipt. Payments of periodic Rent shall be in the amount set forth in, and due and allocated in accordance with, the provisions of the applicable Schedule. In no event shall any Rent payments be refunded to Lessee. 3. EARLY TERMINATION (a) So long as no Default shall have occurred and be continuing, at any time during the Term, Lessee may, but not more than twice in any fiscal year, upon 90 days' prior written irrevocable notice to Lessor, terminate this Agreement with respect to any one or more Units of Equipment (each, an "Affected Unit"), if Lessee certifies by a certificate of Lessee's Chief Financial Officer to Lessor that each such Affected Unit has become economically obsolete or is surplus to Lessee's and Guarantor's needs; provided however, that prior to the second anniversary of the Basic Term Commencement Date, the aggregate value of such Units (measured by Capitalized Cost) subject to termination shall not exceed $5,000,000.00. The termination shall become effective on any Rent Payment Date selected by Lessee occurring at least 90 days after such notice (the "Termination Date"). (b) In the case of a termination described in paragraph (a) above, at any time within 45 days after notice from Lessee of its election to terminate this Lease with respect to any such Affected Unit, Lessor may give Lessee notice of its election to retain such Affected Unit. If Lessor shall have elected to retain any such Affected Unit in accordance with the preceding sentence, on the Termination Date Lessee shall pay to Lessor any periodic Rent due with respect to such Affected Unit as of such Termination Date and any other Rent due on or prior to such Termination Date, but will not be required to pay Stipulated Loss Value with respect to such Affected Unit. On such Termination Date Lessee shall deliver such Affected Unit to Lessor pursuant to the requirements of Section 11 (but without regard to the time periods set forth in Section 11), and such Affected Unit shall cease to be leased hereunder. (c) In the case of a termination described in paragraph (a) above with respect to any Affected Unit, during the period from the giving of such notice of termination until 10 Business Days prior to the Termination Date and so long as Lessor shall not have exercised its option pursuant to paragraph (b) above to retain any Affected Unit, Lessee, as agent for Lessor and at Lessee's expense, shall use commercially reasonable efforts to obtain the highest possible bids from Persons other than, except with the prior consent of Lessor, Lessee, Guarantor or their Affiliates to purchase such Affected Unit on the Termination Date. Lessee shall notify Lessor in writing, at least 10 Business Days prior to the Termination Date, of the amount and terms of each such bid that has theretofore been submitted and the name and address of the party submitting such bid. Lessee shall certify to Lessor that such bidder is not an Affiliate of Lessee or Guarantor (unless previously consented to by Lessor). Each such bid shall be a bona fide bid for payment in full in cash (such a bid is referred to herein as a "Qualifying Bid"). Lessee shall deliver to Lessor, on reasonable request, periodic reports of Lessee's progress in finding a bidder -3- for each Affected Unit subject to the termination notice. Lessor shall have the right, directly or through agents or brokers, to solicit bids, but shall be under no duty to solicit bids or to inquire into the efforts of Lessee to obtain bids. If Lessor has not elected to retain such Affected Unit pursuant to paragraph (b) above and no Qualifying Bids are received as of the Termination Date, this Lease shall continue in full force and effect as to such Affected Unit, notwithstanding Lessee's prior written notice pursuant to paragraph (a) above. Such continuation shall not constitute a revocation pursuant to paragraph (a) above nor prejudice in any way Lessee's right to terminate the Lease as of a later date as to such Affected Unit. (d) If (i) Lessee shall have received a Qualifying Bid on or prior to the tenth Business Day before the Termination Date, and (ii) Lessor shall have received from Lessee notice of the highest Qualifying Bid and shall have received from the bidder that shall have submitted the highest Qualifying Bid for each such Affected Unit immediately available funds of the amount specified in such bid, Lessor shall on the Termination Date, subject to the receipt of the amounts payable pursuant to paragraph (e) hereof, transfer to such bidder all of Lessor's right, title and interest to such Affected Unit AS-IS, WHERE-IS without representation or warranty except as to the absence of any liens on such Affected Unit. On such Termination Date, Lessee shall deliver such Affected Unit to the purchasing bidder pursuant to the requirements of Section 11 (to the extent required by the bidder, but without regard to the time periods set forth in Section 11), and such Affected Unit shall cease to be leased hereunder. Any funds received by Lessee for such Affected Unit shall be immediately paid over to Lessor without deduction, set-off or adjustment of any kind. Lessee and Lessor shall execute and deliver such documents evidencing such transfer and take such further action as the purchaser shall reasonably request. Lessee shall pay, on an after-tax basis, all reasonable costs and expenses incurred by Lessor in connection with any transfer of, or attempt to find a Qualifying Bid for, the Affected Unit pursuant to this Section 3. (e) In the case of any termination described in paragraph (a) above with respect to any Affected Unit, unless Lessor has elected to retain such Affected Unit being terminated pursuant to paragraph (b) above on the Termination Date, Lessee shall pay to Lessor the sum of: (i) any periodic Rent due with respect to the Equipment as of such Termination Date; plus (ii) any other Rent due and unpaid as of such Termination Date (including any amounts for reasonable costs and expenses payable by Lessee as required by paragraph (d) above; plus (iii) the excess, if any, of (1) the Stipulated Loss Value of such Affected Unit as of such Termination Date over (2) the net proceeds actually realized on any sale thereof and paid over to Lessor, as the case may be, pursuant to paragraph (d) above. Upon payment by Lessee of all required amounts as to such Affected Unit, the obligation of Lessee to pay Rent with respect to such Affected Unit shall terminate, such Affected Unit shall no longer be subject to this Agreement and the Term with respect to such Affected Unit shall terminate. -4- 4. TAXES Except as provided in Section 15(c) hereof, Lessee shall have no liability for taxes imposed by the United States of America or any State or political subdivision thereof which are on or measured by the net income or profit of Lessor. Lessee shall report (to the extent that it is legally permissible) and pay prior to delinquency, subject to Lessee's right to contest the same in accordance with clause (iii) of the definition of Permitted Lien, all other taxes, fees and assessments due, imposed, assessed or levied against any Equipment (or the purchase, ownership, delivery, leasing, possession, use or operation thereof), this Agreement (or any Rents or receipts hereunder), any Schedule, Lessor or Lessee by any foreign, United States federal, state or local government or taxing authority in any of the foregoing during or related to the term of this Agreement, including, without limitation, all license and registration fees, and all sales, use, personal property, excise, gross receipts, value added, franchise, stamp or other taxes, imposts, duties and charges, other than those taxes contemplated in the first sentence of this Section 4, together with any penalties, fines or interest thereon (all hereinafter called "Taxes"). Lessee shall (i) reimburse Lessor (on an after-tax basis) upon receipt of written request for reimbursement for any Taxes charged to or assessed against Lessor, (ii) on request of Lessor, submit to Lessor written evidence of Lessee's payment of Taxes, (iii) on all reports or returns show the ownership of the Equipment by Lessor, and (iv) send a copy thereof to Lessor. At Lessor's request, Lessee, as Lessor's agent (pursuant to an Agency Agreement to be agreed upon), shall pay directly any such taxes imposed. 5. REPORTS (a) Lessee will notify Lessor in writing, within 10 days after obtaining actual knowledge, or after Lessee shall have received written notice of the attachment of any tax or other Lien against any Equipment, of the full particulars thereof and of the location of such Equipment on the date of such notification. (b) Lessee will deliver to Lessor, within 95 days of the close of each fiscal year of MascoTech, MascoTech's consolidated balance sheet and profit and loss statement, prepared in accordance with generally accepted accounting principles consistently applied ("GAAP") certified by a recognized firm of certified public accountants, together with statements consolidating Guarantor and MascoTech and, if applicable, MascoTech's Form 10K filed with the Securities and Exchange Commission ("SEC"). Lessee will deliver to Lessor quarterly, within 50 days of the close of each of the first three fiscal quarters of Lessee, in reasonable detail, copies of MascoTech's quarterly financial report certified by the chief financial officer of MascoTech, together with, if applicable, MascoTech's Form 10Q filed with the SEC. (c) Lessee will promptly and fully report to Lessor in writing if any Unit of Equipment is lost or damaged (where the estimated repair costs would exceed the greater of 10% of its then fair market value or $50,000), or is otherwise involved in an accident causing personal injury or property damage, excluding claims for worker's compensation. (d) Within 30 days after any request by Lessor and in connection with any financial statement delivered pursuant to paragraph (b) above, Lessee will furnish a certificate of an authorized officer of Lessee stating that he has reviewed the activities of Lessee and that, to the -5- best of his knowledge, there exists no Default or event which, with the giving of notice or the lapse of time (or both), would become a Default. (e) Lessee will deliver to Lessor copies of all notices, statements, reports and other items required to be delivered by Lessee under the Credit Agreement pursuant to Sections 5.01 (other than clause (ii) of Section 5.01(d)) and 5.02 thereof, or under any comparable section in any successor credit agreement. (f) Lessee will comply with Section 17(b)(ii) within 120 days of the Basic Term Commencement Date and will provide Lessor with a written report of the identification numbers applicable to each Unit. 6. DELIVERY, USE AND OPERATION (a) The parties acknowledge that this is a sale/leaseback transaction and the Equipment is in Lessee's possession as of the Basic Term Commencement Date. (b) Lessee agrees that the Equipment will be used by Lessee solely in the conduct of its business and in a manner complying with all Applicable Laws and any applicable insurance policies, and Lessee shall not permanently discontinue use of the Equipment. (c) Lessee shall not directly or indirectly create, incur, assume or suffer to exist, any Lien on or with respect to the Equipment or any part thereof, title thereto, or any interest of Lessor therein, or in this Agreement, except Permitted Liens. Lessee will promptly, at its own expense, take or cause to be taken such action as may be necessary to discharge any Lien with respect to the Equipment which is not a Permitted Lien. (d) Lessee shall permit any Person designated by Lessor, during normal business hours upon reasonable notice to visit, inspect and survey the Equipment, its condition, use and operation, and the records maintained in connection therewith. None of Lessor or any of its designees shall have any duty to make any such inspection and shall not incur any liability or obligation by reason of not making any such inspection. The failure of any such party to object to any condition or procedure observed or observable in the course of an inspection hereunder shall not be deemed to waive or modify any of the terms of this Agreement with respect to such condition or procedure. (e) Lessee will keep each Unit at the Equipment Location specified in the applicable Schedule and will not move any Unit from such Equipment Location unless the following conditions shall have been satisfied: (i) No Default shall have occurred and be continuing; (ii) Such new location shall be a manufacturing facility of Lessee or Guarantor or a Subsidiary of Guarantor located in the continental United States (excluding Alaska); (iii) Lessee shall, not less than 10 Business Days prior to such relocation, inform Lessor in writing of the following: -6- (1) The address of such new location, including, the state and county, (2) Whether the new location is a manufacturing facility of Lessee or Guarantor or a Subsidiary of Guarantor, and if the latter, all pertinent information regarding such Subsidiary, and (3) The name and address of fee owner and any lessee, sublessees and mortgagee's of such new location, all in reasonable detail, (iv) If such new location is not a manufacturing facility of Lessee, then Lessee shall provide a fully executed sublease or license of such Unit from Lessee to such Subsidiary or to Guarantor, in form and substance satisfactory to Lessor, pursuant to which, inter alia, Subsidiary or Guarantor obtains lawful possession of such Unit, acknowledges that its rights to such Unit are subject and subordinate in all respects to the rights of Lessee under this Agreement, and agrees to perform all of the relevant maintenance obligations of Lessee in respect of such Unit; (v) If such new location is subject to a lease or mortgage, Lessee shall deliver to Lessor a fully executed Estoppel/Waiver, in form of Annex E hereto or otherwise in substance satisfactory to Lessor, from each owner, landlord or mortgagee having an interest in such new location; (vi) During the Term, no more than 10% of the Equipment described on any Schedule (measured by Capitalized Cost) shall be relocated; and (vii) Lessee shall have made all filings, including Uniform Commercial Code financing statements, necessary or appropriate to protect the interests of Lessor in the such at such new location. Lessee will notify Lessor in writing on a quarterly basis the location of all Units as of such date. Lessee shall pay, on an after-tax basis, all costs and expenses (including reasonable attorneys' fees and disbursements) incurred by Lessor and for all taxes, fees and other governmental charges payable in connection with any relocation of any Unit pursuant to this Section 6(e). (f) All Equipment shall at all times remain personal property of Lessor regardless of the degree of its annexation to any real property and shall not by reason of any installation in, or affixation to, real or personal property become a part thereof. Lessee shall obtain and deliver to Lessor (to be recorded at Lessee's expense) from any Person having an interest in the property where the Equipment is to be located, waivers of any Lien, encumbrance or interest which such Person might have or hereafter obtain or claim with respect to the Equipment. (g) Lessee may from time to time substitute an item of equipment (a "Replacement Unit") for one or more Units (collectively, the "Old Unit") (all such substitutions done at the same time shall be considered a "Substitution") subject to satisfaction of the following conditions: (i) No Default shall have occurred and be continuing; -7- (ii) Lessee shall, not less than 10 Business Days prior to such substitution, inform Lessor in writing of the following: (1) The location and description of the Old Unit; and (2) A description of each Replacement Unit, including its date of manufacture, original cost, estimated current market value and function; (iii) Lessee shall be effecting such substitution solely for the purpose of either moving the replaced Unit to Alaska or outside the continental United States or to the manufacturing facility of a supplier of Lessee or any of its Affiliates or because such Unit has become economically obsolete or is surplus to Lessee's or Guarantor's needs, and Lessor shall have received a certificate of an officer of Lessee to such effect; (iv) The Replacement Unit (A) is of like-kind with the Old Unit, (B) has a fair market and estimated residual value, utility and remaining economic useful life at least equal to the fair market and estimated residual value, utility and remaining useful life of the Old Unit, assuming such Old Unit has been maintained in the condition required by this Agreement, and (C) is of the same or newer date of manufacture as the replaced Part; (v) Lessor shall have received a duly executed full warranty bill of sale for such Replacement Unit and title to such Unit shall have vested in Lessor, free and clear of all Liens; (vi) Lessor shall have received duly executed amendment to the applicable Schedule confirming such substitution; (vii) Lessee shall make all filings necessary to protect the interests of Lessor in such Replacement Unit concurrently with consummating such substitution; (viii) No more than two Substitutions pursuant to this paragraph (g) shall have occurred during any fiscal year; (ix) Such substitution shall be qualified as a "like-kind exchange" under section 1031 of the Code, and Lessor shall have received a legal opinion from its counsel to such effect; (x) During the Term, Lessee may not substitute more than 10% of the Equipment per Schedule, measured by Capitalized Cost. Upon conveyance of the Replacement Unit to Lessor and compliance with the requirements of this paragraph above, the Replacement Unit shall become the property of Lessor and the Old Unit shall become property of Lessee. For all purposes hereof, the Replacement Unit shall, after such transfer, be deemed to have the Capitalized Cost as the Old Unit. No such substitution shall result in any change in Basic Rent. Lessee shall pay, on an after-tax basis, all costs and expenses (including reasonable attorneys' fees and disbursements) incurred by Lessor and for all taxes, fees and other governmental charges payable in connection with the substitution of Equipment pursuant to this Section 6(g). -8- 7. MAINTENANCE (a) Lessee will, at its sole expense, maintain, service, test and inspect each Unit of Equipment (i) so as to keep such Unit of Equipment in good operating order, repair, condition and appearance, normal wear and tear excepted, (ii) in accordance with manufacturer's recommendations, and so as to maintain in full force and effect any maintenance warranties, (iii) in compliance with applicable law and the requirements of insurance, (iv) at a standard consistent with industry practices, and (v) in all events not less than Lessee's standard practices for similar equipment owned or leased by Lessee. Subject to Section 5(f), Lessee shall, if at any time reasonably requested by Lessor, affix in a prominent position on each Unit of Equipment plates, tags or other identifying labels showing the interest therein of Lessor. (b) Lessee will not, without the prior consent of Lessor, affix or install any accessory, equipment or device on any Equipment if such addition will impair the value, originally intended function or use of such Equipment. All additions, repairs, parts, supplies, accessories, equipment, and devices furnished, attached or affixed to any Equipment which are not readily removable shall be made only in compliance with applicable law, including Internal Revenue Service guidelines, e.g. Rev. Proc. 79-48, shall be free and clear of all Liens other than Permitted Liens and shall become the property of Lessor. Lessee will not, without the prior written consent of Lessor and subject to such conditions as Lessor may impose for its protection, affix or install any Equipment to or in any other personal or real property such that it would become a real property fixture for purposes of the UCC. (c) Any alterations or modifications to the Equipment that may, at any time during the term of this Agreement, be required to comply with any Applicable Law shall be made at the expense of Lessee, and shall be free and clear of all Liens and shall immediately become the property of Lessor. 8. CASUALTY OCCURRENCE Lessee shall promptly and fully notify Lessor in writing if any Unit of Equipment shall be or become worn out, lost, stolen, destroyed, irreparably damaged in the reasonable determination of Lessee, or permanently rendered unfit for use from any cause whatsoever (such occurrences being hereinafter called "Casualty Occurrences"). On the Rent Payment Date next succeeding a Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (x) the Stipulated Loss Value of such Unit calculated in accordance with Annex D as of the Rent Payment Date next preceding such Casualty Occurrence ("Calculation Date"); and (y) all Rent and other amounts which are due hereunder as of the Payment Date. Upon payment of all sums due hereunder, the obligation of Lessee to pay Rent and the term of this lease as to such Unit shall terminate and (except in the case of the loss, theft or complete destruction of such Unit) Lessor shall be entitled to recover possession of such Unit. 9. LOSS OR DAMAGE Lessee hereby assumes and shall bear the entire risk of any loss, theft, damage to, or destruction of, any Unit of Equipment from any cause whatsoever from the time the Equipment is shipped to Lessee. -9- 10. INSURANCE (a) Coverage. Without limiting any of the other obligations or liabilities of Lessee under this Agreement, Lessee shall, during the term of this Agreement, carry and maintain, with respect to Equipment, at its own expense, at least the minimum insurance coverage set forth in this Section 10. Lessee shall also carry and maintain any other insurance that Lessor may reasonably require from time to time. All insurance carried pursuant to this Section 10 shall be placed with such insurers having a minimum A.M. Best rating of A:X, and be in such form, with terms, conditions, limits and deductibles as shall be acceptable to Lessor. (i) All Risk Property Insurance. Lessee shall maintain, all risk property insurance covering the Equipment against physical loss or damage, including but not limited to fire and extended coverage, collapse, flood, earth movement and comprehensive boiler and machinery coverage (including electrical malfunction and mechanical breakdown). Coverage shall be written in the greater of the then current Stipulated Loss Value or replacement cost value in an amount acceptable to Lessor. Such insurance policy shall contain an agreed amount endorsement waiving any coinsurance penalty and shall include expediting expense coverage in an amount not less than $1,000,000; (ii) Business Interruption Insurance. As an extension of the insurance required under subsection (a)(i), Lessee shall maintain, or cause to be maintained, business interruption insurance in an agreed amount equal to 12 months projected net profits, and continuing expenses (including the lease payments due on the Equipment); (iii) Comprehensive General Liability Insurance. Lessee shall maintain comprehensive general liability insurance written on an occurrence basis with a limit of not less than $1,000,000. Such coverage shall include, but not be limited to, premises/operations, broad form contractual liability, independent contractors, products/completed operations, property damage and personal injury liability. Such insurance shall not contain an exclusion for punitive or exemplary damages where insurable by law; (iv) Workers' Compensation/Employer's Liability. Lessee shall maintain (i) Workers' Compensation insurance in accordance with statutory provisions covering accidental injury, illness or death of an employee of Lessee while at work or in the scope of his employment with Lessee and (ii), Employer's Liability in an amount not less than $1,000,000. Such coverage shall not contain any occupational disease exclusions; and (v) Excess/Umbrella Liability. Lessee shall maintain excess or umbrella liability insurance written on an occurrence basis in an amount not less than $25,000,000 providing coverage limits excess of the insurance limits required under sections (a)(iii), and (a)(iv) employer's liability only. Such insurance shall follow form the primary insurances and drop down in case of exhaustion of underlying limits and/or aggregates. Such insurance shall not contain an exclusion for punitive or exemplary damages where insurable under law. -10- (b) Endorsements. Lessee shall cause all insurance policies carried and maintained in accordance with this Section 10 to be endorsed as follows: (i) Lessee shall be the named insured and Lessor shall be an additional named insured and sole loss payee as its interest may appear with respect to the Equipment covered by property policies described in subsection (a)(i). Lessee shall be the named insured and Lessor shall be an additional insured with respect to liability policies described in subsections (a)(iii), (a)(iv) to the extent allowed by law and (a)(v). It shall be understood that any obligation imposed upon Lessee, including but not limited to the obligation to pay premiums, shall be the sole obligation of Lessee and not that of Lessor; (ii) With respect to property policies described in subsections (a)(i) and (a)(ii), the interests of Lessor shall not be invalidated by any action or inaction of Lessee or any other person, and shall insure Lessor regardless of any breach or violation by Lessee or any other person, of any warranties, declarations or conditions of such policies; (iii) Inasmuch as the liability policies are written to cover more than one insured, all terms conditions, insuring agreements and endorsements, with the exception of the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured; (iv) The insurers thereunder shall waive all rights of subrogation against Lessor any right of setoff or counterclaim and any other right to deduction, whether by attachment or otherwise. (v) Such insurance shall be primary without right of contribution of any other insurance carried by or on behalf of Lessor with respect to their interests as such in the Equipment; and (vi) If such insurance is canceled for any reason whatsoever, including nonpayment of premium, or any changes are initiated by Lessee or the carrier which affect the interests of Lessor, such cancellation or change shall not be effective as to Lessor until 30 days, except for non-payment of premium which shall be 10 days, after receipt by Lessor of written notice sent by registered mail from such insurer. (c) Certifications. On the Base Lease Commencement Date with respect to the Equipment leased as of such date, and at each policy renewal, but not less than annually with respect to all Equipment then leased, Lessee shall provide to Lessor a certification from each insurer or by an authorized representative of each insurer. Such certification shall identify the underwriters, the type of insurance, the limits, deductibles, and term thereof and shall specifically list the special provisions delineated for such insurance required for this Section 10. (d) Insurance Report. Concurrently with the furnishing of all certificates referred to in this Section 10, Lessee shall furnish Lessor with a statement from an independent insurance broker, acceptable to Lessor, stating that all premiums then due have been paid. -11- 11. RETURN OF EQUIPMENT (a) Upon any expiration or termination of this Agreement or any Schedule, Lessee shall promptly, at its own cost and expense: (i) Provide to Lessor at least 365 days prior to the scheduled expiration of the Lease a detailed inventory of all components of the Equipment. The inventory should include but not be limited to a detailed listing of all items of the Equipment by both the model and serial number for all components comprising this Agreement. (ii) Ensure that the Equipment is returned to Lessor as follows: (A) all operating and application specific software used to control the machine including upgrades must remain properly installed and functional; (B) all batteries for control memories must be fully charged; (C) all screen changers, sensors, monitors, and computer controllers will operate within manufacturers specifications; (D) all Equipment will be cleaned and cosmetically acceptable, ordinary wear and tear excepted, and in such condition so that it may be immediately installed and placed into use in a production environment; (E) any tooling and/or grinding wheels returned to Lessor at lease termination will be identical, subject to Section 6(g) herein, to those on the Base Lease Commencement Date; and (F) otherwise is in the condition required by the Lease and free and clear of all Liens. (iii) At least 180 days prior to the scheduled expiration of the Lease: (A) and upon receiving reasonable notice by Lessor, make the Equipment available for operational inspections (where applicable) by potential purchasers; (B) cause the persons expressly authorized by Lessor (the "Authorized Inspector"), to inspect, examine and test all material and workmanship to ensure the Equipment is operating within the manufacturer's specifications; and (C) if during such inspection, examination and test, the Authorized Inspector finds any of the material or workmanship, as expected for the age of the Equipment, to be defective or the equipment not operating within the manufacturer's specifications, then Lessee shall repair or replace such defective material and, after corrective measures are completed Lessee will provide for another inspection of the equipment by the Authorized Inspector as outlined above. (iv) Have each Unit of Equipment returned with an in-depth field service report detailing said inspection as outlined in clause (iii) above. The report shall certify that the Equipment has been properly inspected, examined and tested and is operating within the manufacturer's specifications; (v) At least 45 days prior to the scheduled expiration of the Lease and upon request by Lessor provide to Lessor, the following documents: (A) one set of service and operating manuals including replacements and/or additions hereto, such that all documentation is completely up to date; and, (B) if any, one set of documents detailing equipment configuration, operating requirements, maintenance records, and other technical data concerning the set-up and operation of the Equipment including replacements and additions thereto, such that all documentation is completely up to date. -12- (vi) Provide for the deinstallation, packing and transporting of the Equipment to include, but not limited to, the following: (A) the manufacturer's representative shall de-install all Equipment (including all wire, cable and mounting hardware); (B) all process fluids shall be removed from the Equipment and disposed of in accordance with then current waste disposal laws and regulations including regulations specified by the Environmental Protection Agency (EPA) and related government agencies; (C) dismantling and handling is to be done per the original manufacturer's specifications or normal industry accepted practices for new machines must be followed. Any special transportation devices such as metal skids, lifting slings, brackets, etc., which were with the machine when it originally arrived must be used to the extent available, or otherwise, Lessee shall use such other devices as will assure the safety of such Equipment being transported; (D) all keys belonging to the Equipment are to be wired together and secured to a major component of the machine; (E) Lessee shall provide for transportation of the Equipment in a manner consistent with the manufacturer's recommendations and practices to a location within the continental United States which is no more than 1500 miles from the Equipment's current location; and (F) Lessee shall obtain and pay for a policy of transit insurance for the delivery period in an amount equal to the replacement value of the Equipment with Lessor named as loss payee on all such policies of insurance; and (G) Lessee shall provide safe, secure storage for the Equipment for a period of up to 90 days after expiration or early termination of the Lease at an accessible location reasonably satisfactory to Lessor. (vii) Ensure all Equipment and equipment operations conform to all Applicable Laws. (viii) Permit, with Lessee's full cooperation and assistance, Lessor to attempt to effect a resale, by auction or otherwise, of the Equipment from Lessee's facility for a period from 60 days prior to 90 days after expiration of this Lease. During this period, the equipment must remain operational with the necessary electrical power, lighting, heat, water, lubricating fluids, air pollution controls and compressed air necessary to maintain and demonstrate the Equipment to any potential buyer. Any such resale will be conducted no more than 60 days prior to the scheduled Lease expiration and will be conducted in a manner which will not interfere with Lessee's business operations. (b) Until Lessee fully has complied in all material respects with the requirements of subsections (i)-(vii) of paragraph (a) above, Lessee's Rent payment obligation at a rental equal to the greater of the periodic Rent payable in respect of such Unit of Equipment and the Fair Market Rental Value of such Equipment and all other obligations under this Agreement shall continue until all Units of Equipment have been returned in accordance with the terms hereof. If any Unit is not returned to Lessor within 60 days after the expiration of this Agreement, Lessor, at its election, may deem such Unit to have suffered a Casualty Occurrence, in which event, Lessee shall pay to Lessor the greater of the Fair Market Value or the Stipulated Loss Value of such Unit. In addition to these Rents, Lessor shall have all of its other rights and remedies available as a result of this nonperformance. -13- 12. DEFAULT; REMEDIES (a) Lessor may in writing declare this Agreement in default ("Default") if: (i) Lessee breaches its obligation to pay Rent or any other sum as and when due and fails to cure the breach within 5 Business Days after the date such amount was due; (ii) Lessee fails to maintain its insurance coverage required under Section 10 hereof; (iii) Lessee or Guarantor breaches any of its other obligations hereunder or under the Guaranty and fails to cure that breach within 30 days after written notice thereof; (iv) any representation or warranty made by Lessee or Guarantor in connection with this Agreement shall be false or misleading in any material respect; (v) Lessee shall or shall attempt to (except as expressly permitted by the provisions of this Agreement) sell, transfer, encumber (except to the extent of a Permitted Lien), or assign, any Equipment or any part thereof, or use any Equipment for an illegal purpose or permit the same to occur; (vi) any certificate, statement, representation, warranty or audit contained herein or heretofore or hereafter furnished with respect hereto by or on behalf of Lessee or Guarantor proving to have been false in any material respect at the time as of which the facts therein set forth were stated or certified, or having omitted any substantial contingent or unliquidated liability or claim against it; (vii) Lessee or Guarantor admits in writing its inability to pay its debts as they become due or ceases to do business as a going concern; (viii) Lessee or Guarantor shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy or receivership laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against Lessee or Guarantor in any such proceeding, or Lessee or Guarantor shall, by voluntary petition, answer or consent, seek relief under the provisions of any other now existing or future bankruptcy, receivership or other similar law providing for the reorganization or liquidation of corporations, or providing for an agreement, composition, extension or adjustment with its creditors; (ix) petition is filed against Lessee or Guarantor in a proceeding under applicable bankruptcy laws, receivership or other insolvency laws, as now or hereafter in effect, and is not withdrawn, stayed or dismissed within 60 days thereafter, or if, under the provisions of any law providing for reorganization or liquidation of corporations which may apply to Lessee or Guarantor, any court of competent jurisdiction shall assume jurisdiction, custody or control of Lessee or Guarantor or of any substantial part -14- of their property, and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of 60 days; (x) Lessee or Guarantor shall have terminated its corporate existence, consolidated with, merged into, or conveyed or leased substantially all of its assets as an entirety to any Person (such actions being referred to as an "Event"), unless prior to such Event, such Person is organized and existing under the laws of the United States or any state, and executes and delivers to Lessor an agreement containing an effective assumption by such Person of the due and punctual performance of Lessee or Guarantor, as the case may be, under this Agreement; (xi) the Guaranty is repudiated, is determined to be invalid or becomes unenforceable for any reason; (xii) Unless MascoTech shall have become a Guarantor of Lessee's obligations hereunder (substantially in the form of the Guaranty), MascoTech acquires any direct Subsidiary other than Guarantor or otherwise ceases to be a holding company, the principal asset of which is the stock of Guarantor; or (xiii) There occurs under the Credit Agreement an Event of Default (as such term is defined therein) which has not been duly waived or cured thereunder. Such declaration shall apply to all Schedules except as specifically excepted by Lessor. Any provision of this Agreement to the contrary notwithstanding, Lessor may exercise all rights and remedies hereunder independently with respect to each Schedule. (b) After Default shall have occurred, at the request of Lessor, Lessee shall comply with the provisions of Section 11(a) hereof. Lessee hereby authorizes Lessor to enter, with or without legal process, any premises where any Equipment is located and take possession thereof. Lessee shall, without further demand, forthwith pay to Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the Stipulated Loss Value of the Equipment (calculated in accordance with Annex D as of the Rent Payment Date next preceding the declaration of default), and (ii) all Rent and other sums then due hereunder. Lessor may, but shall not be required to, sell the Equipment at private or public sale, in bulk or in parcels, with or without notice, and without having the Equipment present at the place of sale; or Lessor may, but shall not be required to, lease, otherwise dispose of or keep idle all or part of the Equipment; and Lessor may use Lessee's premises, until all amounts due hereunder have been paid, for any or all of the foregoing without liability for rent. The proceeds of sale, lease or other disposition, if any, shall be applied in the following order of priorities: (A) to pay all of Lessor's costs, charges and expenses incurred in taking, removing, holding, repairing and selling, leasing or otherwise disposing of Equipment; then, (B) to the extent not previously paid by Lessee, to pay Lessor all sums due from Lessee hereunder; then, (C) to reimburse to Lessee any sums previously paid by Lessee as liquidated damages; and (D) any surplus shall be retained by Lessor. Lessee shall pay any deficiency in clauses (A) and (B) forthwith. (c) In addition to the foregoing rights, Lessor may terminate or cancel the lease as to any or all of the Equipment. -15- (d) The foregoing remedies are cumulative, and any or all thereof may be exercised in lieu of or in addition to each other or any remedies at law, in equity, or under statute. Lessee waives notice of sale or other disposition (and the time and place thereof), and the manner and place of any advertising. If permitted by Applicable Law, Lessee shall pay reasonable attorney's fees actually incurred by Lessor in enforcing the provisions of this Agreement and any ancillary documents. Waiver of any Default shall not be a waiver of any other or subsequent default. (e) Unless previously terminated or cancelled, upon payment of all amounts due hereunder, this Agreement shall terminate. 13. ASSIGNMENT (a) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT OR THE INTEREST OF LESSEE HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. (b) Lessor may, without the consent of Lessee, assign this Agreement or any Schedule, or the right to enter into any Schedule, provided, that so long as no Default has occurred and is continuing, Lessor will not assign this Agreement, or any Schedule or the right to enter into any Schedule to a Competitor of Lessee. Lessee agrees that it will pay all Rent and other amounts payable under each Schedule to Lessor named therein; provided, however, if Lessee receives written notice of an assignment from Lessor, Lessee will pay all Rent and other amounts payable under any assigned Schedule to such assignee or as instructed by Lessor. Each Schedule, incorporating by reference the terms and conditions of this Agreement, constitutes a separate instrument of lease, and Lessor or its assignee shall have all rights as "Lessor" thereunder separately exercisable by such named Lessor or assignee as the case may be, exclusively and independently of Lessor or any assignee with respect to other Schedules executed pursuant hereto. Lessee agrees reasonably to cooperate with Lessor in connection with any such proposed assignment, including the execution and delivery of such other documents, instruments, notices, opinions, certificates and acknowledgments, as reasonably may be required by Lessor or such assignee; and Lessee further agrees to confirm in writing receipt of a notice of assignment as reasonably may be requested by assignee. Lessee hereby waives and agrees not to assert against any such assignee any defense, set-off, recoupment claim or counterclaim that Lessee has or may at any time have against Lessor or any other Person for any reason whatsoever. (c) Subject always to the foregoing, this Agreement inures to the benefit of, and is binding upon, the successors and assigns of the parties hereto. 14. NET LEASE; NO SET-OFF, ETC This Agreement is a net lease. Lessee's obligation to pay Rent and other amounts due hereunder shall be absolute and unconditional. Lessee shall not be entitled to any abatement or reductions of (except as expressly provided herein in respect of any Unit which ceases to be subject to this Agreement), or set-offs against, said Rent or other amounts, including, without limitation, those arising or allegedly arising out of claims (present or future, alleged or actual, and including claims arising out of strict tort or negligence of Lessor) of Lessee against Lessor -16- under this Agreement or otherwise. Except as provided in Section 8 hereof, with respect to any Unit that shall have suffered a Casualty Occurrence, this Agreement shall not terminate and the obligations of Lessee shall not be affected by reason of any defect in or damage to, or loss of possession, use or destruction of, any Equipment from whatsoever cause. It is the intention of the parties that Rents and other amounts due hereunder shall continue to be payable in all events in the manner and at the times set forth herein unless the obligation to do so shall have been terminated pursuant to the express terms hereof. 15. INDEMNIFICATION (a) Lessee hereby agrees to defend, indemnify, save and keep harmless (on an after-tax basis), Lessor, its agents, employees, successors and assigns, from and against any and all losses, damages, penalties, injuries, claims, actions and suits (herein a "Claim"), including reasonable legal expenses, of whatsoever kind and nature, in contract or tort, whether caused by the active or passive negligence of Lessor or otherwise, and including, but not limited to, Lessor's strict liability in tort, arising out of the selection, manufacture, purchase, acceptance or rejection of Equipment, the ownership of Equipment during the Term, and the delivery, lease, possession, maintenance, uses, condition, return or operation of the Equipment (including, without limitation, latent and other defects, whether or not discoverable by Lessor or Lessee and any claim for patent, trademark or copyright infringement or environmental loss or damage); provided that such indemnity shall not be available to the extent (i) such Claim is attributable to the gross negligence, willful misconduct or breach of this Agreement by such indemnified party, or (ii) such Claim arises and relates to periods after the later of (x) the termination or expiration of the Agreement or (y) the return of the Equipment in accordance with the terms hereof. Lessee shall, upon request, defend any actions based on, or arising out of, any of the foregoing. (b) This Agreement has been entered into on the assumption that (i) this Agreement will be treated for Federal income tax purposes as a true lease and Lessor will be treated as the owner and lessor of the Equipment and Lessee will be treated as Lessee of the Equipment, and (ii) on the Basic Term Commencement Date for any Unit of Equipment, such Unit will qualify for all of the items of deduction and credit specified in Section C of the applicable Schedule ("Tax Benefits") in the hands of Lessor (all references to Lessor in this Section include Lessor and its assignees and the consolidated taxpayer group of which Lessor and any assignee is a member). (c) If for any reason whatsoever (i) tax counsel of Lessor reasonably acceptable to Lessee shall determine that due to a change in fact or law there is not a reasonable basis for Lessor to claim, or Lessor is required to reduce, defer, recompute or recapture, on its Federal income tax return all or any portion of the Tax Benefits with respect to any Equipment, or (ii) any such Tax Benefit claimed on the Federal income tax return of Lessor is disallowed, reduced, deferred, recomputed or recaptured by the Internal Revenue Service, or (iii) Lessor shall become liable for additional tax as a result of Lessee having made a substitution or Lessee having added an attachment or made an alteration to the Equipment, including (without limitation) any such attachment or alteration which would increase the productivity or capability of the Equipment so as to violate the provisions of Rev. Proc. 75-21, 1975-1 C.B. 715, or Rev. Proc. 79-48, 1979-2 C.B. 529 (as either or both may hereafter be modified or superseded), (any such determination, disallowance, adjustment, recomputation or recapture being hereinafter called a "Loss"), then -17- Lessee shall pay to Lessor, as an indemnity and as additional Rent, such amount as shall, in the reasonable opinion of Lessor, cause Lessor's after-tax economic yields and cash flows, computed on the same assumptions, including tax rates as were utilized by Lessor in originally evaluating the transaction (such yields and flows being hereinafter called the "Net Economic Return") to equal the Net Economic Return that would have been realized by Lessor if such Loss had not occurred. Such amount shall be payable upon demand after Lessor has suffered a Loss accompanied by a statement describing in reasonable detail such Loss and the computation of such amount. Anything in this Section to the contrary notwithstanding, Lessee shall have no obligation to indemnify Lessor from or against any such Loss to the extent that such Loss is caused by: (i) any failure by Lessor to properly or timely claim on its Federal income tax return any Tax Benefits on any Equipment (unless such failure is based upon a determination by tax counsel of Lessor reasonably acceptable to Lessee that Lessor is not entitled to claim such Tax Benefits with respect to such Equipment); (ii) any failure of Lessor to have sufficient taxable income to benefit from the Tax Benefits; (iii) any liability of Lessor for any alternative minimum taxes; (iv) the status of Lessor as taxable corporation as for purposes of Federal income taxes; (v) any sale or other disposition of any Equipment by Lessor other than after a Default by Lessee; (vi) any tax election made or not made by Lessor relating to the Tax Benefits; or (vii) any event which results in a payment by Lessee in an amount equal to, or measured by, the Stipulated Loss Value to the extent that such Loss was included in Lessor's calculation of such Stipulated Loss Value. (d) Lessee shall defend, indemnify (on an after-tax basis) and hold harmless Lessor and its Affiliates, successors and assigns, directors, officers, employees and agents, from and against any Environmental Loss and, unless Lessee is then contesting in good faith such Environmental Loss and Lessee has set aside on its books appropriate reserves therefor, Lessee shall fully and promptly pay, perform and discharge any such Environmental Loss. 16. DISCLAIMER LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without limiting the foregoing, Lessor shall have no responsibility or liability to Lessee or any other Person with respect to any of the following (i) any liability, loss or damage caused or alleged to be caused directly or indirectly by any Equipment, any inadequacy thereof, any deficiency or defect (latent or otherwise) therein, or any other circumstance in connection therewith; (ii) the use, operation or performance of any Equipment or any risks relating thereto; (iii) any interruption of service, loss of business or anticipated profits or consequential damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or replacement of any Equipment. If, and so long -18- as, no default exists under this Agreement, Lessee shall be, and hereby is, authorized during the term of this Agreement to assert and enforce, at Lessee's sole cost and expense, from time to time, in the name of and for the account of Lessor and/or Lessee, as their interests may appear, whatever claims and rights Lessor may have against any Supplier of the Equipment. 17. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE (a) Lessee hereby represents and warrants to Lessor that on the date hereof and on the date of execution of each Schedule: (i) Lessee is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation (specified in the first sentence of this Agreement); and is duly qualified to transact business as a foreign corporation in good standing wherever necessary to carry on its present business and operations, including the jurisdictions where the Equipment is or is to be located, except where the failure to be so qualified or to be in good standing would not have a Material Adverse Effect. (ii) This Agreement, the Schedules, the Bill of Sale and all related documents (collectively, the "Documents") have been duly authorized, executed and delivered by Lessee and constitute valid, legal and binding agreements, enforceable in accordance with their terms, except to the extent that the enforcement of remedies therein provided may be limited under applicable bankruptcy and insolvency laws, public policy and equitable principles. (iii) No approval, consent or withholding of objections is required from any Governmental Authority with respect to the entry into or performance by Lessee of the Documents except such as have already been obtained or those, which if not obtained, would not have a Material Adverse Effect, individually or in the aggregate. (iv) Lessee has adequate power and capacity to enter into, and perform under, the Documents. The entry into and performance by Lessee of the Documents will not: (i) violate any judgment, order, law or regulation applicable to Lessee or any provision of Lessee's charter or by-laws; or (ii) result in any breach of, constitute a default under or result in the creation of any Lien upon any Equipment pursuant to any indenture, mortgage, deed of trust, bank loan or credit agreement or other instrument (other than this Agreement) to which Lessee is a party. (v) There are no suits or proceedings pending or to Lessee's knowledge threatened in court or before any commission, board or other administrative agency against or affecting Lessee, which will have a Material Adverse Effect. As used herein, "Material Adverse Effect" shall mean (1) a materially adverse effect on the operations, properties, assets, financial condition, contingent or otherwise, or material agreements of Lessee or any of Lessee's Affiliates or Guarantor or any of Guarantor's Affiliates in each case taken as a whole, or (2) a material impairment of the ability of Lessee to perform its obligations under or to remain in compliance with the Documents. -19- (vi) The chief executive office and chief place of business (as either of such terms is used in Article 9 of the UCC) of Lessee is located at 47603 Halyard Drive, Plymouth, Michigan 48170-2429. (vii) The Equipment accepted under any Certificate of Acceptance is and will remain tangible personal property and is not and shall not constitute real property fixtures. (viii) Each financial statement delivered by Lessee to Lessor has been prepared in accordance with GAAP, and since the date of the most recent annual audited financial statement, there has been no material adverse change in the financial condition of Lessee and its consolidated Subsidiaries or of Guarantor and its consolidated Subsidiaries other than as result of the recapitalization of MascoTech on November 28, 2000 and the acquisition of the Lessee on December 15, 2000. (ix) Each representation and warranty of Lessee made in the Credit Agreement is true and correct in all material respects when made. (x) During the 12 months ending September 30, 2000, the manufacturing facilities of Lessee, which are located in the United States generated at least 75% of its net revenues during such period. (xi) Each Equipment Location identified on the Schedule is owned by Lessee free and clear of any liens for indebtedness or leases. (b) Lessee hereby covenants and agrees with Lessor that: (i) The Equipment will at all times be used for commercial or business purposes. (ii) Lessee shall maintain a system of identification number tagging on all the Equipment and any Part thereof which will identify the manufacturer, serial numbers and type and model of Equipment as set forth in Annex A to the Schedule. (iii) Lessee, at its sole cost and expense shall establish, implement and maintain a formal, comprehensive written environmental, health and safety ("EH&S") program ("EH&S Program") aimed at ensuring that Lessee's operation at the Equipment Locations are conducted in compliance with all applicable Environmental Laws and ISO 14001. Lessee's operations at each Equipment Location shall be ISO 14001 compliant at all times after December 31, 2003. At a minimum, the EH&S Program include: (A) identification of environmental concerns associated with an environmental regulations applicable to Lessee's operations; (B) adoption and implementation of an environmental management system to assess and control the environmental impacts of Lessee's operations; (C) implementation of periodic EH&S audits by or involving an independent third-party consultant with documented corrective action responding to audits; (D) effective labeling of products and services; (v) employee EH&S committees, for ensuring compliance with Environmental Laws; and (E) such other requirements as Lessor may reasonably require from Lessee from time to time. The EH&S Program must involve -20- senior management, include a formal written corporate environmental policy, and identify by name or position the person with overall responsibility for EH&S compliance, as well as those person(s) who are responsible for specific EH&S areas. (iv) At Lessor's request (not more frequently than once in any 12-month period, unless a Default shall have occurred and be continuing), Lessee shall provide Lessor with a briefing regarding Lessee's EH&S Program. (v) If Lessee pays to the lenders under the Credit Agreement any compensation in connection with securing their approval of any waiver or amendment to the Credit Agreement (other than amendments having no adverse effect on Lessor), Lessee shall simultaneously pay to Lessor equivalent compensation, calculated on the same basis as calculated in respect of each such lender. If such compensation is based on the outstanding loan indebtedness from such lender to Lessee, in respect of Lessor it shall be based on the then Casualty Value of the Equipment. 18. INTENT; TITLE (a) It is the express intent of the parties that this Agreement constitutes a true lease and not a sale of the Equipment. Title to the Equipment shall at all times remain in Lessor, and Lessee shall acquire no ownership, title, property, right, equity, or interest in the Equipment other than its leasehold interest solely as Lessee subject to all the terms and conditions hereof. The parties agree that the lease is a "Finance lease" as defined in UCC Article 2A -- Leases ("Article 2A"). Lessee acknowledges: (1) that Lessee has selected the "Supplier" (as defined in Article 2A); and (2) that Lessee has been informed in writing in this Lease, before signing this Lease, that Lessee is entitled under Article 2A to the promises and warranties, including those of any third party, provided to Lessor by the Supplier in connection with or as part of the contract by which Lessor acquired the Equipment, and that Lessee may communicate with the Supplier and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. To the extent permitted by applicable law, Lessee hereby waives any and all rights and remedies conferred upon a lessee in Article 2A and any rights now or hereafter conferred by statute or otherwise which may limit or modify any of Lessor's rights or remedies under Section 12 hereof; provided, however, that such waiver shall not preclude Lessee from asserting any claim of Lessee against Lessor in a separate cause of action; and provided further that such waiver shall not affect Lessor's obligations of good faith, diligence, reasonableness and care. (b) Notwithstanding the express intent of the parties, should a court of competent jurisdiction determine that this Agreement is not a true lease, but rather one intended as security, then solely in that event and for the expressly limited purposes thereof, Lessee shall be deemed to have hereby granted Lessor a security interest in the lease, the Equipment, and all accessions thereto, substitutions and replacements therefor, and proceeds (including insurance proceeds) thereof (but without power of sale); to secure the prompt payment and performance as and when due of all obligations and indebtedness of Lessee (or any affiliate of Lessee) to Lessor, now existing or hereafter created. For the purposes of this paragraph, this Agreement, the Schedule, or a photocopy of either thereof may be filed as a financing statement under the UCC. -21- 19. PURCHASE AND RENEWAL OPTIONS Provided no Default shall have occurred and be continuing, Lessee shall have the option upon the expiration of the Term to renew the Term of this Agreement with respect to, or to purchase, all (but not less than all) of the Equipment leased under all Schedules executed hereunder upon the following terms and conditions. (a) Upon expiration of the Basic Term or any Renewal Term, Lessee may elect to renew the Term with respect to all, but not less than all, of the Equipment leased under all Schedules executed hereunder for a Renewal Term of 2 years, subject to receipt of an appraisal satisfactory to Lessor as to the residual value and remaining useful life of the Equipment, at a periodic Rent equal to the Fair Market Rental Value of the Equipment. (b) Lessee may elect to purchase, at expiration of the Basic Term or any Renewal Term, all (but not less than all) of the Equipment leased under all Schedules executed hereunder on an AS IS BASIS, for cash equal to the then Fair Market Value of the Equipment, plus (in any event) all applicable sales taxes. On the last day of the Term, Lessor shall receive in cash the full purchase price (plus all applicable sales taxes), together with any Rent or other sums then due hereunder on such date. (c) If a Default shall have occurred and be continuing at the time of the notice in the first sentence of paragraph (d) below, then on the date of expiration of the Term, Lessee shall return the Equipment in full compliance with Section 11 of this Agreement on or prior to the date of expiration of the Term. If Lessee shall have given the notice provided in the first sentence of paragraph (d) below, and a Default occurs and is continuing at the expiration of this Lease, Lessor may elect either to enforce the option exercised by Lessee or demand return of the Equipment in full compliance with Section 11 of this Agreement. (d) Lessee shall give Lessor not less than 365 days' irrevocable written notice of whether Lessee shall exercise either of its options pursuant to paragraphs (a) or (b) above. Failure to give such notice shall be deemed an election to purchase the Equipment. If Lessee timely elects to exercise its options pursuant to paragraphs (a) or (b) above, Lessee shall give Lessor at least 90 days' irrevocable written notice to Lessor prior to the expiration of the Term of its election of either the option under paragraph (a) or the option under paragraph (b). Failure to give such notice shall be deemed to be an election to exercise the option under paragraph (b) above. 20. MISCELLANEOUS (a) LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT -22- MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. (b) Any cancellation or termination by Lessor, pursuant to the provision of this Agreement, any Schedule, supplement or amendment hereto, or the lease of any Equipment hereunder, shall not release Lessee from any then outstanding obligations to Lessor hereunder. (c) Time is of the essence of this Agreement. Lessor's failure at any time to require strict performance by Lessee of any of the provisions hereof shall not waive or diminish Lessor's right thereafter to demand strict compliance therewith. (d) Lessee agrees, upon Lessor's request, to execute any instrument necessary or expedient for filing, recording or perfecting the interest of Lessor, and to execute and deliver to Lessor such further documents, instruments and assurances and to take such further action as Lessor from time to time reasonably may request in order to carry out the intent and purpose of the transaction contemplated hereunder. (e) All notices required to be given hereunder shall be in writing, personally delivered, delivered by overnight courier service, sent by facsimile transmission (with confirmation of receipt), or sent by certified mail, return receipt requested, addressed to the other party at its respective address stated above or at such other address as such party shall from time to time designate in writing to the other party; and shall be effective from the date of receipt. (f) This Agreement, the Exhibits and each Schedule and Annexes thereto constitute the entire agreement of the parties with respect to the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. (g) The representations, warranties and covenants of Lessee herein shall be deemed to survive the closing hereunder. The obligations of Lessee under Sections 4, 11 and 15 hereof which accrue during the term of this Agreement and obligations which by their express terms survive the termination of this Agreement, shall survive the termination of this Agreement. (h) In case of a failure of Lessee to comply with any provision of this Agreement, Lessor shall have the right, but shall not be obligated, to effect such compliance, in whole or in part; and all moneys spent and expenses and obligations incurred or assumed by Lessor in effecting such compliance (together with interest thereon at the Overdue Rate) shall constitute additional Rent due to Lessor within 5 days after the date Lessor sends notice to Lessee -23- requesting payment. Lessor's effecting such compliance shall not be a waiver of Lessee's default. (i) Any Rent or other amount not paid to Lessor when due hereunder shall bear interest, both before and after any judgment or termination hereof, at the lesser of 15% per annum or the maximum rate allowed by law (the "Overdue Rate"). (j) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (k) So long as no Default shall have occurred and be continuing hereunder, and conditioned upon Lessee performing all of the covenants and conditions hereof, as to claims of Lessor or Persons claiming under Lessor, Lessee shall peaceably and quietly hold, possess and use the Equipment during the Term of this Agreement subject to the terms and conditions hereof. (l) Lessee agrees to pay on demand all reasonable costs and expenses incurred by Lessor and any assignee in connection with the preparation, execution, delivery, filing, recording, and administration of any of the Documents, including (without limitation) the reasonable fees and expenses of counsel for Lessor and any assignee, due diligence, appraisals, lien searches, UCC and/or Estoppel/Waiver Agreement filing fees, and field audits; and all costs and expenses, if any, in connection with the enforcement of any of the Documents. (m) There is no restriction (either express or implied) on any disclosure or dissemination of the tax structure or tax aspects of the transactions contemplated by this Agreement. Further, each party hereto acknowledges that it has no proprietary rights to any tax matter or tax idea or to any element of the transaction structure. 21. CHOICE OF LAW; JURISDICTION THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT. The parties agree that any action or proceeding arising out of or relating to this Agreement may be commenced in the United States District Court for the Southern District of New York and the parties irrevocably submit to the jurisdiction of such court and agree not to assert, by way of motion, as a defense or otherwise, in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of such suit, action or proceeding is improper, or that this Agreement or the subject matter hereof or the transaction contemplated hereby may not be enforced in or by such court. -24- 22. CHATTEL PAPER To the extent that any Schedule would constitute chattel paper, as such term is defined in the UCC as in effect in any applicable jurisdiction, no security interest therein may be created through the transfer or possession of this Agreement in and of itself without the transfer or possession of the original of a Schedule executed pursuant to this Agreement and incorporating this Agreement by reference; and no security interest in this Agreement and a Schedule may be created by the transfer or possession of any counterpart of the Schedule other than the original thereof, which shall be identified as the document marked "Original" and all other counterparts shall be marked "Duplicate". 23. DEFINITIONS The following terms when used in this Agreement or in the Schedules shall have the following meanings: "Adverse Environmental Condition" shall refer to (i) an Environmental Emission (including, without limitation, a sudden or non-sudden accidental or non-accidental Environmental Emission), of, or exposure to, any Contaminant in violation of any Environmental Law, at, in, by, or from any Equipment, (ii) the transportation, storage, treatment or disposal of Contaminants in connection with the operation of any Equipment in violation of any Environmental Law, or (iii) the violation, or alleged violation, of any Environmental Law resulting from possession, use, operation or modification of any Equipment. "Affected Unit" shall have the meaning given such term in Section 3 of this Agreement. "Affiliate" shall refer, with respect to any given Person, to (a) each Person that controls, is controlled by, or is under common control with, such Person, or (b) each of such Person's officers, directors, joint venturers and partners. For the purposes of this definition, "control" of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall have the meaning given such term in the preamble to this Agreement. "Applicable Laws" means all laws, judgments, decrees, ordinances and regulations and any other governmental rules, orders and determinations and all requirements having the force of law, now or hereafter enacted, made or issued, whether or not presently contemplated, including (without limitation) compliance with all requirements of zoning laws, labor laws and Environmental Laws, compliance with which is required with respect to the Equipment, whether or not such compliance shall require structural, unforeseen or extraordinary changes to any of the Equipment or the operation, occupancy or use thereof. "Appraisal Procedure" shall mean the following procedure for determining the Fair Market Rental Value or the Fair Market Value of the Equipment: (a) At either Lessee's or Lessor's request, as the case may be, Lessor and Lessee shall negotiate in good faith to determine the Fair Market Value and Fair Market Rental Value of the -25- Equipment within 30 days after such request has been given. If after such 30-day period, Lessor and Lessee are unable to agree upon a determination of the Fair Market Value or Fair Market Rental Value, as the case may be, of the Equipment, the Fair Market Value or Fair Market Rental Value, as the case may be, shall be determined in accordance with the appraisal procedure set forth in this definition. If either party shall have given written notice to the other requesting determination of such Fair Market Value or Fair Market Rental Value by such appraisal procedure, the parties shall consult for the purpose of appointing a qualified independent appraiser by mutual agreement. If a single appraiser shall have been appointed by the parties, the determination of such appraiser shall be final and binding upon the parties. If no such appraiser is appointed within 20 days after such notice is given, such determinations shall be made as follows: (i) Two appraisers shall be appointed, one of whom shall be selected by Lessee and the other of whom shall be selected by Lessor, both selections to be made within 10 days after the end of such 20 day period. The appraisal determined by each appraiser shall be compared and if the differential between the two is less then 10% of the average of the two appraisers, then such average of the two appraisals shall be final and binding upon the parties; but (ii) if the differential between the two appraisals is 10% or more of the average of the appraisals, then a third appraiser shall be promptly appointed by the American Arbitration Association of New York, in accordance with its rules as then in effect. The appraisals determined by each of the three appraisers shall be averaged and the appraisal furthest from such average shall be disregarded. The appraisals determined by each of the two remaining appraisers shall be averaged and such average shall be final and binding upon the parties. (b) The appraiser or appraisers shall be provided with, and instructed to appraise in accordance with, the definitions of all terms appearing herein and having a bearing on the determinations subject to appraisal and in accordance with customary appraisal procedures. (c) The fees and expenses of each appraiser shall be paid by Lessee. "Article 2A" shall have the meaning given such term in Section 18(a) of this Agreement. "AS IS BASIS" shall mean the transfer on an AS IS, WHERE IS BASIS, without recourse or warranty, express or implied of any kind whatsoever, of the interest in the Equipment. "Basic Term" shall have the meaning given such term in Section B of the Schedule. "Basic Term Commencement Date" shall have the meaning given such term in Section 2(a) of this Agreement. "Basic Term Rent" shall have the meaning given such term in Section D of the Schedule. "Business Day" shall mean any day other than a Saturday, a Sunday, and any day on which banking institutions located in the States of New York are authorized by law or other governmental action to close. -26- "Calculation Date" shall have the meaning given such term in Section 8 of this Agreement. "Capitalized Lessor's Cost" shall have the meaning given such term in Section B of the Schedule. "Casualty Occurrence" shall have the meaning given such term in Section 8 of this Agreement. "Competitor" means any Person which competes in a direct, significant or material way with Lessee or Guarantor in the metal fabricating business, provided that Competitor shall not mean any affiliate of Lessee or Guarantor engaged in the lease financing of equipment as an equity or debt investor. "Contaminant" shall refer to those substances, including, without limitation, asbestos, polychlorinated biphenyls ("PCBs"), and radioactive substances which are regulated by or form the basis of liability under any Environmental Law. "Credit Agreement" shall mean the Credit Agreement dated as of November 28, 2000 among MascoTech, Metalync Company LLC, the Lenders thereto, the Subsidiary Term Borrowers thereto, the Foreign Subsidiary Borrowers Party thereto, The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, Credit Suisse First Boston as Syndication Agent, and Comerica Bank, First Union National Bank and National City Bank, as Documentation Agents, as amended from time to time and any successor credit agreement entered into in connection with a refinancing or refunding thereto. "Default" shall have the meaning given such term in Section 12(a) of this Agreement. "Documents" shall have the meaning given such term in Section 17(a)(2) of this Agreement. "EH&S" shall have the meaning given such term in Section 17(b) of this Agreement. "EH&S Program" shall have the meaning given such term in Section 17(b) of this Agreement. "Environmental Emission" shall refer to any actual or threatened release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment into or out of any of the Equipment, including, without limitation, the movement of any Contaminant through or in the air, soil, surface water or groundwater. "Environmental Law" shall mean any Federal, foreign, state or local law, rule or regulation pertaining to the protection of the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") (42 U.S.C. section 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. section 1801 et seq.), the Federal Water Pollution Control Act (33 U.S.C. section 1251 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.), the Clean Air Act (42 U.S.C. section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. section 1361 et seq.), and the Occupational Safety and Health Act (19 U.S.C. section 651 et seq.), as these laws have been amended or supplemented, and any analogous foreign, Federal, state or local statutes, and the regulations promulgated pursuant thereto. -27- "Environmental Loss" shall mean any loss, cost, including investigation, removal, cleanup and remedial costs, damage, liability, fine, penalty or expense (including, without limitation, reasonable attorneys' engineering and other professional or expert fees), and damages to, loss of the use of or decrease in value of the Equipment arising out of or based on any Adverse Environmental Condition to the extent attributable to events occurring prior to the later of the return of the Equipment, in accordance with the terms of this Agreement, or the expiration or termination of this Agreement. "Equipment" shall mean (i) the equipment listed in Annex A to the Schedules, (ii) Parts or components thereof, (iii) ancillary equipment or devices furnished therewith under this Agreement, (iv) all manuals and records (other than Rent records) with respect to such Equipment, and (v) all substitutions and replacements of any and all thereof, including, but not limited to, any replacement equipment which may from time to time be substituted for the Equipment leased hereunder; together in each case with any and all Parts permanently incorporated or installed in or attached thereto or any and all Parts temporarily removed therefrom. Except as otherwise set forth herein, at such time as (x) replacement equipment shall be so substituted and leased hereunder, such replaced item of Equipment shall cease to be Equipment hereunder (y) any Equipment shall be subject to a Casualty Occurrence and Lessee shall have paid all sums due under Section 8 with respect thereto, such Equipment shall cease to be Equipment hereunder. "Equipment Location" shall mean the location of the Equipment specified in Section B of the Schedule. "Estoppel/Waiver Agreement" shall have the meaning given such term in Section 1(b) of this Agreement. "Event" shall have the meaning given such term in Section 12(a) of this Agreement. "Fair Market Rental Value" shall mean the Rent which a willing lessee (who is neither a lessee in possession nor a used equipment dealer) would pay for the Rent of the Equipment in an arms'-length transaction to a willing lessor under no compulsion to lease for a period similar to the Renewal Term. Fair Market Rental Value shall be determined by the Appraisal Procedure. "Fair Market Value" shall mean the price which a willing buyer (who is neither a lessee in possession nor a used equipment dealer) would pay for the Equipment in an arm's-length transaction to a willing seller under no compulsion to sell; provided, however, that in such determination the Equipment shall be assumed to be in the condition in which it is required to be maintained and returned under this Agreement. Fair Market Value shall be determined by the Appraisal Procedure. "GAAP" shall have the meaning given such term in Section 5(b) of this Agreement. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. -28- "Guaranty" means the Guaranty, dated the date of the Lease, made by Guarantor in favor of Lessor. "Guarantor" means Metalync Company LLC, a Delaware limited liability company. "Last Delivery Date" shall have the meaning given such term in Section B of the Schedule. "Lessee" shall have the meaning given such term in the preamble to this Agreement. "Lessor" shall have the meaning given such term in the preamble to this Agreement. "Lessor's Lien" shall mean any Lien affecting the Equipment or any part thereof arising as a result of (i) Lessor's rights under or pursuant to this Agreement; (ii) any claim arising from any transfer by Lessor of an interest in the Equipment or this Agreement; (iii) any claim against Lessor not related to the transactions contemplated by this Agreement; (iv) any act or omission of Lessor not expressly contemplated by this Agreement or not permitted without consent (which consent has not been granted) by Lessee or that is in violation of any term of this Agreement or not taken as a result of the occurrence and continuance of a Default as permitted by this Agreement; or (v) taxes imposed against Lessor or the consolidated group of taxpayers of which it is a member which are not to be indemnified against by Lessee under this Agreement; provided, however, that there shall be excluded from this definition and no Lessor's Lien shall exist if such Lien is being diligently contested in good faith so long as neither such proceedings nor Lien involves a material danger of the sale, forfeiture or loss of the Equipment or adversely affects Lessee's rights under this Agreement. "Lien" shall mean any mortgage, chattel mortgage, pledge, Lien, charge, encumbrance, lease, exercise of rights, security interest, lease in the nature of a security interest, statutory right in rem, or claim of any kind, including any thereof arising under any conditional sale agreement, equipment trust agreement or title retention agreement. "Loss" shall have the meaning given such term in Section 15(c) of this Agreement. "MascoTech" means MascoTech Inc., a Delaware corporation, the parent of Guarantor. "Material Adverse Effect" shall have the meaning given such term in Section 17(a) of this Agreement. "Net Economic Return" shall have the meaning given such term in Section 15(c) of this Agreement. "Old Unit" shall have the meaning given such term in Section 6 of this Agreement. "Overdue Rate" shall have the meaning given such term in Section 20(i) of this Agreement. "Parts" shall mean all appliances, components, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature which may now or from time to time be incorporated or installed in or attached to, or were provided by the manufacturer with, the Equipment, including after temporary removal from such Equipment. -29- "Payment Date" shall have the meaning given such term in Section 8 of this Agreement. "Permitted Lien" shall mean (i) the rights of Lessor and Lessee as herein provided, (ii) Lessor's Liens, (iii) Liens for taxes, assessment or other governmental charge either not yet delinquent or being diligently contested in good faith by appropriate proceedings and so long as adequate reserves are maintained with respect to such Liens and available to Lessee for the payment of such taxes and only so long as neither such proceedings nor such Liens involve any material danger of the sale, forfeiture, loss or loss of use of the Equipment or any part thereof, or any interest of Lessor therein or any risk of criminal liability of Lessor and Lessee has given Lessor prior written notice of Lessee's intent to contest any such taxes and Lessee has agreed to indemnify Lessor for any and all costs and expenses (including, without limitation reasonable attorneys' fees) which Lessor may incur as a result of such contest, (iv) inchoate materialmen's, mechanics', carriers', workmen's, repairmen's, or other like inchoate Liens imposed by law arising in the ordinary course of Lessee's business for sums either not delinquent or being diligently contested in good faith and only so long as neither such proceedings nor any such Liens involve any material danger of the sale, forfeiture, loss or loss of use of the Equipment, or any part thereof, or any interest of Lessor therein or any material risk of material civil liability and further provided that adequate reserves are maintained with respect to such Liens and provided that Lessee has given Lessor written notice thereof, (v) the rights of others under agreements or arrangements to the extent expressly permitted under this Agreement, (vi) Liens arising out of any judgment or award against Lessee with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith by appropriate proceedings diligently conducted and with respect to which there shall have been secured a stay of execution pending such appeal or proceeding for review and so long as adequate reserves are available to Lessee for the payment of such obligations and there is no material danger of sale, forfeiture, loss, or loss of use of the Equipment or material risk of material civil liability and Lessee shall have given Lessor written notice thereof, and (vii) any Lien against which Lessee causes to be provided a bond in such amount and under such terms and conditions as are reasonably satisfactory to Lessor. "Person" shall include any individual, partnership, corporation, trust, unincorporated organization, government or department or agency thereof and any other entity. "Qualifying Bid" shall have the meaning given such term in Section 3 of this Agreement. "Rent" means all amounts payable by Lessee hereunder, including periodic Rent with respect to any Unit as provided in Section 2(b) of this Agreement. "Rent Payment Date" shall have the meaning given such term in Section D of the Schedule. "Renewal Term" shall mean a renewal term elected by Lessee in accordance with Section 19(a) of this Agreement. "Schedule" shall have the meaning given such term in Section 1(a) of this Agreement. "Stock" shall mean the voting stock, membership interests or similar equity interests of any Person. -30- "Subsidiary" means, with respect to any Person, a corporation, limited liability company, partnership or other entity of which such Person and/or its other subsidiaries own, directly or indirectly, more than 50% of the Stock. "Tax Benefits" shall have the meaning given such term in Section 15(b) of this Agreement. "Taxes" shall have the meaning given such term in Section 4 of this Agreement. "Term" shall have the meaning given such term in Section 2(a) of this Agreement. "Termination Date" shall have the meaning given such term in Section 3 of this Agreement. "UCC" shall mean the UCC as enacted in any applicable jurisdiction. "Unit" shall mean any item of Equipment identified on a Schedule and lease hereunder. Rules of Construction. Unless otherwise specified, references in any Document or any of the Appendices thereto to a Section, subsection or clause refer to such Section, subsection or clause as contained in such Document. The words "herein," "hereof" and "hereunder" and other words of similar import used in any Document refer to such Document as a whole, including all annexes, exhibits and schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular section, subsection or clause contained in such Document or any such annex, exhibit or schedule. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; the word "or" is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Documents) or, in the case of Governmental Authorities, Persons succeeding to the relevant functions of such Persons; references to any agreement refer to that agreement as from time to time amended or supplemented or as the terms of such agreement are waived or modified in accordance with its terms; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. -31- IN WITNESS WHEREOF, Lessee and Lessor have caused this Master Lease Agreement to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: GENERAL ELECTRIC CAPITAL SIMPSON INDUSTRIES, INC. CORPORATION By: /s/ Peter DiBies By: /w/ Timothy Wadhams ------------------------------ ------------------------------ Name: Peter DiBies Name: Timothy Wadhams Title: Senior Risk Manager Title: Vice President EQUIPMENT SCHEDULE ------------------ SCHEDULE NO. ONE DATED THIS 27th DAY OF DECEMBER, 2000 TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER 21, 2000 Lessor & Mailing Address: Lessee & Mailing Address: GENERAL ELECTRIC CAPITAL SIMPSON INDUSTRIES, INC. CORPORATION 401 Merritt Seven, Second Floor 47603 Halyard Drive Norwalk, Connecticut 06856 Plymouth, Michigan 48170 This Equipment Schedule is executed pursuant to, and incorporates by reference the terms and conditions of, and capitalized terms not defined herein shall have the meanings assigned to them in, the Master Lease Agreement identified above ("Agreement"; said Agreement and this Schedule being collectively referred to as "Lease"). This Equipment Schedule, incorporating by reference the Agreement, constitutes a separate instrument of lease. A. Equipment. Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the Equipment listed on Annex A attached hereto and made a part hereof. B. Financial Terms. 1. Capitalized Lessor's Cost: $40,342,810 2. Basic Term Lease Rate Factor: 3.85959558% 3. Basic Term (No. of Quarters): 34 4. Basic Term Commencement Date: December 27, 2000 5. Equipment Location: See Annex A 6. Lessee Federal Tax ID No.: 38-1225111 7. Stipulated Loss Value: See Annex D attached for calculation of the Stipulated Loss Value of the Equipment during the Term. C. Tax Benefits. Depreciation Deductions: a. Depreciation Method: 7 year MACRS, mid-quarter convention. b. Basis: 100 % of Capitalized Lessor's Cost. c. Tax Rate: 35% United States federal and 7% State and local and a combined rate of 39.55%. d. Income Inclusion: Lessor will have no income in respect of the Equipment other than Rent for the periods to which it is allocated. D. Term and Rent. 1. Basic Term Rent. Commencing on March 27, 2001, and on the same day of each March, June, September and December thereafter during the Basic Term, Lessee shall pay, in arrears as Rent ("Basic Term Rent") the product of the Basic Term Lease Rate Factor times the Capitalized Lessor's Cost of all Equipment on this Schedule. Rent shall be allocated for federal income tax purposes ending on the date such Rent is scheduled to be paid. Each date for the payment of Rent during the Basic Term and any Renewal Term is herein referred to as a "Rent Payment Date". 2. If any Rent Payment Date is not a Business Day, the Rent otherwise due on such date shall be payable on the immediately preceding Business Day. This Schedule is not binding or effective with respect to the Agreement or Equipment until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee, respectively. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: GENERAL ELECTRIC CAPITAL SIMPSON INDUSTRIES, INC. CORPORATION By: /s/ Peter DiBiasi By: /s/ Timothy Wadhams ------------------------------ ------------------------------ Name: Peter DiBiasi Name: Timothy Wadhams Title: Senior Risk Manager Title: Vice President ANNEX A TO SCHEDULE NO. ONE DATED THIS 27th DAY OF DECEMBER, 2000 TO MASTER LEASE AGREEMENT DATED AS OF DECEMBER 21, 2000 DESCRIPTION OF EQUIPMENT ------------------------ Type and Model Manufacturer Serial Numbers of Equipment Number of Units Cost per Unit - -------------------------------------------------------------------------------- SEE ATTACHED SCHEDULE Capitalized Lessor's Cost for any Unit equals the value specified underneath the column headed "Fair Market Value Removed" Initials: -------------- -------------- Lessor Lessee EX-10.12 6 0006.txt RELEASE AND CONSULTING AGREEMENT RELEASE AND CONSULTING AGREEMENT AGREEMENT dated as of November 22, 2000 between Frank M. Hennessey residing at 236 Cloverly Road, Grosse Pointe Farms, MI 48236 (the "Executive") and MascoTech, Inc., a Delaware corporation with its principal place of business at 21001 Van Born Road, Taylor, Michigan 48180 (the "Company"). A. The Executive is presently the Vice Chairman and Chief Executive Officer of the Company. B. The Company has entered into an agreement with an affiliate of Heartland Industrial Partners that will result, subject to approval of Company shareholders, in MascoTech becoming a private company (the "Transaction"). C. The Executive has advised the Board of Directors of the Company that he intends to resign his position to pursue other opportunities, including a continuing relationship with the Company's affiliate, Masco Corporation. The Executive, at the request of the Company, has agreed to provide consulting services to the Company through December 31, 2003, on the terms and conditions provided herein. D. The Executive and the Company desire to memorialize the terms and conditions of their agreement. NOW, THEREFORE, in consideration of the foregoing and of the promises and mutual covenants contained herein, it is hereby agreed between the Executive and the Company as follows: 1. Effectiveness of Agreement. This Agreement will become effective upon the earlier of (i) the closing of the Transaction, or (ii) December 20, 2000 (the "Effective Date"). 2. Consulting Services. (a) The consulting relationship shall commence on the day immediately following the Effective Date and ending on December 31, 2003 (the "Consulting Period"). During the Consulting Period, the Company shall retain the Executive as a consultant, and the Executive shall perform and discharge well and faithfully for the Company and its subsidiaries, such consulting services as may be requested from time to time by the Board of Directors of the Company. Notwithstanding the foregoing, it is understood and agreed that the Executive will be engaging in other activities unrelated to the Company and any request by the Company for services by the Executive will give due consideration to the Executive's other commitments. (b) It is agreed that during the Consulting Period the Executive shall be an independent contractor, shall not be an employee, servant, agent, partner or joint venturer of the Company or any of its subsidiaries, officers, directors or employees, and shall have no authority to assume or create any obligation or liability, express or implied, on behalf of the Company or its subsidiaries, or in its or their name or to bind them in any manner whatsoever; provided, however, that to the extent payments pursuant to paragraph 3 are made to the Executive with no payment by the Employer of the Employer's portion of social security taxes, the Company shall increase the payments under paragraph 3 by an amount, equal to one-half of Executive's self-employment tax on a fully grossed-up basis. 3. Consulting Fees. (a) In full satisfaction for any and all services rendered and covenants made by the Executive hereunder, and in full payment for the covenant of Executive set forth in Section 6 below, the Company shall pay the Executive $1,500,000, payable in three equal installments of $500,000 each on January 4, 2001, January 4, 2002 and January 4, 2003. If after the Effective Date the Executive dies or becomes disabled, then all consulting payments hereunder scheduled for payment on or following the date of death or the date of disability shall cease and any obligation to provide Employment or Consulting Services thereafter shall cease. For the purposes of this Agreement, the date of disability is the date the Executive first perfects his eligibility (or the date he would have first perfected such eligibility, but for his termination of employment with the Company or his loss of coverage under the Company's long term disability program) for extended long term disability benefits requiring him to be unable to perform any gainful occupation pursuant to the Company's long term disability program. (b) If at anytime after the Transaction closes and during the Consulting Period there occurs a subsequent Change in Control, then promptly following such Change in Control the Company (or its successors or assigns) shall pay to the Executive in a single lump sum the present value (utilizing an 8% discount factor compounded annually) of all the cash payments then not yet paid pursuant to paragraph 3(a), and all other provisions of this Agreement shall thereupon continue in full force and effect. For the purposes hereof, "Change in Control" means the occurrence, following the date of the Transaction, of an event as a result of which a "person" or "group of persons", as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, who are not affiliated with or are not controlled by Heartland Industrial Partners, L.P., directly or indirectly are the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) or have 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 50% or more of the combined voting power of all outstanding voting securities of the Company. (c) The Executive acknowledges that his employment will terminate as of the Effective Date and he will cease to be an active participant under the benefit plans of the Company on such date pursuant to the terms of the applicable benefit plans, and no additional Company-provided benefits shall accrue to him after such date, other than salary earned through the Effective Date which has not yet been paid. Nothing contained herein shall restrict the Executive's receipt of benefits under the Company's employee fringe benefit programs accrued during the Executive's employment with the Company. 2 4. Options and Awards. All of the restricted stock awards and options heretofore granted to the Executive under the Company's restricted stock award and option plans will be treated in the same manner as the awards and options of other employees of the Company in the Transaction who continue as employees of the Company. 5. Gross-Up. In the event that, as a result of the payment to the Executive under paragraph 3 hereof and/or the vesting of stock awards or options in connection with the Transaction, Executive becomes subject to excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to Executive as an additional payment an amount (the "Gross-Up Payment") equal to an amount which, after payment by Executive of all taxes (including any federal, state and local income tax and excise tax upon such amount) would allow the Executive to retain an amount equal to the Excise Tax, unless, if the reduction of the payments under paragraph 3(a) to Executive by no more than 5% would avoid the imposition of Excise Tax, then the Company shall so reduce such payments to Executive and no Gross-Up Payment will be made. For purposes of determining whether Executive will be subject to the Excise Tax and the amount of such Excise Tax, the following criteria shall apply: (a) All determinations required to be made under this Section 5 shall be made by the Company's independent auditors (the "Accounting Firm"), which shall provide detailed supporting calculations to both the Company and Executive within 15 business days after the Effective Date or such earlier time as is requested by the Company provided that any determination that an Excise Tax is payable by Executive shall be made on the basis of substantial authority. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that Executive has substantial authority not to record any Excise Tax on his federal income tax return. Any determination by the Accounting Firm meeting the requirements of this Section 5(a) shall, subject to possible adjustment as set forth in Section 5(c) below, be binding upon the Company and Executive. (b) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the date on which the Excise Tax is incurred, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 3 (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state, and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional payment in respect of such excess at the time that the amount of such excess finally is determined. In the case of any payment that the Company is required to make to Executive pursuant to the preceding sentence (a "Later Payment"), the Company shall also pay to Executive an additional amount such that after payment by Executive of all of Executive's applicable federal, state and local taxes, including any interest and penalties assessed by any taxing authority, on such additional amount, Executive will retain an amount equal to the total of Executive's applicable federal, state and local taxes, including any interest and penalties assessed by any taxing authority, arising due to the Later Payment. Executive and the Company each shall reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax. Notwithstanding any provision of this Agreement to the contrary, Executive shall pay his ordinary federal, state and local income taxes to which he is subject as a result of the Transaction (including but not limited to the accelerated vesting of stock options). 6. Non-Competition; Non-Solicitation; Confidentiality. (a) Executive acknowledges and recognizes the highly competitive nature of the business of the Company and accordingly agrees that, in consideration of this Agreement, the rights conferred hereunder, and the payments hereunder, during the Non-Compete Term, Executive will not engage, either directly or indirectly, as an employee, consultant or independent contractor, or as a principal for his own account or jointly with others, or as a stockholder in any corporation or joint stock association which designs, develops, manufactures, distributes, sells or markets the type of products or services sold, distributed or provided by the Company or its subsidiaries during the two year period prior to the Effective Date (the "Business"); provided, that nothing herein shall prevent Executive from owning, directly or indirectly, not more than 5% of the outstanding shares of, or any other equity interest in, any entity engaged in the Business and listed or traded on a national securities exchanges or in an over-the-counter securities market. (b) During the period from the date of this Agreement until December 31, 2003 ("Non-Compete Term"), Executive will not (i) directly or indirectly employ or solicit, or receive or accept the performance of services by, any active employee of the Company or any of its subsidiaries who is employed primarily in connection with the Business, except in connection with general, non-targeted recruitment efforts such as advertisements and job listings or (ii) solicit for business (relating to the Business) any person who is a customer or former customer of the Company or any of its subsidiaries, 4 unless such person shall have ceased to have been such a customer for a period of at least six months. (c) Executive will not at any time disclose or use for his own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, financing methods, plans, or the business and affairs of the Company generally, or of any subsidiary of the Company, unless required to do so by applicable law or court order, subpoena or decree or otherwise required by law, with reasonable evidence of such determination promptly provided to the Company. The preceding sentence of this sub-clause (c) shall not apply to information which is not unique to the Company or which is generally known to the industry or the public other than as a result of Executive's breach of this covenant. Executive agrees that within 10 days after the Effective Date, he will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company and its subsidiaries, except that he may retain personal notes, notebooks and diaries. Executive further agrees that he will not retain or use for his account at any time any trade names, trademark or other proprietary business designation used or owned in connection with the business of the Company or its subsidiaries. (d) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any tribunal of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. 7. Remedies. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 6 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to seek equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. 5 8. No Disparagement. Executive agrees not to criticize, disparage or otherwise demean in any way the Company, any of its subsidiaries or their respective products, officers, directors or employees. Likewise, the Company agrees not to criticize, discourage or otherwise demean in any way the Executive. 9. RELEASE. IN CONSIDERATION OF THE PAYMENTS TO BE MADE AND BENEFITS PROVIDED BY THE COMPANY AND OTHER AGREEMENTS HEREUNDER, EXECUTIVE ON EXECUTIVE'S OWN BEHALF AND ON BEHALF OF EXECUTIVE'S HEIRS, EXECUTORS, AGENTS, SUCCESSORS AND ASSIGNS, RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND THEIR RESPECTIVE OFFICERS, AGENTS, CURRENT AND FORMER EMPLOYEES, SUCCESSORS, PREDECESSORS AND ASSIGNS AND ANY OTHER PERSON, FIRM, CORPORATION OR LEGAL ENTITY IN ANY WAY RELATED TO THE COMPANY AND ITS SUBSIDIARIES (THE "RELEASED PARTIES"), OF AND FROM ALL CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, STATUTORY RIGHTS, DUTIES, DEBTS, SUMS OF MONEY, SUITS, RECKONINGS, CONTRACTS, AGREEMENTS, CONTROVERSIES, PROMISES, DAMAGES, OBLIGATIONS, RESPONSIBILITIES, LIABILITIES AND ACCOUNTS OF WHATSOEVER KIND, NATURE OR DESCRIPTION, DIRECT OR INDIRECT, IN LAW OR IN EQUITY, IN CONTRACT OR IN TORT OR OTHERWISE, WHICH EXECUTIVE EVER HAD OR WHICH EXECUTIVE NOW HAS OR HEREAFTER CAN, SHALL OR MAY HAVE, AGAINST ANY OF THE RELEASED PARTIES, FOR OR BY REASON OF ANY MATTER, CAUSE, OR THING WHATSOEVER UP TO THE PRESENT TIME, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED AT THE PRESENT TIME, OR WHICH MAY BE BASED UPON PRE-EXISTING ACTS, CLAIMS OR EVENTS OCCURRING AT ANY TIME UP TO THE DATE HEREOF WHICH MAY RESULT IN FUTURE DAMAGES, INCLUDING WITHOUT LIMITATION ALL DIRECT OR INDIRECT CLAIMS EITHER FROM DIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER AND RIGHTS OR CLAIMS ARISING UNDER TITLE VII, ANY STATE CIVIL-RIGHTS LEGISLATION, CLAIMS OF HANDICAP DISCRIMINATION, CLAIMS RELATING TO THE TERMINATION OF EMPLOYMENT AS REFERRED TO HEREIN, AND CLAIMS OF AGE DISCRIMINATION UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED ("ADEA"), AGAINST ANY OF THE RELEASED PARTIES, OTHER THAN (A) CLAIMS ARISING UNDER THE EXPRESS PROVISIONS OF THIS AGREEMENT, AND (B) THE RIGHT TO RECEIVE BENEFITS, IF ANY, ACCRUED THROUGH THE EFFECTIVE DATE UNDER THE COMPANY'S BENEFIT PLANS. THE EXECUTIVE AGREES NOT TO SUE OR TO FILE ANY LAWSUITS AGAINST ANY RELEASED PARTY WITH RESPECT TO CLAIMS COVERED BY THIS RELEASE. 10. Notices. Any notice required or permitted to be given under this Agreement shall be deemed properly given if in writing and delivered by hand and receipt is acknowledged by the party to whom said notice shall be directed, or if mailed by certified or registered mail, postage prepaid with return receipt requested, or sent by express courier service, charges prepaid by shipper, to the addresses of each party stated above (or to such other address as a party is directed pursuant to written notice from the other party) and in the case of notices to the Company, to the attention of its Vice President - General Counsel, at 21001 Van Born Road, Taylor, Michigan 48180. 6 11. Assignment. This Agreement shall not be assignable by either party. Notwithstanding the foregoing, the Company shall assign this Agreement to any successor to substantially all of the stock, assets or business of the Company and any such successor must assume in writing all of the obligations of the Company under this Agreement. 12. Acceptance and Revocation. Pursuant to provisions of ADEA, the Executive has been given at least 21 days from the date this Agreement was first communicated to the Executive to review and sign this Agreement. The Executive understands he may revoke his acceptance of this Agreement within seven calendar days after the date of the Executive's signature set forth below. This Agreement will not be effective until the seven-day revocation period has expired. The Executive understands that to be effective any such revocation must be in writing, signed by the Executive and hand delivered or post-marked within such seven-day period addressed to the Vice President - General Counsel, MascoTech, Inc., 21001 Van Born Road, Taylor, Michigan 48180. If revocation is by mail, certified mail return receipt requested is recommended to show proof of mailing. 13. Mediation/Arbitration. The parties hereto agree that pursuant to the Company's Corporate Dispute Resolution Policy (the "CDRP"), mediation, and, if unsuccessful, arbitration, will apply to the employment and consulting relationship hereunder and will be the sole and exclusive remedies for any claims which may arise between the parties (other than allegations by the Company of breach of Sections 6 or 8) in any way relating to this Agreement or for the breach thereof to the extent such claims are covered by the CDRP, and the Executive agrees not to pursue any such claims through a court or a jury. The Executive hereby acknowledges that he has had an opportunity to review the CDRP, and agrees that all proceedings held in accordance with the CDRP will be conducted in the Detroit, Michigan metropolitan area. Notwithstanding the foregoing, any determinations of whether or not the Executive is disabled shall be made in the first instance by the Committee established under the MascoTech, Inc. Key Employee Retention Plan. 14. Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, supersedes and replaces in its entirety any existing employment agreement or consulting agreement of the Executive and may not be waived, changed, modified, extended or discharged orally but only by agreement in writing signed by the party against whom enforcement of any such waiver, change, modification, extension or discharge is sought. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of a breach of any other provision or of any subsequent breach by the Executive. 15. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. 7 16. Attorney Fees. In the event of a dispute by the Company, Executive or others as to the validity or enforceability of, or liability under, any (i) provision of this Agreement, the Company shall reimburse Executive for all reasonable legal fees and expenses incurred by him in connection with such dispute if Executive substantially prevails in the dispute and (ii) if Executive has not substantially prevailed in such dispute as set forth in (i), one-half the amount of all reasonable legal fees and expenses incurred by him in connection with such dispute except to the extent Executive's position is found by a tribunal of competent jurisdiction to have been frivolous. 17. Headings. The headings of the Sections are for convenience only and shall not control or affect the meaning or construction or limit the scope of intent of any of the provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first above written. MASCOTECH, INC. By /s/ Richard A. Manoogian -------------------------------- Its Chairman ----------------------------- Date: November 22, 2000 /s/ Frank M. Hennessey ----------------- -------------------------------- Frank M. Hennessey 8 EX-10.13 7 0007.txt EMPLOYMENT, RELEASE AND CONSULTING AGREEMENT EMPLOYMENT, RELEASE AND CONSULTING AGREEMENT AGREEMENT dated as of November 22, 2000 between Lee M. Gardner residing at 325 Suffield, Birmingham, Michigan 48009 (the "Executive") and MascoTech, Inc., a Delaware corporation with its principal place of business at 21001 Van Born Road, Taylor, Michigan 48180 (the "Company"). A. The Executive is presently the President and Chief Operating Officer of the Company. B. The Board of Directors of the Company (the "Board") has approved a transaction whereby the Company will become a private company (the "Transaction"). C. The Executive has advised the Board that he is willing to continue in his current capacity for a transition period after the Transaction closes in order to facilitate a smooth transition and to determine, jointly with the new Board of Directors of the Company, whether a long term employment arrangement for the Executive is in the best interests of the Company and the Executive, and should it be determined that a long-term employment relationship shall not be commenced, to provide for the Executive's termination of employment and thereafter for his provision of certain consulting services. D. The Executive and the Company desire to memorialize the terms and conditions of the Executive's employment by, consulting with and termination from the Company. NOW, THEREFORE, in consideration of the foregoing and of the promises and mutual covenants contained herein, it is hereby agreed between the Executive and the Company as follows: 1. Effectiveness of Agreement. This Agreement will become effective on the date hereof (the "Effective Date"). 2. Employment and Consulting/Non-Compete Periods. (a) The Executive agrees to continue full-time in his current capacity with the Company (or such other capacity as mutually agreed between the Executive and the Company) until the later of June 30, 2001 or the date 60 days after either the Executive or the Company gives the other notice ("Employment Period"), whereupon the Executive shall either (i) enter into a long-term employment agreement for a period of years ("New Employment Period") with the Company, whereupon the provisions of this Agreement requiring payment of a stay bonus and consulting fees shall terminate and no further such payments to the Executive shall be made hereunder (but all other provisions of this Agreement shall continue in full force and effect) or (ii) cease his employment with the Company ("Termination Date"). At the Termination Date the Executive shall be paid a cash stay bonus of $1,500,000 upon his execution of a Supplemental Release in the form of the Release contained in paragraph 11 hereof. During the Employment Period, the Executive will continue to receive compensation at least at his current rate of base pay. During the Employment Period, the Executive shall also receive his earned bonus for calendar year 2000 and his target bonus (which shall be no less than 50% of his base compensation rate) for subsequent calendar years (pro-rated in the case of any partial year of employment), in each case at the same time that other executives of the Company receive bonuses for calendar years 2000 and subsequent years, but in no event later than (respectively) February 28, 2001 and the same date in subsequent years. Notwithstanding the foregoing, if the closing of the Transaction does not occur by June 30, 2001, then the Executive may terminate his employment on not less than 60 days notice to the Company, and the Executive's last day of work pursuant to such notice shall be the Termination Date which triggers the stay bonus, consulting fee and other payments pursuant to the provisions hereof. (b) Following the Termination Date, the Executive shall continue to hold himself available to work for the Company as a consultant through the date which is three years after the Termination Date (the "Consulting Period"). During the Consulting Period, the Executive shall be paid fees for consulting and for the non-competition and confidentiality covenants contained in paragraph 8 hereof in the sum of $600,000 payable on the day after the Termination Date, the sum of $540,000 payable on the day which is a year and a day after the Termination Date, and the sum of $585,000 payable on the day which is two years and a day after the Termination Date. (c) During the Consulting Period, the Company shall retain the Executive as a consultant, and the Executive shall perform and discharge well and faithfully for the Company and its subsidiaries, such consulting services as may be requested from time to time by the Board of Directors of the Company. Notwithstanding the foregoing, it is understood and agreed that the Executive will be engaging in other activities unrelated to the Company and any request by the Company for services by the Executive will give due consideration to the Executive's other commitments. (d) It is agreed that during the Consulting Period the Executive shall be an independent contractor, shall not be an employee, servant, agent, partner or joint venturer of the Company or any of its subsidiaries, officers, directors or employees, and shall have no authority to assume or create any obligation or liability, express or implied, on behalf of the Company or its subsidiaries, or in its or their name or to bind them in any manner whatsoever; provided, however, that to the extent payments pursuant to paragraph 2(b) are made to the Executive with no payment by the Employer of the Employer's portion of social security taxes, the Company shall increase the payments under paragraph 2(b) by an amount, equal to one-half of Executive's self-employment tax on a fully grossed-up basis. (e) If at anytime after the Transaction closes and during the Employment or Consulting Periods (as the case may be) there occurs a subsequent Change in Control then promptly following such Change in Control the Company (or its successors or assigns) shall pay to the Executive in a single lump sum the present value (utilizing an 8% discount factor compounded annually) of all the cash payments then not yet paid pursuant to the second sentence of paragraph 2(a) and paragraph 2(b), and all 2 other provisions of this Agreement shall thereupon continue in full force and effect. For the purposes hereof, "Change in Control" means the occurrence, following the date of the Transaction, of an event as a result of which a "person" or "group of persons", as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, who are not affiliated with or are not controlled by Heartland Industrial Partners, L.P., directly or indirectly are the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) or have 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 50% or more of the combined voting power of all outstanding voting securities of the Company. 3. Death. If after the Effective Date the Executive dies or becomes disabled, then all payments pursuant to the second sentence of paragraph 2(a) and paragraph 2(b) scheduled for payment on or following the date of death or the date of disability shall cease and any obligations to provide Employment or Consulting Services thereafter shall cease. For the purposes of this Agreement, the date of disability is the date the Executive first perfects his eligibility (or the date he would have first perfected such eligibility, but for his termination of employment with the Company or his loss of coverage under the Company's long term disability program) for extended long term disability benefits requiring him to be unable to perform any gainful occupation pursuant to the Company's long term disability program. 4. Benefits. (a) The Executive acknowledges that his employment will terminate as of the Termination Date and, except as specifically provided herein, he will cease to be an active participant under the benefit plans of the Company on such date pursuant to the terms of the applicable benefit plans, and no additional Company-provided benefits shall accrue to him after such date, other than salary and accrued vacation earned through the Termination Date which has not yet been paid and the pro rata portion of the Executive's target bonus for the calendar year in which the Termination Date occurs (or earned bonus in the case of a Termination Date in calendar year 2000). Nothing contained herein shall restrict the Executive's receipt of benefits under the Company's employee fringe benefit programs accrued during the Executive's employment with the Company. (b) Effective immediately following the Termination Date, the Executive shall be entitled to receive (i) reimbursement (in an amount tax-effected, if such reimbursements are determined to be taxable, by dividing the amount required for such reimbursement by one minus the decimal equivalent of the sum of Executive's marginal state and federal income tax rates) for the purchase by the Executive and his spouse and such other dependents as would be permitted under the Company's group health plan of Company's COBRA coverage for the 18 months following the Termination Date hereunder; provided, however, such COBRA reimbursements shall be suspended (subject to resumption if such other coverage ceases) at any time Executive becomes eligible for any other comparable group health coverage and (ii) reimbursement for Executive's purchase of commercial (non-employer-sponsored) health and dental coverage for Executive and his spouse and such other dependents as would be permitted under the 3 Company's group health plan which coverage is comparable to Company's COBRA coverage (or if such coverage is not available, then the best comparable coverage that is available for purchase), in an amount tax-effected (if such reimbursements are determined to be taxable) by dividing the amount required to reimburse the actual cost of such coverage as billed to the Executive by one minus the decimal equivalent of the sum of Executive's marginal state and federal income tax rates, paid monthly in advance, for the time following the expiration of Executive's COBRA eligibility (provided other group coverage is not yet in effect) provided, however, such reimbursement will be suspended (subject to resumption if such other coverage ceases) (A) at any time Executive becomes eligible for any other comparable group health coverage or (B) during any period that the Executive is participating (for comparable group coverage) under the retirement medical provisions of that certain Supplemental Executive Retirement Plan agreement (SERP) between the Executive and the Company dated February 28, 1995 as the same may be from time to time amended; provided, further, the Company reserves the right in its reasonable discretion to select and require Executive to utilize the most cost-effective provider of such comparable group health coverage. Upon the death of the Executive, his surviving spouse, if any, will be entitled to receive the same benefits that the Executive would have received under this Section 4(b) had he not died; provided, however, that (1) if Executive's surviving spouse remarries, then such benefits will immediately terminate, and (2) if Executive's surviving spouse is more than 20 years younger than the Executive, then the Benefits described in this Clause (b) will only continue for such surviving spouse for a period of three (3) years after the death of the Executive. 5. Options and Awards. All of the restricted stock awards and options heretofore granted to the Executive under the Company's restricted stock award and option plans will be treated in the same manner as the awards and options of other employees of the Company in the Transaction who continue as employees of the Company. 6. SERP. (a) On the Termination Date, notwithstanding any contrary term of the SERP, the Executive will become 100% vested (i.e., treated as if he retired at age 65) in the SERP and receive benefits upon his attainment of age 65 or his death (whether before or after such age) or disability as if (i) his "Average Compensation", as otherwise defined in the SERP, were the Executive's base and target bonus (exclusive of the bonus paid pursuant to the first sentence of Paragraph 2(a)) compensation annualized as at the Effective Date or the Termination Date, whichever is higher, and (ii) his SERP percentage were 60%. Notwithstanding the foregoing, unless the Executive dies or becomes disabled prior to attaining age 65, the Executive and his spouse will not be entitled to receive benefits under the SERP until the Executive attains the age of 65 (based on his compensation at the Effective Date or Termination Date, whichever is higher) and be entitled to receive all of the benefits of the SERP in accordance with the terms thereof as if his SERP percentage were 60%. (b) For purposes of this Agreement, the SERP may not be amended to terminate or reduce benefits provided in such SERP Agreement. 4 7. Gross-Up. In the event that, as a result of the payments to the Executive under Section 2 hereof and/or the vesting of stock awards or options in connection with the Transaction and/or the benefits provided under Sections 4 or 6, Executive becomes subject to excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to Executive an amount (the "Gross-Up Payment") equal to an amount which, after payment by Executive of all taxes (including any federal, state and local income tax and excise tax upon such amount) would allow the Executive to retain an amount equal to the Excise Tax, unless, if the reduction of the payments under the second sentence of paragraph 2(a) and paragraph 2(b) to Executive by no more than 5% would avoid the imposition of Excise Tax, then the Company shall so reduce such payments to Executive and no Gross-Up Payment will be made. For purposes of determining whether Executive will be subject to the Excise Tax and the amount of such Excise Tax, the following criteria shall apply: (a) All determinations required to be made under this Section 7 shall be made by the Company's independent auditors (the "Accounting Firm"), which shall provide detailed supporting calculations to both the Company and Executive within 15 business days after the Termination Date or such earlier time as is requested by the Company provided that any determination that an Excise Tax is payable by Executive shall be made on the basis of substantial authority. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that Executive has substantial authority not to record any Excise Tax on his federal income tax return. Any determination by the Accounting Firm meeting the requirements of this Section 7(a) shall, subject to possible adjustment as set forth in Section 7(c) below, be binding upon the Company and Executive. (b) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the date on which the Excise Tax is incurred, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state, and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is 5 determined to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional payment in respect of such excess at the time that the amount of such excess finally is determined. In the case of any payment that the Company is required to make to Executive pursuant to the preceding sentence (a "Later Payment"), the Company shall also pay to Executive an additional amount such that after payment by Executive of all of Executive's applicable federal, state and local taxes, including any interest and penalties assessed by any taxing authority, on such additional amount, Executive will retain an amount equal to the total of Executive's applicable federal, state and local taxes, including any interest and penalties assessed by any taxing authority, arising due to the Later Payment. Executive and the Company each shall reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax. Notwithstanding any provision of this Agreement to the contrary, Executive shall pay his ordinary federal, state and local income taxes to which he is subject as a result of the payments to which he becomes entitled pursuant to the terms hereof or the terms of any other agreement (including but not limited to the accelerated vesting of stock options). 8. Non-Competition; Non-Solicitation; Confidentiality. (a) Executive acknowledges and recognizes the highly competitive nature of the business of the Company and accordingly agrees that, in consideration of this Agreement, the rights conferred hereunder, and the payments hereunder, during the Non-Compete Term (as hereinafter defined), Executive will not engage, either directly or indirectly, as an employee, consultant or independent contractor, or as a principal for his own account or jointly with others, or as a stockholder in any corporation or joint stock association which designs, develops, manufactures, distributes, sells or markets the type of products or services sold, distributed or provided by the Company or its subsidiaries during the two year period prior to the Termination Date (the "Business"); provided, that nothing herein shall prevent Executive from owning, directly or indirectly, not more than 5% of the outstanding shares of, or any other equity interest in, any entity engaged in the Business and listed or traded on a national securities exchanges or in an over-the-counter securities market. (b) During the period from the date of this Agreement until the date two years following the Termination Date ("Non-Compete Term"), Executive will not (i) employ or solicit, or receive or accept the performance of services by, any active employee of the Company or any of its subsidiaries who is employed primarily in connection with the Business, except in connection with general, non-targeted recruitment efforts such as advertisements and job listings or (ii) solicit for business (relating to the Business) any person who is a customer or former customer of the Company or any of its subsidiaries, unless such person shall have ceased to have been such a customer for a period of at least six months. 6 (c) Executive will not at any time disclose or use for his own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, financing methods, plans, or the business and affairs of the Company generally, or of any subsidiary of the Company, unless required to do so by applicable law or court order, subpoena or decree or otherwise required by law, with reasonable evidence of such determination promptly provided to the Company. The preceding sentence of this sub-clause (c) shall not apply to information which is not unique to the Company or which is generally known to the industry or the public other than as a result of Executive's breach of this covenant. Executive agrees that within 10 days after the Termination Date, he will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the business of the Company and its subsidiaries, except that he may retain personal notes, notebooks and diaries. Executive further agrees that he will not retain or use for his account at any time any trade names, trademark or other proprietary business designation used or owned in connection with the business of the Company or its subsidiaries. (d) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any tribunal of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. 9. Remedies. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 8 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to seek equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. 10. No Disparagement. Executive agrees not to criticize, disparage or otherwise demean in any way the Company, any of its subsidiaries or their respective products, officers, directors or employees. Likewise, the Company agrees not to criticize, disparage or otherwise demean in any way the Executive. 7 11. RELEASE. IN CONSIDERATION OF THE PAYMENTS TO BE MADE AND BENEFITS PROVIDED BY THE COMPANY AND OTHER AGREEMENTS HEREUNDER, EXECUTIVE ON EXECUTIVE'S OWN BEHALF AND ON BEHALF OF EXECUTIVE'S HEIRS, EXECUTORS, AGENTS, SUCCESSORS AND ASSIGNS, RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND THEIR RESPECTIVE OFFICERS, AGENTS, CURRENT AND FORMER EMPLOYEES, SUCCESSORS, PREDECESSORS AND ASSIGNS AND ANY OTHER PERSON, FIRM, CORPORATION OR LEGAL ENTITY IN ANY WAY RELATED TO THE COMPANY AND ITS SUBSIDIARIES (THE "RELEASED PARTIES"), OF AND FROM ALL CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, STATUTORY RIGHTS, DUTIES, DEBTS, SUMS OF MONEY, SUITS, RECKONINGS, CONTRACTS, AGREEMENTS, CONTROVERSIES, PROMISES, DAMAGES, OBLIGATIONS, RESPONSIBILITIES, LIABILITIES AND ACCOUNTS OF WHATSOEVER KIND, NATURE OR DESCRIPTION, DIRECT OR INDIRECT, IN LAW OR IN EQUITY, IN CONTRACT OR IN TORT OR OTHERWISE, WHICH EXECUTIVE EVER HAD OR WHICH EXECUTIVE NOW HAS OR HEREAFTER CAN, SHALL OR MAY HAVE, AGAINST ANY OF THE RELEASED PARTIES, FOR OR BY REASON OF ANY MATTER, CAUSE, OR THING WHATSOEVER UP TO THE PRESENT TIME, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED AT THE PRESENT TIME, OR WHICH MAY BE BASED UPON PRE-EXISTING ACTS, CLAIMS OR EVENTS OCCURRING AT ANY TIME UP TO THE DATE HEREOF WHICH MAY RESULT IN FUTURE DAMAGES, INCLUDING WITHOUT LIMITATION ALL DIRECT OR INDIRECT CLAIMS EITHER FROM DIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER AND RIGHTS OR CLAIMS ARISING UNDER TITLE VII, ANY STATE CIVIL-RIGHTS LEGISLATION, CLAIMS OF HANDICAP DISCRIMINATION, CLAIMS RELATING TO THE TERMINATION OF EMPLOYMENT AS REFERRED TO HEREIN, AND CLAIMS OF AGE DISCRIMINATION UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED ("ADEA"), AGAINST ANY OF THE RELEASED PARTIES, OTHER THAN (A) CLAIMS ARISING UNDER THE EXPRESS PROVISIONS OF THIS AGREEMENT, AND (B) THE RIGHT TO RECEIVE BENEFITS, IF ANY, ACCRUED THROUGH THE TERMINATION DATE UNDER THE COMPANY'S BENEFIT PLANS. THE EXECUTIVE AGREES NOT TO SUE OR TO FILE ANY LAWSUITS AGAINST ANY RELEASED PARTY WITH RESPECT TO CLAIMS COVERED BY THIS RELEASE. 12. Notices. Any notice required or permitted to be given under this Agreement shall be deemed properly given if in writing and delivered by hand and receipt is acknowledged by the party to whom said notice shall be directed, or if mailed by certified or registered mail, postage prepaid with return receipt requested, or sent by express courier service, charges prepaid by shipper, to the addresses of each party stated above (or to such other address as a party is directed pursuant to written notice from the other party) and in the case of notices to the Company, to the attention of its Vice President - General Counsel, at 21001 Van Born Road, Taylor, Michigan 48180. 13. Assignment. This Agreement shall not be assignable by either party. Notwithstanding the foregoing, the Company shall assign this Agreement to any successor to substantially all of the stock, assets or business of the Company; provided, any such successor must assume in writing all of the obligations of the Company under this Agreement. 8 14. Acceptance and Revocation. Pursuant to provisions of ADEA, the Executive has been given at least 21 days from the date this Agreement was first communicated to the Executive to review and sign this Agreement. The Executive understands he may revoke his acceptance of this Agreement within seven calendar days after the date of the Executive's signature set forth below. This Agreement will not be effective until the seven-day revocation period has expired. The Executive understands that to be effective any such revocation must be in writing, signed by the Executive and hand delivered or post-marked within such seven-day period addressed to the Vice President - General Counsel, MascoTech, Inc., 21001 Van Born Road, Taylor, Michigan 48180. If revocation is by mail, certified mail return receipt requested is recommended to show proof of mailing. 15. Mediation/Arbitration. The parties hereto agree that pursuant to the Company's Corporate Dispute Resolution Policy (the "CDRP"), mediation, and, if unsuccessful, arbitration, will apply to the employment and consulting relationship hereunder and will be the sole and exclusive remedies for any claims which may arise between the parties (other than allegations by the Company of breach of Sections 8 or 10) in any way relating to this Agreement or for the breach thereof to the extent such claims are covered by the CDRP, and the Executive agrees not to pursue any such claims through a court or a jury. The Executive hereby acknowledges that he has had an opportunity to review the CDRP, and agrees that all proceedings held in accordance with the CDRP will be conducted in the Detroit, Michigan metropolitan area. Notwithstanding the foregoing, any determinations of whether or not the Executive is disabled shall be made in the first instance by the Committee established under the MascoTech, Inc. Key Employee Retention Plan. 16. Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, supersedes and replaces in its entirety any existing employment agreement or consulting agreement of the Executive and may not be waived, changed, modified, extended or discharged orally but only by agreement in writing signed by the party against whom enforcement of any such waiver, change, modification, extension or discharge is sought. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of a breach of any other provision or of any subsequent breach by the Executive. 17. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. 18. Attorneys Fees. In the event of a dispute by the Company, Executive or others as to the validity or enforceability of, or liability under, any provision of this Agreement, (i) the Company shall reimburse Executive for all reasonable legal fees and expenses incurred by him in connection with such dispute if Executive substantially prevails in the dispute and (ii) if Executive has not substantially prevailed in such dispute as set forth in (i), one-half the amount of all reasonable legal fees and expenses incurred 9 by him in connection with such dispute except to the extent Executive's position is found by a tribunal of competent jurisdiction to have been frivolous. 19. Headings. The headings of the Sections are for convenience only and shall not control or affect the meaning or construction or limit the scope of intent of any of the provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first above written. MASCOTECH, INC. By /s/ Richard A. Manoogian -------------------------------- Its Chairman ---------------------------- Date: November 22, 2000 /s/ Lee M. Gardner ----------------- ----------------------------------- Lee M. Gardner 10 EX-10.14 8 0008.txt EMPLOYMENT, RELEASE AND CONSULTING AGREEMENT EMPLOYMENT, RELEASE AND CONSULTING AGREEMENT AGREEMENT dated as of November 22, 2000 between Timothy Wadhams residing at 3666 River Pines, Ann Arbor, Michigan 48103 (the "Executive") and MascoTech, Inc., a Delaware corporation with its principal place of business at 21001 Van Born Road, Taylor, Michigan 48180 (the "Company"). A. The Executive is presently the Executive Vice President - Finance and Administration of the Company. B. The Board of Directors of the Company (the "Board") has approved a transaction whereby the Company will become a private company (the "Transaction"). C. The Executive has advised the Board that he is willing to continue in his current capacity for a transition period after the Transaction closes, and will thereafter provide certain employment and consulting services. D. The Executive and the Company desire to memorialize the terms and conditions of the Executive's employment by, consulting with and termination from the Company. NOW, THEREFORE, in consideration of the foregoing and of the promises and mutual covenants contained herein, it is hereby agreed between the Executive and the Company as follows: 1. Effectiveness of Agreement. This Agreement will become effective on the date hereof (the "Effective Date"). 2. Employment and Consulting/Non-Compete Periods. (a) The Executive agrees to continue full-time in his current capacity with the Company (or such other capacity as mutually agreed between the Executive and the Company) until the later of March 31, 2001 or the date 60 days after either the Executive or the Company gives the other notice ("Employment Period"), whereupon the Executive shall either (i) enter into a long-term employment agreement for a period of years ("New Employment Period") with the Company, whereupon the provisions of this Agreement requiring payment of a stay bonus and consulting fees shall terminate and no further such payments to the Executive shall be made hereunder (but all other provisions of this Agreement shall continue in full force and effect) or (ii) cease his employment with the Company ("Termination Date"). At the Termination Date the Executive shall be paid a cash stay bonus of $1,200,000 upon his execution of a Supplemental Release in the form of the Release contained in paragraph 11 hereof. During the Employment Period, the Executive will continue to receive compensation at least at his current rate of base pay. During the Employment Period, the Executive shall also receive his earned bonus for calendar year 2000 and his target bonus (which shall be no less than 50% of his base compensation rate) for subsequent calendar years (pro-rated in the case of any partial year of employment), in each case at the same time that other executives of the Company receive bonuses for calendar years 2000 and subsequent years, but in no event later than (respectively) February 28, 2001 and the same date in subsequent years. (b) Following the Employment Period, the Executive shall continue to hold himself available to work for the Company as a consultant for a three-year period which begins on the day after the Termination Date and ends on the third anniversary of the Termination Date (the "Consulting Period"). During the Consulting Period, the Executive shall be paid fees for consulting and for the non-competition and confidentiality covenants contained in paragraph 8 hereof in the amount of $400,000 payable on the first day of the Consulting Period, the amount of $400,000 payable on the first day of the second year of the Consulting Period and the amount of $350,000 payable on the first day of the third year of the Consulting Period. (c) During the Consulting Period, the Company shall retain the Executive as a consultant, and the Executive shall perform and discharge well and faithfully for the Company and its subsidiaries, such consulting services as may be requested from time to time by the Board of Directors of the Company. Notwithstanding the foregoing, it is understood and agreed that the Executive will be engaging in other activities unrelated to the Company and any request by the Company for services by the Executive will give due consideration to the Executive's other commitments. (d) It is agreed that during the Consulting Period the Executive shall be an independent contractor, shall not be an employee, servant, agent, partner or joint venturer of the Company or any of its subsidiaries, officers, directors or employees, and shall have no authority to assume or create any obligation or liability, express or implied, on behalf of the Company or its subsidiaries, or in its or their name or to bind them in any manner whatsoever; provided, however, that to the extent payments pursuant to paragraph 2(b) are made to the Executive with no payment by the Employer of the Employer's portion of social security taxes, the Company shall increase the payments under paragraph 2(b) by an amount, equal to one-half of executive's self-employment tax on a fully grossed up basis. (e) If at anytime after the Transaction closes and during the Employment or Consulting Periods (as the case may be) there occurs a subsequent Change in Control then promptly following such Change in Control the Company (or its successors or assigns) shall pay to the Executive in a single lump sum the present value (utilizing an 8% discount factor) of all the cash payments then not yet paid pursuant to the second sentence of paragraph 2(a) and paragraph 2(b), and all other provisions of the Agreement shall thereupon continue in full force and effect. For the purposes hereof, "Change in Control" means the occurrence, following the date of the Transaction, of an event as a result of which a "person" or "group of persons", as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, who are not affiliated with or not controlled by Heartland Industrial Partners, L.P., directly or indirectly are the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) or have 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 2 securities representing 50% or more of the combined voting power of all outstanding voting securities of the Company. 3. Death. If after the Effective Date the Executive dies or becomes disabled, then all payments pursuant to the second sentence of paragraph 2(a) and paragraph 2(b) scheduled for payment on or following the date of death or the date of disability shall cease and any obligation to provide Employment or Consulting Services thereafter shall cease. For the purposes of this Agreement, the date of disability is the date the Executive first perfects his eligibility (or the date he would have first perfected such eligibility, but for his termination of employment with the Company or his loss of coverage under the Company's long term disability program) for extended long term disability benefits requiring him to be unable to perform any gainful occupation pursuant to the Company's long term disability program. 4. Benefits. (a) The Executive acknowledges that his employment will terminate as of the Termination Date and, except as specifically provided herein, he will cease to be an active participant under the benefit plans of the Company on such date pursuant to the terms of the applicable benefit plans, and no additional Company-provided benefits shall accrue to him after such date, other than salary and accrued vacation earned through the Termination Date which has not yet been paid. Nothing contained herein shall restrict the Executive's receipt of benefits under the Company's employee fringe benefit programs accrued during the Executive's employment with the Company. (b) Effective immediately following the Termination Date, the Executive shall be entitled to receive (i) reimbursement (in an amount tax-effected, if such reimbursements are determined to be taxable, by dividing the amount required for such reimbursement by one minus the decimal equivalent of the sum of Executive's marginal state and federal income tax rates) for the purchase by the Executive and his spouse and such other dependents as would be permitted under the Company's group health plan of Company's COBRA coverage for the 18 months following the Termination Date hereunder; provided, however, such COBRA reimbursements shall be suspended (subject to resumption if such other coverage ceases) at any time Executive becomes eligible for any other comparable group health coverage and (ii) reimbursement for Executive's purchase of commercial (non-employer-sponsored) health and dental coverage for Executive and his spouse and such other dependents as would be permitted under the Company's group health plan which coverage is comparable to Company's COBRA coverage (or if such coverage is not available, then the best comparable coverage that is available for purchase), in an amount tax-effected, if such reimbursements are determined to be taxable, by dividing the amount required to reimburse the actual cost of such coverage as billed to the Executive by one minus the decimal equivalent of the sum of Executive's marginal state and federal income tax rates, paid monthly in advance, for the time following the expiration of Executive's COBRA eligibility (provided other group coverage is not yet in effect); provided, however, such reimbursement will be suspended (subject to resumption if such other coverage ceases) (A) at any time Executive becomes eligible for any other comparable group health coverage or (B) during any period that the 3 Executive is participating (for comparable group coverage) under the retirement medical provisions of that certain Supplemental Executive Retirement Plan agreement (SERP) between the Executive and the Company dated February 28, 1995 as the same may be from time to time amended, provided, further, the Company reserves the right in its reasonable discretion to select and require Executive to utilize the most cost-effective provider of such comparable group health coverage. Upon the death of the Executive, his surviving spouse, if any, will be entitled to receive the same benefits that the Executive would have received under this Section 4(b) had he not died; provided, however, that (1) if Executive's surviving spouse remarries, then such benefits will immediately terminate, and (2) if Executive's surviving spouse is more than 20 years younger than the Executive, then the Benefits described in this Clause (b) will only continue for such surviving spouse for a period of three (3) years after the death of the Executive. 5. Options and Awards. All of the restricted stock awards and options heretofore granted to the Executive under the Company's restricted stock award and option plans will be treated in the same manner as the awards and options of other employees of the Company in the Transaction who continue as employees of the Company. 6. SERP. (a) On the Termination Date, notwithstanding any contrary term of the SERP, the Executive will become 100% vested (i.e., treated as if he retired at age 65) in the SERP and receive benefits upon his attainment of age 65 or his death (whether before or after such age) or disability as if (i) his "Average Compensation", as otherwise defined in the SERP, were $705,000 and (ii) his SERP percentage were 60%. Notwithstanding the foregoing, unless the Executive dies or becomes disabled prior to attaining age 65, the Executive and his spouse will not be entitled to receive benefits under the SERP until the Executive attains the age of 65 (based on Average Compensation of $705,000) and be entitled to receive all of the benefits of the SERP in accordance with the terms thereof as if his SERP percentage were 60%. (b) For purposes of this Agreement, the SERP may not be amended to terminate or reduce benefits provided in such SERP Agreement. 7. Gross-Up. In the event that, as a result of the payments to the Executive under Section 2 hereof and/or the vesting of stock awards or options in connection with the Transaction and/or the benefits provided under Sections 4 or 6, Executive becomes subject to excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to Executive an amount (the "Gross-Up Payment") equal to an amount which, after payment by Executive of all taxes (including any federal, state and local income tax and excise tax upon such amount) would allow the Executive to retain an amount equal to the Excise Tax, unless, if the reduction of the payments under the second sentence of paragraph 2(a) and paragraph 2(b) to Executive by no more than 5% would avoid the imposition of Excise Tax, then the Company shall so reduce such payments to Executive and no Gross-Up Payment will be made. 4 For purposes of determining whether Executive will be subject to the Excise Tax and the amount of such Excise Tax, the following criteria shall apply: (a) All determinations required to be made under this Section 7 shall be made by the Company's independent auditors (the "Accounting Firm"), which shall provide detailed supporting calculations to both the Company and Executive within 15 business days after the Termination Date or such earlier time as is requested by the Company provided that any determination that an Excise Tax is payable by Executive shall be made on the basis of substantial authority. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that Executive has substantial authority not to record any Excise Tax on his federal income tax return. Any determination by the Accounting Firm meeting the requirements of this Section 7(a) shall, subject to possible adjustment as set forth in Section 7(c) below, be binding upon the Company and Executive. (b) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the date on which the Excise Tax is incurred, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state, and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional payment in respect of such excess at the time that the amount of such excess finally is determined. In the case of any payment that the Company is required to make to Executive pursuant to the preceding sentence (a "Later Payment"), the Company shall also pay to Executive an additional amount such that after payment by Executive of all of Executive's applicable federal, state and local taxes, including any interest and penalties assessed by any taxing authority, on such additional amount, Executive will retain an amount equal to the total of Executive's applicable federal, state and local taxes, including any interest and penalties assessed by any taxing authority, arising due to the Later Payment. Executive and the Company each shall reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax. 5 Notwithstanding any provision of this Agreement to the contrary, Executive shall pay his ordinary federal, state and local income taxes to which he is subject as a result of the payments to which he becomes entitled pursuant to the terms hereof or the terms of any other agreement (including but not limited to the accelerated vesting of stock options). 8. Non-Competition; Non-Solicitation; Confidentiality. (a) Executive acknowledges and recognizes the highly competitive nature of the business of the Company and accordingly agrees that, in consideration of this Agreement, the rights conferred hereunder, and the payments hereunder, during the Non-Compete Term (as hereinafter defined), Executive will not engage, either directly or indirectly, as an employee, consultant or independent contractor, or as a principal for his own account or jointly with others, or as a stockholder in any corporation or joint stock association which designs, develops, manufactures, distributes, sells or markets the type of products or services sold, distributed or provided by the Company or its subsidiaries during the two year period prior to the Termination Date (the "Business"); provided, that nothing herein shall prevent Executive from owning, directly or indirectly, not more than 5% of the outstanding shares of, or any other equity interest in, any entity engaged in the Business and listed or traded on a national securities exchanges or in an over-the-counter securities market. (b) During the period from the date of this Agreement until the end of the Consulting Period ("Non-Compete Term"), Executive will not (i) employ or solicit, or receive or accept the performance of services by, any active employee of the Company or any of its subsidiaries who is employed primarily in connection with the Business, except in connection with general, non-targeted recruitment efforts such as advertisements and job listings or (ii) solicit for business (relating to the Business) any person who is a customer or former customer of the Company or any of its subsidiaries, unless such person shall have ceased to have been such a customer for a period of at least six months. (c) Executive will not at any time disclose or use for his own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than the Company and any of its subsidiaries, any trade secrets, information, data, or other confidential information relating to customers, development programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, financing methods, plans, or the business and affairs of the Company generally, or of any subsidiary of the Company, unless required to do so by applicable law or court order, subpoena or decree or otherwise required by law, with reasonable evidence of such determination promptly provided to the Company. The preceding sentence of this sub-clause (c) shall not apply to information which is not unique to the Company or which is generally known to the industry or the public other than as a result of Executive's breach of this covenant. Executive agrees that within 10 days after the Termination Date, he will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, in any way relating to the 6 business of the Company and its subsidiaries, except that he may retain personal notes, notebooks and diaries. Executive further agrees that he will not retain or use for his account at any time any trade names, trademark or other proprietary business designation used or owned in connection with the business of the Company or its subsidiaries. (d) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any tribunal of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. 9. Remedies. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 8 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to seek equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. 10. No Disparagement. Executive agrees not to criticize, disparage or otherwise demean in any way the Company, any of its subsidiaries or their respective products, officers, directors or employees. Likewise, the Company agrees not to criticize, disparage or otherwise demean in any way the Executive. 11. RELEASE. IN CONSIDERATION OF THE PAYMENTS TO BE MADE AND BENEFITS PROVIDED BY THE COMPANY AND OTHER AGREEMENTS HEREUNDER, EXECUTIVE ON EXECUTIVE'S OWN BEHALF AND ON BEHALF OF EXECUTIVE'S HEIRS, EXECUTORS, AGENTS, SUCCESSORS AND ASSIGNS, RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND THEIR RESPECTIVE OFFICERS, AGENTS, CURRENT AND FORMER EMPLOYEES, SUCCESSORS, PREDECESSORS AND ASSIGNS AND ANY OTHER PERSON, FIRM, CORPORATION OR LEGAL ENTITY IN ANY WAY RELATED TO THE COMPANY AND ITS SUBSIDIARIES (THE "RELEASED PARTIES"), OF AND FROM ALL CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, STATUTORY RIGHTS, DUTIES, DEBTS, SUMS OF MONEY, SUITS, RECKONINGS, CONTRACTS, AGREEMENTS, CONTROVERSIES, PROMISES, DAMAGES, OBLIGATIONS, RESPONSIBILITIES, LIABILITIES AND ACCOUNTS OF WHATSOEVER KIND, NATURE OR DESCRIPTION, DIRECT OR INDIRECT, IN LAW OR IN EQUITY, IN CONTRACT OR IN TORT OR OTHERWISE, WHICH EXECUTIVE EVER HAD OR WHICH EXECUTIVE NOW HAS OR HEREAFTER CAN, SHALL OR MAY HAVE, AGAINST ANY OF THE RELEASED PARTIES, FOR OR BY REASON OF ANY MATTER, CAUSE, OR THING WHATSOEVER UP TO THE PRESENT TIME, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED AT THE PRESENT TIME, OR WHICH MAY BE BASED UPON PRE-EXISTING ACTS, 7 CLAIMS OR EVENTS OCCURRING AT ANY TIME UP TO THE DATE HEREOF WHICH MAY RESULT IN FUTURE DAMAGES, INCLUDING WITHOUT LIMITATION ALL DIRECT OR INDIRECT CLAIMS EITHER FROM DIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER AND RIGHTS OR CLAIMS ARISING UNDER TITLE VII, ANY STATE CIVIL-RIGHTS LEGISLATION, CLAIMS OF HANDICAP DISCRIMINATION, CLAIMS RELATING TO THE TERMINATION OF EMPLOYMENT AS REFERRED TO HEREIN, AND CLAIMS OF AGE DISCRIMINATION UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED ("ADEA"), AGAINST ANY OF THE RELEASED PARTIES, OTHER THAN (A) CLAIMS ARISING UNDER THE EXPRESS PROVISIONS OF THIS AGREEMENT, AND (B) THE RIGHT TO RECEIVE BENEFITS, IF ANY, ACCRUED THROUGH THE TERMINATION DATE UNDER THE COMPANY'S BENEFIT PLANS. THE EXECUTIVE AGREES NOT TO SUE OR TO FILE ANY LAWSUITS AGAINST ANY RELEASED PARTY WITH RESPECT TO CLAIMS COVERED BY THIS RELEASE. 12. Notices. Any notice required or permitted to be given under this Agreement shall be deemed properly given if in writing and delivered by hand and receipt is acknowledged by the party to whom said notice shall be directed, or if mailed by certified or registered mail, postage prepaid with return receipt requested, or sent by express courier service, charges prepaid by shipper, to the addresses of each party stated above (or to such other address as a party is directed pursuant to written notice from the other party) and in the case of notices to the Company, to the attention of its Vice President - General Counsel, at 21001 Van Born Road, Taylor, Michigan 48180. 13. Assignment. This Agreement shall not be assignable by either party. Notwithstanding the foregoing, the Company shall assign this Agreement to any successor to substantially all of the stock, assets or business of the Company. Any such successor must assume in writing all of the obligations of the Company under this Agreement. 14. Acceptance and Revocation. Pursuant to provisions of ADEA, the Executive has been given at least 21 days from the date this Agreement was first communicated to the Executive to review and sign this Agreement. The Executive understands he may revoke his acceptance of this Agreement within seven calendar days after the date of the Executive's signature set forth below. This Agreement will not be effective until the seven-day revocation period has expired. The Executive understands that to be effective any such revocation must be in writing, signed by the Executive and hand delivered or post-marked within such seven-day period addressed to the Vice President - General Counsel, MascoTech, Inc., 21001 Van Born Road, Taylor, Michigan 48180. If revocation is by mail, certified mail return receipt requested is recommended to show proof of mailing. 15. Mediation/Arbitration. The parties hereto agree that pursuant to the Company's Corporate Dispute Resolution Policy (the "CDRP"), mediation, and, if unsuccessful, arbitration, will apply to the employment and consulting relationship hereunder and will be the sole and exclusive remedies for any claims which may arise between the parties (other than allegations by the Company of breach of Sections 8 or 10) 8 in any way relating to this Agreement or for the breach thereof to the extent such claims are covered by the CDRP, and the Executive agrees not to pursue any such claims through a court or a jury. The Executive hereby acknowledges that he has had an opportunity to review the CDRP, and agrees that all proceedings held in accordance with the CDRP will be conducted in the Detroit, Michigan metropolitan area. Notwithstanding the foregoing, any determinations of whether or not the Executive is disabled shall be made in the first instance by the Committee established under the MascoTech, Inc. Key Employee Retention Plan. 16. Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, supersedes and replaces in its entirety any existing employment agreement or consulting agreement of the Executive and may not be waived, changed, modified, extended or discharged orally but only by agreement in writing signed by the party against whom enforcement of any such waiver, change, modification, extension or discharge is sought. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of a breach of any other provision or of any subsequent breach by the Executive. 17. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. 18. Attorneys Fees. In the event of a dispute by the Company, Executive or others as to the validity or enforceability of, or liability under, any (i) provision of this Agreement, the Company shall reimburse Executive for all reasonable legal fees and expenses incurred by him in connection with such dispute if Executive substantially prevails in the dispute and (ii) if Executive has not substantially prevailed in such dispute as set forth in (i), one-half the amount of all reasonable legal fees and expenses incurred by him in connection with such dispute except to the extent Executive's position is found by a tribunal of competent jurisdiction to have been frivolous. 19. Headings. The headings of the Sections are for convenience only and shall not control or affect the meaning or construction or limit the scope of intent of any of the provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first above written. MASCOTECH, INC. By Richard A. Manoogian -------------------------------- Its Chairman ---------------------------- Date: 11/22/00 /s/ Timothy Wadhams -------- ----------------------------------- Timothy Wadhams EX-10.20 9 0009.txt STRATEGIC COOPERATION AGREEMENT STRATEGIC COOPERATION AGREEMENT This Strategic Cooperation Agreement (the "Agreement") is entered into as of January 23, 2001 (the "Effective Date") by and between Metalync Company LLC, a Delaware limited liability Company ("Metalync"), Metaldyne Corporation, a Delaware corporation ("Metaldyne") (for purposes of Sections 2 and 4(a) only), and Global Metal Technologies, Inc., a Delaware corporation ("GMTI') (each a "Party" and collectively, the "Parties"). WHEREAS, Metalync and its subsidiary manufacture highly engineered products for the transportation, industrial and consumer markets and is commonly controlled with GMTI, a leading designer and manufacturer of highly engineered, medium size aluminum die castings predominantly for the automotive industry; WHEREAS, Metalync intends to change its name to Metaldyne Company LLC; WHEREAS, the Parties desire to realize the benefits of a cooperative relationship with respect to their complementary business services as part of a full metal forming and fabrication platform serving automotive and other industrial original equipment manufacturers ("OEMs"); WHEREAS, GMTI acknowledges that this Agreement is fair and equitable and contains terms comparable to the terms that would be achieved in an arm's length transaction with a person that is not an affiliate and is of the kind which would be entered into by a prudent person in the position of GMTI with a person which is not one of its affiliates; WHEREAS, Metalync acknowledges that this Agreement is entered into in the ordinary course of business and contains terms and conditions not less favorable to Metalync than could be obtained on an arm's-length basis from an unrelated third party; WHEREAS, the Parties desire to set forth in this Agreement certain aspects of a strategic relationship between Metalync and GMTI, some of which may be supplemented in the future by more detailed agreements; NOW, THEREFORE, in exchange for valuable and adequate consideration and the terms set forth below, the Parties agree as follows: 1. STRATEGIC RELATIONSHIP. (a) The purpose of this Agreement is to broadly establish certain of the parameters for a strategic relationship between the Parties under which the Parties will operate independently, but cooperatively, as part of a full metal forming and fabrication platform serving automotive and other industrial OEMs. (b) During the Term of this Agreement, Metalync will provide to GMTI and its subsidiaries, and GMTI will provide to Metalync and its subsidiaries, the corporate services and functions listed on Schedule A attached hereto as well as such other corporate services and/or functions which may be mutually identified by the Parties in the future, including those which may be contemplated by Section 1(c). It is expected that the requirements for services and/or functions set forth on Schedule A by a particular Party may be fluid. Accordingly, the chief executive officers of each of GMTI and Metalync will be meet frequently (and not less frequently than monthly) to identify the mutual requirements of each such Party and to specify any changes required to be made to the then existing arrangements. (c) From time to time, the Parties will cooperate to identify employees of GMTI and its subsidiaries whose employment by Metalync or one of its subsidiaries rather than GMTI would be mutually advantageous. Under such circumstances, the Parties will seek to arrange for the termination of the GMTI employee, the immediate hiring of such employee by Metalync or one of its subsidiaries on mutually acceptable terms and the provision of services by such identified employee or other employees of Metalync and its subsidiaries on the terms contemplated hereby to the extent required by GMTI. In such event, the salary and employee benefits paid to such employees will become a responsibility of Metalync or its subsidiary from and after the hiring of such employee. (d) Charges by a Party for the provision of services by such Party to the other Party and its subsidiaries pursuant to this Agreement will be at the cost to the providing Party, except as set forth on the Schedules hereto or as may be otherwise agreed. Metalync and GMTI will deliver invoices to one another on a regular basis to be determined (but not less frequently than quarterly) for services rendered hereunder and the net amount shall be paid by the Party owing amounts for the particular period in accordance with the term of the particular invoice (but not later than 90 days after the date of the invoice). Each Party will endeavor to maintain adequate records to support such invoices and the Parties will cooperate with one another in accounting and tax matters necessitated by this Agreement. If requested by any Party, the other Party will provide such supporting information as may be reasonably requested by it. (e) It is agreed that GMTI and Metalync will be cooperatively marketing their collective products and services on a basis that is mutually beneficial and that each Party will have the opportunity to benefit from cost reductions in raw materials and energy costs due to, among other things, volume discounts from suppliers, the greater procurement and provisioning capabilities of one Party as compared with the other Party. The Parties will negotiate with one another in good faith to identify such opportunities and to document them as identified. The first such initiatives, to become effective immediately but to be more fully documented after the signing of this Agreement, relate to metal purchases and energy supplies as set forth on Schedule B hereto. (f) The provision of services and/or the cooperation of the Parties with respect to the procurement of other corporate services pursuant to this Agreement will in no way create an obligation on the part of one Party to assume, guarantee or otherwise become liable for, the debts or obligations of the other Party. (g) Each Party will provide to the other Party any information and documentation, whether proprietary or otherwise, as may be required in order for each Party to fulfill its obligations under this Agreement, but subject to confidentiality to the extent such information is non-public, in any reasonable manner whatsoever. (h) GMTI or Metalync may provide the services contemplated hereby directly or through any of their respective subsidiaries or affiliates. 2. INTELLECTUAL PROPERTY USE AND OWNERSHIP. (a) Metalync hereby authorizes the use of the "Metalync" trade name and related intellectual property by Metalync in connection with its performance of this Agreement. (b) It is understood that Metalync will market certain agreed products and services of GMTI and its subsidiaries when marketing its own products and services Under the Metalync name. It will ensure paper invoicing and allocation of all receivables and will not directly or indirectly act to -2- divest or impair GMTI of any of its business opportunities. Any such unanticipated conflicts shall be resolved through good faith negotiations between the chief executive officers of GMTI and Metalync. (c) The use by Metalync of any trademark, service mark or trade name of GMTI in connection with the performance of this Agreement will in no way create an obligation by Metalync to allow the use of, or a right of GMTI to use, the "Metalync" trade name or related intellectual property by GMTI. Any services provided by Metalync hereunder using the "Metalync" trade name or related intellectual property shall not be construed in any manner as authorizing or constituting the conduct of business by GMTI under such name. (d) GMTI acknowledges that Metalync retains title to and ownership of and all rights with respect to the "Metalync" trade name and related intellectual property. (e) Metalync will retain all right, title and interest in and to all of its trademarks, service marks and trade names worldwide. 3. TERM, TERMNATION AND SURVIVAL. (a) This Agreement will begin on the Effective Date and will continue until the earlier of: (i) any business combination involving Metalync or any of its subsidiaries and GMTI or (ii) GMTI and Metalync ceasing to be within the common control of Heartland Industrial Partners, L.P. and its affiliates (the "Term"), unless terminated in accordance with the provisions hereof. (b) Either Party may terminate this Agreement upon written notice to the other Party if the other Party materially fails to perform or observe any of its obligations under this Agreement or if there is a determination by either such Party that the intended benefits, or anticipated burdens, of this Agreement are materially different than presently anticipated and such failure or determination cannot be remedied or, if remediable, is not cured within sixty (60) days after written notice thereof from the terminating Party. (c) The provisions of Section 4 with respect to indemnity will survive any termination of this Agreement. -3- 4. REPRESENTATIONS, WARRANTIES AND INDEMNITY. (a) Each Party represents and warrants that it is duly organized and has the unrestricted right to enter into and perform this Agreement. (b) Metalync will indemnify, defend and hold harmless GMTI, its affiliates, officers, directors, employees, consultants and agents from any and all third party claims, liability, damages and/or costs (including, but not limited to, attorneys fees) arising from any gross negligence or willful misconduct in the performance of this Agreement by it or its breach of any representation or covenant in this Agreement in any material respect. GMTI will promptly notify Metalync of any and all such claims and will reasonably cooperate with Metalync with the defense and/or settlement thereof, provided that if any settlement requires an affirmative obligation of, results in any ongoing liability to or prejudices or detrimentally impacts GMTI in any way and such obligation, liability, prejudice or impact can reasonably be expected to be material, then such settlement shall require GMTI's written consent (not to be unreasonably withheld or delayed) and GMTI may have its own counsel in attendance at all proceedings and substantive negotiations relating to such claim. (c) GMTI will indemnify, defend and hold harmless Metalync, its affiliates, officers, directors, employees, consultants and agents from any and all third party claims, liability, damages and/or costs (including, but not limited to, attorneys fees) not arising from its performance of this Agreement or its breach or covenant in this Agreement. Metalync will promptly notify GMTI of any and all such claims and will reasonably operate with GMTI with the defense and/or settlement thereof, provided that, if any settlement requires an affirmative obligation of, results in any ongoing liability to or prejudices or detrimentally impacts Metalync in any way and such obligation, liability, prejudice or impact can reasonably be expected to be material, then such settlement shall require Metalync's written consent (not to be unreasonably withheld or delayed) and Metalync may have its own counsel in attendance at all proceedings and substantive negotiations relating to such claim. 5. FURTHER AGREEMENT. The Parties agree that as soon as practicable hereafter, they shall enter into one or more detailed agreements related to the matters contemplated by this -4- Agreement, as requested by any Party, as well as certain other services and/or functions identified by the Parties in the future. 6. GOVERNING LAW This Agreement, its interpretation, performance or any breach thereof, shall be construed in accordance with, and all questions with respect thereto shall be determined by, the internal, substantive laws of the State of Michigan. In connection with any judicial proceeding, the parties consent to the exclusive jurisdiction of the state and federal courts having jurisdiction over Wayne County, Michigan. -5- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives. METALYNC COMPANY LLC By: ____________________________ Name: Title: METALYNC CORPORATION By: ____________________________ Name: Title: GLOBAL METAL TECHNOLOGIES, INC. By: ____________________________ Name: Title: -6- Schedule A SERVICES AND FUNCTIONS(a) o Finance and Accounting o Accounts Payable o Accounts Receivable o Human Resources (to be provided in both directions as agreed by the CEOs) o Benefits Administration o Insurance o Risk Reserves o Information Technology (to be provided in both directions as agreed by the CEOs) o Sales (to be provided in both directions on an account-by-account basis as agreed by the CEOs) o Strategic Light Metal Services (to be provided by GMTI) o Operational Services o Purchase of Raw Materials o Quality Control and Engineering Services (mutual cooperation may be required) ____________________ (a) To be provided by Metaldyne, unless otherwise noted. STRATEGIC PURCHASING SERVICE SCHEDULE B TO STRATEGIC COOPERATION AGREEMENT SERVICE On an ongoing basis, Metalync will purchase for GMTI raw materials and utility services subject to the terms contained herein. OBLIGATIONS OF PARTIES o Raw Materials - Metalync will purchase for GMTI aluminum raw materials. GMTI will promptly reimburse Metalync for the funds for raw material purchases, together with the other payments described below. o Utility Service - Metalync will purchase for GMTI electric and natural gas services for its various plants. GMTI will promptly reimburse Metalync for the funds for such utility service purchases, together with the other payments described below. o In no event shall the gross receivables due to Metalync from GMTI for the purchasing services described herein at any time exceed Nine Million Dollars ($9,000,000) or such lesser amount as Metalync shall advise GMTI as causing its aggregate investments in GMTI to exceed such amount. LENGTH OF AGREEMENT Metalync agrees to provide the purchasing services described herein on an ongoing basis. Termination of any of these purchasing services by either party requires thirty (30) days notice in writing. PAYMENTS o As long as any of the purchasing services described herein are being provided by Metalync, GMTT agrees to make a payment in reimbursement of assumed Metalync administrative fees of Five Thousand Dollars ($5,000) per month. o To the extent funds advanced by Metalync exceed funds due from GMTI for any aspect of the purchasing services described herein, GMTI shall pay Metalync interest on such excess at a rate equal to one percent (1%) over the interest rate then being charged Metalync under its revolving credit facility. o To the extent Metalync provides raw materials or utility service at a price less than GMTI could otherwise obtain such raw materials or utility service, GMTI shall pay to Metalync cost savings payment equal to fifty percent (50%) of the savings. EX-12.1 10 0010.txt COMPUTATION OF RATIO EARNINGS EXHIBIT 12.1 METALDYNE CORPORATION COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31 --------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- EARNINGS BEFORE INCOME TAXES AND FIXED CHARGES: Income from continuing operations before income taxes and cumulative effect of accounting change, net.................. $ 92,720 $139,470 $144,520 $190,290 $ 77,220 Deduct equity in undistributed earnings of less-than-fifty percent owned companies............................... (9,180) (9,800) (8,530) (46,030) (31,650) Add interest on indebtedness, net ....... 91,730 83,470 83,620 36,650 30,350 Add amortization of debt expense ........ 5,030 2,740 3,250 900 1,490 Estimated interest factor for rentals ... 3,480 3,710 3,620 2,100 6,350 ---------- ---------- ---------- ---------- ---------- Earnings before income taxes and fixed charges................................. $183,780 $219,590 $226,480 $183,910 $ 83,760 ========== ========== ========== ========== ========== FIXED CHARGES: Interest on indebtedness, net............ $ 91,990 $ 83,760 $ 84,080 $ 36,770 $ 30,590 Amortization of debt expense............. 5,030 2,740 3,250 900 1,490 Estimated interest factor for rentals ... 3,480 3,710 3,620 2,100 6,350 ---------- ---------- ---------- ---------- ---------- Total fixed charges.................... 100,500 90,210 90,950 39,770 38,430 ---------- ---------- ---------- ---------- ---------- Preferred stock dividend requirement (a)..................................... 650 -- -- 10,300 21,570 ---------- ---------- ---------- ---------- ---------- Combined fixed charges and preferred stock dividends......................... $101,150 $ 90,210 $ 90,950 $ 50,070 $ 60,000 ========== ========== ========== ========== ========== RATIO OF EARNINGS TO FIXED CHARGES ...... 1.8 2.4 2.5 4.6 2.2 ========== ========== ========== ========== ========== RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS .. 1.8 2.4 2.5 3.7 1.4 ========== ========== ========== ========== ==========
- ------------ (a) Represents amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company and its 50 percent owned companies. EX-21.1 11 0011.txt SUBSIDIARIES METALDYNE CORPORATION (FKA MASCOTECH, INC.) (A DELAWARE CORPORATION) Subsidiaries as of March 15, 2001* NAME JURISDICTION OF ---- INCORPORATION OR ORGANIZATION ----------------------------- MascoTech Saturn Holdings Inc. Delaware Metalync Company LLC Delaware Acme Office Group, Inc. New York Arrow Specialty Company Delaware Cuyam Corporation Ohio ER Acquisition Corp. Delaware Gruppo Tov Sr.l (80%) Italy K.S. Disposition, Inc. Michigan K-Tech Mfg., Inc. Delaware Masco Industries International Sales, Inc. Barbados MascoTechLux S.a.r.l. Luxembourg Metaldyne Europe S.a.r.l. Luxembourg Metaldyne Europe, Inc. Delaware MascoTech GmbH Germany Gruppo Tov Sr.l. (20%) Italy H&B Hyprotec Technology OHG Germany Anton Bauer GmbH (20%) Germany Holzer GmbH & Co. OHG Germany Holzer Limited United Kingdom Metaldyne Sintered Components Spain Espana S.L. Neumeyer CR spol s.r.o. Czech Republic Neumeyer Fliesspressen GmbH Germany MascoTech European Holdings Inc. Delaware GLO S.p.A. Italy Metaldyne Forming Technologies - Fort Wayne, Inc. Indiana Metaldyne Services, Inc. Delaware MascoTech Sintered Components Limited United Kingdom Metaldyne Sintered Components of Indiana, Inc. Delaware * Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business. 1 Metaldyne Sintered Components, Inc. Delaware MascoTech Sintered Components Holdings, Mexico S. de R.L. de C.V. MascoTech Sintered Components Mexico Services, S.de R.L. de C.V. MascoTech Sintered Components Mexico Mexico, S.A. de C.V. Metaldyne Tubular Products, Inc. Michigan MASG Disposition, Inc. Michigan MASX Energy Services Group, Inc. Delaware MTSPC, Inc. Delaware NI Wheel, Incorporated Ontario Plastic Form, Inc. Delaware Precision Headed Products, Inc. Delaware Simpson Industries, Inc. Michigan Simpson Industries, Ltda Brazil Simpson Industries, S.A. de C.V. Mexico R.J. Simpson Manufacturing Company Canada Stahl International, Inc. Tennessee Simpson Industries, Inc. (FSC) Barbados R.J. Simpson India Private Limited (51%) India Simpson Sabind Korea Limited (51%) India Fukoku Simpson Korea Limited (17%) Korea Simpson U.S. Holding Company Michigan Simpson International Holdings, B.V. Netherlands Simpson International Finance, Netherlands B.V. Simpson Industries Netherlands International B.V. R.J. Simpson Spain International S.L. Simpson International United Kingdom (UK) Ltd. Simpson International Germany Deutschland GmbH Simpson International France Holding S.A.R.L. Simpson International France France SAS Simpson Techniparts France SAS * 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 TriMas Corporation Delaware Beaumont Bolt & Gasket, Inc. Texas Industrial Bolt & Gasket, Inc. Louisiana Compac Corporation Delaware Netcong Investments, Inc. New Jersey Di-Rite Company Ohio Draw-Tite, Inc. Delaware Draw-Tite (Canada) Ltd. Ontario Eskay Screw Corporation Delaware Fulton Performance Products, Inc. Delaware Heinrich Stolz GmbH Germany Hitch'N Post, Inc. Delaware Keo Cutters, Inc. Michigan Lake Erie Screw Corporation Ohio Lamons Metal Gasket Co. Delaware Canadian Gasket & Supply Inc. Canada Louisiana Hose & Rubber Co. Louisiana James Walker J.V. (50%) United Kingdom Monogram Aerospace Fasteners, Inc. Delaware NI Foreign Military Sales Corp. Delaware NI West, Inc. California Norris Cylinder Company Delaware Norris Environmental Services, Inc. California Norris Industries, Inc. California Punchcraft Company Michigan Reese Products, Inc. Indiana TriMas Corporation Pty. Ltd. Australia Roof Rack Industries Pty Ltd. Australia TriMas Industries Pty. Ltd. Australia Rola Roof Rack Pty. Ltd. Australia Reese Products of Canada Ltd. Ontario Reska Spline Products, Inc. Michigan Richards Micro-Tool, Inc. Delaware Rieke Corporation Indiana Rieke Canada Limited Canada Rieke Corporation (S) Pte Ltd Singapore Rieke of Indiana, Inc. Indiana Rieke of Mexico, Inc. Delaware Rieke de Mexico, S.A. de C.V. Mexico Rieke Leasing Co., Incorporated Delaware Rieke Packaging Systems Australia Australia Pty. Ltd. * 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 Rieke Packaging Systems Brasil Ltda. Brazil TriMas Corporation Limited United Kingdom The Englass Group Limited United Kingdom Rieke Packaging Systems Limited United Kingdom Top Emballage S.A. France TriMas Export, Inc. Barbados TriMas Fasteners, Inc. Delaware TriMas Services Corp. Delaware W. C. McCurdy Co. Michigan Wesbar Corporation Wisconsin Consumer Products, Inc. Wisconsin Windfall Products, Inc. Pennsylvania Windfall Specialty Powders, Inc. Pennsylvania WIPCO, Inc. Delaware Windfall do Brasil Ltda. Brazil Windfall Foreign Sales Corp. Barbados * 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 EX-23.1 12 0012.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Registration Nos. 33-59222 and 33-55837) and Form S-8 (Registration Nos. 33-42230 and 333-64531) of Metaldyne Corporation of our report dated March 16, 2001 relating to the consolidated financial statements and financial statement schedules, which appears in this Form 10-K. PRICEWATERHOUSECOOPERS LLP Detroit, Michigan March 29, 2001 -----END PRIVACY-ENHANCED MESSAGE-----